PROPOSAL
1: THE MERGER PROPOSAL
Overview
In
connection with the Business Combination, Globis is asking its stockholders to approve the Merger Proposal. Under the Business Combination
Agreement, the approval of the Merger Proposal is also a condition to the Closing. If the Merger Proposal is approved, but the Redomiciliation
Proposal, Business Combination Proposal or the Charter Proposal are not approved, then none of the Merger, the Redomiciliation or the
Business Combination will be consummated.
As
a condition to the Closing under the terms of the Business Combination Agreement, Globis has agreed to change its jurisdiction of incorporation
from Delaware to Nevada to effect the reincorporation, pursuant to the terms of the Merger Agreement. Globis will merge with and into
Globis Nevada, with Globis Nevada surviving the merger. Immediately upon effectiveness of the reincorporation, the currently issued and
outstanding shares of Globis Common Stock will be exchanged, on a one-for-one basis, for shares of Globis Nevada common stock. Similarly,
the outstanding Warrants will become warrants to acquire the corresponding number of shares of Globis Nevada common stock on the same
terms as the current outstanding Warrants.
The
Merger Proposal, if approved, will approve of the merger of Globis with and into Globis Nevada, with Globis Nevada surviving the merger.
As a result, Globis’ jurisdiction of incorporation will change from Delaware to Nevada. Accordingly, while Globis is currently
governed by the DGCL, upon reincorporation, Globis Nevada will be governed by Nevada law. We urge stockholders to carefully consult the
information set out below under “Comparison of Stockholder’s Rights.”
A
copy of the Merger Agreement is attached as Annex I hereto.
Vote
Required for Approval With Respect to the Merger Proposal
The
approval of the Merger Proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Globis Common
Stock, voting together as a single class. Thus, with respect to the Merger Proposal, abstentions and broker non-votes will count as a
vote “AGAINST” this proposal.
Resolution
to be Voted Upon
The
full text of the resolution to be passed is as follows:
“RESOLVED,
that the Merger Agreement in the form attached as Annex I to the proxy statement/prospectus in respect of the Stockholders Meeting
of New Forafric to be approved and adopted in all respects”
Recommendation
of the Globis Board
THE
GLOBIS BOARD UNANIMOUSLY RECOMMENDS THAT GLOBIS STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE MERGER PROPOSAL.
PROPOSAL
2: THE REDOMICILIATION PROPOSAL
Overview
After
effecting the Pre-Globis is proposing to change its corporate structure and domicile from a corporation incorporated under the laws of
the State of Delaware to a public company limited by shares incorporated under the laws of Gibraltar. This change will be implemented
as a legal continuation of Globis under the applicable laws of the State of Delaware and Gibraltar as described under the section entitled
“— Manner of Effecting the Merger and the Redomiciliation and the Legal Effect of the Merger and the Redomiciliation.”
The Redomiciliation will be
effected by filing an application for re-domiciliation to the Registrar of Companies at Companies House Gibraltar accompanied
by all required documentation and filing an application to de-register Globis Nevada with Nevada Secretary of State. In connection
with the Redomiciliation, all outstanding securities of Globis Nevada will convert to outstanding securities of the continuing Gibraltar
public company limited by shares. The Redomiciliation will become effective immediately prior to the completion of the Business Combination.
The proposed Memorandum and Articles of Association, which will become effective upon the Redomiciliation, is attached to this proxy
statement/prospectus as Annex C.
At
the effective time of the Redomiciliation, which will be the Closing Date, the separate existence of Globis Nevada will cease as a Nevada
corporation and will become and continue as a Gibraltar public company limited by shares, which is herein referred as “New Forafric”.
The Certificate of Incorporation will be replaced by the Memorandum and Articles of Association and your rights as a shareholder will
cease to be governed by the laws of the State of Nevada and you will become a stockholder of New Forafric with all rights as such governed
by Gibraltar law.
In
connection with the Redomiciliation and simultaneously with the Business Combination, the corporate name of Globis will change to “Forafric
Global PLC”
Reasons
for the Redomiciliation
Our
Board believes that there are significant advantages to New Forafric that will arise as a result of being domiciled in Gibraltar, including
(i) being redomiciled in Gibraltar will create operational efficiencies for the combined company due to the fact that FAHL is a Gibraltar
private company limited by shares and its subsidiaries are all located outside the United States and (ii) the elimination of our obligation
to pay the annual Delaware franchise tax and the expected savings as a result of not having a franchise tax. FAHL required that Globis
redomicile in the state of Gibraltar in order to enter into the Business Combination Agreement.
Reasons
for the Name Change
The
Globis Board believes that it would be in the best interests of Globis Nevada to, in connection with the Redomiciliation and simultaneously
with the Business Combination, change its corporate name to “Forafric Global PLC” in order to more accurately reflect its
business purpose and activities.
Regulatory
Approvals; Third Party Consents
Globis
is not required to make any filings or to obtain any approvals or clearances from any antitrust regulatory authorities in the United
States or other countries in order to complete the Redomiciliation; however, because the Redomiciliation must occur immediately prior
to the Business Combination, it will not occur unless the Business Combination can be completed, which will require the approvals as
described below under the section entitled “Proposal 3: The Business Combination Proposal.” Globis must comply with
applicable United States federal and state securities laws in connection with the Redomiciliation, including the filing with Nasdaq of
a press release disclosing the Redomiciliation, among other things.
The
Redomiciliation will not breach any covenants or agreements binding upon Globis and will not be subject to any additional federal or
state regulatory requirements, except compliance with the laws of Nevada and Gibraltar necessary to effect the Redomiciliation.
Memorandum
and Articles of Association
Commencing
with the effective time of the Redomiciliation, which will be the Closing Date, the Memorandum and Articles of Association will govern
the rights of stockholders in New Forafric.
A
chart comparing your rights as a holder of shares of Common Stock of Globis as a Delaware corporation with your rights as a holder of
New Forafric’s ordinary shares as a Gibraltar public company limited by shares can be found below in “— Comparison
of Shareholder Rights under the Applicable Corporate Law Before and After the Redomiciliation.”
Comparison
of Shareholder Rights under Applicable Corporate Law Before and After the Redomiciliation
When
the Redomiciliation is completed, the rights of stockholders will be governed by Gibraltar law, rather than by the laws of the State
of Delaware. Certain differences exist between the Gibraltar Companies Act and DGCL that will alter certain of the rights of shareholders
and affect the powers of New Forafric Board and management following the Redomiciliation.
Stockholders
should consider the following summary comparison of the laws of the DGCL, on the one hand, and Gibraltar laws, on the other. This comparison
is not intended to be complete and is qualified in its entirety by reference to the DGCL and the Gibraltar Companies Act and Companies
Regulations.
The
owners of a Delaware corporation’s shares are referred to as “stockholders.” For purposes of language consistency,
in certain sections of this proxy statement/prospectus, we may continue to refer to the share owners of New Forafric as “stockholders.”
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Provision
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Delaware
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Gibraltar
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Applicable
legislation
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General
Corporation Law of the State of Delaware.
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The
Companies Act (As Revised).
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General
Vote Required for Combinations with Interested Stockholders/Shareholders
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Generally
a corporation may not engage in a business combination with an interested stockholder for a period of three years after the time
of the transaction in which the person became an interested stockholder, unless the corporation opts out of the statutory provision.
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No
Similar Provision.
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Appraisal
Rights
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Generally
a stockholder of a publicly traded corporation does not have appraisal rights in connection with a merger. Stockholders of a publicly
traded corporation do, however, generally have appraisal rights in connection with a merger if they are required by the terms of
a Business Combination Agreement to accept for their shares anything except: (a) shares or depository receipts of the corporation
surviving or resulting from such merger; (b) shares of stock or depository receipts that will be either listed on a national securities
exchange or held of record by more than 2,000 holders; (c) cash in lieu of fractional shares or fractional depository receipts described
in (a) and (b) above; or (d) any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or
fractional depository receipts described in (a), (b) and (c) above.
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No
Similar Provision.
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Requirements
for Stockholder/Shareholder Approval
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Subject
to the certificate of incorporation, stockholder approval of mergers, a sale of all or substantially all the assets of the corporation,
dissolution and amendments of constitutional documents require a majority of outstanding shares; most other stockholder approvals
require a majority of those present and voting, provided a quorum is present.
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Certain
instances require the shareholders to pass a special resolution (75% majority). The following
resolutions will therefore only be passed if, on a show of hands, at least 75% of the shareholders
present vote in its favor or, on a poll vote, if more than 75% of the votes cast are in favor:
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alteration
of the Articles of New Forafric (s25);
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change
of name of New Forafric (s29)
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re-registration
of New Forafric from a public company to a private company (s45);
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whitewash
procedure to ensure that any financial assistance provided by New Forafric in connection with the purchase of its own shares is permissible
(s. 103)
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approval
of the contract in respect of redemption or buy back of shares of New Forafric (s109);
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reduction
of share capital of New Forafric (s136);
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redenomination
of share capital of New Forafric (s139);
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New
Forafric making the liability of the directors unlimited (s225);
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reduction
of share capital below the authorized minimum (s. 142)
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reserving
the liability of New Forafric i.e. determine that any portion of its share capital which has not been already called up shall not
be capable of being called up, except in the event and for the purposes of New Forafric being wound up (s129);
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authorising
New Forafric to pay interest out of capital in certain cases (s134);
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appointing
an inspector to investigate New Forafric’s affairs (s213);
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authorising
the assignment by a director of his office to another person (s230);
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approving
the voluntary winding up of New Forafric (s364);
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authorising
a liquidator to accept shares as consideration for sale of the property of New Forafric (s384). ); and
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removal
of director from office (article 74A of the articles of association).
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Other
shareholder approvals require an ordinary resolution, being a simple majority.
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Provision
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Delaware
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Gibraltar
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Requirement
for Quorum
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Quorum
is a majority of shares entitled to vote at the meeting unless otherwise set in the constitutional documents, but cannot be less
than one-third of shares entitled to vote at the meeting.
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No
Similar Provision, however note that under the Articles of Association the holders of 33
1/3% of New Forafric’s issued and outstanding share capital present in person or by
proxy and entitled to vote on the business to be transacted shall be a quorum.
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Stockholder/Shareholder
Consent to Action Without Meeting
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Unless
otherwise provided in the certificate of incorporation, stockholders may act by written consent.
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Shareholders
may not act by written consent.
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Inspection
of Books and Records
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Any
stockholder may inspect the corporation’s books and records for a proper purpose during the usual hours for business.
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The
Companies Act affords certain rights of inspection to shareholders, and contains provisions which entitle a shareholder to be furnished
with particular information in respect of New Forafric. A shareholder is entitled during normal business hours to inspect the following
at the registered office of New Forafric, free of charge:
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Register
of Directors (section 222)
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Register
of Secretaries (section 223)
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Register
of Charges (section 176)
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Minutes
of Shareholders Meetings (copies must be provided for the prescribed sum) (section 210)
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Register
of Members (copies must be provided within 10 days, for the prescribed sum) (section 183)
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Register
of debenture holders (copies must be provided for the prescribed sum) (section 164)
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Documents
relating to a merger (section 312)
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Documents
relating to a division (section 333)
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Statement
as to pending liquidation (section 406)
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Contract
for the purchase of own shares (section 114)
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Moreover,
a shareholder is required to be furnished with the following on payment of the prescribed sum:
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an
up-to-date copy of New Forafric’s memorandum and articles;
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a
copy of any resolution or agreement relating to New Forafric to which Chapter 1 of Part III applies (resolutions and agreements affecting
a company’s constitution) and that is for the time being in force;
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a
copy of any document required to be sent to the Registrar under section 36 (alterations in the articles);
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a
copy of any court order under either or both of sections 299 and 300 (order sanctioning compromise or arrangement, reconstruction
or amalgamation);
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a
copy of New Forafric’s current certificate of incorporation, and of any past certificates of incorporation;
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in
the case of a company with a share capital, a current statement of capital
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Stockholder/Shareholder
Lawsuits
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A
stockholder may bring a derivative suit subject to procedural requirements.
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A
shareholder may bring a derivative action subject to procedural requirements.
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Removal
of Directors
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Any
director or the entire board may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, except as follows: (1) unless the charter otherwise provides, in the case of a corporation with a classified
board, stockholders may effect
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No
Similar Provision, however note that under the Articles of Association New Forafric may, by ordinary resolution of which special
notice has been given, or by special resolution, remove any director from office
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Provision
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Delaware
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Gibraltar
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such
removal only for cause; or (2) in the case of a corporation having cumulative voting, if less than the entire board is to be removed,
no director may be removed without cause if the votes cast against such director’s removal would be sufficient to elect such
director if then cumulatively voted at an election of the entire board. Because the corporation board will be classified after the
closing of the Business Combination, a director may be removed from office only for cause and only by the affirmative vote of at
least a majority of the total voting power of the outstanding shares of capital stock of the corporation entitled to vote in any
annual election of directors or class of directors, voting together as a single class.
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Number
of Directors
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The
number of directors is fixed by the Bylaws, unless the certificate of incorporation fixes the number of directors, in which case
a change in the number of directors shall be made only by amendment of the certificate of incorporation. The Bylaws may provide that
the board may increase the size of the board and fill any vacancies.
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Every
public limited company shall have at least two directors (s215)
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Classified
or Staggered Boards
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Classified
boards are permitted.
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No
Similar Provision
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Fiduciary
Duties of Directors
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Directors
must exercise a duty of care and duty of loyalty and good faith to New Forafric and its stockholders.
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Fiduciary
duties are common law duties and are not codified in the Companies Act:
A
director is required to act and exercise his or her powers in good faith in what he or she considers (not what a court may consider)
is in the best interests of the company as a whole (i.e., the company itself and all of its shareholders as a group), and not for
an unrelated purpose, even if there is no question of personal gain
A
director is required to exercise the degree of skill and care that may reasonably be expected from someone in their position as director,
but a higher standard may be imposed depending on their own ability and experience.
A
director must not put himself or herself in a position where personal interests conflict with those of New Forafric
A
director has an obligation to protect and use the property of New Forafric as if he or she were a trustee of it.
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Provision
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Delaware
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Gibraltar
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Indemnification
of Directors and Officers
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A
corporation shall have the power to indemnify any person who was or is a party to any proceeding because such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer,
employee or agent of another entity against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred
if the person acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal proceeding, had no reasonable cause to believe their conduct was unlawful. If the action was brought
by or on behalf of the corporation, no indemnification is made when a person is adjudged liable to the corporation unless a court
determines such person is fairly and reasonably entitled to indemnity for expenses the court deems proper.
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Under
section 231 of the Companies Act, any provision (whether in the articles or in a contract
with a company) exempting or indemnifying any officer of New Forafric for negligence, default
or breach of duty is void. However, New Forafric may, if permitted by its articles or a contract:
(a)
indemnify a director as to the costs of successful court proceedings; and/or
(b)
purchase and maintain for any director insurance for any liability referred to in section 231.
Any
person not being New Forafric may indemnify a director against any liability referred to in section 231.
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Limited
Liability of Directors
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Permits
the limiting or eliminating of the monetary liability of a director to a corporation or its stockholders, except with regard to breaches
of duty of loyalty, intentional misconduct, unlawful stock repurchases or dividends, or improper personal benefit.
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In
a limited company the liability of the directors, if so provided by the memorandum, may be unlimited.
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Comparison
of Shareholder Rights under the Applicable Organizational Documents Before and After the Redomiciliation
When
the Redomiciliation is completed, the rights of shareholders will be governed by the Memorandum and Articles of Association, rather than
the Amended and Restated Certificate of Incorporation and Bylaws (which will cease to be effective) and the rights of shareholders and
the scope of the powers of New Forafric’s Board and management will be altered as a result.
Stockholders
should consider the following summary comparison of the Amended and Restated Certificate of Incorporation and Bylaws, on the one hand,
and the Memorandum and Articles of Association, on the other hand. This comparison assumes that the changes to be made to the proposed
Certificate of Incorporation and proposed Bylaws in connection with the Organizational Documents Proposals are approved. This comparison
is not intended to be complete and is qualified in its entirety by reference to the Amended and Restated Certificate of Incorporation
and the proposed Memorandum and Articles of Association of New Forafric. You should read the form of Memorandum and Articles of Association
attached to this proxy statement/prospectus as Annex C, carefully in its entirety.
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Delaware
Amended and Restated Certificate of Incorporation
and
Bylaws
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Gibraltar
Memorandum
and Articles of Association
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Corporate
Purpose
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The
purpose shall be to engage in any lawful act or activity for which corporations may be organized under the DGCL.
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New
Forafric’s Memorandum and Articles of Association do not specifically restrict the objects of New Forafric, and as such its
objects are unrestricted
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Capital
Stock
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The
total number of shares of all classes of capital stock which New Forafric shall have authority to issue is 101,000,000 of which 100,000,000
shares shall be common stock, par value $0.0001 per share and 1,000,000 shares shall be preferred stock, par value $0.0001 per share.
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The
authorised share capital of New Forafric is USD 101,000 (one hundred and one thousand United States Dollars) divided into: (i) 100,000,000
ordinary shares, nominal value $0.001 per share, and (ii) 1,000,000 preferred shares, nominal value $0.001 per share, each conferring
those rights, entitlements, obligations and restrictions as more particularly set out in the articles of association of New Forafric.
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Preferred
Stock
The
Board of Directors is expressly granted authority to issue shares of Preferred Stock, in one or more series, and to fix for each
such series the number of shares constituting such series and the designation, the voting powers (if any), and the powers, preferences
and relative, participating, optional, or other special rights and such qualifications, limitations or restrictions thereof as shall
be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series
(a “Preferred Stock Designation”) and as may be permitted by the DGCL. The number of authorized shares of Preferred Stock
may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders
of a majority of the voting power of all of the then outstanding shares of the capital stock of New Forafric entitled to vote thereon,
without a separate vote of the holders of the common stock or Preferred Stock, unless a vote of any such holders is required pursuant
to the Certificate of Incorporation or any Preferred Stock Designation.
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Preferred
Shares
New
Forafric may issue shares with such rights and/or restrictions as may be determined by ordinary resolution.
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Common
Stock
Each
holder of common stock is entitled to one vote for each share of common stock held of record by such holder on all matters on which
stockholders generally are entitled to vote.
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Ordinary
Shares
On
a show of hands every shareholder present in person shall have one vote.
On
a poll every shareholder shall have one vote for each share of which he is the holder
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Delaware
Amended and Restated Certificate of Incorporation
and
Bylaws
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Gibraltar
Memorandum
and Articles of Association
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Directors;
Classes
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Subject
to the Certificate of Incorporation, the Board of Directors will determine the number of directors who will serve on the board. The
exact number of directors will be fixed from time to time by a majority of the Board of Directors. The Board of Directors will be
divided into three classes designated as Class I, Class II and Class III. Class I directors will initially serve for a term expiring
at the first annual meeting of stockholders following the closing of the Business Combination. Class II and Class III directors shall
initially serve for a term expiring at the second and third annual meeting of stockholders following the closing of the Business
Combination, respectively. At each succeeding annual meeting, successors to the class of directors whose term expires at that annual
meeting will be elected for a term expiring at the third succeeding annual meeting of stockholders. There will be no limit on the
number of terms a director may serve on the Board of Directors.
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The
board of directors of New Forafric shall be fixed for a period of (i) three years from the
date of the adoption of the Articles, and (ii) for subsequent periods of three years.
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Board
Vacancies; Removal
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Any
vacancy on the Board of Directors, including a vacancy that results from an increase in the number of directors or a vacancy that
results from the removal of a director with cause, may be filled only by a majority of the directors then in office.
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New
Forafric may by ordinary resolution appoint a person who is willing to act to be a director
to fill a vacancy.
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Delaware
Amended and Restated Certificate of Incorporation
and
Bylaws
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Gibraltar
Memorandum
and Articles of Association
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Stockholder/Shareholder
Voting
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Election
of directors need not be by ballot unless the Bylaws so provide.
Subject
to the rights of holders of any series of Preferred Stock, special meetings of the stockholders of the company may be called only
by or at the direction of the board, the chairman of the board or the chief executive officer of the company.
Stockholders
must comply with certain advance notice procedures to nominate candidates to the company Board or to propose matters to be acted
upon at a stockholders’ meeting.
Except
pursuant to a certificate of designation by the holders of one or more series of Preferred Stock, voting separately as a series or
separately as a class with one or more other such series, any action required or permitted to be taken by the holders of stock of
the company must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in
writing by such holders.
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Any
person who is willing to act as a director, and is permitted by law to do so, may be appointed
to be a director–
(a)
by ordinary resolution, or
(b)
by a decision of the directors.
New
Forafric may, by ordinary resolution of which special notice has been given, or by special resolution, remove any director from office
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Amendments
to the Governing Documents
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The
Board of Directors shall have the power, without the assent or vote of the stockholders,
to make, alter, amend, change, add to, or repeal the Bylaws.
The
affirmative vote of the holders of at least 662⁄3% of the total voting power of all the then outstanding
shares of stock of the company entitled to vote generally in the election of directors, voting together as a single class, shall
be required to alter, amend, repeat or rescind, in whole or in part, any provision of Article I, Article II or Article IV of the
Bylaws of the company, or to adopt any provision inconsistent therewith and, with respect to any other provision of the Bylaws, the
affirmative vote of the holders of at least a majority of the total voting power of all the then outstanding shares of stock of the
company entitled to vote generally in the election of directors, voting together as a single class, shall be required in order for
the stockholders of the company to alter, amend, repeal or rescind, in whole or in part, any provision of the Bylaws of the company,
or to adopt any provision inconsistent therewith.
Certain
provisions of the Certificate of Incorporation may only be amended, altered, repealed, or rescinded by the affirmative vote of the
holders of at least 66-2/3% of the total voting power of all the then outstanding shares of stock of the company entitled to vote
generally in the election of directors, voting together as a single class.
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No
provision in the Articles of Association.
The
Companies Act requires that an alteration to New Forafric’s articles is made by special resolution (75% majority)
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Delaware
Amended and Restated Certificate of Incorporation and Bylaws
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Gibraltar
Memorandum and Articles of Association
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|
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Authority
of the Directors
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The
directors are empowered to exercise all such powers and do all such acts and things as may be exercised or done by the company; subject,
nevertheless, to the provisions of the statutes of Delaware, of the Certificate of Incorporation, and to any Bylaws from time to
time made by the stockholders; provided, however, that no Bylaw so made shall invalidate any prior act of the directors which would
have been valid if such Bylaw had not been made.
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The
directors are responsible for the management of the company’s business subject to and in accordance with the provisions of
the memorandum and articles of association of New Forafric and also subject to the laws of Gibraltar, for which purpose they may
exercise all the powers of the company
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Liability
of Directors
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A
director of the company shall not be personally liable to the company or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the company or its
stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. If
the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability
of a director of the company shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any repeal
or modification of this provision by the stockholders of the company shall not adversely affect any right or protection of a director
of the company with respect to events occurring prior to the time of such repeal or modification.
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Subject
to article 297 of the articles of association of New Forafric, a relevant director of the
company or an associated company may be indemnified out of New Forafric’s assets against
any liability which by virtue of any rule of law would otherwise attach to him in respect
of any negligence, default, breach of duty or breach of trust of which he may be guilty in
relation to the company. New Forafric is able to procure and pay insurance premiums for Directors
& Officers insurance in favor of the directors of New Forafric.
Article
297 provides that the above does not authorise any indemnity which would be prohibited or rendered void by any provision of the Act
or by any other provision of law.
Under
section 231 of the Companies Act, any provision (whether in the articles or in a contract with a company) exempting or indemnifying
any officer of New Forafric for negligence, default or breach of duty is void. However, New Forafric may, if permitted by its articles
or a contract:
(a)
indemnify a director as to the costs of successful court proceedings; and/or
(b)
purchase and maintain for any director insurance for any liability referred to in section 231.
Any
person not being New Forafric may indemnify a director against any liability referred to in section 231.
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Indemnification
of Directors, Officers, Employees and Others
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Each
person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative or any other type whatsoever, by reason of the fact that he or she is or
was a director or an officer of New Forafric or, while a director or officer of New Forafric, is or was serving at the request of
the company as a director, officer, employee, agent or trustee of another corporation or of a partnership, joint venture, trust or
other enterprise, shall be indemnified and held harmless by the company to the fullest extent permitted by Delaware law against all
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See
“Liability of Directors” above
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Delaware
Amended and Restated Certificate of Incorporation
and
Bylaws
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Gibraltar
Memorandum
and Articles of Association
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expense,
liability and loss reasonably incurred or suffered by such indemnitee in connection therewith, provided, however, that, except in
certain circumstances, the company shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated
by such indemnitee only if such proceeding (or part thereof) was authorized by the company’s board of directors. An indemnitee
shall also have the right to be paid by the company the expenses(including attorney’s fees) incurred in appearing at, participating
in or defending any such proceeding in advance of its final disposition or in connection with a proceeding brought to establish or
enforce a right to indemnification or advancement of expenses under the Bylaws.
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Exclusive
Forum
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(a)
Unless the company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or,
if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the
State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District
of Delaware) shall be the sole and exclusive forum for the following types of actions or proceedings: (A) any derivative action or
proceeding brought on behalf of New Forafric; (B) any action asserting a claim of breach of or based on a fiduciary duty owed by
any current or former director, officer or other employee of New Forafric to New Forafric or New Forafric’s shareholders; (C)
any action asserting a claim against the company or any current or former director or officer or other employee of the company arising
pursuant to any provision of the DGCL, the Certificate of Incorporation or the Bylaws (including any right, obligation or remedy
thereunder); (D) any action to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws;
(E) any action or proceeding as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware; or (F)
any action asserting a claim that is governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law
and subject to the court’s having personal jurisdiction over any indispensable parties named as defendants. The foregoing shall
not apply to any claims arising under the Exchange Act or the Securities Act; and (b) unless the company consents in writing to the
selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive
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The
Articles of Association do not contain a provision adopting an exclusive forum for shareholder litigation
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Delaware
Amended and Restated Certificate of Incorporation and Bylaws
|
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Gibraltar
Memorandum and Articles of Association
|
|
|
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Business
Opportunities
|
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forum
for the resolution of any complaint asserting a cause of action arising under the Securities Act. If any action that is the subject
matter of which is within the scope of the foregoing is filed in a court other than a court located within the State of Delaware
(a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal
jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such
court to enforce the foregoing (an “Enforcement Action”) and (ii) having service of process made upon such stockholder
in any such Enforcement Action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
If any provision of the Bylaws becomes or is declared on any ground by a court of competent jurisdiction to be illegal, unenforceable
or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from the Bylaws,
and the court will replace such illegal, void or unenforceable provision of the Bylaws with a valid and enforceable provision that
most accurately reflects the company’s intent, in order to achieve, to the maximum extent possible, the same economic, business
and other purposes of the illegal, void or unenforceable provision. The balance of the Bylaws shall be enforceable in accordance
with its terms. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the corporation
shall be deemed to have notice of and consented to the provisions of the foregoing.
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The
company renounces any interest or expectancy that it has in, or right to be offered an opportunity to participate in, any business
opportunities that may be a corporate opportunity for its directors or their respective affiliates, other than those officers, directors,
stockholders or affiliates who are our employees. Non-employee directors or his or her affiliates have no duty to refrain from (i)
engaging in a corporate opportunity in the same or similar lines of business in which the company or its affiliates now engage or
propose to engage or (ii) otherwise competing with the company or its affiliates. In the event that any non-employee director or
any of his or her affiliates acquires knowledge of a potential transaction or other business opportunity which may be a corporate
opportunity for itself or himself or herself or its or his or her affiliates or for the company or its affiliates, such
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No
similar provision
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Delaware
Amended and Restated Certificate of Incorporation and Bylaws
|
|
Gibraltar
Memorandum and Articles of Association
|
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person
will have no duty to communicate or offer such transaction or business opportunity to New Forafric or any of its affiliates and they
may take any such opportunity for themselves or offer it to another person or entity. The company does not renounce its interest
in any business opportunity that is expressly offered to a non-employee director solely in his or her capacity as a director or officer
of the company. A business opportunity will not be deemed to be a potential corporate opportunity for the company if it is a business
opportunity that (i) the company is neither financially or legally, nor contractually permitted to undertake, (ii) from its nature,
is not in the line of the company’s business or is of no practical advantage to New Forafric, (iii) is one in which the company
has no interest or expectancy or (iv) is presented to any account for the benefit of a member of the Board or such member’s
affiliate over which such member of the Board has no direct or indirect influence or control, including, but not limited to, a blind
trust.
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Transactions
with Certain Stockholders/Shareholders
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The
company has elected not to be subject to provisions Section 203 of the DGCL, which generally prohibits “interested stockholders”
(stockholders holding 15% or more of the outstanding stock) from engaging in business combinations with the company for a period
of time unless certain conditions are met.
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No
similar provision
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Accounting
Treatment of the Redomiciliation
The
Redomiciliation is being proposed solely for the purpose of changing the legal domicile of Globis. There will be no accounting effect
or change in the carrying amount of the assets and liabilities of Globis as a result of the Redomiciliation. The business, capitalization,
assets and liabilities and financial statements of Globis immediately following the Redomiciliation will be the same as those immediately
prior to the Redomiciliation.
Resolution
to be Voted Upon
The
full text of the resolution to be passed is as follows:
“RESOLVED,
that the application by Globis Nevada to the Office of the Secretary of State in the State
of Nevada and in Gibraltar for the de-registration of Globis Nevada as a company registered
in the State of Nevada and for registration of Globis Nevada in Gibraltar and the continuance
as a public company limited by shares established under the laws of Gibraltar be and is hereby
approved.
In
order to effect the desired registration of Globis Nevada in Gibraltar and for the continuance of Globis Nevada under the laws of Gibraltar
in accordance with the Companies (Re-domiciliation) Regulations 1996 of Gibraltar as amended, the directors of Globis (or any of them)
and/or Hassans International Law Firm Limited, the legal and the other professional advisers of Globis in the name of and on behalf of
Globis Nevada, be and are hereby authorized to:
(a)
apply for the consent of the Registrar of Companies in Gibraltar for registration in Gibraltar and for the continuance of Globis Nevada
under the laws of Gibraltar;
(b)
file with the Registrar of Companies in Gibraltar the appropriate Form 442A;
(c)
file with the Gibraltar authorities any and all documents required to be filed pursuant to the Companies (Re-domiciliation) Regulations
1996 and pursuant to the Companies Act 2014 (as amended from time to time);
(d)
obtain from the Registrar of Companies in Gibraltar a certificate of continuance for Globis Nevada;
(e)
forward a copy of such certificate of continuance to the Secretary of State of Nevada and to obtain from the Secretary of State of Nevada
a certificate of continuance of a company overseas and thereafter a certificate (or other evidence) of discontinuance as a company registered
in the State of Nevada; and
(f)
do all other acts as may be necessary or desirable in connection with the foregoing and the Re-domiciliation generally.
Subject
to the receipt by Globis Nevada of the certificate of continuance of Globis Nevada evidencing the registration of Globis Nevada in Gibraltar
and the continuance of Globis Nevada in Gibraltar under the laws of Gibraltar, the registered office of Globis Nevada shall be Madison
Building, Midtown, Queensway, Gibraltar GX11 1AA, Gibraltar.
That
the name of Globis Nevada upon and following the Re-domiciliation of Globis Nevada to Gibraltar will be “Forafric Global PLC.”
That
the shareholders upon and following the re-domiciliation of Globis Nevada to Gibraltar will remain shareholders at the time of the Re-domiciliation.
That the company secretary
of Globis Nevada upon and following its Re-domiciliation to Gibraltar, will be Line Secretaries Limited of 57/63 Line Wall Road, Gibraltar
GX11 1AA and that the existing registered agent shall therefore be removed as registered agent upon and following the conclusion of the
Re-domiciliation.”
That
the Memorandum and Articles of Association be adopted upon the registration of Globis Nevada in Gibraltar and the continuance of Globis
Nevada in Gibraltar under the laws of Gibraltar as Memorandum and Articles of Association of Globis Nevada in substitution for and to
the entire exclusion of the existing Articles of Incorporation, bylaws and/or all other constitutional documents of Globis Nevada.”
Vote
Required for Approval with Respect to the Redomiciliation Proposal
The
approval of the Redomiciliation Proposal will require the affirmative vote of the holders of a majority of the outstanding shares of
Globis Common Stock, voting together as a single class. Thus, with respect to the Redomiciliation Proposal, abstentions and broker non-votes
will count as a vote “AGAINST” this proposal.
Recommendation
of the Globis Board with Respect to the Redomiciliation Proposal
THE
GLOBIS BOARD UNANIMOUSLY RECOMMENDS THAT stockholderS VOTE “FOR” THE REDOMICILIATION
PROPOSAL.
PROPOSAL
3: THE BUSINESS COMBINATION PROPOSAL
Overview
Globis
is asking its stockholders to adopt and approve the Business Combination Agreement, certain related agreements and the transactions contemplated
thereby (including the Business Combination). Globis stockholders should read carefully this proxy statement/prospectus in its entirety
for more detailed information concerning the Business Combination Agreement, which is attached as Annex A to this proxy
statement/prospectus, and the transactions contemplated thereby. Please see “ — The Business Combination Agreement”
below for additional information and a summary of certain terms of the Business Combination Agreement. You are urged to read carefully
the Business Combination Agreement in its entirety before voting on this proposal.
We
may complete the Business Combination only if it is approved by holders of a majority, as of the Record Date, of the Globis Shares that
are present and vote at the Stockholders Meeting. If any of the Redomiciliation Proposal, the Business Combination Proposal, the Equity
Incentive Plan Proposal, the Director Election Proposal, the Charter Proposal or the Nasdaq Proposal fail to receive the required approval
by the stockholders of Globis at the Stockholders Meeting, the Business Combination will not be completed.
The
Business Combination Agreement
This
section describes the material provisions of the Business Combination Agreement, but does not purport to describe all of the terms of
the Business Combination Agreement. The following summary is qualified in its entirety by reference to the complete text of the Business
Combination Agreement, which is attached as Annex A to this proxy statement/prospectus. You are urged to read the Business
Combination Agreement in its entirety because it is the primary legal document that governs the Business Combination. Unless otherwise
defined herein, the capitalized terms used in this section “Proposal 3: The Business Combination Proposal — The Business
Combination Agreement” not defined herein are defined in the Business Combination Agreement.
The
Business Combination Agreement contains representations, warranties and covenants that the respective parties made to each other as of
the date of the Business Combination Agreement or other dates specified therein. The assertions embodied in or by those representations,
warranties and covenants were made for purposes of the contract among the respective parties thereto and are subject to important qualifications
and limitations agreed to by the parties in connection with negotiating, and as set forth in, the Business Combination Agreement. The
representations, warranties and covenants in the Business Combination Agreement are also modified in part by the underlying disclosure
schedules, which are not filed publicly and which are subject to a contractual standard of materiality different from the standard generally
applicable to stockholders and were used for the purpose of allocating risk among the parties to the Business Combination Agreement rather
than establishing matters as facts. Additionally, the representations and warranties of the parties to the Business Combination Agreement
may or may not have been accurate as of any specific date and do not purport to be accurate as of the date of this proxy statement/prospectus.
Accordingly, no person should rely on the representations and warranties in the Business Combination Agreement or the summaries thereof
in this proxy statement/prospectus as characterizations of the actual state of facts about Globis, the Sponsor, the Seller, FAHL, any
of their respective affiliates or subsidiaries or any other matter.
On
December 19, 2021, Globis, the Seller and FAHL entered into the Business Combination Agreement, which provides for, among other things,
the following transactions: (a) Globis will form under the laws of the State of Nevada a wholly-owned subsidiary of Globis, or Globis
Nevada, change its jurisdiction of incorporation to Nevada by merging with and into Globis Nevada such that Globis Nevada will survive
the merger, and 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, referred to herein as the “Redomiciliation” and change its name to “Forafric
Global PLC,” referred to herein as New Forafric; and (b) immediately following the effectiveness of the Redomiciliation, New Forafric
will acquire 100% of the equity interests in FAHL from the Seller.
In
connection with the Business Combination, certain related agreements have been, or will be entered into on or prior to the closing of
the Business Combination, including the Subscription Agreements, the Lock-Up Agreements and the Sponsor Letter Agreement (each as defined
in the accompanying proxy statement/prospectus). See “— Related Agreements” for more information.
Existing
Organizational Structure
The
diagrams below depict simplified versions of the current organizational structures of Globis and FAHL, respectively.
Organizational
Structure Following the Business Combination
The
diagram below depicts a simplified version of our organizational structure immediately following the completion of the Redomiciliation
and the Business Combination.
Effect
of the Redomiciliation on Existing Globis Equity in the Business Combination
The
Redomiciliation will result in, among other things, the following, each of which will occur prior to the Effective Time on the Closing
Date:
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each
share of Common Stock of Globis that is issued and outstanding immediately prior to the Redomiciliation shall become one ordinary
share of New Forafric;
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●
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each
Warrant that is outstanding immediately prior to the Redomiciliation will, from and after the Redomiciliation, represent the right
to purchase one Ordinary Share of New Forafric, at the exercise price of $11.50 per share, on the terms and subject to the conditions
set forth in the Warrant Agreement; and
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●
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the
existing governing documents of Globis will be amended and restated and become the Memorandum and Articles of Association as described
in this proxy statement/prospectus and Globis’ name will change to “Forafric Global PLC”
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Business
Combination Consideration
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 Globis or Globis’
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 New Forafric 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. The Seller will also be entitled to receive, as additional consideration, and without any action on behalf of New Forafric
or New Forafric’s stockholders, 20% of any cash proceeds received by New Forafric from the exercise of New Forafric’s outstanding
warrants.
Aggregate
Transaction Proceeds
The
Aggregate Transaction Proceeds will be used to pay off existing debt of FAHL and its subsidiaries as of the Effective Time, and for general
corporate purposes after the Business Combination.
Closing
and Effective Time of the Business Combination
The
Closing of the transactions contemplated by the Business Combination Agreement is required to take place electronically by exchange of
the closing deliverables on the third (3rd) business day following the satisfaction (or, to the extent permitted by applicable law, waiver)
of the conditions described below under the section entitled “— Conditions to Closing of the Business Combination”
(other than those conditions that by their nature are to be satisfied at the Closing, but subject to satisfaction or waiver of such conditions)
or at such other place, date and/or time as Globis and FAHL may agree in writing.
Conditions
to Closing of the Business Combination
Conditions
to Each Party’s Obligations
The
respective obligations of each party to the Business Combination Agreement to consummate the transactions contemplated by the Business
Combination Agreement are subject to the satisfaction or, if permitted by applicable law, waiver by the party for whose benefit such
condition exists of the following conditions:
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no
order or law issued by any court of competent jurisdiction or other governmental entity or other legal restraint or prohibition preventing
the consummation of the transactions contemplated by the Business Combination Agreement being in effect;
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●
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this
registration statement of which this proxy statement/prospectus forms a part becoming effective in accordance with the provisions
of the Securities Act, no stop order being issued by the SEC and remaining in effect with respect to this registration statement
of which this proxy statement/prospectus forms a part, and no proceeding seeking such a stop order being threatened or initiated
by the SEC and remaining pending;
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the
approval of each Condition Precedent Proposal by the affirmative vote of the holders of the requisite number of common stock of Globis
entitled to vote thereon being obtained in accordance with Globis’ governing documents and applicable law; and
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after
giving effect to the transactions contemplated by the Business Combination Agreement (including the PIPE Investment), Globis having
at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) immediately after
the Effective Time of the Business Combination.
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Other
Conditions to the Obligations of Globis
The
obligations of Globis to consummate the transactions contemplated by the Business Combination Agreement are subject to the satisfaction
or, if permitted by applicable law, waiver by Globis of the following further conditions:
Other
Conditions to the Obligations of FAHL and Seller
The
obligations of FAHL and Seller to consummate the transactions contemplated by the Business Combination Agreement are subject to the satisfaction
or, if permitted by applicable law, waiver by Seller of the following further conditions:
Representations
and Warranties
Under
the Business Combination Agreement, each of FAHL and Seller made customary representations and warranties to Globis relating to, among
other things: organization and qualification; capitalization; authorization; financial statements and absence of undisclosed liabilities,
consents and approvals; permits; material contracts; absence of certain changes; litigation; compliance with law; employee plans; environmental
matters; intellectual property; labor matters; insurance; tax matters; brokers; real and personal property; transactions with affiliates;
data privacy and security; compliance with international trade and anti-corruption laws; information supplied; regulatory compliance;
affiliated provider practices; and investigation.
Under
the Business Combination Agreement, Globis made customary representations and warranties to FAHL relating to, among other things: organization
and qualification; authorization; consent and approvals; brokers; information supplied; capitalization; SEC filings; the Trust Account;
transactions with affiliates; litigation; compliance with law; business activities; internal controls, listing and financial statements;
absence of undisclosed liabilities; compliance with international trade and anti-corruption laws; and investigation.
Material
Adverse Effect
Under
the Business Combination Agreement, certain representations and warranties of FAHL, Seller and Globis are qualified in whole or in part
by materiality thresholds. In addition, certain representations and warranties of FAHL, Seller and Globis are qualified in whole or in
part by a material adverse effect standard for purposes of determining whether a breach of such representations and warranties has occurred.
Pursuant
to the Business Combination Agreement, a “ Material Adverse Effect” means any change, effect, event, occurrence, state
of facts or development that was, is, or would reasonably be expected to be materially adverse to the results of operations, condition
(financial or otherwise), Business, or assets or liabilities of the Acquired Companies (as defined therein), taken as a whole; provided
that any adverse change, effect, event, occurrence, state of facts or development attributable to the following will not constitute,
and will not be taken into account in determining whether there has been or will be, a Material Adverse Effect: (a) changes in conditions
generally affecting the economy as a whole or the capital, credit or financial markets in general or the markets in which the Acquired
Companies operate, including changes in interest rates; (b) any change in accounting requirements or principles or any change in applicable
Laws (including IFRS or GAAP) or the interpretation thereof by a Governmental Authority; (c) actions required to be taken under applicable
Laws; (d) any acts of war (whether or not declared), armed hostilities, sabotage or terrorism or the continuation, escalation or worsening
of any such acts of war, armed hostilities, sabotage or terrorism; (e) changes in political or social conditions, including, any natural
disaster, earthquake, hurricane, tsunami, tornado, flood, mudslide, wild fire or other natural disaster or act of God, political instability,
epidemic or pandemic (including, before the Signing Date, the COVID-19 pandemic), or any worsening of any of the foregoing, whether or
not occurring or commenced before or after the Signing Date; (f) changes in the markets in which the Acquired Companies operate, including
changes in the cost of raw materials or other inputs or in the generally available selling prices for products produced by them; or (g)
the failure by the Acquired Companies to meet any projections, estimates or budgets (but not the underlying cause or event of such failure
to meet any internal projection or forecast if the same would otherwise constitute a Material Adverse Effect); provided, further, that
any change, effect, event, occurrence, state of facts or development described in clauses (a) through (f) above will not be precluded
from being or having, or taken into account in determining whether there has been or will be, a “Material Adverse Effect”
if it disproportionately adversely impacts the Acquired Companies when compared to other similarly situated businesses.
Under
the Business Combination Agreement, certain representations and warranties of Globis are qualified in whole or in part by a material
adverse effect standard for purposes of determining whether a breach of such representations and warranties has occurred. Pursuant to
the Business Combination Agreement, a “Buyer Material Adverse Effect” means a material adverse effect on the ability
of Globis to consummate the transactions contemplated by this Agreement and perform all of its obligations hereunder.
Covenants
of the Parties
Covenants
of Seller
Seller
made certain covenants under the Business Combination Agreement, including, among others, the following:
Covenants
of Globis
Globis
made certain covenants under the Business Combination Agreement, including, among others, the following:
Mutual
Covenants of the Parties
The
parties to the Business Combination Agreement made certain covenants under the Business Combination Agreement, including, among others,
the following:
In
addition, the parties agreed that Globis and FAHL will prepare and mutually agree upon and Globis will file with the SEC, this registration
statement of which this proxy statement/prospectus forms a part on Form S-4 relating to the Business Combination.
Board
of Directors
Pursuant
to the Business Combination Agreement, the parties agreed, upon Closing, that the New Forafric Board (and committees of the New Forafric
Board) and officers shall consist of two persons to be appointed by the Sponsors and the remaining members nominated by the Seller.
All directors will have a three-year term on the New Forafric Board.
Survival
of Representations, Warranties and Covenants
The
representations and warranties of the parties pursuant to the Business Combination Agreement will survive the Closing until 11:59 p.m.
Eastern Time on the date that is 12 months after the Closing Date, except that Buyer Fundamental Representations and the Seller Fundamental
Representations (as defined therein) will survive the Closing until 11:59 p.m. Eastern Time on the date that is 48 months after the Closing
Date. The covenants, obligations, and agreements to be performed under the Business Combination Agreement (a) at or before the Closing
will survive the Closing until 11:59 p.m. Eastern Time on the date that is 12 months after the Closing Date and (b) in whole or in part
after the Closing Date will survive the Closing until the end of the period of applicable performance or until otherwise fully performed
or waived by the Party with the authority to make such waiver.
Termination
The
Business Combination Agreement may be terminated at any time prior to the Closing under certain circumstances, including, among others,
(i) by mutual written consent of Globis and the Seller, or (ii) by either Globis or the Seller if the Closing has not occurred on or
before March 15, 2022 (or until June 15, 2022, if Globis’ Board of Directors (in its sole discretion) has extended the period
of time to consummate a business combination in accordance with its organizational documents, or such later date as Globis and the Seller
may mutually agree), provided that such right to terminate is not available to Globis or the Seller if such party’s breach of the
Business Combination Agreement has directly caused the failure of, or has prevented, the consummation of the transactions contemplated
by the Business Combination Agreement to occur by such date.
Expenses
The
fees and expenses incurred in connection with the Business Combination Agreement and the applicable ancillary documents, and, in each
case, the transactions contemplated thereby, including the fees and disbursements of counsel, financial advisors and accountants, will
be paid by the party incurring such fees or expenses; provided that, (i) if the Business Combination Agreement is terminated in accordance
with its terms, Seller or FAHL shall pay, or cause to be paid, all unpaid fees and expenses incurred by or on behalf of Seller and any
Group Company in connection with the transactions contemplated by the Business Combination Agreement (the “Company Expenses”)
and Globis shall pay, or cause to be paid, all unpaid fees and expenses incurred by or on behalf of Globis in connection with the transactions
contemplated by the Business Combination Agreement (the “Globis Expenses”) and (ii) if the Closing occurs, then New
Forafric shall pay, or cause to be paid, all Company Expenses and all Globis Expenses.
Governing
Law
All
matters relating to the interpretation, construction, validity and enforcement of the Business Combination Agreement will be governed
by and construed in accordance with the domestic Laws of the State of New York without giving effect to any choice or conflict of Law
provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of Laws of any jurisdiction
other than the State of New York (except that the Laws of Gibraltar and the Laws of the State of Nevada shall also apply to the Redomiciliation).
Amendments
The
Business Combination Agreement not be modified, amended, supplemented, canceled, or discharged, except by written instrument executed
by each of the Seller and Globis. No failure to exercise, and no delay in exercising, any right, power, or privilege under the Business
Combination Agreement will operate as a waiver, nor will any single or partial exercise of any right, power, or privilege hereunder
preclude the exercise of any other right, power, or privilege. No waiver of any breach of any provision will be deemed to be a waiver
of any preceding or succeeding breach of the same or any other provision, nor will any waiver be implied from any course of dealing between
the parties to the Business Combination Agreement. No extension of time for performance of any obligations or other acts hereunder or
under any other agreement will be deemed to be an extension of the time for performance of any other obligations or any other acts. No
waiver by any of the parties of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by
the party sought to be charged with such waiver.
Ownership
of New Forafric
As of the date of this proxy
statement/prospectus, there are 15,050,833 shares of common stock issued and outstanding. As of the date of this proxy statement/prospectus,
there is outstanding an aggregate of 15,789,722 warrants, comprised of 4,289,722 private placement warrants held by Sponsors and 11,500,000
public warrants. Each whole warrant entitles the holder thereof to purchase one share of Common Stock and, following the Merger and
Redomiciliation, will entitle the holder thereof to purchase one ordinary share of New Forafric. Therefore, as of the date of this
proxy statement/prospectus (without giving effect to the Business Combination and assuming that none of Globis’ outstanding Common
Stock are redeemed in connection with the Business Combination), Globis’ fully-diluted share capital would be 30,900,555 shares
of Common Stock.
The
following table illustrates varying ownership levels in New Forafric’ Ordinary Shares immediately following the consummation
of the Business Combination, assuming varying levels of redemptions by the Public Stockholders and that the Business Combination and
the transactions contemplated by the Business Combination Agreement are consummated in accordance with the terms of the Business Combination
Agreement.
|
|
|
Assuming
No
Redemptions
|
|
|
Assuming
Maximum
Redemptions(1)
|
|
|
|
|
Shares
|
|
|
%
|
|
|
Shares
|
|
|
%
|
|
|
Globis’ Public Stockholders(1)
|
|
|
11,500,000
|
|
|
|
33.5
|
%
|
|
|
0
|
|
|
|
0.0
|
%
|
|
Sponsors and Independent
Directors(2)(3)
|
|
|
3,148,333
|
|
|
|
9.2
|
%
|
|
|
3,148,333
|
|
|
|
13.4
|
%
|
|
Underwriter
|
|
|
402,500
|
|
|
|
1.2
|
%
|
|
|
402,500
|
|
|
|
1.7
|
%
|
|
Seller(4)
|
|
|
15,100,000
|
|
|
|
44.0
|
%
|
|
|
16,248,307
|
|
|
|
69.4
|
%
|
|
PIPE Investors(5)
|
|
|
1,712,245
|
|
|
|
5.0
|
%
|
|
|
1,168,566
|
|
|
|
5.0
|
%
|
|
FAHL Bond Holders(6)
|
|
|
1,005,291
|
|
|
|
2.9
|
%
|
|
|
1,005,291
|
|
|
|
4.3
|
%
|
|
FAHL Related Party Loan
Holders(7)
|
|
|
1,445,164
|
|
|
|
4.2
|
%
|
|
|
1,445,164
|
|
|
|
6.2
|
%
|
|
|
(1)
|
Assumes
that 11,500,000 Public Shares (the estimated maximum number of Public Shares that could be redeemed in connection with the Business
Combination based on a per share redemption price of $10.20) are redeemed in connection with the Business Combination.
|
|
|
(2)
|
Includes
3,148,333 Ordinary Shares issued upon conversion of the existing Common Stock in connection with the Redomiciliation. The Ordinary
Shares are issued upon the automatic conversion of Common Stock concurrently with the consummation of the Business Combination.
|
|
|
(3)
|
Excludes
1,005,291 Ordinary Shares issuable upon the conversion of the FAHL Bonds (as defined in the accompanying proxy statement/prospectus)
purchased by certain affiliates of the Sponsors.
|
|
|
(4)
|
Assumes
an amount of Remaining Cash (as defined in the Business Combination Agreement) at the Closing
based on Remaining Cash as of September 30, 2021.
|
|
|
(5)
|
Pursuant
to the terms of the PIPE Subscription Agreement, calculated as 4.99% of all issued and outstanding ordinary shares, after taking
into account the completion of the Business Combination and related transactions.
|
|
|
(6)
|
Represents
the number of Ordinary Shares issuable upon the conversion of the FAHL Bonds.
|
|
|
(7)
|
Represents
the number of Ordinary Shares issuable upon the conversion of the FAHL Related Party Loans (as defined in the accompanying proxy
statement/prospectus).
|
Certain
Agreements Related to the Business Combination
This
section describes the material provisions of certain additional agreements entered into or to be entered into pursuant to the Business
Combination Agreement (the “Related Agreements”) but does not purport to describe all of the terms thereof or include all
of the additional agreements entered into or to be entered into pursuant to the Business Combination Agreement. The following summary
is qualified in its entirety by reference to the complete text of each of the Related Agreements. Stockholders and other interested parties
are urged to read such Related Agreements in their entirety.
Registration
Rights Agreement
Globis
and certain equityholders of Globis (Sponsor and each of the directors and executive officers of Globis) have entered into the Registration
Rights Agreement, a copy of which is attached as Annex G to this proxy statement/prospectus, pursuant to which, among other
things, the Sponsors hold certain registration rights and certain preemptive rights with respect to its respective shares of Globis’
common stock.
In
particular, the Registration Rights Agreement provides for the following:
|
|
●
|
Demand
registration rights. At any time after the period commencing from the Closing and through the date that is thirty (30) days from
the date of the Closing (the “Registration Rights Agreement Lock-Up Period”), Globis will be required, upon the written
request of the requisite number of holders of such rights, to file a registration statement and use reasonable best efforts to effect
the registration of all or part of their registrable securities, including, under certain circumstances, the offering of such registrable
securities in the form of an underwritten offering. Globis is not obligated to effect (i) more than one demand registration during
any six-month period or (ii) any demand registration if an effective registration statement on Form S-3 or its successor form, or,
if Globis is ineligible to use Form S-3, a registration statement on Form S-1, for an offering to be made on a continuous basis pursuant
to Rule 415 of the Securities Act registering the resale from time to time of all of the registrable securities then held by participating
Stockholders that are not covered by an effective resale registration statement (a “Resale Shelf Registration Statement”)
already on file with the SEC.
|
|
|
|
|
|
|
●
|
Piggy-back
registration rights. At any time after the Closing Date, if Globis proposes to file a registration statement to register any
of its equity securities under the Securities Act or to conduct a public offering, either for its own account or for the account
of any other person, subject to certain exceptions, the holders of registrable securities are entitled to include their registrable
securities in such registration statement.
|
|
|
|
|
|
|
●
|
Expenses
and indemnification. All fees, costs and expenses of underwritten registrations will be borne by Globis and underwriting discounts
and selling commissions will be borne by the holders of the shares being registered. The Registration Rights Agreement contains customary
cross-indemnification provisions, under which Globis is obligated to indemnify holders of registrable securities in the event of
material misstatements or omissions in the applicable registration statement attributable to Globis, and holders of registrable securities
are obligated to indemnify Globis for material misstatements or omissions attributable to them.
|
|
|
|
|
|
|
●
|
Registrable
securities. Securities of Globis shall cease to be registrable securities when (i) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) such securities shall have been otherwise transferred, new certificates or book-entry positions
for them not bearing a legend restricting further transfer shall have been delivered by Globis and subsequent public distribution
of them shall not require registration under the Securities Act or (iii) such securities shall have ceased to be outstanding.
|
Lock-Up
Agreement
At
the Closing, Seller and the Sponsors will execute and deliver to New Forafric the Lock-Up Agreement, substantially in the forms attached
to this proxy statement/prospectus as Annexes D and E, pursuant to which, among other things, the Seller
and Sponsors will agree not to, subject to certain exceptions set forth in the Lock-Up Agreement, during the period commencing from the
Closing and through the date that is 180 days from the date of the Closing (the “Lock-Up Period”): (i) sell, offer to sell,
contract, or agree to sell, hypothecate, pledge, grant any option to purchase, or otherwise transfer or dispose of or agree to transfer
or dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Exchange Act with respect to, any portion of New Forafric’s Ordinary Shares, or
(ii) enter into any swap or other contract that transfers to another, in whole or in part, any of the economic consequences of ownership
of any of the Ordinary Shares, whether any such transaction is to be settled by delivery of Ordinary Shares or such other equity securities,
in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii). Any waiver
by New Forafric of the provisions of the Lock-Up Agreement requires the approval of a committee consisting of (a) Paul Packer and another
individual designated by Paul Packer, and (b) two “independent” directors of Globis as of after the Closing, who shall be
agreed to by each of Globis and FAHL before the Closing.
Sponsor
Letter Agreement
In
connection with the IPO, the Sponsors, certain other holders of Common Stock and Globis entered into the Sponsor Letter Agreement. Under
the Sponsor Letter Agreement, the Sponsors agreed to (i) vote in favor of the Business Combination Agreement and the transactions contemplated
thereby (including the Business Combination), (ii) be bound by certain other covenants and agreements related to the Business Combination
and (iii) be bound by certain transfer restrictions with respect to his, her or its shares in Globis prior to the Closing Date, or the
earlier termination of the Business Combination Agreement.
The
Sponsor Letter Agreement is attached to this proxy statement/prospectus as Annex F and is incorporated by reference as
an exhibit to the registration statement of which this proxy statement/ prospectus forms a part.
Interests
of Globis’ Directors and Officers and Others in the Business Combination
When
you consider the recommendation of the Globis Board in favor of approval of the Business Combination Proposal, you should keep in mind
that Globis’ directors and officers may have interests in such proposal that are different from, or in addition to, those of Globis
stockholders and warrant holders generally. These interests include, among other things, the interests listed below:
|
|
●
|
If
Globis does not complete an initial business combination transaction by March 15, 2022 (or June 15, 2022, if Globis Board extends
the period of time to consummate a business combination), Globis will cease all operations except for the purpose of winding up,
redeeming all of the outstanding Public Shares for cash and, subject to the approval of the Globis Board and Globis’ remaining
shareholders, dissolving and liquidating, subject in each case to its obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable laws. In such event, the 3,047,500 shares of Common Stock (Founder Shares) owned by the
Sponsors and Globis’ independent directors would be worthless because, following the Redemption of the Public Shares, Globis
would likely have few, if any, net assets and because the Sponsors and Globis’ independent directors have agreed, in the Sponsor
Letter Agreement, to waive their rights to liquidating distributions from the Trust Account with respect to the shares of common
stock if Globis fails to complete a Business Combination within the required period. The Sponsors purchased the shares of Common
Stock prior to Globis’ IPO for an aggregate purchase price of $26,500, or approximately $0.001 per share. Such shares of Common
Stock had an aggregate market value of $ million based upon the closing price of $ per
share on Nasdaq on , 2022, the most recent closing price.
|
|
|
|
|
|
|
●
|
The
Sponsors paid $3.14 million for its Private Placement of 4,188,889 Private Placement Warrants to purchase Common Stock and such Private
Placement Warrants will expire worthless if an initial business combination is not consummated by March 15, 2022 (or June 15, 2022,
if Globis Board extends the period of time to consummate a business combination).
|
|
|
●
|
Up
and Up Capital, LLC purchased an aggregate of 100,833 Private Placement Units at a purchase price of $10.00 per Private Placement
Unit, or $1,008,333 in the aggregate, which each Private Placement Unit consists of one share of Common Stock and one redeemable
warrant entitling the holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment. The Common
Stock will be worthless and the warrants will expire worthless if an initial business combination is not consummated by March 15,
2022 (or June 15, 2022, if Globis’ Board of Directors extends the period of time to consummate a business combination).
|
|
|
|
|
|
|
●
|
Affiliates
of the Sponsors, in aggregate, have purchased $9.5 million in FAHL Bonds and will acquire at the Closing, in accordance with
the FAHL Bonds, 1,005,291 Ordinary Shares.
|
|
|
|
|
|
|
●
|
Paul
Packer, Chief Executive Officer, Chief Financial Officer and director of Globis, is expected to be a director of New Forafric after
the consummation of the Business Combination. As such, in the future, he may receive cash fees, stock options, stock awards or other
remuneration that New Forafric Board determines to pay to its directors.
|
|
|
|
|
|
|
●
|
The
Sponsors and Globis’ officers, directors or their affiliates have made Working Capital Loans prior to the Closing of the Business
Combination, which may not be repaid if the Business Combination is not completed. As of September 30, 2021, Globis has issued
promissory notes in the aggregate amount of $700,000 to Globis SPAC LLC and its designees. In addition, $1,150,000 of indebtedness
was incurred on December 10, 2021 in connection with the extension of the time that Globis needs to complete its initial business
combination to March 15, 2022.
|
|
|
|
|
|
|
●
|
Globis’
existing directors and officers will be eligible for continued indemnification and continued coverage under Globis’ directors’
and officers’ liability insurance after the Business Combination.
|
|
|
|
|
|
|
●
|
In
order to protect the amounts held in the Trust Account, the Sponsors have agreed to be liable to Globis if and to the extent any
claims by a vendor for services rendered or products sold to Globis, or a prospective target business with which Globis has discussed
entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.10 per Public Share or (ii)
such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions
in the value of trust assets, in each case net of the interest which may be withdrawn to pay Globis’ tax obligation and up
to $100,000 for liquidation excepts, except as to any claims by a third party who executed a waiver of any and all rights to seek
access to the Trust Account (even if such waiver is deemed to be unenforceable) and except as to any claims under Globis’ indemnity
of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act.
|
|
|
|
|
|
|
●
|
Following
completion of the Business Combination, the Sponsor, Globis’ officers and directors and their respective affiliates will be
entitled to reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and completing an initial
business combination (which will be the Business Combination should it occur), and repayment of any other loans, if any, and on such
terms as to be determined by Globis from time to time, made by the Sponsor or certain of Globis’ officers and directors to
finance transaction costs in connection with an intended initial business combination (which will be the Business Combination should
it occur). If Globis fails to complete a Business Combination within the required period, the Sponsors and Globis’ officers
and directors and their respective affiliates will not have any claim against the Trust Account for reimbursement.
|
|
|
|
|
|
|
●
|
Pursuant
to the Registration Rights Agreement, the Sponsors and certain of Globis’ directors and officers will have customary registration
rights, including demand and piggy-back rights, subject to cooperation and cut-back provisions with respect to the Ordinary Shares
and warrants of New Forafric held by such parties.
|
Globis’
directors and executive officers have agreed to vote all of their Common Stock in favor of the proposals being presented at the Stockholders
Meeting and waive their redemption rights with respect to such ordinary shares in connection with the consummation of the Business Combination.
As of the date of this proxy statement/prospectus, Globis’ directors and executive officers beneficially own approximately 20%
of the issued and outstanding Common Stock.
At any time at or prior to the
Business Combination, during a period when they are not then aware of any material nonpublic information regarding us or our securities,
the Sponsors or their respective affiliates may purchase Public Shares from institutional and other investors who vote, or indicate an
intention to vote, against any of the Condition Precedent Proposals, or execute agreements to purchase such shares from such investors
in the future, or they may enter into transactions with such investors and others to provide them with incentives to acquire Public Shares
or vote their Public Shares in favor of the Condition Precedent Proposals. Such a purchase may include a contractual acknowledgement
that such shareholder, although still the record or beneficial holder of such Public Shares, is no longer the beneficial owner thereof
and therefore agrees not to exercise its Redemption Rights. In the event that the Sponsors or their respective affiliates purchase shares
in privately negotiated transactions from Public Stockholders who have already elected to exercise their Redemption Rights, such selling
shareholder would be required to revoke their prior elections to redeem their shares. The purpose of such share purchases and other transactions
would be to increase the likelihood of satisfaction of the requirements that (1) a majority of the votes cast by the stockholders present
in person (which would include presence at a virtual meeting) or represented by proxy at the Stockholders Meeting, are voted in favor
of the Business Combination Proposal, the Equity Incentive Plan Proposal, the Organizational Documents Proposals, the Nasdaq Proposal
and the Adjournment Proposal, (2) holders of a majority of the outstanding shares of Globis Common Stock vote in favor of the Merger
Proposal, the Redomiciliation Proposal and the Charter Proposal, (3) the six directors named in the Director Election Proposal
are elected to serve on the Board of Directors of New Forafric, (4) otherwise limit the number of Public Shares electing to redeem and
(5) Globis’ net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) being at least $5,000,001.
Entering
into any such arrangements may have a depressive effect on the price of the Common Stock. For example, as a result of these arrangements,
an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely
to sell the shares he or she owns, either at or prior to the Business Combination.
If
such transactions are effected, the consequence could be to cause the Business Combination to be consummated in circumstances where such
consummation could not otherwise occur. Purchases of shares by the persons described above would allow them to exert more influence over
the approval of the proposals to be presented at the Stockholders Meeting and would likely increase the chances that such proposals would
be approved. We will file a Current Report on Form 8-K to disclose any material arrangements entered into or significant purchases made
by any of the aforementioned persons that would affect the vote on the Proposals or the redemption threshold. Any such report will include
descriptions of any arrangements entered into or significant purchases by any of the aforementioned persons.
The
existence of financial and personal interests of one or more of Globis’ directors may result in a conflict of interest on the part
of such director(s) between what he/she or they may believe is in the best interests of Globis and its stockholders and what he/she or
they may believe is best for himself/ herself or themselves in determining to recommend that stockholders vote for the proposals. In
addition, Globis’ officers have interests in the Business Combination that may conflict with your interests as a stockholder.
Exchange
Listing
Globis’
Units (each consisting of one share of Common Stock and one redeemable warrant), Common Stock and Warrants (each to purchase one share
of Common Stock) are currently traded on Nasdaq under the symbols “GLAQU” “GLAQ” and “GLAQW.” At
the closing of the Business Combination, Globis’ Units will separate into their component Ordinary Shares of New Forafric and warrants
so that the units will no longer trade separately under “GLAQU.” Globis has applied for the continued listing of New Forafric’s
Ordinary Shares and warrants on Nasdaq under the ticker symbols “AFRI” and “AFRIW,” respectively.
Background
of the Business Combination
Globis
is a blank check company incorporated under the laws of the State of Delaware on August 21, 2020 for the purpose of entering into a merger,
share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination. The terms
of the Business Combination Agreement are the result of extensive arm’s-length negotiations between Globis and the Seller and their
respective representatives. The following is a brief description of the background of these negotiations and summarizes the key meetings
and events that led to the signing of the Business Combination Agreement. The following chronology does not purport to catalogue every
conversation among the parties to the Business Combination Agreement or their representatives.
On
December 15, 2020, Globis consummated its IPO of 11,500,000 Units, including 1,500,000 Units as a result of the full exercise of the
underwriters’ over-allotment option. Each Unit consists of one share of common stock of Globis, $0.0001 par value per share, and
one Public Warrant, with each Public Warrant entitling the holder thereof to purchase one share of Common Stock at an exercise price
of $11.50 per share, subject to adjustment.
The
Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $115,000,000 (before underwriting discounts and
commissions and offering expenses). Simultaneously with the consummation of the IPO and the sale of the Units, Globis consummated a private
placement of 4,188,889 Private Placement Warrants at a price of $0.75 per Private Placement Warrant, issued to the Sponsors, generating
gross proceeds of $3,141,667. In addition, Up and Up Capital, LLC purchased an aggregate of 100,833 Placement Units at a purchase price
of $10.00 per Placement Unit, or $1,008,333 in the aggregate. Each Placement Unit consists of one share of Common Stock and one Private
Placement Warrant. Each Private Placement Warrant entitles the holders to purchase one share of Common Stock at a price of $11.50 per
share, subject to adjustment.
$116,150,000
of the net proceeds from the IPO and certain of the proceeds from the private placements with the Sponsors was deposited in the Trust
Account established for the benefit of Globis’ public stockholders.
Prior
to the consummation of its IPO, neither Globis, nor anyone on its behalf, contacted any prospective target business or had any substantive
discussions, formal or otherwise, with respect to a potential business combination with Globis.
After
the IPO, Globis engaged Valyans Consulting (“Valyans”) to identify companies in the North African region that would
be potential targets of a business combination. Valyans prepared a presentation on 10 companies. Of the potential targets, Globis expressed
interest in 5 of the companies, one of which was FAHL, and asked Valyans to prepare additional information on them and continued further
due diligence on them. Following receipt and review of this additional information, Globis determined that FAHL was the best candidate
for a potential business combination. Valyans subsequently made introductions between Globis and FAHL management.
On
February 12, 2021, Globis and FAHL executed a confidentiality agreement and subsequently FAHL provided representatives of Globis with
access to a data room and began to share confidential information regarding its business with Globis.
Thereafter,
and on various occasions through May 2021, the management teams of FAHL and Globis met, during which FAHL shared presentation materials
with Globis, and provided Globis with detailed company information regarding FAHL that included financial information and metrics about
FAHL and an overview of FAHL’s business and the markets in which it operates. Between February 15, 2021 and May 2021, Mr. Packer
engaged in discussions with representatives of FAHL regarding a potential business combination. During this time, Globis conducted further
financial and business due diligence on FAHL while at the same time reviewing other potential targets.
On
May 20, 2021, Globis’ legal advisor, McDermott Will & Emery LLP (“MWE”) sent FAHL’s legal advisor,
Hassans International Law Firm Limited (“FAHL Counsel”) a draft letter of intent regarding a potential business combination
between Globis and FAHL. The May 20, 2021 proposal included consideration to the Seller of 15,000,000 shares of Globis’ common
stock, $20,000,000 in cash, additional cash or stock consideration of $20,000,000 based on the amount of cash retained at closing of
the proposed business combination, as well as contingent consideration based on the exercise of Globis’ warrants and certain to-be-determined
financial and per-share targets after closing of the business combination. The proposal also contained provisions regarding governance,
lock-up periods, indemnification obligations (including an escrow of shares), and exclusivity, among other terms.
On
June 3, 2021, following discussions between representatives of Globis and FAHL, FAHL’s legal counsel sent a revised letter of intent
to Globis’ legal counsel, including an increase in the share consideration to be paid to the Seller at closing of the proposed
business combination to 15,100,000 shares of Globis’ common stock.
Prior
to the submission of a revised proposal, Mr. Packer updated the members of the Globis Board on the discussions with FAHL regarding a
potential business combination, including the status of Globis’ due diligence and the terms of the potential transaction.
On
June 6, 2021, following further discussions and negotiations between the parties, Globis’ legal counsel sent a revised letter of
intent to FAHL’s legal counsel. Globis’ June 6, 2021 proposal agreed to FAHL’s prior proposal as to the consideration
framework.
Between
June 7, 2021 and June 16, 2021, the parties further negotiated the letter of intent, and FAHL Counsel and MWE, exchanged drafts reflecting
the progressing discussions of the parties, including with respect to the indemnification construct and related matters. The parties
also continued due diligence activities and ongoing discussions regarding future value creation as well as began preparation of certain
investor materials.
On
June 16, 2021, the parties executed the letter of intent (the “Letter of Intent”), which included the financial terms
of the transaction. The Letter of Intent also set out the parties’ agreed framework with respect to post-closing governance of
the combined public company.
In
connection with the entry into the Letter of Intent, the Seller and FAHL agreed not to continue or engage in any discussions or negotiations,
or enter into any agreements, with respect to a competing transaction (including other M&A transactions), subject to certain exceptions,
including for preexisting competing buyers, until 45 days after the execution of the Letter of Intent.
Following
the execution of the Letter of Intent, Globis and its advisors continued their due diligence review of FAHL, including business, legal,
accounting, and tax due diligence, as well as due diligence calls with FAHL management.
On
July 1, 2021, MWE delivered an initial draft of the Business Combination Agreement to FAHL Counsel and FAHL’s US legal advisor
Cohen Tauber Spievack & Wagner P.C. (“CTSW”).
Between
July and December 2021, Globis and the Seller exchanged drafts of the Business Combination Agreement and drafts and/or summaries of the
ancillary documents, including New Forafric’s Memorandum and Articles of Association. The various drafts exchanged reflected the
parties’ negotiations on, among other things, the consideration structure, interim operating covenants, allocation of tax risk
and responsibility, treatment of tax benefits, post-closing governance matters, scope of registration rights and other matters.
On
December 10, 2021, Sponsor extended the time available to Globis to complete the Business Combination to March 15, 2022 by depositing
$1,150,000 into our trust account. In conjunction with the extension, Globis drew down $1,150,000 under an unsecured promissory note
that was previously issued to Globis SPAC LLC in exchange for depositing such amount into the trust account. The note is non-interest
bearing and due upon the consummation of a Business Combination.
On
December 16, the Globis Board met to review the terms of the proposed Business Combination with FAHL and the proposed final
definitive documentation. The Globis Board also reviewed proposed resolutions which would be adopted by the Globis Board in order to
approve the entry into the Business Combination Agreement and related transactions. During the meeting, Globis’ management
provided the Globis Board reiterated its prior overview of FAHL’s business, strategy, and future operating plans and
prospects, the results and findings of Globis’ due diligence process and financial analyses, The Globis Board unanimously
determined that it was in the best interests of Globis to proceed with executing a transaction on the terms discussed and based on
the documents reviewed, and authorized Globis’ officers to finalize the transaction.
On
December 19, 2021, the parties executed the Business Combination Agreement.
On
December 20, 2021, a press release was issued announcing the Business Combination. Shortly thereafter, Globis filed a current report
on Form 8-K attaching the press release and the Business Combination Agreement.
Globis
Board’s Reasons for the Approval of the Business Combination
In
evaluating the transaction with FAHL, the Globis Board consulted with Globis’ management and its legal counsel as well as other
advisors. The Globis Board considered and evaluated several factors, including, but not limited to, the factors discussed below. In light
of the number and wide variety of factors considered in connection with its evaluation of the Business Combination, the Globis Board
did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that
it considered in reaching its determination and supporting its decision. The Globis Board viewed its decision as being based on all the
information available and the factors presented to and considered by it. In addition, individual directors may have given different weight
to different factors. This explanation of reasons for the Business Combination and all other information presented in this section is
forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Note Regarding Forward-Looking
Statements.”
Before
reaching its decision, the Globis Board discussed the material results of its management’s due diligence activities, which included:
●
extensive meetings and calls with FAHL’s management team regarding
FAHL’s operations and projections, including interviews of top executives;
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research on the food, agriculture and soft commodities industry, including historical and projected growth
trends;
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financial and valuation analyses prepared by Globis management;
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the financial projections provided by FAHL discussed below;
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research on the public trading values of comparable peer companies as well as private transaction precedents;
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multiple site visits and tours of various FAHL facilities;
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financial, accounting, tax, IT and public-market readiness due diligence;
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engagement of MWE for legal due diligence; and
The
Globis Board considered a number of factors pertaining to the Business Combination as generally supporting its decision to enter into
the Business Combination Agreement, and the transactions contemplated thereby, including but not limited to, the following material factors
and viewpoints:
●
Leader in Wheat Milling. FAHL is a leader in the production and sale of a variety of wheat flours in Morocco, Semolina in Morocco and
Africa and Pasta & Couscous in Morocco and in several countries in Africa, Europe and the US. FAHL owns six milling plants across
Morocco (four dedicated to common wheat and two to durum wheat) with total processing capacity of 2,200 tons per day and a total milling
capacity of 700,000 tons per year.
●
Management. FAHL’s Chairman is Saad Bendidi who has turned around the profitability of FAHL over the last few years. The Globis
Board believes that he has assembled a strong leadership team to lead FAHL toward future growth and expansion.
●
Attractive valuation. The Globis Board reviewed the market capitalization, implied enterprise value and
revenue and Adjusted EBITDA multiples and other metrics of certain companies which Globis’ management believed had operational,
business and/or financial characteristics that, for purposes of its analyses, were similar to FAHL, based on its professional judgment
and expertise, and compared the same to the implied enterprise value and other metrics of FAHL determined in accordance with the internal
valuation analysis of Globis’ management.
●
Globis considered a basket of (i) agribusiness companies including Archer-Daniels Midland Co., The Mosaic Company, Bunge Ltd., Darling
Ingredients Inc., Adecoagro SA, The Andersons Inc., and S&W Seed Co. (together, “the Agri Comps”), (ii) diversified
food companies including General Mills Inc., Herc Holdings Inc., McCormick & Co.. Inc., Kellogg Co., Conagra Brands Inc., Campbell
Soup Co., The JM Smucker Co., Post Holdings Inc., Lancaster Colony Corp., TreeHouse Foods Inc., and B&G Foods Inc. (together “the
Diversified Food Comps”), and (iii) snacks/confectionary companies including Mondelez International Inc., Hershey Co., Flowers
Foods Inc., Simply Good Foods Co., J&J Snack Foods Corp., Utz Brands Inc., Hostess Brands Inc., and John B Sanfilippo & Son Inc.
(together “the Snack Comps”).
●
Globis reviewed FAHL against these companies using a number of metrics, including estimated compounded
annual growth rates, enterprise value, , estimated revenue and estimated Adjusted EBITDA.
●
Globis’ management estimated that FAHL’s implied post-transaction enterprise value of $300 million equaled 0.9 x estimated
2022 revenue. In comparison, the median of Agri Comps, the Diversified Food Comps and the Snack Comps was 1.2x, 2.3x and 2.7x respectively
or a total median of 2.1x. In addition, the implied post-transaction enterprise value of $300 million equaled 9.1x estimated 2022
adjusted EBITDA. In comparison, the median of the Agri Comps, the Diversified Food Comps and the Snack Comps was 7.1x, 11.9x, 16.7x
respectively or a total median of 12.3x. The estimated revenue compound annual growth rate (“CAGR”) from 2020-2024
for FAHL is 30.9% versus 6.9%, 1.7% and 5.0% for the Agri Comps, the Diversified Food Comps and the Snack Comps, respectively or a total
median of 4.3%. The estimated adjusted EBITDA CAGR from 2020-2024 for FAHL is 41.0% versus 19.2%, 1.8% and 7.9% for the
Agri Comps, the Diversified Food Comps and the Snack Comps, respectively or a total median of 6.4%. Based on the foregoing, Globis
believed that the valuation of FAHL was attractive relative to its peers.
●
Strong financial performance. The Globis Board considered FAHL’s strong financial position, including historical financial results,
outlook and financial plan, as well as valuations of future growth initiatives and acquisitions.
●
Multi-pronged growth strategy. The Globis Board noted FAHL’s growth strategy through developing new markets, cultivating organic
growth and acquisitions.
●
Terms of transaction. The Globis Board reviewed and considered the terms of the Business Combination Agreement
and related agreements, including the parties’ conditions to their respective obligations to complete the transactions contemplated
therein and their ability to terminate the agreement. See “—The Business Combination Agreement” and “—Certain
Agreements Related to the Business Combination” for detailed discussions of the terms and conditions of these agreements.
●
Results of due diligence process. The Globis Board considered the scope of the due diligence investigation conducted by Globis’
management and outside advisors and evaluated the results thereof and information available to it related to FAHL, including:
●
multiple meetings and calls with the FAHL management team regarding its operations, financial metrics, historical performance and financial
projections and the proposed transaction;
●
review of materials related to FAHL made available by FAHL, including strategic plans, key metrics and performance indicators, benefit
plans, insurance policies, litigation information, financial statements, compliance plans, risk mitigation materials and other financial
and legal diligence;
●
review of the due diligence reports of all third-party advisors;
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interviews with FAHL’s management as well as interviews of industry experts;
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analysis of industry competitors and publicly traded comparable companies; and
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research regarding the food, agriculture and soft commodities markets.
The
Globis Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination,
including, but not limited to, the following:
●
Future financial performance. The risk that future financial performance of FAHL may not meet the Globis
Board’s expectations due to factors in New Forafric’s control or out of its control, including due to economic cycles or
other macroeconomic factors.
●
COVID-19. Uncertainties regarding the potential impacts of the COVID-19 pandemic and related economic disruptions on FAHL’s operations
and demand for its services.
●
Competition for acquisitions. Food, agriculture and soft commodities companies that compete with FAHL may pursue acquisitions that FAHL
may otherwise have an interest in pursuing. Major competitors include Moulins du Maghreb, Zine Cereales, Rica Maroc, Casagrains and Dari
Couspate.
●
Potential benefits may not be achieved. The risk that the potential benefits of the Business Combination,
including FAHL’s future value-creation strategies and identified cost savings or revenue opportunities, may not be fully
achieved, or may not be achieved within the expected timeframe.
●
Liquidation of Globis. The risks and costs to Globis’ business if the Business Combination is not
completed, including the risk of diverting management focus and resources from other businesses combination opportunities, which could
result in our inability to effect a business combination by March 15, 2022 (or June 15, 2022 if the Globis Board decides to extend the
period of time to consummate a business combination) and force Globis to liquidate and the warrants to expire worthless.
●
Exclusivity. The fact that the Business Combination Agreement includes an exclusivity provision that prohibits Globis from soliciting
other business combination proposals.
●
Stockholder vote. The risk that Globis’ stockholders may fail to provide the respective votes necessary
to effect the Business Combination.
●
Closing conditions. The fact that completion of the Business Combination is conditioned on the satisfaction of certain closing conditions
that are not within Globis’ control.
●
Litigation. The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent injunctive
relief could indefinitely enjoin consummation of the Business Combination.
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Fees and expenses. The fees and expenses associated with completing the Business Combination.
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Other risks. Various other risks associated with the Business Combination, the business of Globis, and the business of FAHL described
in the section entitled “Risk Factors.”
In
addition to considering the factors described above, the Globis Board also considered that:
●
Interests of Certain Persons. Some officers and directors of Globis may have interests in the Business Combination that are in addition
to, and that may be different from, the interests of New Forafric’s stockholders (see — “Interests of Globis’
Directors and Officers and Others in the Business Combination”). Globis’ independent directors reviewed and considered
these interests during the negotiation of the Business Combination and in evaluating and unanimously approving, as members of the Globis
Board, the Business Combination Agreement and the transactions contemplated therein, including the Business Combination.
The
Globis Board concluded that the potential benefits that it expects New Forafric and its stockholders to achieve as a result of the Business
Combination outweigh the risks associated with the Business Combination. Accordingly, the Globis Board unanimously determined that the
Business Combination Agreement, and the transactions contemplated thereby, including the Business Combination, are advisable, fair to,
and in the best interests of, Globis and its shareholders.
Cautionary
Note Regarding Unaudited Prospective Financial Information of FAHL
FAHL
does not as a matter of course make public projections as to future sales, earnings or other results. However, management prepared and
provided to members of the FAHL board of directors, FAHL financial advisors, members of the Globis board of directors and Globis’
financial advisors certain internal, unaudited prospective financial information in connection with the evaluation of the Business Combination.
FAHL management prepared such financial information based on their judgment and assumptions regarding the future financial performance
of FAHL. The inclusion of such information in this proxy statement/prospectus should not be regarded as an indication that FAHL or any
other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results.
The
unaudited prospective financial information is subjective in many respects. As a result, there can be no assurance that the prospective
results will be realized or that actual results will not be significantly higher or lower than estimated. Since the unaudited prospective
financial information covers multiple years, that information by its nature becomes less predictive with each successive year.
While
presented in this proxy statement/prospectus with numeric specificity, the information was based on numerous variables and assumptions
that are inherently uncertain and may be beyond the control of FAHL management, including, among other things, the matters described
in the sections entitled “Cautionary Note Regarding Forward-Looking Statements; “Market and Industry Data” and “Risk
Factors.” FAHL believes the assumptions in the prospective financial information were reasonable at the time the financial information
was prepared, given the information FAHL had at the time. However, important factors that may affect actual results and cause the results
reflected in the prospective financial information not to be achieved include, among other things, risks and uncertainties relating to
FAHL business, industry performance, the regulatory environment, and general business and economic conditions. The prospective financial
information also reflects assumptions as to certain business decisions that are subject to change. The unaudited prospective financial
information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines of the SEC, or
the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information.
However, in the view of FAHL management, such unaudited prospective financial information was prepared on a reasonable basis, reflects
the best available estimates and judgments at the time given, and presents, to the best of management’s knowledge and belief, the
expected course of action and the expected future financial performance of FAHL. However, this information is not fact and should not
be relied upon as being necessarily indicative of future results, and readers of this proxy statement/consent solicitation statement/prospectus
are cautioned not to place undue reliance on the prospective financial information.
Neither
FAHL independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to
the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information
or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information. The
audit reports included in this proxy statement/consent solicitation statement/prospectus relate to historical financial information.
They do not extend to the prospective financial information and should not be read to do so.
EXCEPT
AS REQUIRED BY APPLICABLE SECURITIES LAWS, FAHL DOES NOT INTEND TO MAKE PUBLICLY AVAILABLE ANY UPDATE OR OTHER REVISION TO THE PROSPECTIVE
FINANCIAL INFORMATION. THE PROSPECTIVE FINANCIAL INFORMATION DOES NOT TAKE INTO ACCOUNT ANY CIRCUMSTANCES OR EVENTS OCCURRING AFTER THE
DATE THAT INFORMATION WAS PREPARED. READERS OF THIS PROXY STATEMENT/CONSENT SOLICITATION STATEMENT/PROSPECTUS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON THE UNAUDITED PROSPECTIVE FINANCIAL INFORMATION SET FORTH BELOW. NONE OF GLOBIS, FAHL NOR ANY OF THEIR RESPECTIVE AFFILIATES,
OFFICERS, DIRECTORS, ADVISORS OR OTHER REPRESENTATIVES HAS MADE OR MAKES ANY REPRESENTATION TO ANY FAHL STOCKHOLDER, GLOBIS STOCKHOLDER
OR ANY OTHER PERSON REGARDING ULTIMATE PERFORMANCE COMPARED TO THE INFORMATION CONTAINED IN THE PROSPECTIVE FINANCIAL INFORMATION OR
THAT FINANCIAL AND OPERATING RESULTS WILL BE ACHIEVED.
Certain
of the measures included in the prospective financial information may be considered non-GAAP financial measures. Non-GAAP financial measures
should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP
financial measures as used by FAHL may not be comparable to similarly titled amounts used by other companies. Financial measures provided
to a financial advisor in connection with a business combination transaction are excluded from the definition of non-GAAP financial measures
and therefore are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation
of a non-GAAP financial measure to a GAAP financial measure. Accordingly, we have not provided a reconciliation of such financial measures.
Satisfaction
of 80% Test
It
is a requirement under the Existing Organizational Documents that any business acquired by Globis have a fair market value equal to at
least 80% of the balance of the funds in the trust account at the time of the execution of a definitive agreement for an initial business
combination. Based on the financial analysis of FAHL generally used to approve the transaction, the Globis Board determined that this
requirement was met. The Globis Board determined that the consideration being paid in the Business Combination, which amount was negotiated
at arms-length, was fair to and in the best interests of Globis and its stockholders and appropriately reflected FAHL’s value.
In reaching this determination, the Globis Board concluded that it was appropriate to base such valuation in part on qualitative factors
such as management strength and depth, competitive positioning, customer relationships, and technical skills, as well as quantitative
factors such as FAHL’s historical growth rate and its potential for future growth in revenue and profits. The Globis Board believes
that the financial skills and background of its members qualify it to conclude that the acquisition of FAHL met this requirement and
make the other determinations regarding the transaction.
Material
U.S. Federal Income Tax Consequences of the Redomiciliation to Globis Stockholders.
The
following discussion is a summary of the material U.S. federal income tax considerations of the Business Combination to U.S. Holders
(as defined below) of Globis Common Stock and Globis Warrants (collectively “Globis securities”). The following discussion
also summarizes the material U.S. federal income tax consequences to U.S. Holders and Non-U.S. Holders (as defined below) of Globis Common
Stock that elect to have their Common Stock redeemed for cash and the material U.S. federal income tax consequences of the ownership
and disposition of New Forafric Ordinary Shares and New Forafric Warrants following the Business Combination. This discussion applies
only to Globis securities, New Forafric Ordinary Shares, and New Forafric Warrants, as the case may be, that are held as “capital
assets” within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) (generally,
property held for investment).
The
following does not purport to be a complete analysis of all potential tax effects arising in connection with the closing of the Business
Combination, the redemption of Globis Common Stock, or the ownership and disposition of New Forafric Ordinary Shares and New Forafric
Warrants. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local, or non-U.S.
tax laws are not discussed. This discussion is based on the Code, Treasury regulations promulgated thereunder, judicial decisions, and
published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”), in each case
in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing
interpretation may be applied retroactively in a manner that could adversely affect the tax consequences discussed below. Globis and
FAHL have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the
IRS will not take, or a court will not sustain, a contrary position regarding the tax consequences discussed below.
This
discussion does not address all U.S. federal income
tax consequences relevant to a holder’s particular circumstances, including the impact of the Medicare contribution tax on net
investment income and the alternative minimum tax. In addition, it does not address consequences relevant to holders subject to special
rules, including, without limitation:
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banks, insurance companies,
and certain other financial institutions;
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regulated investment companies
and real estate investment trusts;
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brokers, dealers, or traders
in securities;
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traders in securities that
elect to mark to market;
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tax-exempt organizations
or governmental organizations;
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U.S. expatriates and former
citizens or long-term residents of the U.S.;
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persons holding Globis securities or New Forafric
Ordinary Shares and/or New Forafric Warrants, as the case may be, as part of a hedge, straddle, constructive
sale, or other risk reduction strategy or as part of a conversion transaction or other integrated or similar transaction;
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persons subject to special
tax accounting rules as a result of any item of gross income with respect to Globis securities or New Forafric Ordinary Shares and/or
New Forafric Warrants, as the case may be, being taken into account in an applicable financial statement;
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persons that actually or
constructively own 5% or more (by vote or value) of the outstanding Globis Common Stock or, after the Business Combination, the issued
New Forafric Ordinary Shares;
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founders, sponsors, officers
or directors of Globis or holders of private placement warrants;
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“controlled foreign
corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal
income tax (and their shareholders);
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S corporations, partnerships,
or other entities or arrangements treated as partnerships or other flow-through entities for U.S. federal income tax purposes (and
investors therein);
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U.S. Holders having a functional
currency other than the U.S. dollar;
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persons who hold or received
Globis securities or New Forafric Ordinary Shares and/or New Forafric Warrants, as the case may be, pursuant to the exercise of any
employee stock option or otherwise as compensation; and
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tax-qualified retirement
plans.
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In
addition, this summary does not address any tax consequences to investors that directly or indirectly hold equity interests in Forafric
Agro prior to the Business Combination, including holders of Globis securities that also hold, directly or indirectly, equity interests
in Forafric Agro. With respect to the consequences of holding New Forafric Ordinary Shares, this discussion is limited to holders who
acquire such New Forafric Ordinary Shares in connection with the Business Combination or as a result of the exercise of an Forafric Global
Warrant. With respect to the consequences of holding New Forafric Warrants, this discussion is limited to holders who held Globis Warrants
prior to and through the Business Combination.
If
an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Globis securities, New Forafric Ordinary
Shares and/or New Forafric Warrants, the tax treatment of an owner of such entity will depend on the status of the owner or participant
in the arrangement, the activities of the entity or arrangement, and certain determinations made at the owner or participant level. Accordingly,
entities or arrangements treated as partnerships for U.S. federal income tax purposes and the partners in such partnerships should consult
their tax advisors regarding the U.S. federal income tax consequences to them.
For
purposes of this discussion, because any Globis Unit consisting of one share of Globis Common Stock and one Globis Warrant is separable
at the option of the holder, Globis is treating any share of Globis Common Stock and Globis Warrant held by a holder in the form of a
single Globis Unit as separate instruments and is assuming that the Globis Unit itself will not be treated as an integrated instrument.
Under this treatment the separation of an Globis Unit prior to or in connection with the consummation of the Business Combination generally
would not be a taxable event for U.S. federal income tax purposes. This position is not free from doubt, and no assurance can be given
that the IRS would not assert, or that a court would not sustain, a contrary position. Holders of Globis Units and Globis securities
are urged to consult their tax advisors concerning the U.S. federal, state, local, and foreign tax consequences of the transactions contemplated
by the Business Combination (including any redemption of Globis Common Stock for cash) with respect to any Globis securities held through
an Globis Unit (including alternative characterizations of an Globis Unit).
For
purposes of this discussion, a “U.S. Holder” is any beneficial owner of shares of Globis securities, New Forafric
Ordinary Shares and/or New Forafric Warrants, as the case may be, that is for U.S. federal income tax purposes:
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an individual who is a citizen
or resident of the U.S.;
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a corporation (or other entity
taxable as a corporation) created or organized in, or under the laws of, the U.S., any state thereof, or the District of Columbia;
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an estate, the income of
which is subject to U.S. federal income tax regardless of its source; or
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a trust that (1) is subject
to the primary supervision of a U.S. court and the control of one or more “United States persons” (within the meaning of
Section 7701(a)(30) of the Code) or (2) has a valid election in effect to be treated as a United States person for U.S. federal income
tax purposes.
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THE
U.S. FEDERAL INCOME TAX TREATMENT OF THE BUSINESS COMBINATION AND THE U.S. FEDERAL INCOME TAX TREATMENT TO HOLDERS OF Globis
UNITS OR Globis SECURITIES DEPEND IN SOME INSTANCES ON DETERMINATIONS OF FACT AND
INTERPRETATIONS OF COMPLEX PROVISIONS OF U.S. FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. IN ADDITION,
THE U.S. FEDERAL INCOME TAX TREATMENT OF THE BUSINESS COMBINATION, THE EXERCISE OF REDEMPTION RIGHTS WITH RESPECT TO Globis
COMMON STOCK, AND THE OWNERSHIP AND DISPOSITION OF NEW FORAFRIC ORDINARY SHARES AND/OR NEW FORAFRIC WARRANTS TO ANY PARTICULAR
HOLDER WILL DEPEND ON THE HOLDER’S PARTICULAR TAX CIRCUMSTANCES. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE U.S. FEDERAL,
STATE, LOCAL, AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES TO YOU, IN LIGHT OF YOUR PARTICULAR INVESTMENT OR TAX CIRCUMSTANCES, OF
THE BUSINESS COMBINATION, THE EXERCISE OF YOUR REDEMPTION RIGHTS WITH RESPECT TO Globis
COMMON STOCK, AND THE OWNERSHIP AND DISPOSITION OF NEW FORAFRIC ORDINARY SHARES AND/OR NEW FORAFRIC WARRANTS.
U.S.
Federal Income Tax Treatment of Forafric Global
Tax
Residence of Forafric Global for U.S. Federal Income Tax Purposes.
Although
Forafric Global is incorporated and tax resident in Gibraltar, following the closing of the Business Combination the IRS may assert that
it should be treated as a U.S. corporation for U.S. federal income tax purposes pursuant to Section 7874 of the Code. For U.S. federal
income tax purposes, a corporation is generally considered a U.S. “domestic” corporation if it is created or organized in
or under the laws of the U.S., any state thereof, or the District of Columbia. Because Forafric Global is not so created or organized
(but is instead incorporated only in Gibraltar), it would generally be classified as a foreign corporation (that is, a corporation other
than a U.S. “domestic” corporation) under these rules. Section 7874 of the Code provides an exception under which a corporation
created or organized only under foreign law may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax
purposes. The Section 7874 rules are complex and require analysis of all relevant facts, and there is limited guidance and significant
uncertainties as to their application.
Under
Code Section 7874, a corporation created or organized outside the U.S. (i.e., a foreign corporation) will nevertheless be treated as
a U.S. corporation for U.S. federal income tax purposes when (i) the foreign corporation directly or indirectly acquires substantially
all of the assets held directly or indirectly by a U.S. corporation (including the indirect acquisition of assets of the U.S. corporation
by acquiring the outstanding shares of the U.S. corporation), (ii) the shareholders of the acquired U.S. corporation hold, by vote or
value, at least 80% of the shares of the foreign acquiring corporation after the acquisition by reason of holding shares in the U.S.
acquired corporation (the “Section 7874 Percentage”), and (iii) the foreign corporation’s “expanded affiliated
group” does not have substantial business activities in the foreign corporation’s country of creation or organization relative
to such expanded affiliated group’s worldwide activities (the “Substantial Business Activities Exception”). In order
to satisfy the Substantial Business Activities Exception, at least 25% of the employees (by headcount and compensation), real and tangible
assets, and gross income of the foreign acquiring corporation’s “expanded affiliated group” must be based, incurred,
located, and derived, respectively, in the country in which the foreign acquiring corporation is created or organized. The Section 7874
Regulations further provide for a number of special rules that aggregate multiple acquisitions of U.S. corporations for purposes of Code
Section 7874 that are made as part of a plan or made over a 36-month period, making it more likely that Code Section 7874 will apply
to a foreign acquiring corporation.
Forafric
Global will acquire substantially all of the assets of Globis through the Business Combination. As a result, Section 7874 of the Code
may apply to cause Forafric Global to be treated as a U.S. corporation for U.S. federal income tax purposes following the Business Combination
depending on whether the Section 7874 Percentage equals or exceeds 80%, subject to the applicability of the Substantial Business Activities
Exception.
Based
upon the terms of the Business Combination, the rules for determining share ownership under Code Section 7874 and the Section 7874 Regulations,
and certain factual assumptions, Globis and Forafric Global currently expect that the Section 7874 Percentage of Globis stockholders
in Forafric Global should be less than 80% after the Business Combination. Accordingly, Forafric Global is not expected to be treated
as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code. The calculation of the Section 7874 Percentage
is complex, is subject to detailed regulations (the application of which is uncertain in various respects and could be impacted by changes
in U.S. tax laws and regulations with possible retroactive effect), and is subject to certain factual uncertainties. Whether the Section
7874 Percentage is less than 80% must be finally determined after completion of the Business Combination, by which time there could be
adverse changes to the relevant facts and circumstances. Moreover, former holders of Globis Common Stock may be deemed to own an amount
of New Forafric Ordinary Shares in respect to certain redemptions by former holders of Globis Common Stock prior to the Business Combination
for purposes of determining the ownership percentage of former holders of Globis Common Stock under Section 7874 of the Code. Accordingly,
there can be no assurance that the IRS will not challenge the status of Forafric Global as a foreign corporation under Code Section 7874
or that such challenge would not be sustained by a court.
If
the IRS were to successfully challenge under Code Section 7874 Forafric Global’s status as a foreign corporation for U.S. federal
income tax purposes, Forafric Global and certain Forafric Global shareholders could be subject to significant adverse tax consequences,
including a higher effective corporate income tax rate on Forafric Global and future withholding taxes on certain Forafric Global shareholders.
In particular, holders of New Forafric Ordinary Shares and/or New Forafric Warrants would be treated as holders of stock and warrants
of a U.S. corporation.
However,
even if the Section 7874 Percentage was such that Forafric Global were still respected as a foreign corporation under Code Section 7874,
Forafric Global may be limited in using its equity to engage in future acquisitions of U.S. corporations over a 36-month period following
the Business Combination. If Forafric Global were to be treated as acquiring substantially all of the assets of a U.S. corporation within
a 36-month period after the Business Combination, the Section 7874 Regulations would exclude certain shares of Forafric Global attributable
to the Business Combination for purposes of determining the Section 7874 Percentage of that subsequent acquisition, making it more likely
that Code Section 7874 would apply to such subsequent acquisition.
The
remainder of this discussion assumes that Forafric Global will not be treated as a U.S. corporation for U.S. federal income tax purposes
under Section 7874 of the Code.
Utilization
of Globis’ Tax Attributes and Certain Other Adverse Tax Consequences to Forafric Global and Forafric Global’s Shareholders.
Following
the acquisition of a U.S. corporation by a foreign corporation, Code Section 7874 can limit the ability of the acquired U.S. corporation
and its U.S. affiliates to use U.S. tax attributes (including net operating losses and certain tax credits) to offset U.S. taxable income
resulting from certain transactions, as well as result in certain other adverse tax consequences, even if the acquiring foreign corporation
is respected as a foreign corporation for purposes of Code Section 7874. Specifically, Code Section 7874 can apply in this manner if
(i) the foreign corporation acquires, directly or indirectly, substantially all of the properties held directly or indirectly by a U.S.
corporation, (ii) after the acquisition, the former shareholders of the acquired U.S. corporation hold at least 60% (by either vote or
value) but less than 80% (by vote and value) of the shares of the foreign acquiring corporation by reason of holding shares in the acquired
U.S. corporation, and (iii) the foreign corporation’s “expanded affiliated group” does not meet the Substantial Business
Activities Exception.
Based
upon the terms of the Business Combination, the rules for determining share ownership under Section 7874 of the Code and the Section
7874 Regulations, and certain factual assumptions, Globis and Forafric Global currently expect that the Section 7874 Percentage should
be less than 60% after the Business Combination. Accordingly, the limitations and other rules described above are not expected to apply
to Forafric Global or Globis after the Business Combination.
If
the Section 7874 Percentage applicable to the Business Combination is at least 60% but less than 80%, Forafric
Global
and certain of Forafric Global’s shareholders may be subject to adverse tax consequences including, but not limited to, restrictions
on the use of tax attributes with respect to “inversion gain” recognized over a 10-year period following the transaction,
disqualification of dividends paid from preferential “qualified dividend income” rates, and the requirement that any U.S.
corporation owned by Forafric Global include as “base erosion payments” that may be subject to a minimum U.S. federal income
tax any amounts treated as reductions in gross income paid to certain related foreign persons. Furthermore, certain “disqualified
individuals” (including officers and directors of a U.S. corporation) may be subject to an excise tax on certain stock-based compensation
at a rate of 20%. However, as a blank check company whose assets are primarily comprised of cash and cash equivalents, it is not expected
that Globis will have a significant amount of inversion gain as a result of the Business Combination.
The
determination that the Section 7874 Percentage should be less than 60% after the Business Combination is subject to detailed regulations
(the application of which is uncertain in various respects and would be impacted by future changes in tax laws and regulations, with
possible retroactive effect) and is subject to certain factual uncertainties. Whether the Section 7874 Percentage is less than 60% must
be finally determined after completion of the Business Combination, by which time there could be adverse changes to the relevant facts
and circumstances. There can be no assurance that the IRS will not challenge whether Forafric Global is subject to the above rules or
that such a challenge would not be sustained by a court. If the IRS successfully applied these rules to Forafric Global, significant
adverse tax consequences could result for Forafric Global and for certain Forafric Global shareholders, including a higher effective
corporate tax rate on Forafric Global U.S. Holders.
U.S.
Federal Income Tax Considerations of the Business Combination.
Tax
Consequences of the Business Combination Under Section 368(a) of the Code
The
parties to the Business Combination intend that the Business Combination qualifies as a reorganization within the meaning of Section
368(a) of the Code (a “reorganization”), and subject to the balance of this discussion, the parties expect the Business Combination
to so qualify. If the Business Combination qualifies as a reorganization, then the Business Combination will have the material tax consequences
described in the remainder of this paragraph. The Business Combination is not expected to result in gain being recognized by U.S. Holders
of Globis Common Stock and/or Globis Warrants immediately prior to the Effective Time (other than possibly with respect to any such holder
that would own, actually or constructively, 5% or more (by vote or value) of the outstanding Ordinary Shares of New Forafric immediately
after the Business Combination) (together, the “Intended Tax Treatment”), as discussed below under “Tax Consequences
of the Business Combination Under Section 367(a) of the Code”. Subject to the discussion of Code Section 367, below, a U.S. Holder’s
initial tax basis in New Forafric Ordinary Shares and/or New Forafric Warrants received in the Business Combination will equal the tax
basis of the Globis securities exchanged therefor. Subject to the discussion of Code Section 367, below, a U.S. Holder’s holding
period in New Forafric Ordinary Shares and/or New Forafric Warrants received in the Business Combination will include the holding period
for the Globis securities surrendered in exchange therefor. The parties intend to report the Business Combination in a manner consistent
with the Intended Tax Treatment.
To
qualify as a reorganization, a transaction must satisfy certain requirements, including, among others, that the acquiring corporation
(or, in the case of certain reorganizations structured similarly to the Business Combination, its corporate parent) continue, either
directly or indirectly through certain controlled corporations, either a significant line of the acquired corporation’s historic
business or use a significant portion of the acquired corporation’s historic business assets in a business, in each case, within
the meaning of Treasury regulations Section 1.368-1(d). However, due to the absence of guidance bearing directly on how the above rules
apply in the case of an acquisition of a corporation with investment-type assets, such as Globis, the qualification of the Business Combination
as a reorganization is not free from doubt, since the Department of Treasury and Internal Revenue Service have never issue guidance or
other authority that is factually on point with the present transaction. As a result, neither Globis’ nor Forafric Global’s
counsel is able to opine as to whether the Business Combination will qualify as a reorganization. Moreover, the closing of the Business
Combination is not conditioned upon the receipt of an opinion of counsel that the Business Combination will qualify as a reorganization,
and neither Globis nor Forafric Global intends to request a ruling from the IRS regarding the U.S. federal income tax treatment of the
Business Combination. Accordingly, no assurance can be given that the IRS will not challenge the Business Combination’s qualification
as a reorganization or that a court will not sustain such a challenge by the IRS. U.S. Holders of Globis securities are urged to consult
their tax advisors regarding the proper U.S. federal income tax treatment of the Business Combination, including with respect to its
qualification as a “reorganization.”
If,
at the Effective Time, any requirement for the application of Code Section 368(a) is not met, a U.S. Holder of Globis securities generally
would recognize gain or loss in an amount equal to the difference, if any, between the fair market value as of the closing date of the
Business Combination of New Forafric Ordinary Shares and/or New Forafric Warrants received by such holder in the Business Combination
over such holder’s adjusted tax basis in the Globis securities surrendered by such holder in the Business Combination. Any gain
or loss so recognized would generally be long-term capital gain or loss if the U.S. Holder had held the Globis securities for more than
one year (or short-term capital gain otherwise). Long-term capital gains of non-corporate U.S. Holders (including individuals) currently
are eligible for preferential U.S. federal income tax rates. However, the deductibility of capital losses is subject to limitations.
A U.S. Holder’s initial tax basis in New Forafric Ordinary Shares and/or New Forafric Warrants received in the Business Combination
will equal the fair market value of such stock or warrants upon receipt. A U.S. Holder’s holding period in New Forafric Ordinary
Shares and/or New Forafric Warrants received in the Business Combination, if any, will begin on the day following the closing date of
the Business Combination and would not include the holding period for the Globis securities surrendered in exchange therefor.
Tax
Consequences of the Business Combination Under Section 367(a) of the Code
Section
367(a) of the Code and the Treasury regulations promulgated thereunder provide that, where a U.S. person exchanges stock or securities
in a U.S. corporation for stock or securities in a foreign corporation in a transaction that qualifies as a reorganization, the U.S.
person is required to recognize any gain (but not loss) realized on such exchange unless certain additional requirements are satisfied.
In
general, for the Business Combination to meet these additional requirements, certain reporting requirements must be satisfied and (i)
no more than 50% of both the total voting power and the total value of the stock of the transferee foreign corporation is received, in
the aggregate, by the “U.S. transferors” (as defined in the Treasury regulations and computed taking into account direct,
indirect and constructive ownership) in the transaction; (ii) no more than 50% of each of the total voting power and the total value
of the stock of the transferee foreign corporation is owned, in the aggregate, immediately after the transaction by “U.S. persons”
(as defined in the Treasury regulations) that are either officers or directors or “five-percent target shareholders” (as
defined in the Treasury regulations and computed taking into account direct, indirect and constructive ownership) of the transferred
U.S. corporation; and (iii) the “active trade or business test” as defined in Treasury regulations Section 1.367(a)-3(c)(3)
must be satisfied. Conditions (i), (ii), and (iii) are expected to be met, and, as a result, the Business Combination is expected to
satisfy the applicable requirements under Section 367(a) of the Code on account of such conditions. Accordingly, it is intended that
the Business Combination does not result in gain recognition by a U.S. Holder exchanging Globis Common Stock for New Forafric Ordinary
Shares so long as either (A) the U.S. Holder is not a “five-percent transferee shareholder” (as defined in the Treasury regulations
and computed taking into account direct, indirect and constructive ownership) of the transferee foreign corporation (by total voting
power or by total value) or (B) the U.S. Holder is a “five-percent transferee shareholder” of the transferee foreign corporation
and enters into an agreement with the IRS to recognize gain under certain circumstances. All U.S. Holders of Globis Securities that will
own 5% or more of either the total voting power or the total value of the outstanding shares of Forafric Global after the Business Combination
(taking into account, for this purpose, ownership of New Forafric Ordinary Shares acquired in connection with the Business Combination
and any New Forafric Ordinary Shares not acquired in connection with the Business Combination) may want to enter into a valid “gain
recognition agreement” under applicable Treasury regulations and are strongly urged to consult their own tax advisors to determine
the particular consequences to them of the Business Combination.
Whether
the requirements described above are met will depend on facts existing at the Effective Time, and the closing of the Business Combination
is not conditioned upon the receipt of an opinion of counsel or ruling from the IRS that the Business Combination will not result in
gain being recognized by U.S. Holders of Globis securities under Section 367(a) of the Code. In addition, no assurance can be given that
the IRS will not challenge the satisfaction of the relevant requirements under Section 367(a) of the Code and the Treasury regulations
promulgated thereunder with respect to the Business Combination or that a court would not sustain such a challenge.
If
the Business Combination does meet the requirements of Section 368(a) of the Code but, at the Effective Time, any
requirement for Section 367(a) of the Code not to impose gain on a U.S. Holder is not satisfied, then a U.S. Holder of Globis securities
generally would recognize gain (but not loss) in an amount equal to the excess, if any, of the fair market value as of the closing date
of the Business Combination of New Forafric Ordinary Shares and/or New Forafric Warrants received by such holder in the Business Combination
over such U.S. Holder’s tax basis in the Globis securities surrendered by such U.S. Holder in the Business Combination. Any gain
so recognized would generally be long-term capital gain if the U.S. Holder had held the Globis securities for more than one year at the
Effective Time (or short-term capital gain otherwise). Long-term capital gain of non-corporate U.S. Holders (including individuals) currently
is eligible for preferential U.S. federal income tax rates. A U.S. Holder’s initial tax basis in New Forafric Ordinary Shares and/or
New Forafric Warrants received in the Business Combination will equal the fair market value of such stock or warrants upon receipt. A
U.S. Holder’s holding period in New Forafric Ordinary Shares and/or New Forafric Warrants received in the Business Combination
may not include the holding period for the Globis securities surrendered in exchange therefor. In such case, the holding period will
begin on the day following the closing date of the Business Combination.
The
rules dealing with Section 367(a) of the Code discussed above are very complex and are affected by various factors in addition to those
described above. Accordingly, you are strongly urged to consult your tax advisor concerning the application of these rules to your exchange
of Globis securities under your particular circumstances, including whether you will be a five-percent transferee shareholder and the
possibility of entering into a “gain recognition agreement” under applicable Treasury regulations.
U.S.
Holders exchanging Globis Securities for New Forafric Ordinary Shares and/or New Forafric Warrants
If
the Business Combination qualifies as a reorganization under Section 368(a) of the Code and is not taxable under Section 367(a) of the
Code, as is intended by the parties, a U.S. Holder generally would not recognize gain or loss if, pursuant to the Business Combination,
the U.S. Holder either (i) exchanges only Globis Common Stock (but not Globis Warrants) for New Forafric Ordinary Shares, (ii) exchanges
Globis Warrants for New Forafric Warrants, or (iii) both exchanges Globis Common Stock for New Forafric Ordinary Shares and exchanges
its Globis Warrants for New Forafric Warrants.
In
such a case, the aggregate tax basis of New Forafric Ordinary Shares received by a U.S. Holder in the Business Combination should be
equal to the aggregate adjusted tax basis of Globis Common Stock surrendered in exchange therefor. The tax basis in an Forafric Global
Warrant received by a U.S. Holder in the Business Combination should be equal to the adjusted tax basis of the Globis Warrant exchanged
therefor. The holding period of New Forafric Ordinary Shares and/or New Forafric Warrants received by a U.S. Holder in the Business Combination
should include the period during which the Globis Common Stock and/or Globis Warrants exchanged therefor were held by such U.S. Holder.
It is unclear whether the redemption rights with respect to the Globis Common Stock may suspend the running of the applicable holding
period for this purpose.
U.S.
Holders Exercising Redemption Rights with Respect to Globis Common Stock.
In
the event that a U.S. Holder’s shares of Globis Common Stock are redeemed for cash pursuant to the redemption provisions described
herein, the treatment of such redemption for U.S. federal income tax purposes will depend on whether the redemption qualifies as a sale
of stock under Section 302 of the Code. Whether a redemption qualifies for sale treatment will depend largely on the total number of
shares of Globis Common Stock treated as held by the U.S. Holder relative to all of the shares of Globis Common Stock outstanding both
before and after the redemption.
The
redemption of Globis Common Stock generally will be treated as a sale of stock (rather than as a corporate distribution) if the redemption
(i) results in a “complete termination” of the U.S. Holder’s interest in Globis, (ii) is “substantially disproportionate”
with respect to the U.S. Holder or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. Holder. These
tests are explained more fully below.
In
determining whether any of the foregoing tests are satisfied, a U.S. Holder generally should take into account not only Globis Common
Stock actually owned by such U.S. Holder but also Globis Common Stock constructively owned by such holder. A U.S. Holder may constructively
own, in addition to shares owned directly, shares owned by certain related individuals and entities in which the U.S. Holder has an interest
or that have an interest in such U.S. Holder, as well as any shares the U.S. Holder has a right to acquire by exercise of an option,
which would generally include Globis Common Stock or New Forafric Ordinary Shares which could be directly or constructively acquired
pursuant to the exercise of Globis Warrants or New Forafric Warrants.
There
will be a complete termination of a U.S. Holder’s interest if either (i) all of Globis Common Stock actually and constructively
owned by the U.S. Holder is redeemed or (ii) all of Globis Common Stock actually owned by the U.S. Holder is redeemed and the U.S. Holder
is eligible to waive, and effectively waives in accordance with specific rules, the attribution of shares owned by certain family members
and the U.S. Holder does not constructively own any other shares. In order to meet the “substantially disproportionate” test,
the percentage of outstanding voting stock actually or constructively owned by a U.S. Holder immediately following the redemption generally
must be less than (a) 80% of the percentage of outstanding voting stock actually or constructively owned by such U.S. Holder immediately
prior to the redemption and (b) 50% of the total combined voting power of Globis Common Stock. The redemption of Globis Common Stock
will not be essentially equivalent to a dividend if a U.S. Holder’s redemption results in a “meaningful reduction”
of the U.S. Holder’s proportionate interest in Globis. Whether the redemption will result in a meaningful reduction in a U.S. Holder’s
proportionate interest in Globis will depend on the particular facts and circumstances. However, the IRS has indicated in a published
ruling that even a small reduction in the proportionate interest of a small minority shareholder in a publicly held corporation who exercises
no control over corporate affairs may constitute such a “meaningful reduction.” U.S. Holders should consult with their tax
advisors as to the tax consequences of a redemption.
If
the redemption qualifies as a sale of stock by the U.S. Holder under Section 302 of the Code, the U.S. Holder would generally be required
to recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received and the tax basis of the
shares of Globis Common Stock redeemed. Such gain or loss generally would be treated as capital gain or loss if such shares were held
as a capital asset on the date of the redemption. A U.S. Holder’s tax basis in such holder’s Globis Common Stock generally
will equal the cost of such shares.
If
the redemption does not qualify as a sale of stock under Section 302 of the Code, then the U.S. Holder will be treated as receiving a
corporate distribution. Such distribution generally will constitute a dividend for U.S. federal income tax purposes to the extent paid
from current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of
current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below
zero) the U.S. Holder’s adjusted tax basis in such U.S. Holder’s Globis Common Stock. Any remaining excess will be treated
as gain realized on the sale or other disposition of Globis Common Stock.
Amounts
treated as dividends that Globis pays to a U.S. Holder that is treated a taxable corporation generally will qualify for the dividends
received deduction if the requisite holding period is satisfied. With certain exceptions (including, but not limited to, dividends treated
as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are
met, amounts treated as dividends that Globis pays to a non-corporate U.S. Holder may be taxed as “qualified dividend income”
at the preferential tax rate accorded to long-term capital gains. It is unclear whether the redemption rights described herein with respect
to the Globis Common Stock may have suspended the running of the applicable holding period for these purposes. If the holding period
requirements are not satisfied, then a corporation may not be able to qualify for the dividends received deduction and would have taxable
income equal to the entire dividend amount and non-corporate U.S. Holders may be subject to tax on such dividend at regular ordinary
income tax rates instead of the preferential rate that applies to “qualified dividend income.”
After
the application of those rules, any remaining tax basis of the U.S. Holder in the redeemed Globis Common Stock will be added to the U.S.
Holder’s adjusted tax basis in its remaining Globis Common Stock, or, if it has none, to the U.S. Holder’s adjusted tax basis
in its Globis Warrants or possibly in other shares of Globis Common Stock constructively owned by it.
U.S.
Federal Income Tax Consequences of the Ownership and Disposition of New Forafric Ordinary Shares and New Forafric Warrants to U.S. Holders.
Distributions
on New Forafric Ordinary Shares
Subject
to the discussion below under “— Passive Foreign Investment Company Rules,” if Forafric Global makes distributions
of cash or property on New Forafric Ordinary Shares, such distributions will be treated first as a dividend to the extent of Forafric
Global’s current and accumulated earnings and profits (as determined for U.S. federal income tax purposes), and then as a tax-free
return of capital to the extent of the U.S. Holder’s tax basis, with any excess treated as gain from the sale or exchange of the
shares. The amount of any such distribution will include any amounts withheld by Forafric Global (or another applicable withholding agent).
If Forafric Global does not provide calculations of its earnings and profits under U.S. federal income tax principles, a U.S. Holder
should expect all cash distributions to be reported as dividends for U.S. federal income tax purposes. Any dividend will not be eligible
for the dividends received deduction allowed to corporations in respect of dividends received from U.S. corporations.
Subject
to the discussions above under “— Utilization of Globis’ Tax Attributes and Certain Other Adverse Tax Consequences
to Forafric Global and Forafric Global’s Shareholders” and below under “— Passive Foreign Investment Company
Rules,” dividends received by certain non-corporate U.S. Holders (including individuals) may be “qualified dividend income,”
which is taxed at the lower applicable capital gains rate, provided that:
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either
(a) the shares are readily tradable on an established securities market in the U.S. or (b) Forafric Global is eligible for the benefits
of a qualifying income tax treaty with the U.S. that includes an exchange of information program;
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Forafric
Global is neither a PFIC (as discussed below under below under “— Passive Foreign Investment Company Rules”)
nor treated as such with respect to the U.S. Holder for Forafric Global’s taxable year in which the dividend is paid or the
preceding taxable year;
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the
U.S. Holder satisfies certain holding period requirements;
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the
U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property;
and
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the
taxpayer does not take the dividends into account as investment income under Code Section 163(d)(4)(B).
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There
is no comprehensive income tax treaty between the U.S. and Gibraltar, thus Forafric Global will not be eligible for benefits of an applicable
comprehensive income tax treaty. In addition, there can be no assurance that New Forafric Ordinary Shares will be considered “readily
tradable” on an established securities market in accordance with applicable legal authorities. Furthermore, Forafric Global will
not constitute a qualified foreign corporation for purposes of these rules if it is a PFIC for the taxable year in which it pays a dividend
or for the preceding taxable year. See “— Passive Foreign Investment Company Rules.” U.S. Holders should consult
their tax advisors regarding the availability of the lower rate for dividends paid with respect to New Forafric Ordinary Shares.
The
amount of any dividend distribution paid in foreign currency will be the U.S. dollar amount calculated by reference to the applicable
exchange rate in effect on the date of actual or constructive receipt, regardless of whether the payment is in fact converted into U.S.
dollars at that time. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date
of receipt.
Subject
to certain exceptions, dividends on New Forafric Ordinary Shares will constitute foreign source income for foreign tax credit limitation
purposes. If the dividends are qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes
of calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by a fraction, the numerator
of which is the reduced rate applicable to qualified dividend income and the denominator of which is the highest rate of tax normally
applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes
of income. For this purpose, dividends distributed by Forafric Global with respect to New Forafric Ordinary Shares generally will constitute
“passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.”
The rules governing foreign tax credits are complex and U.S. Holders are urged to consult their tax advisors regarding the creditability
of foreign taxes in their particular circumstances. In lieu of claiming a foreign tax credit, a U.S. Holder may, in certain circumstances,
deduct foreign taxes in computing the holder’s taxable income, subject to generally applicable limitations under U.S. law. Generally,
an election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable
year.
Sale,
Exchange, Redemption or Other Taxable Disposition of New Forafric Ordinary Shares and New Forafric Warrants
Subject
to the discussion below under “— Passive Foreign Investment Company Rules,” a U.S. Holder generally will recognize
gain or loss on any sale, exchange, redemption or other taxable disposition of New Forafric Ordinary Shares or New Forafric Warrants
in an amount equal to the difference between (i) the amount realized on the disposition and (ii) such U.S. Holder’s adjusted tax
basis in such shares and/or warrants. Any gain or loss recognized by a U.S. Holder on a taxable disposition of New Forafric Ordinary
Shares or New Forafric Warrants generally will be capital gain or loss. A non-corporate U.S. Holder, including an individual, who has
held New Forafric Ordinary Shares and/or New Forafric Warrants for more than one year generally will be eligible for reduced tax rates
for such long-term capital gains. The deductibility of capital losses is subject to limitations.
Any
such gain or loss recognized generally will be treated as U.S. source income or loss. Accordingly, in the event any Gibraltar tax (including
withholding tax) is imposed upon such sale or other disposition, a U.S. Holder may not be able to utilize foreign tax credits unless
such holder has foreign source income or gain in the same category from other sources. U.S. Holders are urged to consult their tax advisor
regarding the ability to claim a foreign tax credit.
Exercise,
Lapse, or Redemption of an Forafric Global Warrant
Subject
to the PFIC rules discussed below, a U.S. Holder generally will not recognize gain or loss upon the acquisition of an Forafric Global
ordinary share on the exercise of an Forafric Global Warrant for cash. A U.S. Holder’s tax basis in an New Forafric Ordinary Shares
received upon exercise of the Forafric Global Warrant generally should be an amount equal to the sum of the U.S. Holder’s tax basis
in the Globis Warrant exchanged therefor (assuming the Business Combination is not a taxable transaction, as discussed above) and the
exercise price. The U.S. Holder’s holding period for an Forafric Global Ordinary Share received upon exercise of the Forafric Global
Warrant will begin on the date following the date of exercise (or possibly the date of exercise) of the Forafric Global Warrant and will
not include the period during which the U.S. Holder held the Forafric Global Warrant. If an Forafric Global Warrant is allowed to lapse
unexercised, a U.S. Holder generally will recognize a capital loss equal to such holder’s tax basis in the Forafric Global Warrant.
The
tax consequences of a cashless exercise of an Forafric Global Warrant are not clear under current tax law. Subject to the PFIC rules
discussed below, a cashless exercise may be tax-deferred, either because the exercise is not a gain realization event or because the
exercise is treated as a recapitalization for U.S. federal income tax purposes. In either tax-deferred situation, a U.S. Holder’s
basis in New Forafric Ordinary Shares received generally would equal the U.S. Holder’s basis in New Forafric Warrants exercised
therefor. If the cashless exercise is not treated as a gain realization event, a U.S. Holder’s holding period in New Forafric Ordinary
Shares would be treated as commencing on the date following the date of exercise (or possibly the date of exercise) of New Forafric Warrants
and will not include the period during which the U.S. Holder held New Forafric Warrants. If the cashless exercise were treated as a recapitalization,
the holding period of New Forafric Ordinary Shares would include the holding period of New Forafric Warrants exercised therefor.
It
is also possible that a cashless exercise of an Forafric Global Warrant could be treated in part as a taxable exchange in which gain
or loss would be recognized in the manner set forth above under “— Sale, Exchange, Redemption or Other Taxable Disposition
of New Forafric Ordinary Shares and New Forafric Warrants.” In such event, a U.S. Holder could be deemed to have surrendered
warrants equal to the number of New Forafric Ordinary Shares having an aggregate fair market value equal to the exercise price for the
total number of warrants to be exercised. Subject to the PFIC rules discussed below, the U.S. Holder would recognize capital gain or
loss with respect to New Forafric Warrants deemed surrendered in an amount generally equal to the difference between (i) the fair market
value of New Forafric Ordinary Shares that would have been received in a regular exercise of New Forafric Warrants deemed surrendered,
net of the aggregate exercise price of such New Forafric Warrants and (ii) the U.S. Holder’s tax basis in such New Forafric Warrants.
In this case, a U.S. Holder’s aggregate tax basis in New Forafric Ordinary Shares received would equal the sum of (i) U.S. Holder’s
tax basis in New Forafric Warrants deemed exercised and (ii) the aggregate exercise price of such New Forafric Warrants. A U.S. Holder’s
holding period for New Forafric Ordinary Shares received in such case generally would commence on the date following the date of exercise
(or possibly the date of exercise) of New Forafric Warrants and will not include the period during which the U.S. Holder held New Forafric
Warrants.
Due
to the absence of authority on the U.S. federal income tax treatment of a cashless exercise of warrants, including when a U.S. Holder’s
holding period would commence with respect to the Forafric Global Ordinary Share received, there can be no assurance regarding which,
if any, of the alternative tax consequences and holding periods described above would be adopted by the IRS or a court of law. Accordingly,
U.S. Holders should consult their tax advisors regarding the tax consequences of a cashless exercise of New Forafric Warrants.
Subject
to the PFIC rules described below, if Forafric Global redeems New Forafric Warrants for cash pursuant to the redemption provisions described
in the section of this registration statement entitled “— Description of New Forafric Warrants “ or if Forafric
Global purchases New Forafric Warrants in an open market transaction, such redemption or purchase generally will be treated as a taxable
disposition to the U.S. Holder, taxed as described above under “— Sale, Exchange, Redemption or Other Taxable Disposition
of New Forafric Ordinary Shares and New Forafric Warrants.”
Possible
Constructive Distributions
The
terms of each Forafric Global Warrant provide for an adjustment to the number of New Forafric Ordinary Shares for which the Forafric
Global Warrant may be exercised or to the exercise price of the Forafric Global Warrant in certain events, as discussed in the section
of this registration statement captioned “Description of New Forafric Warrants.” An adjustment which has the effect
of preventing dilution generally is not taxable. A U.S. Holder of an Forafric Global Warrant would, however, be treated as receiving
a constructive distribution from Forafric Global if, for example, the adjustment increases the holder’s proportionate interest
in Forafric Global’s assets or earnings and profits (for instance, through an increase in the number of New Forafric Ordinary Shares
that would be obtained upon exercise of such warrant) as a result of a distribution of cash or other property such as other securities
to the holders of New Forafric Ordinary Shares which is taxable to the U.S. Holders of such shares as described under “—
Distributions on New Forafric Ordinary Shares” above. Such constructive distribution would be subject to tax as described
under that section in the same manner as if the U.S. Holder of such Forafric Global Warrant received a cash distribution from Forafric
Global equal to the fair market value of such increase in interest.
Passive
Foreign Investment Company Rules
The
treatment of U.S. Holders of New Forafric Ordinary Shares and New Forafric Warrants could be materially different from that described
above, if Forafric Global is treated as a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes.
An entity treated as a foreign corporation for U.S. federal income tax purposes generally will be a PFIC for U.S. federal income tax
purposes for any taxable year if either:
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at
least 75% of its gross income for such year is passive income (such as interest, dividends, rents and royalties (other than rents
or royalties derived from the active conduct of a trade or business) and gains from the disposition of assets giving rise to passive
income); or
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at
least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable
to assets that produce passive income or are held for the production of passive income.
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For
this purpose, Forafric Global will be treated as owning its proportionate share of the assets and earning its proportionate share of
the income of any other entity treated as a corporation for U.S. federal income tax purposes in which Forafric Global own, directly or
indirectly, 25% or more (by value) of the stock.
Based
on the current and anticipated composition of the income, assets and operations of Forafric Global and its subsidiaries, Forafric Global
does not believe it will be treated as a PFIC for U.S. federal income tax purposes for its current taxable year, which includes the Business
Combination, and does not expect to become one for U.S. federal income tax purposes in the near future.
Nevertheless,
whether Forafric Global is treated as a PFIC is determined on an annual basis. The determination of whether a non-U.S. corporation is
a PFIC is a factual determination that depends on, among other things, the composition of Forafric Global’s income and assets,
and the market value of its shares and assets, including the composition of income and assets and the market value of shares and assets
of its subsidiaries, from time to time, and thus the determination can only be made annually after the close of each taxable year. Thus,
no assurance can be given as to whether Forafric Global will be a PFIC in 2021 or for any future taxable year. In addition, neither Globis’
nor Forafric Global’s respective U.S. counsel expresses any opinion with respect to Forafric Global’s PFIC status for 2021
or future taxable years.
Under
the PFIC rules, if Forafric Global were considered a PFIC at any time that a U.S. Holder owns New Forafric Ordinary Shares or New Forafric
Warrants, Forafric Global would generally continue to be treated as a PFIC with respect to such holder in a particular year unless (i)
Forafric Global has ceased to be a PFIC and (ii) (a) the U.S. Holder has made a valid “QEF election” (as described below)
for the first taxable year in which the holder owned such holder’s New Forafric Ordinary Shares in which Forafric Global was a
PFIC, (b) a valid mark-to-market election (as described below) is in effect for the particular year, or (c) the U.S. Holder has made
a “deemed sale” election under the PFIC rules. If such a “deemed sale” election is made, a U.S. Holder will be
deemed to have sold its New Forafric Ordinary Shares at their fair market value on the last day of the last taxable year in which Forafric
Global is classified as a PFIC, and any gain from such deemed sale would be subject to the consequences described below. After the “deemed
sale” election, New Forafric Ordinary Shares with respect to which the “deemed sale” election was made will not be
treated as shares in a PFIC unless Forafric Global subsequently becomes a PFIC.
For
each taxable year that Forafric Global is treated as a PFIC with respect to a U.S. Holder’s New Forafric Ordinary Shares or New
Forafric Warrants, the U.S. Holder will be subject to special tax rules with respect to any “excess distribution” (as defined
below) received and any gain realized from a sale or disposition (including a pledge of New Forafric Ordinary Shares and under proposed
regulations transfers of New Forafric Warrants and certain transfers of New Forafric Ordinary Shares that would otherwise qualify as
nonrecognition transactions for U.S. federal income tax purposes) of its New Forafric Ordinary Shares or New Forafric Warrants (collectively
the “excess distribution rules”), unless, with respect to New Forafric Ordinary Shares, the U.S. Holder makes a valid
QEF or mark-to-market election as discussed below. Generally, distributions received by a U.S. Holder in a taxable year that are greater
than 125% of the average annual distributions received by such U.S. Holder during the shorter of the three preceding taxable years or
the portion of such U.S. Holder’s holding period for New Forafric Ordinary Shares or New Forafric Warrants that preceded the taxable
year of the distribution will be treated as excess distributions. Under these special tax rules:
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the
excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for New Forafric Ordinary Shares
or New Forafric Warrants;
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the
amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution
or to the period in the U.S. Holder’s holding period before the first day of Forafric Global’s first taxable year in
which Forafric Global is a PFIC, will be treated as ordinary income; and
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the
amount allocated to each other taxable year (or portions thereof) of the U.S. Holder and included in such holder’s holding
period will be subject to the highest tax rate in effect for individuals or corporations, as applicable, for each such year without
regard to the U.S. Holder’s other items of income and loss for such year; and
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the
interest charge generally applicable to underpayments of tax will be imposed on the U.S. Holder with respect to the resulting tax
attributable to each such year.
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Under
the excess distribution rules, the tax liability for amounts allocated to taxable years prior to the year of disposition or excess distribution
cannot be offset by any net operating losses, and gains (but not losses) realized on the sale of New Forafric Ordinary Shares or New
Forafric Warrants cannot be treated as capital gains, even though the U.S. Holder holds New Forafric Ordinary Shares or New Forafric
Warrants as capital assets.
Certain
of the PFIC rules may impact U.S. Holders with respect to equity interests in subsidiaries and other entities which Forafric Global may
hold, directly or indirectly, that are PFICs (collectively, “Lower-Tier PFICs”). There can be no assurance, however,
that Forafric Global does not own, or will not in the future acquire, an interest in a subsidiary or other entity that is or would be
treated as a Lower-Tier PFIC. U.S. Holders should consult their tax advisors regarding the application of the PFIC rules to any of Forafric
Global’s subsidiaries.
If
Forafric Global is a PFIC, a U.S. Holder of shares in Forafric Global may avoid taxation under the excess distribution rules described
above in respect to New Forafric Ordinary Shares by making a timely and valid “qualified electing fund” (“QEF”)
election (if eligible to do so). However, a U.S. Holder may make a QEF election with respect to its New Forafric Ordinary Shares only
if Forafric Global provides U.S. Holders on an annual basis with certain financial information specified under applicable U.S. Treasury
regulations, including the information provided in a PFIC Annual Information Statement. There can be no assurance, however, that Forafric
Global will have timely knowledge of its status as a PFIC in the future or that Forafric Global will timely provide such information
for such years. The failure to provide such information on an annual basis could prevent a U.S. Holder from making a QEF election or
result in the invalidation or termination of a U.S. Holder’s prior QEF election.
A
U.S. Holder that makes a QEF election with respect to its New Forafric Ordinary Shares would generally be required to include in income
for each year that Forafric Global is treated as a PFIC the U.S. Holder’s pro rata share of Forafric Global’s ordinary earnings
for the year (which would be subject to tax as ordinary income) and net capital gains for the year (which would be subject to tax at
the rates applicable to long-term capital gains), without regard to the amount of any distributions made in respect of New Forafric Ordinary
Shares. Any net deficits or net capital losses of Forafric Global for a taxable year, however, would not be passed through and included
on the tax return of the U.S. Holder. A U.S. Holder’s basis in New Forafric Ordinary Shares would be increased by the amount of
income inclusions under the QEF rules. Dividends actually paid on New Forafric Ordinary Shares generally would not be subject to U.S.
federal income tax to the extent of prior income inclusions and would reduce the U.S. Holder’s basis in New Forafric Ordinary Shares
by a corresponding amount. If Forafric Global owns any interests in a Lower-Tier PFIC, a U.S. Holder generally must make a separate QEF
election for each Lower-Tier PFIC, subject to Forafric Global’s providing the relevant tax information for each Lower-Tier PFIC
on an annual basis. There can be no assurance that Forafric Global will have timely knowledge of the status of any such Lower-Tier PFIC.
In addition, Forafric Global may not hold a controlling interest in any such Lower-Tier PFIC and thus there can be no assurance Forafric
Global will be able to cause the Lower-Tier PFIC to provide such required information.
If
a U.S. Holder does not make a QEF election effective from the first taxable year of a U.S. Holder’s holding period for New Forafric
Ordinary Shares in which Forafric Global is a PFIC (or a mark-to-market election, as discussed below), then the U.S. Holder generally
will remain subject to the excess distribution rules. A U.S. Holder that first makes a QEF election in a later year may avoid the continued
application of the excess distribution rules to its New Forafric Ordinary Shares by making a “deemed sale” election. In that
case, the U.S. Holder will be deemed to have sold New Forafric Ordinary Shares at their fair market value on the first day of the taxable
year in which the QEF election becomes effective, and any gain from such deemed sale would be subject to the excess distribution rules
described above. As a result of the “deemed sale” election, the U.S. Holder will have additional basis (to the extent of
any gain recognized on the deemed sale) and, solely for purposes of the PFIC rules, a new holding period in New Forafric Ordinary Shares.
It
is not entirely clear how various aspects of the PFIC rules apply to New Forafric Warrants. However, a U.S. Holder may not be eligible
to make a QEF election with respect to its New Forafric Warrants. As a result, if a U.S. Holder sells or otherwise disposes of such warrants
(other than upon exercise of such warrants) and Forafric Global was a PFIC at any time during the U.S. Holder’s holding period
of such warrants, any gain recognized generally will be treated as an excess distribution, taxed as described above.
If
a U.S. Holder that exercises such warrants properly makes and maintains a QEF election with respect to the newly acquired New Forafric
Ordinary Shares (or has previously made a QEF election with respect to New Forafric Ordinary Shares), the QEF election will apply to
the newly acquired New Forafric Ordinary Shares. Notwithstanding such QEF election, the rules relating to “excess distributions”
discussed above, adjusted to take into account the current income inclusions resulting from the QEF election, will continue to apply
with respect to such newly acquired New Forafric Ordinary Shares (which under proposed regulations will be deemed to have a holding period
for purposes of the PFIC rules that includes the period the U.S. Holder held New Forafric Warrants), unless the U.S. Holder makes a “deemed
sale” election under the PFIC rules. U.S. Holders are urged to consult their tax advisors as to the application of the rules governing
“deemed sale” elections to their particular circumstances.
The
QEF election is made on a shareholder-by-shareholder basis and, once made, can be revoked only with the consent of the IRS. A U.S. Holder
that is eligible to make a QEF election with respect to its New Forafric Ordinary Shares generally may do so by providing the appropriate
information to the IRS in the U.S. Holder’s timely filed tax return for the year in which the election becomes effective. Retroactive
QEF elections generally may be made only by filing a protective statement with such return and if certain other conditions are met or
with the consent of the IRS. U.S. Holders should consult their tax advisors regarding the availability and tax consequences of a retroactive
QEF election under their particular circumstances.
Alternatively,
if Forafric Global is a PFIC and New Forafric Ordinary Shares constitute “marketable stock” (as defined below), a U.S. Holder
may make a mark-to-market election for such holder’s New Forafric Ordinary Shares with respect to such shares for the first taxable
year in which it holds (or is deemed to hold) New Forafric Ordinary Shares and each subsequent taxable year to elect out of the excess
distribution rules discussed above. If a U.S. Holder makes a mark-to-market election with respect to its New Forafric Ordinary Shares,
such U.S. Holder generally will include in income for each year that Forafric Global is treated as a PFIC with respect to such New Forafric
Ordinary Shares an amount equal to the excess, if any, of the fair market value of New Forafric Ordinary Shares as of the close of the
U.S. Holder’s taxable year over the adjusted basis in New Forafric Ordinary Shares as of the beginning of such taxable year. A
U.S. Holder will be allowed a deduction for the excess, if any, of the adjusted basis of New Forafric Ordinary Shares over their fair
market value as of the close of the taxable year. However, deductions will be allowed only to the extent of any net mark-to-market gains
on New Forafric Ordinary Shares included in the U.S. Holder’s income for prior taxable years. Amounts included in income under
a mark-to-market election, as well as gain on the actual sale or other disposition of New Forafric Ordinary Shares, will be treated as
ordinary income. Ordinary loss treatment will also apply to the deductible portion of any mark-to-market loss on New Forafric Ordinary
Shares, as well as to any loss realized on the actual sale or disposition of New Forafric Ordinary Shares, to the extent the amount of
such loss does not exceed the net mark-to-market gains for such New Forafric Ordinary Shares previously included in income. A U.S. Holder’s
basis in New Forafric Ordinary Shares will be adjusted to reflect any mark-to-market gain or loss. If a U.S. Holder makes a mark-to-market
election, any distributions Forafric Global makes would generally be subject to the rules discussed above under “— Distributions
on New Forafric Ordinary Shares,” except the lower rates applicable to qualified dividend income would not apply. Currently,
U.S. Holders of New Forafric Warrants may not be able to make a mark-to-market election with respect to their New Forafric Warrants.
The
mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded on a qualified
exchange or other market, as defined in applicable U.S. Treasury regulations. New Forafric Ordinary Shares, which are expected to be
listed on Nasdaq, are expected to qualify as marketable stock for purposes of the PFIC rules, but there can be no assurance that New
Forafric Ordinary Shares will be “regularly traded” for purposes of these rules. If made, a mark-to-market election would
be effective for the taxable year for which the election was made and for all subsequent taxable years unless New Forafric Ordinary Shares
cease to qualify as “marketable stock” for purposes of the PFIC rules or the IRS consents to the revocation of the election.
Because a mark-to-market election cannot be made for equity interests in any Lower-Tier PFICs, a U.S. Holder that does not make the applicable
QEF elections generally will continue to be subject to the excess distribution rules with respect to its indirect interest in any Lower-Tier
PFICs as described above, even if a mark-to-market election is made for New Forafric Ordinary Shares.
If
a U.S. Holder does not make a mark-to-market election (or a QEF election, as discussed above) effective from the first taxable year of
a U.S. Holder’s holding period for New Forafric Ordinary Shares in which Forafric Global is a PFIC, then the U.S. Holder generally
will remain subject to the excess distribution rules. A U.S. Holder that first makes a mark-to-market election with respect to New Forafric
Ordinary Shares in a later year will continue to be subject to the excess distribution rules during the taxable year for which the mark-to-market
election becomes effective, including with respect to any mark-to-market gain recognized at the end of that year. In subsequent years
for which a valid mark-to-mark election remains in effect, the excess distribution rules generally will not apply. A U.S. Holder that
is eligible to make a mark-to-market with respect to such holder’s New Forafric Ordinary Shares may do so by providing the appropriate
information on IRS Form 8621 and timely filing that form with the U.S. Holder’s tax return for the year in which the election becomes
effective.
U.S.
Holders should consult their tax advisors as to the availability and desirability of a mark-to-market election, as well as the impact
of such election on interests in any Lower-Tier PFICs.
A
U.S. Holder of a PFIC may be required to file an IRS Form 8621 on an annual basis and to provide such other information as may be required
by the U.S. Treasury Department. Failure to do so, if required, will extend the statute of limitations applicable to such U.S. Holder
until such required information is furnished to the IRS. U.S. Holders should consult their tax advisors regarding any reporting requirements
that may apply to them if Forafric Global is a PFIC.
The
rules dealing with PFICs and with the QEF, “deemed sale,” and mark-to-market elections are very complex and are affected
by various factors in addition to those described above. U.S. Holders are strongly encouraged to consult their tax advisors regarding
the application of the PFIC rules to their particular circumstances.
Non-U.S.
Holders
The
section applies to Non-U.S. Holders of New Forafric Ordinary Shares and New Forafric Warrants. For purposes of this discussion, a Non-U.S.
Holder means a beneficial owner (other than a partnership or an entity or arrangement so characterized for U.S. federal income tax purposes)
of New Forafric Ordinary Shares or New Forafric Warrants that is for U.S. federal income tax purposes not a U.S. Holder, including:
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a
nonresident alien individual, other than certain former citizens and residents of the U.S. subject to U.S. tax as expatriates;
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a
foreign corporation; or
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a
foreign estate or trust;
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but
generally does not include a beneficial owner who has been or is engaged in the conduct of a trade or business within the U.S. or an
individual who is present in the U.S. for 183 days or more in the taxable year of the disposition of New Forafric Ordinary Shares or
New Forafric Warrants (except to the extent discussed below). If you are such an individual, you should consult your tax advisor regarding
the U.S. federal income tax consequences of exercising redemption rights with respect to Globis Common Stock or the ownership and disposition
of New Forafric Ordinary Shares or New Forafric Warrants.
Non-U.S.
Holders Exercising Redemption Rights with Respect to Globis Common Stock
The
characterization for U.S. federal income tax purposes of the redemption of a Non-U.S. Holder’s Globis Common Stock generally will
correspond to the U.S. federal income tax characterization of such a redemption of a U.S. Holder’s Globis Common Stock, as described
above under “— U.S. Holders Exercising Redemption Rights with Respect to Globis Common Stock.”
Subject
to the discussion below concerning backup withholding, if such a redemption qualifies as a sale of the Globis Common Stock, any redeeming
Non-U.S. Holder will generally not be subject to U.S. federal income tax or withholding tax on any gain recognized as a result of the
redemption or be able to utilize a loss in computing U.S. federal income tax liability unless one of the exceptions described below under
“— U.S. Federal Income Tax Consequences of the Ownership and Disposition of New Forafric Ordinary Shares and New Forafric
Warrants to Non-U.S. Holders” applies in respect of gain from the disposition of Globis Common Stock. Moreover, redeeming Non-U.S.
Holders may be subject to U.S. federal income tax on any gain recognized as a result of the redemption if Globis Common Stock constitutes
a U.S. real property interest by reason of Globis’ status as a U.S. real property holding corporation for U.S. federal income tax
purposes. Globis believes that it is not and has not been at any time since its formation a U.S. real property holding corporation.
If
a Non-U.S. Holder receives cash for Globis Common Stock, and the redemption is treated as a corporate distribution (rather than a sale
of stock under Section 302 of the Code), the Non-U.S. Holder will be subject to a 30% withholding tax (unless otherwise reduced by an
applicable income tax treaty and the Non-U.S. Holder provides a proper certificate of its eligibility for such reduced rate (usually
on an IRS Form W-8BEN or W-8BEN-E, as applicable)) on the gross amount of the distribution to the extent the distribution is paid from
current or accumulated earnings and profits, as determined under U.S. federal income tax principles, and treated as dividends, provided
such dividends are not effectively connected with such Non-U.S. Holder’s conduct of a trade or business within the U.S. Any distribution
not constituting a dividend will be treated first as reducing (but not below zero) the Non-U.S. Holder’s adjusted tax basis in
its Globis Common Stock and then, to the extent such distribution exceeds the Non-U.S. Holder’s adjusted tax basis, as gain realized
from the sale or other disposition of such Globis Common Stock, which will be treated as described in the paragraph immediately above.
A redemption treated as a dividend by Globis to a Non-U.S. Holder that is effectively connected with such Non-U.S. Holder’s conduct
of a trade or business within the United States (and if an income tax treaty applies, are attributable to a U.S. permanent establishment
or fixed base maintained by the Non-U.S. Holder in the U.S.) will generally not be subject to U.S. withholding tax, provided such Non-U.S.
Holder complies with certain certification and disclosure requirements (usually by providing an IRS Form W-8ECI). Instead, such dividends
will generally be subject to U.S. federal income tax, net of certain deductions, at the same corporate or graduated individual rates
applicable to U.S. Holders (together with branch profits tax, at a 30% rate, or such lower rate specified by an applicable tax treaty,
as adjusted for certain items, if such Non-U.S. Holder is a corporation).
IF
YOU ARE A NON-U.S. HOLDER OF Globis COMMON STOCK CONTEMPLATING EXERCISE OF YOUR REDEMPTION
RIGHTS, WE URGE YOU TO CONSULT YOUR TAX ADVISOR CONCERNING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES
THEREOF.
U.S.
Federal Income Tax Consequences of the Ownership and Disposition of New Forafric Ordinary Shares and New Forafric Warrants to Non-U.S.
Holders
Subject
to the discussion below concerning backup withholding, any (i) dividends of cash or property (including constructive distributions treated
as dividends as further described under the heading “U.S. Holders — U.S. Federal Income Tax Consequences of the Ownership
and Disposition of New Forafric Ordinary Shares and New Forafric Warrants to U.S. Holders — Possible Constructive Distributions”)
paid or deemed paid to a Non-U.S. Holder in respect of New Forafric Ordinary Shares or (ii) gain realized upon the sale or other taxable
disposition of New Forafric Ordinary Shares and/or New Forafric Warrants by a Non-U.S. Holder generally will not be subject to U.S. federal
income taxation or withholding tax unless:
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the
gain or dividend is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States
(and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment or a “fixed base”
in the United States to which such gain is attributable); or
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in
the case of any gain, the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during
the taxable year of the disposition and certain other requirements are met.
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Gain
or distributions described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis
at the regular rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower
rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.
Gain
described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified
by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. Holder (even though the individual
is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with
respect to such losses.
The
U.S. federal income tax treatment of a Non-U.S. Holder’s exercise of an Forafric Global Warrant, or the lapse of an Forafric Global
Warrant held by a Non-U.S. Holder, generally will correspond to the U.S. federal income tax treatment of the exercise or lapse of an
Forafric Global Warrant by a U.S. Holder, as described under “U.S. Holders — U.S. Federal Income Tax Consequences of the
Ownership and Disposition of New Forafric Ordinary Shares and New Forafric Warrants to U.S. Holders — Exercise, Lapse or Redemption
of an Forafric Global Warrant” above, although to the extent a cashless exercise or lapse results in a taxable exchange, the
consequences would be similar to those described in the preceding paragraphs above for a Non-U.S. Holder’s gain on the sale or
other disposition of New Forafric Ordinary Shares and New Forafric Warrants.
The
characterization for U.S. federal income tax purposes of the redemption of the Non-U.S. Holder’s New Forafric Warrants generally
will correspond to the U.S. federal income tax treatment of such a redemption of a U.S. Holder’s warrants, as described under “U.S.
Holders — U.S. Federal Income Tax Consequences of the Ownership and Disposition of New Forafric Ordinary Shares and New Forafric
Warrants to U.S. Holders — Exercise, Lapse or Redemption of an Forafric Global Warrant” above, and the consequences of
the redemption to the Non-U.S. Holder will be as described in the first paragraph above under the heading “— U.S. Federal
Income Tax Consequences of the Ownership and Disposition of New Forafric Ordinary Shares and New Forafric Warrants to Non-U.S. Holders”
based on such characterization.
Non-U.S.
Holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
Information
Reporting and Backup Withholding
Information
reporting requirements may apply to cash received in redemption of Globis Common Stock, dividends received by U.S. Holders of New Forafric
Ordinary Shares, and the proceeds received on the disposition of New Forafric Ordinary Shares effected within the U.S. (and, in certain
cases, outside the U.S.), in each case other than U.S. Holders that are exempt recipients (such as corporations). Backup withholding
(currently at a rate of 24%) may apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer identification number
(generally on an IRS Form W-9 provided to the paying agent of the U.S. Holder’s broker) or is otherwise subject to backup withholding.
Any redemptions treated as dividend payments with respect to Globis Common Stock or New Forafric Ordinary Shares and proceeds from the
sale, exchange, redemption or other disposition of New Forafric Ordinary Shares may be subject to information reporting to the IRS and
possible U.S. backup withholding. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting
and backup withholding rules.
Information
returns may be required to be filed with the IRS in connection with, and Non-U.S. Holders may be subject to backup withholding on amounts
received in respect of, a Non-U.S. Holder’s disposition of Globis securities or their New Forafric Ordinary Shares, unless the
Non-U.S. Holder furnishes to the applicable withholding agent the required certification as to its non-U.S. status, such as by providing
a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI, as applicable, or the Non-U.S. Holder otherwise establishes an exemption.
Dividends paid with respect to New Forafric Ordinary Shares and proceeds from the sale of other disposition of New Forafric Ordinary
Shares received in the U.S. by a Non-U.S. Holder through certain U.S.-related financial intermediaries may be subject to information
reporting and backup withholding unless such Non-U.S. Holder provides proof of an applicable exemption or complies with certain certification
procedures described above, and otherwise complies with the applicable requirements of the backup withholding rules.
Backup
withholding is not an additional tax. Amounts withheld as backup withholding may be credited against the taxpayer’s U.S. federal
income tax liability, and a taxpayer may obtain a refund of any excess amounts withheld under the backup withholding rules by timely
filing the appropriate claim for a refund with the IRS and furnishing any required information.
THE
U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY AND MAY NOT BE APPLICABLE TO YOU DEPENDING UPON YOUR PARTICULAR SITUATION. YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR WITH RESPECT
TO THE TAX CONSEQUENCES TO YOU OF THE BUSINESS COMBINATION, THE EXERCISE OF YOUR REDEMPTION RIGHTS WITH RESPECT TO Globis
COMMON STOCK, AND OF THE OWNERSHIP AND DISPOSITION OF NEW FORAFRIC ORDINARY SHARES AND NEW FORAFRIC WARRANTS, AS APPLICABLE, INCLUDING
THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND TAX TREATIES AND THE POSSIBLE EFFECTS OF CHANGES IN U.S. OR OTHER
TAX LAWS.
Regulatory
Matters
The
Business Combination and the transactions contemplated by the Business Combination Agreement are not subject to any additional federal
or state regulatory requirement or approval, (i) except for filings with the Gibraltar and Delaware necessary to effectuate the Redomiciliation
and (ii) the Business Combination and filings required of solicitation materials pursuant to Rule 14a-12 of the Exchange Act.
Resolution
to be Voted Upon
The
full text of the resolution to be passed is as follows:
“RESOLVED,
that the entry of Globis into the Business Combination Agreement, entered into as of December 19, 2021 (as amended, restated, supplemented
and/or otherwise modified from time to time, the “Business Combination Agreement”), by and among Globis, FAHL and
the Seller, the consummation of the transactions contemplated by the Business Combination Agreement, including the issuance of the acquisition
consideration thereunder, and the performance by Globis of its obligations thereunder thereby be ratified, approved, adopted and confirmed
in all respects.”
Vote
Required for Approval with Respect to the Business Combination Proposal
The
approval of the Business Combination Proposal will require the affirmative vote of a majority of the votes cast by the stockholders present
in person (which would include presence at a virtual meeting) or represented by proxy at the Stockholders Meeting. Accordingly, a Globis
stockholder’s failure to vote by proxy or to vote in person, as well as an abstention from voting and a broker non-vote with regard
to the Business Combination Proposal will have no effect on the Business Combination Proposal. Abstentions will be counted in connection
with the determination of whether a valid quorum is established but will have no effect on the Business Combination Proposal.
If
any of the Merger Proposal, the Redomiciliation Proposal, the Business Combination Proposal, the Equity Incentive Plan Proposal, the
Director Election Proposal, the Charter Proposal or the Nasdaq Proposal fail to receive the required approval by the stockholders of
Globis at the Stockholders Meeting, the Business Combination will not be completed.
Recommendation
of the Globis Board with Respect to the Business Combination Proposal
THE
GLOBIS BOARD UNANIMOUSLY RECOMMENDS THAT THE GLOBIS STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE BUSINESS COMBINATION PROPOSAL.
PROPOSAL
4: THE EQUITY INCENTIVE PLAN PROPOSAL
Overview
Globis
is asking its shareholders to approve the Forafric 2022 Long Term Employee Share Incentive Plan, referred to herein as the “Equity
Incentive Plan.” The Globis Board intends to adopt the Equity Incentive Plan, subject to the approval from the holders of Globis
Shares. If approved, the Equity Incentive Plan will become effective upon the Closing and will be used by New Forafric following the
Closing. Where the interests of FAHL (before the Closing) and the interests of New Forafric (following the Closing) are the same with
respect to the Equity Incentive Plan, the term “New Forafric” will be used.
The
Globis Board believes that New Forafric must offer a competitive equity incentive program if it is to successfully attract and retain
the best possible candidates for positions of substantial responsibility within New Forafric. The Globis Board expects that the Equity
Incentive Plan will be an important factor in attracting, retaining and rewarding high caliber employees who are essential to New Forafric’s
success and providing incentives to these individuals to promote the success of New Forafric.
The
following is a summary description of the Equity Incentive Plan, or the Equity Incentive Plan, as proposed to be adopted by Globis in
connection with the Business Combination. This summary is not a complete statement of the Equity Incentive Plan and is qualified in its
entirety by reference to the complete text of the Equity Incentive Plan, a copy of which is attached hereto as Annex H
to the proxy statement/prospectus. Globis stockholders should refer to the Equity Incentive Plan for more complete and detailed information
about the terms and conditions of the Equity Incentive Plan.
The
purpose of the Equity Incentive Plan is to provide a means whereby New Forafric can align the long-term financial interests of its employees,
consultants, and directors with the financial interests of its stockholders. In addition, the Globis Board believes that the ability
to grant options and other equity-based awards will help New Forafric to attract, retain and motivate employees, consultants, and directors
and encourages them to devote their best efforts to New Forafric’s business and financial success.
Approval
of the Equity Incentive Plan by Globis stockholders is required, among other things, in order to: (i) comply with Nasdaq rules requiring
stockholder approval of equity compensation plans and (ii) allow the grant of incentive stock options to participants in the Equity Incentive
Plan.
If
this Equity Incentive Plan Proposal is approved by Globis stockholders, the Equity Incentive Plan will become effective as of the date
immediately preceding the date of the Closing. Approval of the Equity Incentive Plan by Globis stockholders will allow New Forafric to
grant nominal cost options or phantom options at levels determined appropriate by its board of directors or Compensation Committee of
New Forafric following the closing of the Business Combination. The Equity Incentive Plan will also allow New Forafric to utilize a broad
array of equity incentives and performance-based cash incentives in order to secure and retain the services of its employees, directors
and consultants, and to provide long-term incentives that align the interests of its employees, directors and consultants with the interests
of its stockholders following the closing of the Business Combination.
New
Forafric’s employee equity compensation program, as implemented under the Equity Incentive Plan, will allow New Forafric to remain
competitive with comparable companies in its industry by giving it the resources to attract and retain talented individuals to achieve
its business objectives and build stockholder value. Approval of the Equity Incentive Plan will provide New Forafric with the flexibility
it needs to use equity compensation and other incentive awards to attract, retain and motivate talented employees, directors and consultants
who are important to New Forafric’s long-term growth and success.
The
Globis Board has approved the award of restricted stock units and stock options to executive officers
and members of senior management under the Equity Incentive
Plan, subject to stockholder approval of the Equity Incentive Plan. These awards are shown in the table entitled “New Plan Benefits”
below.
Summary
of Material Features of the Equity Incentive Plan
The
Equity Incentive Plan allows for the grant of awards, consisting of nominal cost options or phantom options to employees, directors and
consultants of New Forafric or any of its subsidiaries.
The
New Forafric Board is responsible for the administration of the Equity Incentive Plan and may, from time to time, make or amend regulations
for the administration of the Equity Incentive Plan. The decision of the New Forafric Board on all matters relating to the administration
of the Equity Incentive Plan, including the resolution of any ambiguity of the rules in the Equity Incentive Plan, is final and binding.
The New Forafric Board may also terminate or, from time to time, suspend the grant of awards. The New Forafric Board may also make, subject
to certain restrictions, amendments to the rules of the Equity Incentive Plan or any subplans.
Generally,
an award is granted by the execution by New Forafric of an award certificate, which provides information regarding the award’s
date of grant, the number of Ordinary Shares in respect of which an option is granted pursuant to the award, vesting schedule, and exercisability.
The exercise price for nominal cost options is 50% of the nominal value of the shares, and in the case of phantom options is the market
value of the shares less 50% of their nominal value.
With
the exception of an individual’s death or in the event of a corporate transaction, awards are not capable of being transferred,
charged or otherwise alienated. Any time an award holder purports to make one of these transfers, the award shall lapse immediately.
The
maximum number of Shares which may be the subject of awards under the Equity Incentive Plan may not exceed 10% of the issued share capital
of New Forafric from time to time.
Subject
to certain provisions of the Equity Incentive Plan, no award can be exercised after the tenth anniversary of the date of grant. With
the exception of certain special circumstances, an award can only be exercised while the award holder is employed or engaged by New Forafric
or any of its subsidiaries. Subject to certain provisions, a vested award may be exercised in whole or in part at any time after its
date of grant.
When
there are certain corporate transactions related to New Forafric, such as a compulsory acquisition, a general offer, a reconstruction,
a merger or division of New Forafric, the winding up of New Forafric, or the sale of New Forafric’s business or subsidiary, the
New Forafric Board has discretion (subject to certain requirements) to allow all awards (vested or unvested) to be exercised in whole
or in part. In certain circumstances, if the New Forafric Board exercises such discretion and the awards are not exercised, they will
instead lapse. If New Forafric is acquired, all award holders are required to release their awards in consideration of the grant of a
new award.
An
award can lapse when it has not been exercised after the tenth anniversary of the date of grant. It can also lapse when the award holder
ceases to be a director, an employee, or a consultant with New Forafric or any of its subsidiaries. An award will lapse when an order
is made by a court (or when a resolution is passed) for the compulsory winding up of New Forafric. Finally, an award lapses when the
award holder becomes bankrupt, enters into a compromise with their creditors generally except as permitted under certain circumstances.
Prior to the exercise of an award, an award holder has no rights in respect of any shares.
In
the event of a reorganization, vesting conditions may be adjusted by the New Forafric Board, subject to an auditors’ confirmation
that the adjustment is fair and reasonable and notice to the award holder.
An
award may not vest or be exercised until the New Forafric Board is satisfied that the award holder will be able to pay for any tax or
social security liability that is owed by the holder.
Following
the consummation of the Business Combination the FAHL 2021 Plan shall be replaced by the Equity Incentive Plan.
New
Plan Benefits
Grants
of awards under the Equity Incentive Plan are subject to the discretion of the plan administrator. Therefore, it is not possible to determine
the future benefits that will be received by participants under the Long-Term Incentive Plan.
Form
S-8
Following
the consummation of the Business Combination, when permitted by SEC rules, we intend to file with the SEC a registration statement on
Form S-8 covering the Ordinary Shares issuable under the Equity Incentive Plan.
Resolution
to be Voted Upon
The
full text of the resolution to be passed is as follows:
“RESOLVED, that the Forafric
2022 Long Term Employee Share Incentive Plan in the form attached as Annex H to the proxy statement/prospectus in
respect of the Stockholders Meeting of New Forafric to be approved and adopted in all respects with effect from the closing of the Business
Combination and transactions contemplated by the Business Combination Agreement.”
Vote
Required for Approval With Respect to the Equity Incentive Plan Proposal
The
approval of the Equity Incentive Plan Proposal will require the affirmative vote of a majority of the votes cast by the stockholders
present in person (which would include presence at a virtual meeting) or represented by proxy at the Stockholders Meeting. Accordingly,
a Globis stockholder’s failure to vote by proxy or to vote in person, as well as an abstention from voting and a broker non-vote
with regard to the Equity Incentive Plan Proposal will have no effect on the Equity Incentive Plan Proposal. Abstentions will be counted
in connection with the determination of whether a valid quorum is established but will have no effect on the Equity Incentive Plan Proposal.
If
any of the Merger Proposal, the Redomiciliation Proposal, the Business Combination Proposal, the Equity Incentive Plan Proposal, the
Director Election Proposal, the Charter Proposal or the Nasdaq Proposal fail to receive the required approval by the stockholders of
Globis at the Stockholders Meeting, the Business Combination will not be completed.
Recommendation
of the Globis Board with Respect to the Equity Incentive Plan Proposal
THE
GLOBIS BOARD UNANIMOUSLY RECOMMENDS THAT THE GLOBIS STOCKHOLDERS VOTE “FOR” THE EQUITY INCENTIVE PLAN PROPOSAL.
PROPOSAL
5: DIRECTOR ELECTION PROPOSAL
Overview
Globis
stockholders are also being asked to elect six directors to serve on the Board of Directors of New Forafric (the “Board”)
until the 2025 annual general meeting and, in each case until their respective successors are duly elected and qualified.
Under
Section 1.11 of the Business Combination Agreement, as a condition to the closing of the Business Combination, the board of directors
of New Forafric will consist of six directors, four of whom will be designated by Seller and two of whom will be designated by Global
SPAC LLC. Our Board has nominated Saad Bendidi, Julien Benitah, Franco Cassar, James Lasry, Paul Packer, and Ira Greenstein to
serve on New Forafric’s board of directors effective as of the closing of the Business Combination.
At
the Stockholders Meeting, Globis’ stockholders are being asked to appoint Saad Bendidi, Julien Benitah, Franco Cassar, James Lasry,
Paul Packer, and Ira Greenstein until the 2025 annual general meeting and, in each case until their respective successors are
duly elected and qualified, or until their earlier resignation, removal or death. See “Management of New Forafric Following the
Business Combination” of this proxy statement/prospectus for more information.
Resolution
to be Voted Upon
The
full text of the resolution to be passed is as follows:
“RESOLVED,
that Saad Bendidi, Julien Benitah, Franco Cassar, James Lasry, Paul Packer and Ira Greenstein be appointed as directors serving until
New Forafric’s 2025 annual general meeting; and in each case, effective as of the closing of the Business Combination in accordance
with the Business Combination Agreement.”
Vote
Required for Approval With Respect to the Director Election Proposal
Directors
are elected by a plurality of all of the votes cast by the stockholders present in person (which would include presence at a virtual
meeting) or represented by proxy at the Stockholder Meeting. This means that the six director nominees who receive the most affirmative
votes will be elected. With respect to the Director Election Proposal, abstentions and broker non-votes will not count as votes cast
at the Stockholders Meeting and, therefore, will have no effect on the outcome of this proposal.
If
any of the Merger Proposal, the Redomiciliation Proposal, the Business Combination Proposal, the Equity Incentive Plan Proposal, the
Director Election Proposal, the Charter Proposal or the Nasdaq Proposal fail to receive the required approval by the stockholders of
Globis at the Stockholders Meeting, the Business Combination will not be completed.
Recommendation
of the Globis Board with Respect to the Equity Incentive Plan Proposal
THE
GLOBIS BOARD UNANIMOUSLY RECOMMENDS THAT THE GLOBIS STOCKHOLDERS VOTE “FOR” THE DIRECTOR ELECTION PROPOSAL.
PROPOSAL
6: THE CHARTER PROPOSAL
Overview
Globis
stockholders are also being asked to adopt the new Memorandum and Articles of Association in the form attached hereto as Annex C,
which, in the judgment of the Globis Board, is necessary to adequately address the needs of Globis following the Redomiciliation
and the consummation of the Business Combination.
For
a summary of the key differences between the Amended and Restated Certificate of Incorporation of Globis under the DGCL and the new Memorandum
and Articles of Association of New Forafric under Gibraltar law, please see “Proposal 7: The Organizational Documents Proposals.”
The summary is qualified in its entirety by reference to the full text of the Memorandum and Articles of Association, a copy of which
is included as Annex C to this proxy statement/prospectus.
Resolution
to be Voted Upon
The
full text of the resolution to be passed is as follows:
“RESOLVED,
that the Amended and Restated Certificate of Incorporation of Globis Acquisition Corp. currently in effect be amended and restated by
the deletion in their entirety and the substitution in their place of the proposed Memorandum and Articles of Association (copy of which
is attached to the proxy statement/prospectus in respect of the Stockholders Meeting as Annex C) including the authorization
of the change in authorized share capital as indicated therein and the change of name to “Forafric Global PLC’”
Vote
Required for Approval With Respect to the Charter Proposal
The
approval of the Charter Proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Common Stock,
voting together as a single class. Thus, with respect to the Charter Proposal, abstentions and broker non-votes will count as a vote
“AGAINST” this proposal.
If
any of the Merger Proposal, the Redomiciliation Proposal, the Business Combination Proposal, the Equity Incentive Plan Proposal, the
Director Election Proposal, the Charter Proposal or the Nasdaq Proposal fail to receive the required approval by the stockholders of
Globis at the Stockholders Meeting, the Business Combination will not be completed.
Recommendation
of the Globis Board with Respect to the Charter Proposal
THE
GLOBIS BOARD UNANIMOUSLY RECOMMENDS THAT THE GLOBIS STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE CHARTER PROPOSAL.
PROPOSAL
7: THE ORGANIZATIONAL DOCUMENTS PROPOSALS
Overview
Globis’
stockholders are asked to consider and vote upon, on a non-binding advisory basis, three separate proposals (collectively, the “Organizational
Documents Proposals”) in connection with the replacement of the Existing Organizational Documents with the Proposed Organizational
Documents. The Organizational Documents Proposals are not conditioned on the approval of any other proposal.
In
the judgment of the Globis Board, these provisions are necessary to adequately address the needs of Globis and its stockholders following
the consummation of the Business Combination and the Redomiciliation. Accordingly, regardless of the outcome of the non-binding advisory
vote on these proposals, Globis intends that the Memorandum and Articles of Association in the form set forth on Annex C will
take effect at consummation of the Business Combination and Redomiciliation, assuming adoption of the Charter Proposal.
The
Proposed Organizational Documents differ materially from the Existing Organizational Documents. The following table sets forth a summary
of the principal changes proposed to be made between our Amended and Restated Certificate of Incorporation and the proposed Memorandum
and Articles of Association for New Forafric. This summary is qualified by reference to the complete text of the Existing Organizational
Documents of Globis, attached to this proxy statement/prospectus as Annex B, the complete text of the proposed Memorandum
and Articles of Association, a copy of which is attached to this proxy statement/prospectus as Annex C. All shareholders
are encouraged to read each of the Proposed Organizational Documents in its entirety for a more complete description of its terms. Additionally,
as the Existing Organizational Documents are governed by the DGCL and the Proposed Organizational Documents will be governed by the laws
of Gibraltar , we encourage stockholders to carefully consult the information set out under the section entitled “Proposal 2:
The Redomiciliation Proposal — Comparison of Shareholder Rights under the Applicable Organizational Documents Before and After
the Redomiciliation,” “Proposal 2: The Redomiciliation Proposal — Comparison of Shareholder Rights under Applicable
Corporate Law Before and After the Redomiciliation” and “Proposal 6: The Charter Proposal.”
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Existing
Organizational
Documents
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Proposed
Organizational
Documents
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Authorized
Shares
(Organizational
Documents
Proposal
7A)
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The
Existing Organizational Documents authorize 101,000,000 shares, consisting of 100,000,000 shares of Common Stock and 1,000,000 shares
of Preferred Stock.
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The
Proposed Organizational Documents authorize 101,000,000 shares, consisting of 100,000,000 Ordinary Shares and 1,000,000 Preferred
Shares.
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See
Article 5 of our Existing Organizational Documents.
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See
Memorandum of Association of Forafric Global PLC
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Require
New Forafric to Seek Shareholder Consent Prior to Issuances of Preferred Shares
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The
Existing Organizational Documents authorize the issuance of 1,000,000 shares of Preferred Stock with such designations, rights and
preferences as may be determined from time to time by our board of directors. Accordingly, Globis Board is empowered under the Existing
Organizational Documents, without shareholder approval, to issue shares of preferred stock with dividend, liquidation, redemption,
voting or other rights which could adversely affect the voting power or other rights of the holders of ordinary shares.
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The
Proposed Organizational Documents provide that New Forafric may issue shares with such rights
or restrictions as may be determined by ordinary resolution of the shareholders of New Forafric.
New
Forafric may issue shares which are to be redeemed, or are liable to be redeemed at the option of New Forafric or the holder, and
the directors may determine the terms, conditions and manner of redemption of any such shares.
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See
Article 5 of our Existing Organizational Documents
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See
article 160 of the Articles of Association.
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Exclusive
Forum
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The
Existing Organizational Documents do not contain a provision adopting an exclusive forum for certain shareholder litigation.
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The
Proposed Organizational Documents do not contain a provision adopting an exclusive forum for shareholder litigation.
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Existing
Organizational
Documents
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Proposed
Organizational
Documents
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Corporate
Name
(Organizational
Documents
Proposal
7B)
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The
Existing Organizational Documents provide the name of New Forafric is “Globis Acquisition Corp.”
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The
Proposed Organizational Documents will provide that the name of the company will be “Forafric Global PLC”
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See
paragraph 1 of our Existing Organizational Documents.
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Perpetual
Existence
(Organizational
Documents
Proposal
7B)
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The
Existing Organizational Documents provide that if we do not consummate a business combination (as defined in the Existing Organizational
Documents) by March 15, 2022 (or June 15, 2022 if such date is extended), Globis shall cease all operations except for the purposes
of winding up and shall redeem the shares issued in our IPO and liquidate the Trust Account.
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The
Proposed Organizational Documents do not contain a provision for the mandatory winding up of New Forafric in any circumstances.
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See
Article 6.F of our Existing Organizational Documents.
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Takeovers
by Interested
Stockholders
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The
Existing Organizational Documents do not provide restrictions on takeovers of Globis by a related shareholder following a business
combination.
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The
Proposed Organizational Documents do not provide restrictions on takeovers of New Forafric by a related shareholder following a business
combination.
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Provisions
Related to Status as
Blank
Check Company
(Organizational
Documents
Proposal
7B)
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The
Existing Organizational Documents set forth various provisions related to our status as a blank check company prior to the consummation
of a business combination.
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The
Proposed Organizational Documents do not include such provisions related to our status as a blank check company, which no longer
will apply upon consummation of the Business Combination, as we will cease to be a blank check company at such time.
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See
Article 6 of our Existing Organizational Documents.
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Resolution
to be Voted Upon
The
full text of the resolution to be passed in connection with the replacement of the Existing Organizational Documents with the Proposed
Organizational Documents is as follows:
“RESOLVED,
as a non-binding advisory resolution, that the proposed Memorandum and Articles of Association (a copy of which is attached to the proxy
statement/prospectus in respect of the Stockholders Meeting as Annex C), will be approved and adopted with such
principal changes as described in Organizational Documents Proposals 7C.”
Vote
Required for Approval With Respect to the Organizational Documents Proposals
The
approval of the Organizational Documents proposals will require the affirmative vote of a majority of the votes cast by the stockholders
present in person (which would include presence at a virtual meeting) or represented by proxy at the Stockholders Meeting. Accordingly,
a Globis stockholder’s failure to vote by proxy or to vote in person, as well as an abstention from voting and a broker non-vote
with regard to the Organizational Documents Proposals will have no effect on the Organizational Documents Proposal. Abstentions will
be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Organizational
Documents Proposal.
As
discussed above, a vote to approve the Organizational Documents Proposals is an advisory vote, and therefore, is not binding on Globis
or its Board. Accordingly, regardless of the outcome of the non-binding advisory vote, Globis intends that each of the proposed Memorandum
and Articles of Association of New Forafric, in the form set forth on Annex C of the proxy statement
and prospectus, and containing the provisions noted above, will take effect at consummation of the Business Combination and Redomiciliation,
assuming adoption of the Charter Proposal.
If
any of the Merger Proposal, the Redomiciliation Proposal, the Business Combination Proposal, the Equity Incentive Plan Proposal, the
Director Election Proposal, the Charter Proposal or the Nasdaq Proposal fail to receive the required approval by the stockholders of
Globis at the Stockholders Meeting, the Business Combination will not be completed.
Recommendation
of the Globis Board with Respect to the Organizational Documents Proposals
THE
GLOBIS BOARD UNANIMOUSLY RECOMMENDS THAT THE GLOBIS STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ORGANIZATIONAL DOCUMENTS
PROPOSALS.
ORGANIZATIONAL
DOCUMENTS PROPOSAL 7A — APPROVAL OF AUTHORIZATION OF CHANGE TO AUTHORIZED CAPITAL STOCK, AS SET FORTH IN THE PROPOSED ORGANIZATIONAL
DOCUMENTS
Overview
Organizational
Documents Proposal 7A — An amendment to change 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.
As
of the date of this proxy statement/prospectus, there are 15,050,833 shares of Common Stock issued and outstanding, which includes
an aggregate of 3,148,333 shares of Common Stock held by the Sponsors and Globis’ independent directors. In addition, as
of the date of this proxy statement/prospectus, there is outstanding an aggregate of 15,789,722 Warrants to acquire ordinary shares,
which comprise the 4,289,722 Private Placement Warrants held by Sponsor and the 11,500,000 Public Warrants.
In
connection with the Business Combination, at the Closing, New Forafric will issue up to 17,004,762 Ordinary Shares to the Seller
for all FAHL Equity Securities held by the Seller. For further details, see “Proposal 3: The Business Combination Proposal —
The Business Combination Agreement — Business Combination Consideration.”
In
order to ensure that New Forafric has sufficient authorized capital for future issuances our board of directors has approved, subject
to stockholder approval, that the Proposed Organizational Documents of New Forafric change the authorized capital stock of Globis from
(i) 100,000,000 shares of Common Stock and 1,000,000 shares of preferred stock of Globis to (ii) 100,000,000 Ordinary shares of New Forafric
and 1,000,000 preferred shares of New Forafric.
This
summary is qualified by reference to the complete text of the proposed Memorandum and Articles of Association of New Forafric, copies
of which is attached to this proxy statement/prospectus as Annex C. All stockholders are encouraged to read the
proposed Memorandum and Articles of Association in its entirety for a more complete description of their terms.
Reasons
for the Amendments
The
principal purpose of this proposal is to provide for an authorized capital structure of New Forafric that will enable it to continue
as an operating company governed by the laws of Gibraltar. Our board of directors believes that it is important for us to have available
for issuance a number of authorized ordinary shares and preferred shares sufficient to support our growth and to provide flexibility
for future corporate needs (including, if needed, as part of financing for future growth acquisitions).
Recommendation
of the Globis Board
THE
GLOBIS BOARD UNANIMOUSLY RECOMMENDS THAT GLOBIS STOCKHOLDERS VOTE
“FOR”
THE APPROVAL OF ORGANIZATIONAL DOCUMENTS PROPOSAL 7A.
ORGANIZATIONAL
DOCUMENTS PROPOSAL 7B — APPROVAL OF OTHER CHANGES
IN
CONNECTION WITH ADOPTION OF THE PROPOSED ORGANIZATIONAL DOCUMENTS
Overview
Organizational
Documents Proposal 7B — An amendment to authorize all other changes in connection with the replacement of the Existing Organizational
Documents with the Memorandum and Articles of Association as part of the Redomiciliation (a copy of which is attached to this proxy statement/prospectus
as Annex C), including (1) changing the corporate name from “Globis Acquisition Corp.” to “Forafric
Global PLC” (which will occur as part of the Redomiciliation 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.
Our
shareholders are also being asked to approve, on a non-binding advisory basis, Organizational Documents Proposal 7B which is, in the
judgment of the Globis Board, necessary to adequately address the needs of New Forafric after the Business Combination.
The
Proposed Organizational Documents will provide that the name of the corporation will be “Forafric Global PLC” However, this
name change will occur in connection with the Business Combination and as part of the Redomiciliation and associated adoption of the
Proposed Organizational Documents. In addition, the Proposed Organizational Documents will make New Forafric’s corporate existence
perpetual.
The
Proposed Organizational Documents will not contain provisions related to a blank check company (including those related to operation
of the Trust Account, winding up of our operations should we not complete a business combination by a specified date, and other such
blank check-specific provisions as are present in the Existing Organizational Documents) because following the consummation of the Business
Combination, New Forafric will not be a blank check company.
Adoption
of each of the Organizational Documents Proposals, assuming approval of each of the Condition Precedent Proposals, will result, upon
the Redomiciliation, in the wholesale replacement of Globis’ Existing Organizational Documents with New Forafric’s Proposed
Organizational Documents. While certain material changes between the Existing Organizational Documents and the Proposed Organizational
Documents have been unbundled into distinct Organizational Documents Proposals or otherwise identified in this Organizational Documents
Proposal 7B there are other differences between the Existing and Proposed Organizational Documents (arising from, among other things,
differences between the DGCL and the laws of Gibraltar and the typical form of organizational documents under each such body of law)
that will be approved (subject to the approval of the aforementioned related proposals and consummation of the Business Combination)
if we adopt this Organizational Documents Proposal 7B Accordingly, we encourage stockholders to carefully review the terms of the proposed
Memorandum and Articles of Association of New Forafric, attached hereto as Annex C, as well as the information set
under the section entitled “Proposal 2: The Redomiciliation Proposal — Comparison of Shareholder Rights under the Applicable
Organizational Documents Before and After the Redomiciliation.”
Reasons
for the Amendments
Corporate
Name
The
Globis Board believes that changing the post-business combination corporate name from “Globis Acquisition Corp.” to “Forafric
Global PLC” is desirable to reflect the Business Combination with FAHL and to clearly identify Forafric Global PLC as the publicly
traded entity.
Perpetual
Existence
The
Globis Board believes that making New Forafric’s corporate existence perpetual is desirable to reflect the Business Combination.
Additionally, perpetual existence is the usual period of existence for public corporations, and the Globis Board believes that it is
the most appropriate period for New Forafric following the Business Combination.
Provisions
Related to Status as Blank Check Company
The
elimination of certain provisions related to our status as a blank check company is desirable because these provisions will serve no
purpose following the Business Combination. For example, the Proposed Organizational Documents do not include the requirement to dissolve
New Forafric and allow it to continue as a corporate entity with perpetual existence following consummation of the Business Combination.
Perpetual existence is the usual period of existence for public corporations, and the Globis Board believes it is the most appropriate
period for New Forafric following the Business Combination. In addition, certain other provisions in our current certificate require
that proceeds from the Globis’ initial public offering be held in the Trust Account until a business combination or liquidation
of Globis has occurred. These provisions cease to apply once the Business Combination is consummated and are therefore not included in
the Proposed Organizational Documents.
Recommendation
of the Globis Board
THE
GLOBIS BOARD UNANIMOUSLY RECOMMENDS THAT GLOBIS STOCKHOLDERS VOTE “FOR” THE APPROVAL OF ORGANIZATIONAL DOCUMENTS PROPOSAL
7B
PROPOSAL
8: THE NASDAQ PROPOSAL
Overview
The
Nasdaq Proposal — to consider and vote upon a proposal to approve, for the purposes of complying with the applicable provisions
of the Nasdaq Listing Rule 5635(a), the issuance of Ordinary Shares and securities convertible into or exchangeable for Ordinary Shares
in connection with the Business Combination, and the Ordinary Shares issued in connection with the PIPE Investment, the conversion of
the FAHL Bonds and the conversion of the FAHL Related Party Loans.
Reasons
for the Approval for Purposes of NASDAQ Listing Rule 5635(a)
Under
Nasdaq Listing Rule 5635(a), a company is required to obtain stockholder approval prior to the issuance of common stock, or of securities
convertible into or exercisable for common stock, if the number of shares of common stock to be issued is, or will be upon issuance,
equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the common stock or of securities
convertible into or exercisable for common stock. In the Business Combination, the PIPE Investment, the conversion of the FAHL Bonds
and the conversion of the FAHL Related Party Loans, Globis currently expects to issue an estimated 1,445,164 Ordinary Shares (including
Ordinary Shares to be issued upon the exchange or conversion of securities to be outstanding upon consummation of the Business Combination).
Additionally,
pursuant to Nasdaq Listing Rule 5635(a), when a Nasdaq-listed company proposes to issue securities in connection with the Business Combination
of the stock or assets of another company, stockholder approval is required if a substantial stockholder of such company has a 5% or
greater interest, directly or indirectly, in such company or the assets to be acquired or in the consideration to be paid in the transaction
or series of related transactions and the present or potential issuance of common stock could result in an increase in outstanding shares
of common stock or voting power of 5% or more. Nasdaq Listing Rule 5635(e)(3) defines a substantial stockholder as the holder of an interest
of 5% or more of either the number of shares of common stock or the voting power outstanding of a Nasdaq -listed company. Because the
Sponsors currently own greater than 5% of Globis’ Common Stock, the Sponsor is considered a substantial shareholder of Globis under
Nasdaq Listing Rule 5635(a)(2).
In
the event that this proposal is not approved by Globis stockholders, the Business Combination cannot be consummated. In the event that
this proposal is approved by Globis stockholders, but the Business Combination Agreement is not consummated, New Forafric will not issue
such Ordinary Shares.
Vote
Required for Approval With Respect to the NASDAQ Proposal
The
approval of the NASDAQ Proposal will require the affirmative vote of a majority of the votes cast by the stockholders present in person
(which would include presence at a virtual meeting) or represented by proxy at the Stockholders Meeting. Accordingly, a Globis stockholder’s
failure to vote by proxy or to vote in person, as well as an abstention from voting and a broker non-vote with regard to the NASDAQ Proposal
will have no effect on the NASDAQ Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum
is established but will have no effect on the NASDAQ Proposal.
If
any of the Merger Proposal, the Redomiciliation Proposal, the Business Combination Proposal, the Equity Incentive Plan Proposal, the
Director Election Proposal, the Charter Proposal or the Nasdaq Proposal fail to receive the required approval by the stockholders of
Globis at the Stockholders Meeting, the Business Combination will not be completed.
Resolution
to be Voted Upon
The
full text of the resolution to be passed is as follows:
“RESOLVED,
that for the purposes of complying with the applicable provisions of Nasdaq Listing Rule 5635(a), the issuance of Ordinary Shares and
securities convertible into or exchangeable for Ordinary Shares in connection with the Business Combination, and the Ordinary Shares
issued with the PIPE Investment be approved.”
Recommendation
of the Globis Board
THE
GLOBIS BOARD UNANIMOUSLY RECOMMENDS THAT GLOBIS STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE NASDAQ PROPOSAL.
PROPOSAL
9: THE ADJOURNMENT PROPOSAL
Overview
The
Adjournment Proposal allows the Globis Board to submit a proposal to approve the adjournment of the Stockholders Meeting to a later date
or dates, if necessary, to permit further solicitation and vote of proxies in the event, based on the tabulated votes, there are not
sufficient votes at the time of the Stockholders Meeting to approve the Condition Precedent Proposals. The purpose of the Adjournment
Proposal is to permit further solicitation of proxies and votes and to provide additional time for Sponsor and Globis and the Globis
stockholders to make purchases of ordinary shares or other arrangements that would increase the likelihood of obtaining a favorable vote
on the proposals to be submitted at the Stockholders Meeting. See “Proposal 3: The Business Combination Proposal — Interests
of Globis’ Directors and Officers and Others in the Business Combination.”
Consequences
if the Adjournment Proposal is Not Approved
If
the Adjournment Proposal is presented to the Stockholders Meeting and is not approved by the shareholders, the Globis Board may not be
able to adjourn the Stockholders Meeting to a later date in the event that, based on the tabulated votes, there are not sufficient votes
at the time of the Stockholders Meeting to approve the Condition Precedent Proposals. In such event, the Business Combination would not
be completed.
Vote
Required for Approval
Resolution
to be Voted Upon
The
full text of the resolution to be passed is as follows:
“RESOLVED,
that the adjournment of the Stockholders Meeting to a later date or dates, if necessary, to permit further solicitation and vote
of proxies in the event that there are insufficient votes for the approval of one or more proposals at the Stockholders Meeting be approved.”
Recommendation
of the Globis Board
THE
GLOBIS BOARD UNANIMOUSLY RECOMMENDS THAT GLOBIS STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ADJOURNMENT PROPOSAL.
The
existence of financial and personal interests of one or more of Globis’ directors may result in a conflict of interest on the part
of such director(s) between what he or they may believe is in the best interests of Globis and its stockholders and what he or they may
believe is best for himself or themselves in determining to recommend that stockholders vote for the proposals. In addition, Globis’
officers have interests in the Business Combination that may conflict with your interests as a shareholder. See the section entitled
See “Proposal 3: The Business Combination Proposal — Interests of Globis’ Directors and Officers and Others in the
Business Combination” for a further discussion of these considerations.
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On
December 19, 2021, Globis entered into the Business Combination Agreement, which provides for a business combination between Globis and
FAHL (the “Business Combination”). The Business Combination Agreement provides for the consummation of the following transactions:
(a) Globis will form under the laws of the State of Nevada a wholly-owned subsidiary of Globis, or Globis Nevada, change its jurisdiction
of incorporation to Nevada by merging with and into Globis Nevada such that Globis Nevada will survive the merger, and 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, referred to herein as the “Redomiciliation” and change its name to “Forafric Global PLC,”
referred to herein as “New Forafric”; and (b) immediately following the effectiveness of the Redomiciliation, New Forafric
will acquire 100% of the equity interests in FAHL from the Seller.
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 and the purchase of the Convertible Bonds.
The
unaudited pro forma condensed combined balance sheet as of September 30, 2021 combines the unaudited historical balance sheet of Globis
as of September 30, 2021 with the unaudited historical condensed balance sheet of FAHL as of September 30, 2021, giving effect to the
Business Combination, the PIPE Investment 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 nine months ended September 30, 2021 and for the year ended December
31, 2020 combines the unaudited historical condensed statement of operations of Globis for the nine months ended September 30, 2021 and
the audited historical statement of operations of Globis for the period from August 21, 2020 (inception) through December 31, 2020 with
the unaudited historical condensed consolidated statement of operations of FAHL for the nine months ended September 30, 2021 and the
audited historical consolidated statement of operations of FAHL for the year ended December 31, 2020, respectively, giving effect
to the Business Combination, the PIPE Investment and the purchase of the Convertible Bonds, as if each had been consummated as of January
1, 2020.
The
historical financial information has been adjusted to give pro forma effect to events that relate to material financing transactions
consummated after September 30, 2021 and pro forma adjustments that are directly attributable to the Business Combination, the PIPE Investment
and the purchase of the Convertible Bonds, are factually supportable and, with respect to the unaudited pro forma condensed combined
statements of operations, are expected to have a continuing impact on the results of the combined company. 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 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:
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the
(a) historical audited financial statements of Globis as of December 31, 2020 and for the period August 21, 2020 (inception) through
December 31, 2020 and (b) historical unaudited condensed financial statements of Globis as of and for the nine months ended September
30, 2021;
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the
(a) historical audited consolidated financial statements of FAHL as of and for the years ended December 31, 2020 and December 31,
2019 and (b) historical unaudited condensed consolidated financial statements of FAHL as of and for the nine months ended September
30, 2021;
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the
sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Globis,”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of FAHL” and
other financial information included elsewhere in this proxy statement/prospectus; and
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other
information relating to Globis and FAHL included in this proxy statement/prospectus, including the Business Combination Agreement
and the description of certain terms thereof set forth under the section entitled “The Business Combination.”
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Description
of the Business Combination
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.
We
also entered into a subscription agreement (the “PIPE Subscription Agreement”) with an accredited investor (the “PIPE
Investor”), pursuant to which the PIPE Investor will purchase Ordinary Shares of New Forafric in a private placement following
the Redomiciliation and prior to the closing of the Business Combination. Pursuant to the PIPE Subscription Agreement, the PIPE Investor
will purchase, at a purchase price of $10.50 per share, a number of ordinary shares of New Forafric (the “PIPE Shares”) that
will be equal to the 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”); accordingly, the maximum aggregate amount to be paid
by the PIPE Investor for the PIPE Shares is approximately $20 million. The closing of the PIPE Investment is contingent upon, among other
things, the substantially concurrent consummation of the Business Combination.
In
connection with the proposed Business Combination, between December 31, 2021 and January 3, 2022, affiliates (each a “Bond Investor”)
of Up and Up Capital, LLC and Globis SPAC LLC, the sponsors of Globis, subscribed for convertible bonds of FAHL, as issuer, in an aggregate
principal amount of $9.5 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 will mature and be redeemed on June 15, 2026. Interest shall accrue on the FAHL Bonds
at a rate of 6% per annum and the Bond Investors are entitled to certain customary information rights. Pursuant to the current terms
of the FAHL Bonds, upon consummation of the Business Combination, the FAHL Bonds will automatically convert into ordinary shares of New
Forafric at a price per share that is a 10% discount to the PIPE Investment, subject to certain adjustments. The number of ordinary shares
will be equal to the quotient that results from dividing the aggregate principal amount of the respective FAHL Bond by $9.45, subject
to certain adjustments
Anticipated
Accounting Treatment
The Business Combination
will be accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Globis, who is
the legal acquirer, 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:
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FAHL’s
stockholders will have the largest voting interest in New Forafric under both the no redemption and maximum redemption scenarios;
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The
board of directors of the post-combination company has six members, and FAHL stockholders have the ability to nominate at least the
majority of the members of the board of directors;
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FAHL’s
senior management is the senior management of the post-combination company;
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The
business of FAHL will comprise the ongoing operations of New Forafric; and
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FAHL
is the larger entity, in terms of substantive operations and employee base.
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Basis
of Pro Forma Presentation
The
unaudited pro forma condensed combined financial information has been prepared assuming two redemption scenarios as follows:
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Assuming
No Redemptions: This scenario assumes that no shares of Globis Common Stock are redeemed; and
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Assuming
Maximum Redemptions: This scenario assumes that 11,500,000 shares of Globis Common Stock, the maximum redemption of the outstanding
Globis Common Stock, are redeemed for their pro rata share of the cash in the Trust Account. This presentation assumes that Globis
stockholders exercise their redemption rights with respect to a maximum of 11,500,000 shares of common stock upon consummation of
the Business Combination at a redemption price of approximately $10.20 per share. The maximum redemption amount reflects the maximum
number of Globis public shares that can be redeemed without violating the conditions of the Business Combination Agreement or the
requirement of Globis’ current Amended and Restated Certificate of Incorporation that Globis cannot redeem public shares if
it would result in Globis having a minimum net tangible asset value of less than $5,000,001, after giving effect to the payments
to redeeming stockholders. Scenario 2 includes all adjustments contained in Scenario 1 and presents additional adjustments to reflect
the effect of the maximum redemptions.
|
Included
in the shares outstanding and weighted average shares outstanding as presented in the pro forma combined financial statements are the
following:
|
|
●
|
Assuming
No Redemptions: an aggregate of 15,100,000 combined company shares to be issued to the Seller; the PIPE Investment of
$18.0 million in proceeds for the sale of 1,712,245 PIPE Shares to PIPE Investor and 1,005,291 shares issued upon the conversion
of the FAHL Bonds upon the consummation of the Business Combination.
|
|
|
|
|
|
|
●
|
Assuming
Maximum Redemptions: an aggregate of 16,248,307 combined company shares to be issued to FAHL stockholders; the PIPE Investment
of $12.3 million in proceeds for the sale of 1,168,566 PIPE Shares to PIPE Investor and 1,005,291 shares issued upon the conversion
of the FAHL Bonds upon the consummation of the Business Combination.
|
|
|
|
|
|
|
●
|
The
Earnout Shares have not been included, as these have been deemed financial instruments to be issued upon the occurrence of contingent
earn out provisions.
|
After
the Business Combination, assuming no redemptions of Globis shares for cash, Globis current stockholders will own approximately 42.7%
of the outstanding combined company shares, the former stockholders of FAHL will own approximately 44.0% of the outstanding combined
company shares, the underwriters will own approximately 1.2% of the outstanding combined company shares, the PIPE Investor will own approximately
5.0% of the outstanding combined company shares, certain related parties of FAHL will own approximately 4.2% of the outstanding company
shares” and the Bond Investors will own approximately 2.9% of the outstanding combined company shares. Assuming redemption by holders
of 11,500,000 Globis shares, Globis stockholders will own approximately 13.4% of the outstanding combined company shares, the former
stockholders of FAHL will own approximately 69.4% of the outstanding combined company shares, the underwriters will approximately
1.7% of the outstanding combined company shares, the PIPE investors will own approximately 5.0% of the outstanding combined company shares,
certain related parties of FAHL will own approximately 6.2% of the outstanding company shares and the Bond Investors will
own approximately 4.3% of the outstanding combined company shares (in each case, not giving effect to any shares issuable upon the exercise
or conversion of warrants).
The
foregoing scenarios are for illustrative purposes only as the actual number of redemptions by Globis’ public stockholders is unknowable
prior to the Globis shareholder vote with respect to the Business Combination.
The
following presents the calculation of basic and diluted weighted average shares outstanding. The computation of diluted loss per share
excludes the effect of warrants to purchase 15,789,722 shares to be issued because the inclusion of any of these securities would be
anti-dilutive.
|
|
|
Scenario 1
Combined
(Assuming No
Redemptions
Into Cash)
|
|
|
Scenario 2
Combined
(Assuming
Maximum
Redemptions
Into Cash)
|
|
|
Weighted average shares calculation, basic and diluted
|
|
|
|
|
|
|
|
|
|
Globis public shares
|
|
|
11,500,000
|
|
|
|
—
|
|
|
Globis Sponsor and director shares
|
|
|
3,148,333
|
|
|
|
3,148,333
|
|
|
Globis underwriter shares
|
|
|
402,500
|
|
|
|
402,500
|
|
|
PIPE Investor
|
|
|
1,712,245
|
|
|
|
1,168,566
|
|
|
Bond Investors
|
|
|
1,005,291
|
|
|
|
1,005,291
|
|
|
Conversion of Related Party Loans
|
|
|
1,445,164
|
|
|
|
1,445,164
|
|
|
Combined company shares issued in Business Combination
|
|
|
15,100,000
|
|
|
|
16,248,307
|
|
|
Weighted average shares outstanding
|
|
|
34,313,533
|
|
|
|
23,418,161
|
|
|
Percent of shares owned by FAHL holders
|
|
|
44.0
|
%
|
|
|
69.4
|
%
|
|
Percent of shares owned by Globis public holders
|
|
|
33.5
|
%
|
|
|
0.0
|
%
|
|
Percent of shares owned by Globis Sponsor and directors
|
|
|
9.2
|
%
|
|
|
13.4
|
%
|
|
Percent of shares owned by underwriters
|
|
|
1.2
|
%
|
|
|
1.7
|
%
|
|
Percent of shares owned by PIPE Investor
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
|
Percent of shares owned by Bond Investors
|
|
|
2.9
|
%
|
|
|
4.3
|
%
|
|
Percent of shares issued for Related Party Loans
|
|
|
4.2
|
%
|
|
|
6.2
|
%
|
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
As
of September 30, 2021
(in
thousands)
|
|
|
(A)
FAHL (Historical)
|
|
|
(B)
Globis (Historical)
|
|
|
Transaction Accounting Adjustments (Assuming No Redemptions)
|
|
|
|
|
Pro Forma Combined (Assuming No Redemptions)
|
|
|
Additional Transaction Accounting Adjustments (Assuming Maximum Redemptions)
|
|
|
|
|
Pro Forma Combined (Assuming Maximum Redemptions)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
20,040
|
|
|
$
|
8
|
|
|
$
|
117,306
|
|
|
(2)
|
|
$
|
117,640
|
|
|
$
|
(117,306
|
)
|
|
(3)
|
|
$
|
6,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,979
|
|
|
(4)
|
|
|
|
|
|
|
(5,709
|
)
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,500
|
|
|
(5)
|
|
|
|
|
|
|
12,057
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,800
|
)
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39,543
|
)
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,850
|
)
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
31,030
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
31,030
|
|
|
|
-
|
|
|
|
|
|
31,030
|
|
|
Amounts due from related party
|
|
|
5,565
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
5,565
|
|
|
|
-
|
|
|
|
|
|
5,565
|
|
|
Other receivables
|
|
|
17,603
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
17,603
|
|
|
|
-
|
|
|
|
|
|
17,603
|
|
|
Inventories
|
|
|
44,298
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
44,298
|
|
|
|
-
|
|
|
|
|
|
44,298
|
|
|
Prepaid expenses and other current assets
|
|
|
166
|
|
|
|
151
|
|
|
|
-
|
|
|
|
|
|
317
|
|
|
|
-
|
|
|
|
|
|
317
|
|
|
Total Current Assets
|
|
|
118,702
|
|
|
|
159
|
|
|
|
97,592
|
|
|
|
|
|
216,453
|
|
|
|
(110,958
|
)
|
|
|
|
|
105,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
101,885
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
101,885
|
|
|
|
-
|
|
|
|
|
|
101,885
|
|
|
Right-of-use assets
|
|
|
16,190
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
16,190
|
|
|
|
-
|
|
|
|
|
|
16,190
|
|
|
Goodwill
|
|
|
61,946
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
61,946
|
|
|
|
-
|
|
|
|
|
|
61,946
|
|
|
Intangible assets, net
|
|
|
349
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
349
|
|
|
|
-
|
|
|
|
|
|
349
|
|
|
Other assets, noncurrent
|
|
|
1,691
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
1,691
|
|
|
|
-
|
|
|
|
|
|
1,691
|
|
|
Marketable securities held in Trust Account
|
|
|
-
|
|
|
|
116,156
|
|
|
|
1,150
|
|
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(117,306
|
)
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
300,763
|
|
|
$
|
116,315
|
|
|
$
|
(18,564
|
)
|
|
|
|
$
|
398,514
|
|
|
$
|
(110,958
|
)
|
|
|
|
$
|
287,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
30,591
|
|
|
$
|
647
|
|
|
$
|
(647
|
)
|
|
(6)
|
|
$
|
30,591
|
|
|
$
|
-
|
|
|
|
|
$
|
30,591
|
|
|
Lines of credit - working capital
|
|
|
58,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
58,750
|
|
|
|
-
|
|
|
|
|
|
58,750
|
|
|
Lines of credit - wheat inventories
|
|
|
90,497
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
90,497
|
|
|
|
-
|
|
|
|
|
|
90,497
|
|
|
Contract liabilities
|
|
|
1,600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
1,600
|
|
|
|
-
|
|
|
|
|
|
1,600
|
|
|
Current portion of long-term debt
|
|
|
13,658
|
|
|
|
-
|
|
|
|
(13,658
|
)
|
|
(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Promissory note - related party
|
|
|
-
|
|
|
|
700
|
|
|
|
1,150
|
|
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,850
|
)
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
4,323
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
4,323
|
|
|
|
-
|
|
|
|
|
|
4,323
|
|
|
Total current liabilities
|
|
|
199,419
|
|
|
|
1,347
|
|
|
|
(15,005
|
)
|
|
|
|
|
185,761
|
|
|
|
-
|
|
|
|
|
|
185,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
13,603
|
|
|
|
-
|
|
|
|
(13,603
|
)
|
|
(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Stockholder loan
|
|
|
15,399
|
|
|
|
-
|
|
|
|
(225
|
)
|
|
(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,174
|
)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds
|
|
|
-
|
|
|
|
-
|
|
|
|
9,500
|
|
|
(5)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,500
|
)
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
19,348
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
19,348
|
|
|
|
-
|
|
|
|
|
|
19,348
|
|
|
Total Liabilities
|
|
|
247,769
|
|
|
|
1,347
|
|
|
|
(44,007
|
)
|
|
|
|
|
205,109
|
|
|
|
-
|
|
|
|
|
|
205,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible redemption
|
|
|
-
|
|
|
|
116,150
|
|
|
|
(116,150
|
)
|
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
120,000
|
|
|
|
-
|
|
|
|
1
|
|
|
(3)
|
|
|
3
|
|
|
|
(1
|
)
|
|
(3)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(120,000
|
)
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid in capital
|
|
|
-
|
|
|
|
509
|
|
|
|
116,149
|
|
|
(3)
|
|
|
265,561
|
|
|
|
(117,305
|
)
|
|
(3)
|
|
|
154,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,979
|
|
|
(4)
|
|
|
|
|
|
|
(5,709
|
)
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,250
|
|
|
(7)
|
|
|
|
|
|
|
12,057
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,500
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,174
|
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
5,039
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
5,039
|
|
|
|
-
|
|
|
|
|
|
5,039
|
|
|
Accumulated deficit
|
|
|
(77,933
|
)
|
|
|
(1,691
|
)
|
|
|
(5,153
|
)
|
|
(6)
|
|
|
(83,086
|
)
|
|
|
-
|
|
|
|
|
|
(83,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,691
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest
|
|
|
5,888
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
5,888
|
|
|
|
-
|
|
|
|
|
|
5,888
|
|
|
Total Stockholders’ Equity (Deficit)
|
|
|
52,994
|
|
|
|
(1,182
|
)
|
|
|
141,593
|
|
|
|
|
|
193,405
|
|
|
|
(110,958
|
)
|
|
|
|
|
82,447
|
|
|
Total Liabilities and Stockholders’
Equity (Deficit)
|
|
$
|
300,763
|
|
|
$
|
116,315
|
|
|
$
|
(18,564
|
)
|
|
|
|
$
|
398,514
|
|
|
$
|
(110,958
|
)
|
|
|
|
$
|
287,556
|
|
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Nine
Months Ended September 30, 2021
(in
thousands, except share and per share data)
|
|
|
(A)
FAHL (Historical)
|
|
|
(B)
Globis (Historical)
|
|
|
Transaction Accounting Adjustments (Assuming No Redemptions)
|
|
|
|
|
Pro Forma Combined (Assuming No Redemptions)
|
|
|
Additional Transaction Accounting Adjustments (Assuming Maximum Redemptions)
|
|
|
|
|
Pro Forma Combined (Assuming Maximum Redemptions)
|
|
|
Revenue
|
|
$
|
185,517
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
$
|
185,517
|
|
|
$
|
-
|
|
|
|
|
$
|
185,517
|
|
|
Cost of sales
|
|
|
157,202
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
157,202
|
|
|
|
-
|
|
|
|
|
|
157,202
|
|
|
Gross profit
|
|
|
28,315
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
28,315
|
|
|
|
-
|
|
|
|
|
|
28,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
24,415
|
|
|
|
1,607
|
|
|
|
-
|
|
|
(1)
|
|
|
26,022
|
|
|
|
-
|
|
|
|
|
|
26,022
|
|
|
Total operating expenses
|
|
|
24,415
|
|
|
|
1,607
|
|
|
|
-
|
|
|
|
|
|
26,022
|
|
|
|
-
|
|
|
|
|
|
26,022
|
|
|
Operating income (loss)
|
|
|
3,900
|
|
|
|
(1,607
|
)
|
|
|
-
|
|
|
|
|
|
2,293
|
|
|
|
-
|
|
|
|
|
|
2,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
282
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
282
|
|
|
|
-
|
|
|
|
|
|
282
|
|
|
Interest expense
|
|
|
(7,387
|
)
|
|
|
|
|
|
|
-
|
|
|
|
|
|
(7,387
|
)
|
|
|
-
|
|
|
|
|
|
(7,387
|
)
|
|
Foreign exchange loss
|
|
|
(1,004
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
(1,004
|
)
|
|
|
-
|
|
|
|
|
|
(1,004
|
)
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
-
|
|
|
|
5
|
|
|
|
(5
|
)
|
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Loss before taxes
|
|
|
(4,209
|
)
|
|
|
(1,602
|
)
|
|
|
(5
|
)
|
|
|
|
|
(5,816
|
)
|
|
|
-
|
|
|
|
|
|
(5,816
|
)
|
|
Income tax benefit
|
|
|
831
|
|
|
|
-
|
|
|
|
-
|
|
|
(3)
|
|
|
831
|
|
|
|
-
|
|
|
|
|
|
831
|
|
|
Net loss
|
|
$
|
(3,378
|
)
|
|
$
|
(1,602
|
)
|
|
$
|
(5
|
)
|
|
|
|
$
|
(4,985
|
)
|
|
$
|
-
|
|
|
|
|
$
|
(4,985
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
-
|
|
|
|
15,050,833
|
|
|
|
19,262,700
|
|
|
(4)
|
|
|
34,313,533
|
|
|
|
(10,895,372
|
)
|
|
(4)
|
|
|
23,418,161
|
|
|
Basic and diluted net loss per share
|
|
$
|
-
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
$
|
(0.15
|
)
|
|
|
|
|
|
|
|
$
|
(0.21
|
)
|
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year
Ended December 31, 2020
(in
thousands, except share and per share data)
|
|
|
(C)
FAHL (Historical)
|
|
|
(D)
Globis (Historical)
|
|
|
Transaction Accounting Adjustments (Assuming No Redemptions)
|
|
|
|
|
Pro Forma Combined (Assuming No Redemptions)
|
|
|
Additional Transaction Accounting Adjustments (Assuming Maximum Redemptions)
|
|
|
|
|
Pro Forma Combined (Assuming Maximum Redemptions)
|
|
|
Revenue
|
|
$
|
196,596
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
$
|
196,596
|
|
|
$
|
-
|
|
|
|
|
$
|
196,596
|
|
|
Cost of sales
|
|
|
156,188
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
156,188
|
|
|
|
-
|
|
|
|
|
|
156,188
|
|
|
Gross profit
|
|
|
40,408
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
40,408
|
|
|
|
-
|
|
|
|
|
|
40,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
30,517
|
|
|
|
90
|
|
|
|
5,153
|
|
|
(1)
|
|
|
35,760
|
|
|
|
-
|
|
|
|
|
|
35,760
|
|
|
Total operating expenses
|
|
|
30,517
|
|
|
|
90
|
|
|
|
5,153
|
|
|
|
|
|
35,760
|
|
|
|
-
|
|
|
|
|
|
35,760
|
|
|
Operating income (loss)
|
|
|
9,891
|
|
|
|
(90
|
)
|
|
|
(5,153
|
)
|
|
|
|
|
4,648
|
|
|
|
-
|
|
|
|
|
|
4,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
3
|
|
|
|
-
|
|
|
|
|
|
3
|
|
|
Interest expense
|
|
|
(6,847
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
(6,847
|
)
|
|
|
-
|
|
|
|
|
|
(6,847
|
)
|
|
Foreign exchange loss
|
|
|
(3,043
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
(3,043
|
)
|
|
|
-
|
|
|
|
|
|
(3,043
|
)
|
|
Income (loss) before taxes
|
|
|
4
|
|
|
|
(90
|
)
|
|
|
(5,153
|
)
|
|
|
|
|
(5,239
|
)
|
|
|
-
|
|
|
|
|
|
(5,239
|
)
|
|
Income tax benefit
|
|
|
(143
|
)
|
|
|
-
|
|
|
|
-
|
|
|
(3)
|
|
|
(143
|
)
|
|
|
-
|
|
|
|
|
|
(143
|
)
|
|
Net loss
|
|
$
|
(139
|
)
|
|
$
|
(90
|
)
|
|
$
|
(5,153
|
)
|
|
|
|
$
|
(5,382
|
)
|
|
$
|
-
|
|
|
|
|
$
|
(5,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
-
|
|
|
|
4,179,573
|
|
|
|
30,133,960
|
|
|
(4)
|
|
|
34,313,533
|
|
|
|
(10,895,372
|
)
|
|
(4)
|
|
|
23,418,161
|
|
|
Basic and diluted net loss per share
|
|
$
|
-
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
$
|
(0.23
|
)
|
NOTES
TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
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 September 30, 2021, in the case of the
unaudited pro forma condensed combined balance sheet, and on January 1, 2020, 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 September 30, 2021 has been prepared using the following:
|
|
●
|
FAHL’s
historical condensed consolidated balance sheet as of September 30, 2021, as included elsewhere in this prospectus.
|
|
|
●
|
Globis’
historical condensed balance sheet as of September 30, 2021, as included elsewhere in this prospectus.
|
The
pro forma combined statement of operations for the nine months ended September 30, 2021 has been prepared using the following:
|
|
●
|
FAHL’s
historical condensed consolidated statement of operations for the nine months ended September 30, 2021, as included elsewhere in
this prospectus.
|
|
|
●
|
Globis’
condensed statement of operations for the nine months ended September 30, 2021, as included elsewhere in this prospectus.
|
The
pro forma combined statement of operations for the year ended December 31, 2020 has been prepared using the following:
|
|
●
|
FAHL’s
historical consolidated statement of operations for the year ended December 31, 2020, as included elsewhere in this prospectus.
|
|
|
●
|
Globis’
condensed statements of operations for the period from August 21, 2020 (inception) through December 31, 2020.
|
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.
|
2.
|
Adjustments
to Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2021
|
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 September 30, 2021 are
as follows:
|
(A)
|
Derived
from the unaudited condensed consolidated balance sheet of FAHL as of September 30, 2021.
|
|
(B)
|
Derived
from the unaudited condensed balance sheet of Globis as of September 30, 2021.
|
|
(1)
|
To
reflect the additional contribution of $1.15 million to the Trust Account by related
parties to extend the date by which Globis has to consummate a Business Combination
to March 15, 2022.
|
|
(2)
|
To
reflect the release of cash from marketable securities held in the Trust Account.
|
|
(3)
|
In
Scenario 1, which assumes no Globis shareholders exercise their redemption rights, the common
stock subject to redemption for cash amounting to $116.1 million would be transferred to
permanent equity. In Scenario 2, which assumes the same facts as described in Item 1 and
2 above, but also assumes the maximum number of shares are redeemed for cash by the Globis
shareholders, $117.3 million would be paid out in cash. The $117.3 million, or 11,500,000
shares, represents the maximum redemption amount, after giving effect to payments to redeeming
stockholders based on a consummation of the Business Combination on September 30, 2021.
|
|
(4)
|
In
Scenario 1, reflects proceeds received of $18.0 million from the PIPE Investor in exchange
for the issuance of 1,712,245 PIPE Shares at a price of $10.50 per share. In Scenario
2, reflects proceeds received of $12.3 million from the PIPE Investor in exchange for the
issuance of 1,168,566 PIPE Shares at a price of $10.50 per share. Under both scenarios, the
PIPE Shares represent 5% of all issued and outstanding ordinary shares.
|
|
(5)
|
Reflects
proceeds received of $9.5 million from the Bond Investors.
|
|
(6)
|
To
reflect the payment of an aggregate of $5.8 million of estimated legal, financial
advisory and other professional fees related to the Business Combination and the payment
of $0.6 million of accounts payable and accrued expenses. The direct, incremental
costs of the Business Combination related to the legal, financial advisory, accounting and
other professional fees of approximately $5.2 million is reflected as an adjustment to accumulated
deficit.
|
|
(7)
|
To
reflect the recapitalization of FAHL through (a) the contribution of all the share capital
in FAHL to New Forafric ordinary shares (b) the issuance of 15,100,000 New Forafric shares
in Scenario 1 and 16,248,307 New Forafric shares in Scenario 2, (c) the elimination
of the historical accumulated deficit of Globis of $1.7 million, the legal acquiree, (d)
the repayment of FAHL’s debt and stockholder loan in the aggregate amount of $27.5
million, and (e) in Scenario 1, the cash payment of $12.1 million to the Seller, at the consummation
of the Business Combination.
|
|
(8)
|
Reflects
the conversion of the $9.5 million in FAHL Bonds into 1,005,291 ordinary shares of New Forafric
at $9.45 per share.
|
|
(9)
|
Reflects
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.
|
|
(10)
|
Reflects
the repayment of the promissory note due to related parties.
|
Unaudited
Condensed Combined Pro Forma Adjustments to the Statements of Operations
(in
thousands, except share and per share data)
|
3.
|
Adjustments
to Unaudited Pro Forma Condensed Combined Statements of Operations for the Nine Months Ended September 30, 2021 and the Year
Ended December 31, 2020
|
The
transaction accounting adjustments included in the unaudited pro forma condensed combined statements of operations for the nine and twelve
months ended September 30, 2021 and December 30, 2020 are as follows:
|
(A)
|
Derived
from the unaudited condensed consolidated statement of operations of FAHL for the nine months
ended September 30, 2021.
|
|
(B)
|
Derived
from the unaudited condensed statement of operations of Globis for the nine months ended
September 30, 2021.
|
|
(C)
|
Derived
from the consolidated statement of operations of FAHL for the year ended December 31, 2020.
|
|
(D)
|
Derived
from the statement of operations of Globis for the period from August 21, 2020 (inception)
through December 31, 2020.
|
|
(1)
|
Represents
an adjustment to eliminate the effect of the pro forma balance sheet adjustment presented
in Entry #2(6) above in the aggregate amount of $5.2 million for the direct, incremental
costs of the Business Combination, assuming those adjustments were made as of the beginning
of the fiscal year presented.
|
|
(2)
|
Represents
an adjustment to eliminate interest income on marketable securities held in the trust account
as of the beginning of the period.
|
|
(3)
|
Although
the blended statutory rate for the redomesticated entity post business combination would
be 21%, the consolidated combined pro forma information under both scenarios results
in a net loss for tax purposes. As such, a full valuation allowance has been applied resulting
in no adjustment.
|
|
(4)
|
The
calculation of weighted average shares outstanding for basic and diluted net loss per share
assumes that Globis’ initial public offering occurred as of the beginning of the earliest
period presented. In addition, as the Business Combination is being reflected as if it had
occurred at the beginning of the periods presented, the calculation of weighted average shares
outstanding for basic and diluted net loss per share assumes that the shares have been outstanding
for the entire periods presented. This calculation is retroactively adjusted to eliminate
the number of shares redeemed for the entire period.
|
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, 2020. 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:
|
|
|
Pro Forma Combined Assuming No Redemptions into Cash
|
|
|
Pro Forma Combined Assuming Maximum Redemptions into Cash
|
|
|
Nine Months Ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,985
|
)
|
|
$
|
(4,985
|
)
|
|
Weighted average shares outstanding – basic and diluted
|
|
|
34,313,533
|
|
|
|
23,418,161
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.15
|
)
|
|
$
|
(0.21
|
)
|
|
Weighted average shares calculations,
basic and diluted
|
|
Pro
Forma Combined Assuming No Redemptions into Cash
|
|
|
Pro
Forma Combined Assuming Maximum Redemptions into Cash
|
|
|
|
|
|
|
|
|
|
|
Globis public shares
|
|
|
11,500,000
|
|
|
|
—
|
|
|
Globis initial stockholders’
|
|
|
3,148,333
|
|
|
|
3,148,333
|
|
|
Globis underwriters
|
|
|
402,500
|
|
|
|
402,500
|
|
|
PIPE Investor
|
|
|
1,712,245
|
|
|
|
1,168,566
|
|
|
Bond Investors
|
|
|
1,005,291
|
|
|
|
1,005,291
|
|
|
Conversion of Related Party Loans
|
|
|
1,445,164
|
|
|
|
1,445,164
|
|
|
FAHL stockholders
|
|
|
15,100,000
|
|
|
|
16,248,307
|
|
|
Weighted average shares outstanding –
basic and diluted
|
|
|
34,313,533
|
|
|
|
23,418,161
|
|
|
|
|
Pro Forma Combined Assuming No Redemptions into Cash
|
|
|
Pro Forma Combined Assuming Maximum Redemptions into Cash
|
|
|
Year Ended December 31, 2020 (FAHL) and for the period from August 21, 2020 (inception) through December 31,2020 (Globis)
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,382
|
)
|
|
$
|
(5,382
|
)
|
|
Weighted average shares outstanding – basic and diluted
|
|
|
34,313,533
|
|
|
|
23,418,161
|
|
|
Basic and diluted net loss per share
|
|
|
(0.16
|
)
|
|
|
(0.23
|
)
|
|
Weighted average shares calculations, basic and diluted
|
|
Pro Forma Combined Assuming No Redemptions into Cash
|
|
|
Pro Forma Combined Assuming Maximum Redemptions into Cash
|
|
|
|
|
|
|
|
|
|
|
Globis public shares
|
|
|
11,500,000
|
|
|
|
—
|
|
|
Globis initial stockholders’
|
|
|
3,148,333
|
|
|
|
3,148,333
|
|
|
Globis underwriters
|
|
|
402,500
|
|
|
|
402,500
|
|
|
PIPE Investor
|
|
|
1,712,245
|
|
|
|
1,168,566
|
|
|
Bond Investors
|
|
|
1,005,291
|
|
|
|
1,005,291
|
|
|
Conversion of Related Party Loans
|
|
|
1,445,164
|
|
|
|
1,445,164
|
|
|
FAHL stockholders
|
|
|
15,100,000
|
|
|
|
16,248,307
|
|
|
Weighted average shares outstanding – basic and diluted
|
|
|
34,313,533
|
|
|
|
23,418,161
|
|
COMPARATIVE
PER SHARE INFORMATION
The
following table sets forth the historical comparative per share information of Globis, on a stand-alone basis and the unaudited pro forma
combined per share information after giving effect to the Business Combination, assuming no redemptions and maximum redemptions.
The
weighted average shares outstanding and net earnings per share information reflect the Business Combination as if it had occurred on
January 1, 2020.
The
information in the following table should be read in conjunction with the selected historical financial information summary included
elsewhere in this proxy statement/prospectus, and the historical financial statements of Globis and FAHL and related notes that are included
elsewhere in this proxy statement/prospectus. The unaudited pro forma combined per share information is derived from, and should be read
in conjunction with, the unaudited pro forma combined financial statements and related notes included elsewhere in this proxy statement/prospectus.
The
unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have
occurred had the companies been combined during the period presented, nor earnings per share for any future date or period. The unaudited
pro forma combined book value per share information below does not purport to represent what the value of Globis and FAHL would have
been had the companies been combined during the periods presented.
The
following table sets forth:
|
|
●
|
unaudited
pro forma per share information of the combined company assuming two redemption scenarios as follows:
|
|
|
●
|
The
No Redemptions scenario assumes that no Globis stockholders elect to redeem their shares of common stock for a pro rata portion of
cash in the Trust Account in connection with the Business Combination, and thus the full amount held in the Trust Account as of the
Closing is available for the Business Combination.
|
|
|
●
|
The
Maximum Redemptions scenario assumes that Globis’ stockholders redeem 11.5 million shares at $10.20 per share, for an aggregate
payment of approximately $117.3 million of their shares of common stock for a pro rata portion of cash in the Trust Account in connection
with the Business Combination.
|
|
|
|
|
|
|
|
|
|
Pro Forma Combined
|
|
|
|
|
Globis
|
|
|
FAHL
|
|
|
No Redemptions
|
|
|
Maximum
Redemptions
|
|
|
Nine Months Ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(1,602
|
)
|
|
|
(3,378
|
)
|
|
|
(4,985
|
)
|
|
|
(4,985
|
)
|
|
Stockholders’ (deficit) equity
|
|
|
(1,182
|
)
|
|
|
52,994
|
|
|
|
193,405
|
|
|
|
82,447
|
|
|
Weighted average shares outstanding – basic and diluted
|
|
|
15,050,833
|
|
|
|
—
|
|
|
|
34,313,533
|
|
|
|
23,418,161
|
|
|
Net loss per share – Basic and diluted
|
|
|
(0.11
|
)
|
|
|
N/A
|
|
|
|
(0.15
|
)
|
|
|
(0.21
|
)
|
|
Book value per share (1)
|
|
|
(0.08
|
)
|
|
|
N/A
|
|
|
|
5.64
|
|
|
|
3.52
|
|
|
Cash dividends per share – basic and diluted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period from August 21, 2020 Inception) Through December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(90
|
)
|
|
|
(139
|
)
|
|
|
(5,382
|
)
|
|
|
(5,382
|
)
|
|
Weighted average shares outstanding – basic and diluted
|
|
|
4,179,573
|
|
|
|
—
|
|
|
|
34,313,533
|
|
|
|
23,418,161
|
|
|
Net loss per share – Basic and diluted
|
|
|
(0.02
|
)
|
|
|
N/A
|
|
|
|
(0.16
|
)
|
|
|
(0.23
|
)
|
|
Cash dividends per share – basic and diluted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(1)
|
Book
value per share = (Total shareholders’ equity / shares outstanding)
|
INFORMATION
ABOUT GLOBIS
Overview
Globis
is a blank check company incorporated on August 21, 2020 (inception) as a Delaware corporation for the purpose of effecting a merger,
share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.
Globis
is an early stage and emerging growth company and, as such, Globis is subject to all of the risks associated with early stage and emerging
growth companies.
Significant
Activities Since Inception
On
December 15, 2020, Globis consummated the IPO of 11,500,000 Units, including the issuance of 1,500,000 Units as a result of the underwriters’
full exercise of their over-allotment option, at $10.00 per unit, generating gross proceeds of $115 million. Each Unit consists of one
share of Common Stock and one Warrant. Each whole Public Warrant entitles the holder to purchase one Public Share at an exercise price
of $11.50 per share, subject to adjustment.
Simultaneously
with the closing of the IPO, Globis consummated the Private Placements of (i) 4,188,889 Private Placement Warrants at a price of $0.75
per Private Placement Warrant and (ii) 100,833 Private Placement Units at a price of $10.00 per Private Placement Unit to the Sponsors,
generating gross proceeds of $4,150,000. Each Private Placement Warrant is exercisable for one share of common stock at a price of $11.50
per share.
Globis incurred $2,516,841
in transaction costs, including $2,300,000 of underwriting fees and $216,841 of other offering costs in connection with the
IPO and the sale of the Private Placements. The underwriters in the IPO also received 402,500 equity participation shares. The underwriters
agreed not to transfer, assign or sell any equity participation shares until the completion of our initial business combination. Each
Private Placement Unit is identical to the Unit, except as described in the IPO registration statement.
Following
the closing of the IPO, an amount of $116,150,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in the IPO and certain
of the proceeds from the sale of the Private Placements was placed in a Trust Account which will be invested in U.S. government securities,
within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended
investment company that holds itself out as a money market fund selected by Globis meeting the conditions of Rule 2a-7 of the Investment
Company Act, as determined by Globis, until the earlier of (i) the completion of a Business Combination and (ii) the distribution of
the funds held in the Trust Account, as described below.
Globis’
management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of Private Placements,
although substantially all of the net proceeds are intended to be applied generally toward consummating a business combination. So long
as Globis’ securities are then listed on the Nasdaq, Globis’ initial business combination must be with one or more target
businesses that together have a fair market value of at least 80% of the net assets held in the Trust Account (excluding the amount of
deferred underwriting discounts and taxes payable on the income earned) at the time of the signing of the agreement to enter into a business
combination. Globis will only complete a business combination if the post business combination company owns or acquires 50% or more of
the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be
required to register as an investment company under the Investment Company Act. There is no assurance that Globis will be able to complete
the Business Combination successfully.
Globis
will provide the holders of its issued and outstanding Public Shares with the opportunity to redeem all or a portion of their Public
Shares upon the completion of the Business Combination either (i) in connection with a stockholder meeting called to approve the Business
Combination or (ii) by means of a tender offer. The decision as to whether Globis will seek shareholder approval of a Business Combination
or conduct a tender offer will be made by Globis, solely in its discretion. The Public Stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account ($10.10 per Public Share, plus any pro rata interest
earned on the funds held in the Trust Account and not previously released to Globis to pay income taxes). The per-share amount to be
distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions Globis
will pay to the underwriters. There will be no redemption rights upon the completion of the Business Combination with respect to Globis’
Warrants.
Globis’
units began trading on December 11, 2020 on the Nasdaq under the symbol “GLAQU.” Commencing on February 5, 2021, the
securities comprising the units began separate trading. The ordinary shares and warrants are trading on the Nasdaq under the symbols
“GLAQ” and “GLAQU,” respectively.
As
of September 30, 2021, Globis has issued promissory notes in the aggregate amount of $700,000 to Globis SPAC LLC and
its designees. In addition, $1,150,000 of indebtedness was incurred on December 10, 2021 in connection with the extension
of the time that Globis needs to complete its initial business combination to March 15, 2022. Such date may be further extended to June
15, 2022, if Globis Board extends the period of time to consummate a business combination. The remainder of the indebtedness was incurred
in connection with Working Capital Loans.
Effecting
a Business Combination
General
Globis
is not presently engaged in and Globis will not engage in, any substantive commercial business until it completes the Business Combination
with FAHL or another target business.
Fair
Market Value of Target Business
Pursuant
to Nasdaq listing rules, the target business or businesses that Globis acquires must collectively have a fair market value equal to at
least 80% of the balance of the funds in the Trust Account (less any deferred underwriting commissions and taxes payable on interest
earned) at the time of the execution of a definitive agreement for Globis’ initial business combination. The fair market value
of the target or targets will be determined by the Globis Board based upon one or more standards generally accepted by the financial
community, such as discounted cash flow valuation or value of comparable businesses. Our shareholders will be relying on the business
judgment of the Globis Board, which will have significant discretion in choosing the standard used to establish the fair market value
of the target or targets, and different methods of valuation may vary greatly in outcome from one another. As discussed in the Section
entitled “Proposal 3: The Business Combination Proposal — Satisfaction of 80% Test,” the Globis Board determined
that this test was met in connection with the Business Combination.
Stockholder
Approval of the Business Combination
Globis
is seeking shareholder approval of the Business Combination at the Stockholders Meeting to which this proxy statement/prospectus relates
and, in connection with such meeting, holders of Public Shares may redeem their shares for cash in accordance with the procedures described
in this proxy statement/prospectus. Such Redemption Rights will be effected under the Amended and Restated Certificate of Incorporation
and the DGCL. Unlike other blank check companies in which the initial shareholders agree to vote their common stock in accordance with
the majority of the votes cast by the Public Stockholders in connection with an initial business combination, the Sponsor and Globis’
directors and officers have agreed in the Sponsor Letter Agreement (i) to vote the all of the Common Stock held by the Sponsors and Globis’
independent directors and (b) any other Common Stock owned by the Sponsor or Globis’ directors and officers, in favor of the Business
Combination; and (ii) to not redeem any Globis Shares in connection with a shareholder vote to approve a proposed initial business combination,
including the Business Combination, or a vote to amend the provisions of the Amended and Restated Certificate of Incorporation relating
to shareholders’ rights or pre-business combination activity. If the Business Combination is not completed, then Public Stockholders
electing to exercise their Redemption Rights will not receive such payments and their shares will not be redeemed.
Globis
will proceed with a business combination if Globis has net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the
Exchange Act) of at least $5,000,001 upon such consummation of a business combination and, only if a majority of the Common Stock, represented
in person or by proxy and entitled to vote thereon and who vote at a stockholder meeting, are voted in favor of the business combination.
If a shareholder vote is not required by law and Globis does not decide to hold a shareholder vote for business or other reasons, Globis
will, pursuant to its Amended and Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC
and file tender offer documents with the SEC prior to completing a business combination. If, however, shareholder approval of the transactions
is required by law, or Globis decides to obtain shareholder approval for business or reasons, Globis will offer to redeem shares in conjunction
with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Stockholder
may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or vote at all. If
Globis seeks shareholder approval in connection with a business combination, the Sponsor, executive officers and directors (the “initial
shareholders”) have agreed to vote their shares of Common Stock and any Public Shares purchased during or after the IPO in
favor of approving a business combination.
Notwithstanding
the above, if Globis seeks shareholder approval of a business combination and it does not conduct redemptions pursuant to the tender
offer rules, the Amended and Restated Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of
such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section
13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 20% of the Public Shares,
without the prior consent of Globis.
Despite
the net tangible asset condition, Globis may be able to complete the Business Combination even if a majority of Globis’ Public
Stockholders do not agree with the Business Combination and have redeemed their shares or if Globis has entered into privately negotiated
agreements for investors to sell their shares to Globis’ Sponsor, directors and officers, advisors or their affiliates.
The
initial shareholders have agreed to waive their redemption rights with respect to any shares of Common Stock , including Public Shares
held by them, in connection with (i) the completion of New Forafric’s initial Business Combination and (ii) a shareholder vote
to approve an amendment to New Forafric’s Amended and Restated Certificate of Incorporation (A) that would modify the substance
or timing of New Forafric’s obligation to provide holders of the Public Shares the right to have their shares redeemed in connection
with New Forafric’s initial Business Combination or to redeem 100% of the Public Shares if New Forafric does not complete its initial
Business Combination within the Combination Period (defined below) or (B) with respect to any other provision relating to the rights
of holders of the Public Shares.
Please
refer to the section entitled “Risk Factors — Risks Related to the Business Combination and Globis” for more
information.
Liquidation
if No Business Combination
Globis
will have until March 15, 2022 (or June 15, 2022, if Globis’ Board of Directors extends the period of time to consummate a business
combination) to complete a business combination. If Globis has not completed a business combination within the Combination Period, Globis
will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible, but not more than ten business
days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account including interest earned on the funds held in the Trust Account and not previously released to Globis to pay income taxes
(less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, which
redemption will completely extinguish Public Stockholders’ rights as shareholders (including the right to receive further liquidating
distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of Globis’
remaining shareholders and Globis’ board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) to
Globis’ obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will
be no redemption rights or liquidating distributions with respect to Globis’ warrants, which will expire worthless if Globis fails
to complete a Business Combination within the Combination Period.
The
amount in the Trust Account under the DGCL will be treated as share premium which is distributable under the DGCL provided that immediately
following the date on which the proposed distribution is proposed to be made, Globis is able to pay its debts as they fall due in the
ordinary course of business. If Globis is forced to liquidate the Trust Account, Globis anticipates that it would distribute to its Public
Stockholders the amount in the Trust Account calculated as of the date that is two days prior to the distribution date (including any
accrued interest). Prior to such distribution, Globis would be required to assess all claims that may be potentially brought against
it by its creditors for amounts they are actually owed and make provision for such amounts, as creditors take priority over the Public
Stockholders with respect to amounts that are owed to them. Globis cannot assure you that it will properly assess all claims that may
be potentially brought against it. As such, shareholders could potentially be liable for any claims of creditors to the extent of distributions
received by them as an unlawful payment in the event Globis enters an insolvent liquidation. Furthermore, while Globis will seek to have
vendors, service providers (other than its independent auditors), prospective target businesses or other entities with which it does
business execute agreements with Globis waiving any right, title, interest or claim of any kind they may have in or to any monies held
in the Trust Account, there is no guarantee that they will execute such agreements. Nor is there any guarantee that, even if such entities
execute such agreements with Globis, they will not seek recourse against the Trust Account or that a court would conclude that such agreements
are legally enforceable.
The
initial shareholders have agreed to waive their liquidation rights with respect to the Common Stock if Globis fails to complete a Business
Combination within the Combination Period. However, if the initial shareholders acquire Public Shares in or after the Initial Public
Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if Globis fails to complete a Business
Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission
held in the Trust Account in the event Globis does not complete a Business Combination within the Combination Period and, in such event,
such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public
Shares. In the event of such distribution, it is possible that the per-share value of the assets remaining available for distribution
will be less than the IPO price per unit ($10.10).
Pursuant
to the Business Combination Agreement, FAHL has agreed that it and its affiliates will not have any right, title, interest or claim of
any kind in or to any monies in Globis’ Trust Account held for its Public Stockholders, and agreed not to, and waived any right
to, make any claim against the Trust Account (including any certain distributions therefrom) except, in each case with respect to claims
that FAHL or its affiliates may have in the future against Globis’ assets or funds that are not held in the Trust Account (other
than distributions to Public Stockholders) and claims against any other person (or any affiliate thereof) that is party to an alternative
business combination consummated by Globis.
If
Globis is unable to complete the Business Combination and expends all of the net proceeds of Globis’ IPO, other than the proceeds
deposited in the Trust Account and without taking into account interest, if any, earned on the Trust Account, the per-share distribution
from the Trust Account would be approximately $ based on the value of the
Trust Account as of , 2022.
The
proceeds deposited in the Trust Account could, however, become subject to the claims of Globis’ creditors which would be prior
to the claims of the Public Stockholders. Although Globis has obtained and will continue to seek to have all vendors, including lenders
for money borrowed, prospective target businesses or other entities Globis engages execute agreements with Globis waiving any right,
title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of the Public Stockholders, there
is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing
claims against the Trust Account, including but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar
claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with a claim against
Globis’ assets, including the funds held in the Trust Account.
In order to protect the amounts
held in the Trust Account, the Sponsors have agreed to be liable to Globis if and to the extent any claims by a third party for services
rendered or products sold to Globis, or a prospective target business with which Globis has discussed entering into a transaction agreement,
reduce the amounts in the Trust Account to below the lesser of (i) $10.10 per Public Share and (ii) the actual amount per Public
Share held in the Trust Account if less than $10.10 per Public Share due to reductions in the value of the trust assets. This
liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the
Trust Account nor to any claims under Globis’ indemnity of the underwriters of the IPO against certain liabilities, including liabilities
under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor
will not be responsible to the extent of any liability for such third-party claims. Globis will seek to reduce the possibility that the
Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except
for Globis’ independent registered public auditors), prospective target businesses or other entities with which Globis does business,
execute agreements with Globis waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Employees
We
have one executive officer, Paul Packer, who serves as our chief executive officer and chief financial officer. Mr. Packer is not obligated
to devote any specific number of hours to our matters and intends to devote only as much time as he deems necessary to our affairs. We
do not intend to have any full time employees prior to the consummation of a business combination.
Facilities
Globis
maintains its executive offices at Globis Acquisition Corp., 7100 W. Camino Real, Suite 302-48, Boca Raton, FL 33433. The cost for use
of this space is included in the $10,000 per month fee Globis pays to an affiliate of the Sponsor for office space, administrative and
support services which will be paid through the earlier of the consummation of a business combination or Globis’ liquidation. Globis
considers its current office space adequate for its current operations. Upon completion of the Business Combination, the principal executive
offices of New Forafric will be located at Casablanca, Morocco.
Legal
Proceedings
There
is no material litigation, arbitration or governmental proceeding currently pending against Globis or any members of its management team
in their capacity as such.
DIRECTORS,
OFFICERS, EXECUTIVE
COMPENSATION
AND CORPORATE GOVERNANCE OF GLOBIS
PRIOR
TO THE BUSINESS COMBINATION
Directors
and Executive Officers
Globis’
current directors and executive officers are as follows:
|
Name
|
|
Age
|
|
Title
|
|
Paul
Packer
|
|
50
|
|
Chief
Executive Officer, Chief Financial Officer and Director
|
|
Claude
Benitah
|
|
72
|
|
Director
|
|
Michael
A. Ferguson
|
|
51
|
|
Director
|
|
John
M. Horne
|
|
54
|
|
Director
|
Paul
Packer
Mr.
Packer, age 50, has been Globis’ Chief Executive Officer, Chief Financial Officer and a Director since inception. Mr. Packer has
served as the Managing Member of Globis Capital Advisors LLC, an investment advisory firm, since founding the firm in 2001. Since October
2017, Mr. Packer has served as Chairman of The United States Commission for the Preservation of America’s Heritage Abroad, when
he was first appointed by President Donald J. Trump. He has served on the board of directors of Zedge, Inc. (NYSE AMERICAN: ZDGE), a
provider of content distribution platforms, since April 2020. Mr. Packer also serves as a director on the board of Elementor Ltd., a
privately held company that offers an intuitive, front-end site builder for WordPress. Previously, he served on the boards of directors
of Wakingapp Ltd., an augmented reality technology company, from October 2014 until its sale to Scope AR in October 2019 and Penguin
Digital, Inc., a mobile application developer, before it was acquired by Shutterfly Inc. in 2012. Mr. Packer received a B.A. from Yeshiva
University. We believe Mr. Packer’s extensive knowledge of the capital markets, corporate finance, and public company governance
practices as a result of his investment experience, together with his significant board experience at companies in the technology sector,
makes him well-qualified to serve on the Globis board of directors.
Claude
Benitah
Mr.
Benitah, age 72, has been a Director since the completion of Globis’ initial public offering. Mr. Benitah has more than 35 years’
duty free and travel retail experience, including extensive experience in African markets. He currently serves as a consultant to public
and private companies advising on, among other things, optimization of production, procurement, budgeting, and strategy formation. He
has served as a Senior Advisor to Africa Projects Corporation since January 2017, a Management Advisor to TAXFRY AFRICA since 2012 and
Manager at Duty Free Africa since 2010. Previously, he served as a Manager of Worldwide Development at Flemingo Duty Free, an operator
of duty free stores across the world in airports and seaports of various sizes. Prior to that, from 2001 to 2009, Mr. Benitah served
as the Chief Executive Officer of Saresco Afrique, an owner and operator of Duty Free shops in Western and Central Africa. He also previously
held several senior positions at SAGA Group, a provider of global transportation and logistics services. We believe Mr. Benitah’s
more than three decades of experience in international duty free and travel retail, including his extensive experience developing multimodal
transportation logistic strategies and overseeing and advising on supply chain organization and management makes him well-qualified to
serve on the Globis board of directors.
The
Honorable Michael A. Ferguson
Mr.
Ferguson, age 51, has been a Director since the completion of Globis’ initial public offering. He is currently a senior advisor
at BakerHostetler, where he serves as the leader of their Federal Policy team since joining the firm in June 2016. Prior to this, Mr.
Ferguson founded and served as the chief executive officer and chairman of Ferguson Strategies, LLC, a government affairs and strategic
business consulting firm, from January 2009 until June 2016. From 2001 to January 2009, he served in the U.S. House of Representatives,
representing New Jersey’s 7th congressional district. While in Congress, he was a member of the House Energy and Commerce Committee,
which has wide jurisdiction over the healthcare, telecommunications and energy industries. He served as vice chairman of the panel’s
Health Subcommittee, where he became a key member on health care issues and helped to ensure passage of the Medicare Part D prescription
drug benefit in 2003. In addition, he served as a member of the Telecommunications and Internet Subcommittee as well as the Oversight
and Investigations Subcommittee. Mr. Ferguson was also a member of the House Financial Services Committee, where he cosponsored the Sarbanes-Oxley
Act of 2002 and helped enact the initial terrorism risk insurance law. Mr. Ferguson was the former chairman of the Board of Commissioners
of the New Jersey Sports and Exhibition Authority and also serves as a senior fellow of the Center for Medicine in the Public Interest’s
Odyssey Initiative for Biomedical Innovation and Human Health. Since April 2015, he has served on the Board of Directors of NanoVibronix,
Inc. (Nasdaq: NAOV Previously, he served as the Chairman of the Board of Ohr Pharmaceutical Inc. (n/k/a Neubase Therapeutics Inc.
(Nasdaq: NBSE)) from May 2017 until its merger with Neubase Therapeutics Inc. in July 2019. He has also served on various corporate
advisory boards and committees, including for Pfizer, Inc., the National Italian American Foundation and the United States Golf Association.
Mr. Ferguson received a B.A. in government from the University of Notre Dame and a Master of Public Policy degree with a specialization
in education policy from Georgetown University. We believe Mr. Ferguson’s extensive experience in government affairs, including
regulatory and policymaking initiatives across a wide range of sectors and industries, acquired through his service as a U.S. Congressman,
together with his expertise in business strategy and development, makes him well-qualified to serve on the Globis board of directors.
John
M. Horne
Mr.
Horne, age 54, has been a Director since the completion of Globis’ initial public offering. He is an entrepreneur and venture capitalist.
Over the past twenty-five years, Mr. Horne has had a diverse career in both the private and public sectors, including recently serving
as both Deputy Assistant to President Donald J. Trump and Deputy Chief of Staff to Vice President Michael R. Pence from May 2018 to October
2019. In addition, in September 2019, President Trump nominated Mr. Horne to become a member of The United States Commission for the
Preservation of America’s Heritage Aboard, where he continues to serve. Mr. Horne is also the founder and President of multiple
successful private companies, and has served as President of Zurmos, Inc., a consulting company which focuses on providing U.S. and International
companies with strategic international market sector analyzes, strategic expansion plans, risk and political stability assessments and
international government affairs plans, since founding New Forafric in December 2006. Mr. Horne has significant political experience,
including serving as a Member of the Executive Roundtable of the Republican Governors Association since its inception in 2009, serving
as a Senior Advisor to Governor Mike Huckabee during the 2008 Presidential campaign and working with the Trump Presidential Finance and
Transition and Inaugural Committees. He has also served as a Senior Advisor to Secretary of Commerce Don Evans and was appointed by President
George W. Bush to serve as the Executive Director of Export Assistance and Business Outreach for the International Trade Administration.
Mr. Horne holds an MBA degree from the University of Arkansas, a Finance degree from the University of Tulsa, and studied International
Business at the University of Salzburg, Austria. We believe Mr. Horne’s experience as a successful entrepreneur and his expertise
in international strategic market analysis and risk assessment, coupled with his significant experience in public service, including
serving in senior advisory capacities to elected officials, makes him well-qualified to serve on the Globis board of directors.
Number
and Terms of Office of Officers and Directors
The
Globis Board has four members, three of whom are deemed “independent” under SEC and Nasdaq rules. We may not hold an annual
meeting of stockholders until after we consummate our initial business combination.
Our
officers are appointed by the Globis Board and serve at the discretion of the board of directors, rather than for specific terms of office.
The Globis Board is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide
that our directors may consist of a chairman of the board, and that our officers may consist of chief executive officer, president, chief
financial officer, executive vice president(s), vice president(s), secretary, treasurer and such other officers as may be determined
by the board of directors.
Executive
Compensation
No
executive officer has received any cash compensation for services rendered to us. No compensation of any kind, including finders, consulting
or other similar fees, will be paid to any of our existing stockholders, including our directors, or any of their respective affiliates,
prior to, or for any services they render in order to effectuate, the consummation of a business combination. However, such individuals
will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential
target businesses and performing due diligence on suitable business combinations. There is no limit on the amount of these out-of-pocket
expenses and there will be no review of the reasonableness of the expenses by anyone other than the Globis board of directors and audit
committee, which includes persons who may seek reimbursement, or a court of competent jurisdiction if such reimbursement is challenged.
After
the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting,
management or other fees from the combined company. Any compensation to be paid to our executive officers will be determined by a compensation
committee constituted solely of independent directors.
We
do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation
of our initial business combination, although it is possible that some or all of our executive officers and directors may negotiate employment
or consulting arrangements to remain with us after the initial business combination. The existence or terms of any such employment or
consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting
a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business
combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any
agreements with our executive officers and directors that provide for benefits upon termination of employment.
Director
Independence
Nasdaq
requires that a majority of the Globis Board must be composed of “independent directors.” Currently, Messrs. Benitah, Ferguson
and Horne are each considered an “independent director” under the Nasdaq listing rules, which is defined generally as a person
other than an officer or employee of New Forafric or its subsidiaries or any other individual having a relationship, which, in the opinion
of New Forafric’s board of directors would interfere with the director’s exercise of independent judgment in carrying out
the responsibilities of a director. Our independent directors have regularly scheduled meetings at which only independent directors are
present.
We
will only enter into a business combination if it is approved by a majority of our independent directors. Additionally, we will only
enter into transactions with our officers and directors and their respective affiliates that are on terms no less favorable to us than
could be obtained from independent parties. Any related-party transactions must also be approved by our audit committee and a majority
of disinterested independent directors.
Committees
of the Board of Directors
The
Globis board of directors has two standing committees: an audit committee and a compensation committee. Subject to phase-in rules and
a limited exception, the rules of Nasdaq and Rule 10A of the Exchange Act require that the audit committee of a listed company be comprised
solely of independent directors. Subject to phase-in rules and a limited exception, the rules of Nasdaq require that the compensation
committee of a listed company be comprised solely of independent directors.
Audit
Committee
Under
the Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of
whom must be independent. We have established an audit committee of the board of directors consisting of Messrs. Benitah, Ferguson and
Horne, each of whom is an independent director under Nasdaq’s listing standards. Mr. Ferguson is the Chairperson of the audit committee.
Each member of the audit committee is financially literate and the Globis board of directors has determined that Mr. Ferguson qualifies
as an “audit committee financial expert” as defined in applicable SEC rules. The audit committee’s duties, which are
specified in the Globis Audit Committee Charter, include, but are not limited to:
|
●
|
reviewing
and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board
whether the audited financial statements should be included in Globis’ Form 10-K;
|
|
|
|
|
●
|
discussing
with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation
of Globis’ financial statements;
|
|
|
|
|
●
|
discussing
with management major risk assessment and risk management policies;
|
|
|
|
|
●
|
monitoring
the independence of the independent auditor;
|
|
|
|
|
●
|
verifying
the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law;
|
|
|
|
|
●
|
reviewing
and approving all related-party transactions;
|
|
|
|
|
●
|
inquiring
and discussing with management Globis’ compliance with applicable laws and regulations;
|
|
|
|
|
●
|
pre-approving
all audit services and permitted non-audit services to be performed by Globis’ independent auditor, including the fees and
terms of the services to be performed;
|
|
|
|
|
●
|
appointing
or replacing the independent auditor;
|
|
|
|
|
●
|
determining
the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and
the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;
|
|
|
|
|
●
|
establishing
procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls
or reports which raise material issues regarding Globis’ financial statements or accounting policies; and
|
|
|
|
|
●
|
approving
reimbursement of expenses incurred by Globis’ management team in identifying potential target businesses.
|
|
|
|
|
●
|
discussing
with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation
of Globis’ financial statements;
|
The
audit committee is governed by a charter that complies with the rules of the Nasdaq.
Compensation
Committee
The
Globis Board has established a compensation committee. The members of Globis’ compensation committee consist of Messrs. Benitah,
Ferguson and Horne, each of whom is an independent director under Nasdaq’s listing standards. Mr. Benitah is the Chairperson of
the compensation committee. The compensation committee’s duties, which are specified in Globis’ Compensation Committee Charter,
include, but are not limited to:
|
|
●
|
reviewing
and approving the compensation (if any) of all of Globis’ executive officers;
|
|
|
|
|
|
|
●
|
reviewing
Globis’ executive compensation policies and plans;
|
|
|
●
|
implementing
and administering Globis’ incentive compensation equity-based remuneration plans;
|
|
|
|
|
|
|
●
|
assisting
management in complying with Globis’ proxy statement and annual report disclosure requirements;
|
|
|
|
|
|
|
●
|
approving
all special perquisites, special cash payments and other special compensation and benefit arrangements for Globis’ executive
officers and employees;
|
|
|
|
|
|
|
●
|
producing
a report on executive compensation to be included in Globis’ annual proxy statement; and
|
|
|
|
|
|
|
●
|
reviewing,
evaluating and recommending changes, if appropriate, to the remuneration for directors.
|
The
charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant,
legal counsel or other adviser and be directly responsible for the appointment, compensation and oversight of the work of any such adviser.
However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation
committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Director
Nominations
We
do not have a standing nominating committee, though we intend to form a corporate governance and nominating committee as and when required
to do so by law or Nasdaq rules. In accordance with Rule 5605 of the Nasdaq rules, a majority of the independent directors may recommend
a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily
carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee.
The directors who will participate in the consideration and recommendation of director nominees are Messrs. Benitah, Ferguson and Horne.
In accordance with Rule 5605 of the Nasdaq rules, all such directors are independent. As there is no standing nominating committee, we
do not have a nominating committee charter in place.
The
board of directors will also consider director candidates recommended for nomination by Globis’ stockholders during such times
as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special
meeting of stockholders). Globis’ stockholders that wish to nominate a director for election to the Globis board of directors should
follow the procedures set forth in Globis’ bylaws.
We
have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess.
In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of
professional experience, knowledge of Globis’ business, integrity, professional reputation, independence, wisdom, and the ability
to represent the best interests of Globis’ stockholders.
Code
of Ethics
Globis
has adopted a Code of Ethics applicable to all of Globis’ executive officers, directors and employees. The code of ethics codifies
the business and ethical principles that govern all aspects of Globis’ business.
How
to Obtain the Code of Ethics and Committee Charters
Globis
has filed a copy of Globis’ Code of Ethics as an exhibit to the registration statement relating to Globis’ IPO. Globis’
Code of Ethics and the charters of the committees of the Globis Board may be reviewed by accessing Globis’ 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 Globis.
Conflicts
of Interest
Investors
should be aware of the following potential conflicts of interest:
|
●
|
None
of Globis’ officers and directors is required to commit their full time to Globis’ affairs and, accordingly, they may
have conflicts of interest in allocating their time among various business activities.
|
|
|
|
|
●
|
In
the course of their other business activities, Globis’ officers and directors may become aware of investment and business opportunities
which may be appropriate for presentation to Globis as well as the other entities with which they are affiliated. Globis’ officers
and directors may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
|
|
|
|
|
●
|
Globis’
officers and directors may in the future become affiliated with entities, including other blank check companies, engaged in business
activities similar to those intended to be conducted by Globis.
|
|
|
|
|
●
|
Unless
Globis consummates its initial business combination, Globis’ officers, directors and insiders will not receive reimbursement
for any out-of-pocket expenses incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited
in the trust account and the amount of interest income from the trust account that may be released to us as working capital.
|
|
|
|
|
●
|
The
founder shares beneficially owned by Globis’ officers and directors will be released from escrow only if Globis’ initial
business combination is successfully completed. Additionally, if we are unable to complete an initial business combination within
the required time frame, Globis’ officers and directors will not be entitled to receive any amounts held in the trust account
with respect to any of their founder shares or shares issued in connection with Private Placement. For the foregoing reasons, Globis’
board may have a conflict of interest in determining whether a particular target business is an appropriate business with which to
effect Globis’ initial business combination.
|
In
general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business
opportunities to a corporation if:
|
|
●
|
the
corporation could financially undertake the opportunity;
|
|
|
|
|
|
|
●
|
the
opportunity is within the corporation’s line of business; and
|
|
|
|
|
|
|
●
|
it
would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation.
|
Accordingly,
as a result of multiple business affiliations, Globis’ officers and directors may have similar legal obligations relating to presenting
business opportunities meeting the above-listed criteria to multiple entities. Furthermore, Globis’ Amended and Restated Certificate
of Incorporation will provide that the doctrine of corporate opportunity will not apply with respect to any of Globis’ officers
or directors in circumstances where the application of the doctrine would conflict with any fiduciary duties or contractual obligations
they may have. In order to minimize potential conflicts of interest which may arise from multiple affiliations, Globis’ officers
and directors (other than Globis’ independent directors) have agreed to present to us for Globis’ consideration, prior to
presentation to any other person or entity, any suitable opportunity to acquire a target business, until the earlier of: (1) Globis’
consummation of an initial business combination and (2) 24 months from the date of its IPO. This agreement is, however, subject to any
pre-existing fiduciary and contractual obligations such officer or director may from time to time have to another entity. Accordingly,
if any of them becomes aware of a business combination opportunity which is suitable for an entity to which he or she has pre-existing
fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination
opportunity to such entity, and only present it to us if such entity rejects the opportunity. We do not believe, however, that the pre-existing
fiduciary duties or contractual obligations of Globis’ officers and directors will materially undermine Globis’ ability to
complete Globis’ business combination because in most cases the affiliated companies are closely held entities controlled by the
officer or director or the nature of the affiliated company’s business is such that it is unlikely that a conflict will arise.
The
following table summarizes the current pre-existing fiduciary or contractual obligations of Globis’ officers and directors:
|
Name
of Individual
|
|
Name
of Affiliated Company
|
|
Entity’s
Business
|
|
Affiliation
|
|
Paul
Packer
|
|
Globis
Capital Advisors LLC (and affiliated entities)
|
|
Investment
advisory firm
|
|
Founder
and Managing Member
|
|
|
|
Elementor,
Ltd.
|
|
Software
company
|
|
Director
|
|
|
|
Zedge,
Inc.
|
|
Operates
as a content distribution platform
|
|
Director
|
|
|
|
|
|
|
|
|
|
Claude
Benitah
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Michael
A. Ferguson
|
|
BakerHostetler
|
|
Law
firm
|
|
Senior
Advisor
|
|
|
|
NanoVibronix,
Inc.
|
|
A
medical device company
|
|
Director
|
|
|
|
|
|
|
|
|
|
John
M. Horne
|
|
Zurmos,
Inc.
|
|
Provides
strategic international market sector analysis, strategic expansion plans, risk and political stability assessments and international
government affairs plans
|
|
Founder
and President
|
Globis’
insiders have agreed, pursuant to a letter agreement, to offer all suitable business combination opportunities to us before any other
person or company until the consummation by us of a business combination, subject to any pre-existing contractual or fiduciary obligations
they may have; provided, that Globis’ insiders shall not be limited with respect to their individual activity as a sponsor or independent
director of a separate special purpose acquisition vehicle that does not conflict or compete with us.
Globis’
insiders have agreed to vote any shares of common stock held by them in favor of Globis’ initial business combination. In addition,
they have agreed to waive their respective rights to receive any amounts held in the Trust Account with respect to their founder shares
and shares issued in connection with the Private Placement if we are unable to complete Globis’ initial business combination within
the required time frame. If they purchase shares of common stock in this offering or in the open market, however, they would be entitled
to receive their pro rata share of the amounts held in the trust account if we are unable to complete Globis’ initial business
combination within the required time frame, but have agreed not to convert such shares in connection with the consummation of Globis’
initial business combination.
All
ongoing and future transactions between us and any of Globis’ officers and directors or their respective affiliates will be on
terms believed by us to be no less favorable to us than are available from unaffiliated third parties. Such transactions will require
prior approval by Globis’ audit committee and a majority of Globis’ uninterested “independent” directors, or
the members of Globis’ board who do not have an interest in the transaction, in either case who had access, at Globis’ expense,
to Globis’ attorneys or independent legal counsel. We will not enter into any such transaction unless Globis’ audit committee
and a majority of Globis’ disinterested “independent” directors determine that the terms of such transaction are no
less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third parties.
To
further minimize conflicts of interest, we have agreed not to consummate Globis’ initial business combination with an entity that
is affiliated with any of Globis’ officers, directors or insiders, unless we have obtained (i) an opinion from an independent investment
banking firm that the business combination is fair to Globis’ unaffiliated stockholders from a financial point of view and (ii)
the approval of a majority of Globis’ disinterested and independent directors (if we have any at that time). Furthermore, in no
event will Globis’ insiders or any of the members of Globis’ management team be paid any finder’s fee, consulting fee
or other similar compensation prior to, or for any services they render in order to effectuate, the consummation of Globis’ initial
business combination (regardless of the type of transaction that it is).
Limitation
on Liability and Indemnification of Directors and Officers
Globis’
certificate of incorporation provides that Globis’ directors and officers will be indemnified by us to the fullest extent authorized
by Delaware law as it now exists or may in the future be amended. In addition, Globis’ certificate of incorporation provides that
Globis’ directors will not be personally liable for monetary damages to us for breaches of their fiduciary duty as directors, unless
they violated their duty of loyalty to us or Globis’ stockholders, acted in bad faith, knowingly or intentionally violated the
law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit
from their actions as directors. Notwithstanding the foregoing, as set forth in Globis’ certificate of incorporation, such indemnification
will not extend to any claims Globis’ insiders may make to us to cover any loss that they may sustain as a result of their agreement
to pay debts and obligations to target businesses or third parties or other entities that are owed money by us for services rendered
or contracted for or products sold to us as described elsewhere in this prospectus.
Globis’
bylaws also permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her
actions, regardless of whether Delaware law would permit indemnification. We will purchase a policy of directors’ and officers’
liability insurance that insures Globis’ directors and officers against the cost of defense, settlement or payment of a judgment
in some circumstances and insures us against Globis’ obligations to indemnify the directors and officers.
These
provisions may discourage stockholders from bringing a lawsuit against Globis’ directors for breach of their fiduciary duty. These
provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such
an action, if successful, might otherwise benefit us and Globis’ stockholders. Furthermore, a stockholder’s investment may
be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these
provisions. We believe that these provisions, the insurance and the indemnity agreements are necessary to attract and retain talented
and experienced directors and officers.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to Globis’ directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS OF GLOBIS
Unless
the context otherwise requires, all references in this section to the “Company,” “we,” “us” or “our”
refer to Globis prior to the consummation of the Business Combination. The following discussion and analysis of Globis’ financial
condition and results of operations should be read in conjunction with Globis’ consolidated financial statements and notes to those
statements included in this proxy statement/ prospectus. Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of many factors. Please see “Cautionary Note Regarding Forward-Looking Statements”
and “Risk Factors” in this proxy statement/prospectus.
Overview
We
are a blank check company formed under the laws of the State of Delaware on August 21, 2020, for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (a
“Business Combination”). We intend to effectuate our Business Combination using cash from the proceeds of our initial public
offering (the “Initial Public Offering”) of 11,500,000 units (the “Units,” which included the full exercise by
the underwriter of its over-allotment option in the amount of 1,500,000 Units, at $10.00 per Unit) and the sale of 4,188,889 warrants
(the “Private Warrants”) at a price of $0.75 per Private Warrant and 100,833 units (the “Placement Units” and,
together with the Private Warrants, the “Private Securities”), our capital stock, debt or a combination of cash, stock and
debt. Each Unit consists of one share of Common Stock and one Public Warrant. Each whole Public Warrant and each whole Private Warrant
entitles the holder to purchase one share of Common Stock at an exercise price of $11.50 per share, subject to adjustment.
Globis
incurred $2,516,841 in transaction costs, including $2,300,000 of underwriting fees and $216,841 of other offering costs
in connection with the Initial Public Offering and the sale of the Private Placements. The underwriters in the Initial Public Offering
also received 402,500 equity participation shares. The underwriters agreed not to transfer, assign or sell any equity participation shares
until the completion of our initial business combination.
Upon
the closing of the Initial Public Offering and the Private Placement, $116,150,000 ($10.10 per Unit) of the net proceeds of the sale
of the Units in the Initial Public Offering and certain of the proceeds from the sale of the Private Placement Warrants in the Private
Placement was placed in a trust account and was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a
money market fund selected by Globis meeting the conditions of paragraphs (c)(2), (c)(3) and (c)(4) of Rule 2a-7 of the Investment Company
Act, as determined by Globis, until the earlier of: (i) the completion of an initial business combination; and (ii) the distribution
of the Trust Account. As of ,
2022, there was approximately $
million held in the Trust Account.
Proposed
Business Combination
On
December 19, 2021 (the “Effective Date”), Globis, entered in the Business Combination Agreement, by and among Globis, FAHL,
and Seller. The Business Combination Agreement provides for the consummation of the following transactions for completion of the Business
Combination: (a) Globis will form under the laws of the State of Nevada a wholly-owned subsidiary of Globis, change its jurisdiction
of incorporation to Nevada by merging with and into the new subsidiary such that the new subsidiary will survive the merger, and change
its jurisdiction of incorporation again by transferring by way of a redomiciliation and domesticating as a Gibraltar public company limited
by shares, with the resulting entity referred herein as “New Forafric”; and (b) immediately following the effectiveness
of the redomiciliation, New Forafric will acquire 100% of the equity interests in FAHL from the Seller.
Results
of Operations
We
have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through September 30, 2021
were organizational activities and those necessary to prepare for the Initial Public Offering, described below, and search for a Business
Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect
to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We expect
that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.
For
the three months ended September 30, 2021, we had a net loss of $890,359, which consisted of general and administrative expenses of $892,144
offset by interest earned on marketable securities held in the Trust Account of $1,785.
For
the nine months ended September 30, 2021, we had a net loss of $1,601,809, which consisted of general and administrative expenses of
$1,607,436 offset by interest earned on marketable securities held in the Trust Account of $5,627.
For
the period from August 21, 2020 (inception) through September 30, 2020, we had a net loss of $1,000, which consisted of formation and
operating costs.
Liquidity
and Capital Resources
On
December 15, 2020, we consummated the Initial Public Offering of 11,500,000 Units, which included the full exercise by the underwriters
of their over-allotment option in the amount of 1,500,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $115,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,188,889 Private Warrants to the Sponsors
at a price of $0.75 per Private Warrant and 100,833 Placement Units to the Sponsors at a price of $10.00 per Placement Units, generating
gross proceeds of $4,150,000.
Following
the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Securities, a total of $116,150,000
was placed in a trust account (the “Trust Account”), and we had $209,439 of cash held outside of the Trust Account, after
payment of costs related to the Initial Public Offering, and available for working capital purposes. We incurred $6,541,841 in transaction
costs, including $2,300,000 of underwriting fees, $4,025,000 representing 402,500 shares of common stock issued, which the underwriters
are entitled to receive upon the consummation of a Business Combination (the “equity participation shares”) and $216,841
of other offering costs.
For
the nine months ended September 30, 2021, cash used in operating activities was $893,655. Net loss of $1,601,809 was impacted by interest
earned on marketable securities held in the Trust Account of $5,627. Changes in operating assets and liabilities provided $713,781 of
cash from operating activities.
As
of September 30, 2021, we had marketable securities held in the Trust Account of $116,155,627. We intend to use substantially all of
the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, which interest shall be
net of taxes payable, to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes and up to $150,000
of dissolution expenses, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete
a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of
the target business or businesses, make other acquisitions and pursue our growth strategies.
As
of September 30, 2021, we had cash of $8,413. We intend to use the funds held outside the Trust Account primarily to identify and evaluate
target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar
locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of
prospective target businesses, structure, negotiate and complete a Business Combination.
In
order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsors or an
affiliate of our Sponsors or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. If we complete a Business Combination, we may
repay the notes out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we
may use a portion of the working capital held outside the Trust Account to repay the notes, but no proceeds from our Trust Account would
be used for such repayment. On January 11, 2021, we issued an unsecured promissory note (the “Note”) to Globis SPAC LLC that
permits us to borrow from time to time up to $1,000,000 from Globis SPAC LLC or its assignees or successors. The Note is non-interest
bearing and payable upon the consummation of a Business Combination. On various dates during the nine months ended September 30, 2021,
Globis drew a total of $700,000 under the Note in accordance with the Working Capital Loans. On April 28, 2021, the Note was amended
to terminate the option for a holder to convert the amount outstanding under the Note into Private Warrants. On July 19, 2021, the Note
was amended to increase the principal amount of the Note from $1,000,000 to $2,000,000. On October 13, 2021, the Note was amended to
increase the principal amount of the Note from $2,000,000 to $3,000,000. On December 29, 2021, 2021, the Note was amended to increase
the principal amount of the Note from $3,000,000 to $5,000,000.
We
do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business following
our issuance of the Note. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to complete
our Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Business
Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.
Related
Party Transactions
Private
Placement
Simultaneously
with the closing of the Initial Public Offering, Globis consummated (i) the private placement of 4,188,889 Private Placement Warrants
at a price of $0.75 per Private Placement Warrant to the Sponsors and (ii) the private placement of 100,833 Private Placement Units at
a price of $10.00 per Private Placement Unit , generating gross proceeds of $4.15 million. Each Private Placement Warrant is exercisable
for one share of common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the private placement warrants
were added to the proceeds from the Initial Public Offering to be held in the trust account. If we do not complete a business combination
within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants are non-redeemable
and exercisable on a cashless basis so long as they are held by the Sponsors or its permitted transferees.
Controls
and Procedures
We
are not currently required to maintain an effective system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act.
We will be required to comply with the internal control requirements of the Sarbanes- Oxley Act for the fiscal year ending December 31,
2021. Only in the event that we are deemed to be a large accelerated filer or an accelerated filer and no longer qualify as an emerging
growth company would we be required to comply with the independent registered public accounting firm attestation requirement on internal
control over financial reporting. Further, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend
to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not
“emerging growth companies” including, but not limited to, not being required to comply with the independent registered public
accounting firm attestation requirement.
We
intend to assess the internal controls of our target business or businesses prior to the completion of the Business Combination and,
if necessary, to implement and test additional controls as we may determine are necessary in order to state that we maintain an effective
system of internal controls. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding the adequacy
of internal controls. Many small and mid-sized target businesses we may consider for our initial business combination may have internal
controls that need improvement in areas such as:
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staffing
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reconciliation
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proper
recording of expenses and liabilities in the period to which they relate;
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evidence
of internal review and approval of accounting transactions;
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documentation
of processes, assumptions and conclusions underlying significant estimates; and
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documentation
of accounting policies and procedures.
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Because
it will take time, management involvement and perhaps outside resources to determine what internal control
improvements
are necessary for us to meet regulatory requirements and market expectations for our operation of a target business, we may incur significant
expenses in meeting our public reporting responsibilities, particularly in the areas of designing, enhancing, or remediating internal
and disclosure controls. Doing so effectively may also take longer than we expect, thus increasing our exposure to financial fraud or
erroneous financing reporting.
Once
our management’s report on internal controls is complete, we will retain our independent auditors to audit and render an opinion
on such report when required by Section 404 of the Sarbanes-Oxley Act. The independent auditors may identify additional issues concerning
a target business’s internal controls while performing their audit of internal control over financial reporting.
Quantitative
and Qualitative Disclosures about Market Risk
As
of September 30, 2021, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering,
the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in certain U.S. government
obligations with a maturity of 180 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term
nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Off-balance
Financing Arrangements
We
have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. We do
not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as
variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have
not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments
of other entities, or purchased any non-financial assets.
Critical
Accounting Policies
The
preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the condensed financial statements, and income and expenses during the
periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Common
Stock Subject to Possible Redemption
We
account for our common stock subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability
instrument and measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights
that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our
control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common
stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future
events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the
stockholders’ equity section of our balance sheet.
Net
Income (Loss) Per Common Stock
Net
loss per share of common stock is computed by dividing net loss by the weighted average number of ordinary shares outstanding during
the period. We apply the two-class method in calculating earnings per share of common stock. Accretion associated with the redeemable
shares of common stock is excluded from earnings per share as the redemption value approximates fair value.
Recent
Accounting Standards
In
August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts
to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU
2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early
adoption permitted. Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted,
would have a material effect on Globis’ condensed financial statements.
JOBS
Act
The
JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will
qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements
based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that
comply with new or revised accounting pronouncements as of public company effective dates.
Additionally,
we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject
to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions
we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over
financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required
of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement
that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional
information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s
compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our
initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.
DESCRIPTION
OF NEW FORAFRIC’S SECURITIES
The
following summary of certain provisions of New Forafric’s securities does not purport to be complete and is subject to the proposed
Memorandum and Articles of Association and the provisions of applicable law. Copies of the proposed Memorandum and Articles of Association
are attached to this proxy statement/prospectus as Annexes C.
Authorized
and Outstanding Share Capital
The
authorized share capital of New Forafric is USD 101,000 (one hundred and one thousand United States Dollars) divided into: (i)
100,000,000 ordinary shares of USD 0.001 (one thousandth United States Dollars) each; and (ii) 1,000,000 preferred shares of USD 0.001
(one thousandth United States Dollars) each, each conferring those rights, entitlements, obligations and restrictions as more particularly
set out in the Memorandum and Articles of Association.
Ordinary
Shares
Upon
completion of the Business Combination, we expect that there will be Ordinary Shares of New Forafric outstanding, assuming that no Public
Shares are redeemed in connection with the Business Combination. All Ordinary Shares are fully paid and non-assessable.
Voting
rights. Each holder of Ordinary Shares is entitled to one vote for each Ordinary Share held of record by such holder on all matters
on which shareholders generally are entitled to vote. Holders of Ordinary Shares will vote together as a single class on all matters
presented to New Forafric’s shareholders for their vote or approval. Generally, all matters to be voted on by shareholders must
be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shareholders
present in person or represented by proxy, voting together as a single class.
Dividend
Rights. New Forafric may declare an interim or final dividend to be paid to the holders of its ordinary shares in proportion to their
respective shareholdings. Under the Companies Act and the Memorandum and Articles of Association, final dividend distributions are recommended
by the Board and approved by an ordinary resolution of the shareholders. The amount of such final dividend may not exceed the amount
recommended by the directors. Dividends may not be paid otherwise than out of New Forafric’s distributable reserves.
Rights
upon liquidation. In the event of the liquidation of New Forafric, after satisfaction of liabilities to creditors, the assets of
New Forafric will be distributed to the holders of the Ordinary Shares in New Forafric in proportion to their respective shareholdings.
This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to
the holders of a class of Preferred Shares with preferential rights that may be authorized by ordinary resolution in the future.
Other
rights. The holders of Ordinary Shares have no preemptive or conversion rights or other subscription rights. There are no redemption
or sinking fund provisions applicable to the Ordinary Shares. The rights, preferences and privileges of holders of the Ordinary Shares
may be subject to those of the holders of any Preferred Shares New Forafric may issue in the future.
Preferred
Shares
No
Preferred Shares will be issued or outstanding immediately after the completion of the Business Combination. The Memorandum and Articles
of Association of New Forafric allow the board of directors of New Forafric (the “Board”) to issue Preferred Shares following
the passing of an ordinary resolution. Unless required by law or any stock exchange, the authorized Preferred Shares will be available
for issuance by the Board upon the passing of an ordinary resolution of the holders of the Ordinary Shares. The ordinary resolutions
of the shareholders of New Forafric would stipulate the powers, preferences and relative, participating, optional and other rights or
special rights, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as well
as any restrictions, of the class of Preferred Shares as a whole.
The
issuance of Preferred Shares may have the effect of delaying, deferring or preventing a change in control of New Forafric without further
action by the shareholders. Additionally, the issuance of Preferred Shares may adversely affect the holders of Ordinary Shares by restricting
dividends on the Ordinary Shares, diluting the voting power of the Ordinary Shares or subordinating the liquidation rights of the Ordinary
Shares. As a result of these or other factors, the issuance of Preferred Shares could have an adverse impact on the market price of the
Ordinary Shares. At present, Globis has no plans to issue any Preferred Shares.
Redeemable
Warrants
Public
Warrants
Each
redeemable warrant entitles the registered holder to purchase one Ordinary Share at a price of $11.50 per share, subject to adjustment
as discussed below, at any time commencing on the later of the completion of an initial business combination and 12 months from the closing
of this offering. Except as set forth below, no warrants will be exercisable for cash unless we have an effective and current registration
statement covering the Ordinary Shares issuable upon exercise of the warrants and a current prospectus relating to such Ordinary Share.
Notwithstanding the foregoing, if a registration statement covering the Ordinary Share issuable upon exercise of the warrants is not
effective within 90 days from the consummation of our initial business combination, warrant holders may, until such time as there is
an effective registration statement and during any period when we shall have failed to maintain an effective registration statement,
exercise warrants on a cashless basis pursuant to the exemption from registration provided by Section 3(a)(9) of the Securities Act provided
that such exemption is available. In such event, each holder would pay the exercise price by surrendering the warrants for that number
of Ordinary Share equal to the quotient obtained by dividing (x) the product of the number of Ordinary Share underlying the warrants,
multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y)
the fair market value. The “fair market value” shall mean the average reported last sale price of the Ordinary Share for
the 10 trading days ending on the third trading day prior to the date of exercise. For example, if a holder held 150 warrants to purchase
150 shares and the fair market value on the date prior to exercise was $15.00, that holder would receive 35 shares without the payment
of any additional cash consideration. If an exemption from registration is not available, holders will not be able to exercise their
warrants on a cashless basis. The warrants will expire five years from the consummation of a business combination at 5:00 p.m., Eastern
Standard Time.
We
may call the outstanding warrants for redemption (excluding the private warrants and warrants underlying the units that may be issued
upon conversion of working capital loans), in whole and not in part, at a price of $0.01 per warrant:
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any time while the warrants are exercisable;
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not less than 30 days’ prior written notice of redemption to each warrant holder;
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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 (the “Force-Call Provision”), and
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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.
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right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of redemption. On and
after the redemption date, a record holder of a warrant will have no further rights except to receive the redemption price for such holder’s
warrant upon surrender of such warrant.
The
redemption criteria for our warrants have been established at a price which is intended to provide warrant holders a reasonable premium
to the initial exercise price and provide a sufficient differential between the then-prevailing share price and the warrant exercise
price so that if the share price declines as a result of our redemption call, the redemption will not cause the share price to drop below
the exercise price of the warrants.
If
we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise
warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the warrants
for that number of Ordinary Share equal to the quotient obtained by dividing (x) the product of the number of Ordinary Share underlying
the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined
below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of our Ordinary
Share for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders
of warrants. Whether we will exercise our option to require all holders to exercise their warrants on a “cashless basis”
will depend on a variety of factors including the price of our common shares at the time the warrants are called for redemption, our
cash needs at such time and concerns regarding dilutive share issuances.
In
addition, if (x) we issue additional Ordinary Shares or equity-linked securities for capital raising purposes in connection with the
closing of our initial business combination at an issue price or effective issue price of less than $9.50 per Ordinary Share (with such
issue price or effective issue price to be determined in good faith by our board of directors), (y) the aggregate gross proceeds from
such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business
combination (net of redemptions), and (z) the Market Value is below $9.50 per share, the exercise price of the warrants will be adjusted
(to the nearest cent) to be equal to 115% of the Market Value, and the $16.50 per share redemption trigger price described above will
be adjusted (to the nearest cent) to be equal to 165% of the Market Value.
The
warrants will be issued in registered form under a warrant agreement between VStock Transfer, LLC, as warrant agent, and us. The warrant
agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any
defective provision, but requires the approval, by written consent or vote, of the holders of a majority of the then outstanding warrants
in order to make any change that adversely affects the interests of the registered holders.
The
exercise price and number of Ordinary Share issuable on exercise of the warrants may be adjusted in certain circumstances including in
the event of a share dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. However, the
warrants will not be adjusted for issuances of Ordinary Share at a price below their respective exercise prices.
The
warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant
agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full
payment of the exercise price, by certified or official bank check payable to us, for the number of warrants being exercised. The warrant
holders do not have the rights or privileges of holders of Ordinary Share and any voting rights until they exercise their warrants and
receive Ordinary Shares. After the issuance of Ordinary Shares upon exercise of the warrants, each holder will be entitled to one vote
for each share held of record on all matters to be voted on by stockholders.
Except
as described above, no public warrants will be exercisable for cash and we will not be obligated to issue Ordinary Share unless at the
time a holder seeks to exercise such warrant, a prospectus relating to the Ordinary Share issuable upon exercise of the warrants is current
and the Ordinary Share have been registered or qualified or deemed to be exempt under the securities laws of the state of residence of
the holder of the warrants. Under the terms of the warrant agreement, we have agreed to use our best efforts to meet these conditions
and to maintain a current prospectus relating to the Ordinary Share issuable upon exercise of the warrants until the expiration of the
warrants. However, we cannot assure you that we will be able to do so and, if we do not maintain a current prospectus relating to the
Ordinary Share issuable upon exercise of the warrants, holders will be unable to exercise their warrants and we will not be required
to settle any such warrant exercise. If the prospectus relating to the Ordinary Share issuable upon the exercise of the warrants is not
current or if the Ordinary Share is not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants
reside, we will not be required to net cash settle or cash settle the warrant exercise, the warrants may have no value, the market for
the warrants may be limited and the warrants may expire worthless.
Warrant
holders may elect to be subject to a restriction on the exercise of their warrants such that an electing warrant holder would not be
able to exercise their warrants to the extent that, after giving effect to such exercise, such holder would beneficially own in excess
of 9.9% of the Ordinary Share outstanding. Notwithstanding the foregoing, any person who acquires a warrant with the purpose or effect
of changing or influencing the control of our company, or in connection with or as a participant in any transaction having such purpose
or effect, immediately upon such acquisition will be deemed to be the beneficial owner of the underlying Ordinary Share and not be able
to take advantage of this provision.
No
fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive
a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of Ordinary Share to be issued
to the warrant holder.
An
exchange offer made to both the publicly traded warrants and the warrants held by our sponsors on the same terms will not constitute
an amendment requiring consent of any warrant holder.
Private
Warrants and Placement Warrants
We
have agreed that we will not redeem the private warrants or placement warrants and we will allow the holders to exercise such warrants
on a cashless basis (even if a registration statement covering the shares of common stock issuable upon exercise of such warrants is
not effective). Additionally, the representative of the underwriters has agreed that it will not be permitted to exercise any private
warrants to be issued to it and/or its designees upon consummation of this offering after the five year anniversary of the effective
date of the registration statement of which this prospectus forms a part. Furthermore, because the private warrants and placement warrants
will be issued in private transactions, the holders and their transferees will be allowed to exercise the private warrants and placement
warrants on a cashless basis or for cash even if a registration statement covering the shares of common stock issuable upon exercise
of such warrants is not effective and receive unregistered shares of common stock. In the event that a holder of private warrants or
placement warrants elects to exercise such warrants on a cashless basis, each holder would pay the exercise price by surrendering the
warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares
of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair
market value” (defined below) by (y) the fair market value. With respect to the private warrants or placement warrants, the “fair
market value” shall mean, at the discretion of the holder, either (x) the last reported sale price of the shares of common stock
for the trading day prior to the date of exercise or (y) the average reported last sale price of the shares of common stock for the 10
trading days ending on the third trading day prior to the date of exercise.
Dividends
Globis
did not declare any dividend in the past and the Board will consider whether or not to institute a divided policy in the future. The
payment of future dividends on the Ordinary Shares will depend on the financial condition of New Forafric after the completion of the
Business Combination subject to the discretion of the New Forafric Board.
Exchange
Controls
There
are currently no currency control restrictions on remittances of dividends on Ordinary Shares, proceeds from the sale of the shares or
interest or other payments to non-residents of Gibraltar.
Shareholder
Meetings
New
Forafric will call annual general meetings pursuant to the provisions of the Memorandum and Articles of Association in accordance
with the Companies Act. The New Forafric Board may call extraordinary general meetings whenever they see fit in accordance with the
provisions of the Companies Act and the Memorandum and Articles of Association. A general meeting of New Forafric, other than a
meeting for the passing of a special resolution, may be called by 7 days’ prior written notice. A general meeting of New
Forafric for the passing of a special resolution may be called by giving at least 21 days’ prior written notice and specifying
in the notice the resolution that will be proposed as a special resolution.
Subject
to the provisions of the Companies Act and the regulations promulgated thereunder, shareholders entitled to participate and vote at general
meetings are the shareholders of record on a date to be decided by the board of directors, which may be between four and forty days prior
to the date of the meeting.
Appointment
of Directors, Election of Directors and Vacancies
Any
person who is willing to act as a director, is permitted by law to do so may be appointed to be a director of New Forafric by ordinary
resolution, or by a decision of the New Forafric Board.
Directors
of New Forafric are generally appointed for periods of three calendar years, save as provided below. At every annual general meeting
of New Forafric, any director who has at the start of the annual general meeting been in office for three calendar years or more since
his last appointment or re-appointment shall retire at that annual general meeting but he may offer himself for reappointment by the
shareholders. If New Forafric does not fill the vacancy in the New Forafric Board at the meeting at which a director retires by rotation
or otherwise, the retiring director shall, if willing to act, be deemed to have been re-appointed unless at the meeting it is resolved
not to fill the vacancy or unless a resolution for the re-appointment of the director is put to the meeting and lost. The appointment
of any person proposed as a director shall be effected by a separate resolution.
No
person other than a director retiring by rotation shall be appointed a director at any general meeting unless he is recommended by the
New Forafric Board or, not less than three nor more than forty-two days before the date appointed for the general meeting, a notice executed
by any shareholder qualified to vote at the meeting (not being the person to be proposed) has been received by New Forafric of the intention
to propose that person for appointment stating the particulars of that nominee, together with confirmation in writing executed by that
person of his willingness to be appointed.
Save
as provided above, New Forafric may by ordinary resolution appoint a person who is willing to act to be a director either to fill a vacancy
or as an additional director and may also determine the rotation in which any additional directors are to retire. The appointment of
a person to fill a vacancy or as an additional director shall take effect from the end of the meeting. The New Forafric Board may also
appoint a person who is willing to act to be a director, either to fill a vacancy or as an additional director and in either case whether
or not for a fixed term. Irrespective of the terms of his appointment, a director appointed by the New Forafric Board shall hold office
only until the next annual general meeting and shall be taken into account in determining the directors who are to retire by rotation
at the meeting. If not re-appointed at such annual general meeting, he shall vacate office at its conclusion. A director who retires
at an annual general meeting may, if willing to act, be re-appointed. If he is not re-appointed, he shall retain office until the meeting
appoints someone in his place, or if it does not do so, until the end of the meeting.
Directors
of New Forafric are not required to hold any shares in the capital of New Forafric by way of qualification.
Subject
to the following paragraph, New Forafric may by ordinary resolution of which special notice has been given, or by special resolution,
remove from office a director appointed by ordinary resolution or by a decision of the directors, notwithstanding any provisions of the articles of association or of any agreement between New Forafric and such director, but without prejudice to any claim the director
may make for damages for breach of such agreement. New Forafric may, by ordinary resolution, appoint another person to be a director
in the place of a director so removed from office. In default of such appointment the vacancy so arising may be filled by the New Forafric
Board as a casual vacancy.
During
the first three calendar years commencing from the date of adoption of the articles of association of New Forafric, the company may only
by special resolution or extraordinary resolution, remove from office a director appointed by ordinary resolution or by a decision of
the directors, notwithstanding any provisions of the articles of association or of any agreement between New Forafric and such director,
but without prejudice to any claim such director may make for damages for breach of such agreement.
Quorum
The
Memorandum and Articles of Association provide that the holders of 33 1/3% of the issued and outstanding share capital of New Forafric
present in person or by proxy and entitled to vote on the business to be transacted, shall be a quorum.
Vote
Requirements
An
ordinary resolution of the shareholders (or of a class of shareholders) of New Forafric means a resolution that is passed by members
representing a simple majority (more than 50%) of the total voting rights of the shareholders or, as the case may be, of the class of
shareholders. An extraordinary resolution of the shareholders means a resolution that is passed by shareholders representing a majority
of not less than 75% of those shareholders at a general meeting of which notice specifying the terms of the resolution and the intention
to propose the resolution as an extraordinary resolution has been given.
Anti-Takeover
Measures; Regulation of Takeovers of Gibraltar Companies
Companies
(Cross-Border Mergers) Regulations 2010
New
Forafric will be incorporated in Gibraltar and it is governed by Gibraltar legislation which regulates the takeover of Gibraltar registered
companies. The Companies (Cross-Border Mergers) Regulations 2010, or the Regulations, transpose Directive 2005/56/EC of the European
Parliament and of the Council of 26 October 2005 on cross border mergers of limited liability companies into the law of Gibraltar. This
EC Directive has been incorporated into the laws of other EC member states, including in the United Kingdom by the Companies (Cross-Border
Mergers) Regulations 2007. The Regulations in force in Gibraltar, or the Regulations, in effect, are broadly similar but not identical
to those in place in the United Kingdom. These Regulations are designed to facilitate cross-border mergers of limited liability companies
registered in European Member States and to thereby allow for cross-border merger of a national limited liability company of one Member
State with a limited liability company of another Member State. Under the Regulations, a Gibraltar merging company has to make an application
to the court to obtain a pre-merger certificate prior to any merger taking place (“Pre-Merger Certificate”). In order to
obtain such a certificate, the Gibraltar company must provide the court, inter alia, with the following:
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draft
terms of the proposed merger (indicating, inter alia, details for the companies involved, share exchange ratios, effects of the merger
on employees, rights or restrictions on shares, articles of association, employee participation rights, assets and liabilities transferred
and account dates) (the “Draft Terms”). The Draft Terms must be approved by 75% of the members of the company;
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a
directors’ report (indicating, inter alia, the effects of a cross-border merger for members, creditors and employees, legal
and economic grounds for the Draft Terms and any material interests of the directors). The report must be delivered to the employees
of the company; and
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an
independent expert’s report (indicating, inter alia, details of share exchange ratios and valuation difficulties). Employees
of the Gibraltar company must be able to inspect and make copies of these documents.
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The
courts of Gibraltar may make an order approving the completion of a cross-border merger on the joint application of all the merging companies
if:
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an
order for a Pre-Merger Certificate (either granted by the courts in Gibraltar or another competent authority in another member state)
has been made within 6 months;
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the
Draft Terms presented for acquiring the Pre-Merger Certificate have not been amended; and
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there
are appropriate arrangements for employee participation in the transferee company in accordance with part 4 of the Regulations. Such
an order will specify the date on which the consequences of the cross-border merger are to have effect. A copy of this order must
be provided to the Registrar of Companies of Gibraltar within 7 days of the order if this has been made in Gibraltar or within 14
days if this has been made in another Member State.
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The
Companies (Cross-Border Mergers) Regulations 2010 only apply to mergers between companies in different European Member States. More commonly,
takeovers of a Gibraltar registered company can also take place via a scheme of arrangement pursuant to the Companies Act.
The
Gibraltar Companies Act 2014
The
takeover of a Gibraltar registered company can take place via a scheme of arrangement under the Companies Act. The relevant sections
of the Companies Act provide, inter alia, that an application must be made to court in order to convene a meeting of members of such
company where such an arrangement can be proposed between a company and its members. Draft terms of the merger as well as other reports
and accounting statements would need to be prepared, filed with the Companies Registrar and published prior to such a meeting being convened.
At such meeting, at least 75% of the members present in person or by proxy must approve the arrangement in order for a court to thereafter
be able to sanction the same. If sanctioned, the court may also order the transfer of undertaking, property and/or liabilities of the
transferor company in accordance with the terms of the scheme.
In
addition to the above, another mechanism exists under s.208 of the Gibraltar Companies Act 1930 and s.352(A) of the Companies Act (commonly
referred to as the “Squeeze Out provisions”) which provides for the situation where a bidder proposes a scheme or contract
to take over the shares of a Gibraltar registered company and certain shareholders do not consent to the proposal. If within four months
from making such a proposal more than 90% of shareholders of a target company agree to the terms of such a scheme or contract, then the
bidding company may within two months after the expiration of said four months give notice to the dissenting members of the target company
that it will acquire the shares and certain shareholders do not consent to the proposal on the same terms of the scheme or contract.
A Gibraltar scheme of arrangement, therefore, eliminates the risk that a minority of less than 10% of the target company’s shareholders
may resist the transfer of their shares to the bidder. It should be noted, however, that such a scheme can be subject to the sanction
of the court as any dissenting members may apply to court for an order seeking relief from such a scheme or contract.
Financial
Services Act 2019 – Part 20 Acquisitions
Part
20 of the Financial Services Act 2019 applies to takeover bids for the securities of companies governed by the law of Gibraltar, where
all or some of those securities are admitted to trading on a regulated market in Gibraltar. However, Gibraltar does not, as yet, have
a regulated market. The Gibraltar Financial Services Commission is designated as the competent authority for the purposes of Part 20.
Part 20 contains provisions on the conduct of bids, squeeze outs and sell outs, and applicable offences.
Registration
Rights
Certain
New Forafric shareholders will have registration rights with respect to their Ordinary Shares following the consummation
of the Business Combination. See “Proposal 3: The Business Combination Proposal — Certain Agreements Related to the Business
Combination” for further information.
Transfer
Agent and Registrar
The
transfer agent for New Forafric capital stock will be VStock Transfer, LLC.
Listing
of Ordinary Shares
Globis
has applied for the continued listing of New Forafric’s Ordinary Shares and warrants on Nasdaq under the ticker symbols “AFRI”
and “AFRIW,” respectively.
BENEFICIAL
OWNERSHIP OF SECURITIES
The following table sets forth
information regarding the beneficial ownership of (i) Globis as of January 12, 2022 (pre-Business Combination) and (ii) New Forafric
immediately following the completion of the Business Combination (post-Business Combination), assuming no Redemptions, and alternatively
that 11,500,000 shares of Common Stock of Globis are redeemed, by:
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each
person known by Globis to be the beneficial owner of more than 5% of the shares of Globis Shares or the beneficial owner of more
than 5% of the shares of Globis’ common stock upon completion of the Business Combination;
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●
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each
of Globis’ officers and directors;
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●
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each
person who will become an officer or is nominated to become a director of New Forafric upon completion of the Business Combination;
and
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all
officers and directors of New Forafric as a group prior to the completion of the Business Combination.
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Beneficial
ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security
if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently
exercisable or exercisable within 60 days.
The expected
beneficial ownership of shares of New Forafric’s ordinary shares immediately following completion of the Business Combination has
been determined based on the following assumptions: (i) there will be an aggregate of 15,050,833 common stock of Globis issued and outstanding
immediately prior to the completion of the Business Combination, which shares will have been converted into ordinary shares of New Forafric
upon completion of the Business Combination, (ii) the PIPE Investors will have been issued (A) assuming No Redemptions, an aggregate
of 1,712,245 ordinary shares and (B) assuming Maximum Redemptions, an aggregate of 1,208,296 ordinary shares, (ii) an aggregate of 1,005,291
ordinary shares will have been issued to the FAHL Bond Holders, (iv) an aggregate of 1,445,164 ordinary shares will have been issued
to the FAHL Related Party Loan Holders, (v) the Seller receiving, immediately following the completion of the Business Combination, (A)
assuming No Redemptions, an aggregate of 15,100,000 ordinary shares and (B) assuming Maximum Redemptions, an aggregate of 17,004,762
ordinary shares; and (iv) each of the other assumptions set forth under the section entitled “Frequently Used Terms — Share
Calculations and Ownership Percentages.”
Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares
beneficially owned by them. Unless otherwise noted, the business address of each of the following entities or individuals is Globis Acquisition
Corp., 7100 W. Camino Real, Suite 302-48, Boca Raton, FL 33433.
The
information in the table below for Pre-Business Combination Globis Shares does not include shares underlying the Private Placement Warrants
held or to be held by Globis’ officers or the Sponsor because these securities are not exercisable within 60 days of this proxy
statement/prospectus and are contingent upon the occurrence of the Closing.
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Pre-Business Combination
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Post-Business Combination
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Shares
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Assuming No Redemption
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Assuming Maximum Redemption
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Name of Beneficial Owner
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Number
of Globis Shares
Beneficially Owned(1)
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%
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New Forafric Ordinary Shares
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%
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New Forafric Ordinary Shares
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%
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Paul Packer(2)
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2,830,000
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18.8
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3,570,741
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(3)
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10.2
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3,570,741
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(3)
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14.7
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Claude Benitah
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15,000
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*
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35,000
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*
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35,000
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*
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Michael A. Ferguson
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15,000
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*
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35,000
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*
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35,000
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*
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John M. Horne
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15,000
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*
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35,000
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*
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35,000
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*
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All pre-Business Combination Globis officers
and directors as a group (four individuals)
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2,875,000
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19.1
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3,675,741
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(3)
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10.5
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3,675,741
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(3)
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15.1
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Named Executive Officers and Director Nominees of New Forafric
Post-Business Combination
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Saad Bendidi
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-
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-
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-
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-
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-
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-
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Mustapha Jamaleddine
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-
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|
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-
|
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-
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-
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-
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-
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Julien Benitah
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-
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-
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-
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-
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-
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-
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Paul Packer(2)
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2,830,000
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18.8
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3,570,741
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(3)
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10.2
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3,570,741
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(3)
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14.7
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Franco Cassar
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-
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-
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-
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-
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-
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-
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James Lasry
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-
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|
-
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|
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-
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-
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|
-
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-
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Ira Greenstein
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-
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|
-
|
|
|
|
-
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|
|
|
-
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|
|
-
|
|
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|
-
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All post-Business Combination New Forafric
officers and directors as a group (nine individuals)
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2,830,000
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18.8
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3,570,741
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(3)
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10.2
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3,570,741
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(3)
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14.7
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Five Percent Holders:
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Lighthouse Capital Limited(4)
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-
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-
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15,731,614
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45.9
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17,636,376
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72.8
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*
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Less
than one percent.
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(1)
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Pre-Business
Combination amounts consist entirely of founder shares, which will be exchanged for New Forafric Ordinary Shares in connection with
the Merger and Redomiciliation, and excludes 3,628,889 shares of Globis Common Stock underlying private placement warrants held by
Globis SPAC LLC and 60,000 shares of Globis Common Stock (20,000 shares each) underlying private placement warrants held by Globis'
independent directors that will only become exercisable after completion of an initial business combination.
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(2)
|
Consists
of 2,830,000 shares of Globis Common Stock owned by Globis SPAC LLC, one of our sponsors and 740,741 Ordinary Shares of New Forafric
that will have been issued to an affiliate of Globis. Mr. Packer may be deemed to control and have voting and investment power over
these securities. upon conversion of the FAHL Bonds. Mr. Packer disclaims beneficial ownership over these securities except to the
extent of his pecuniary interest therein.
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(3)
|
Excludes
3,628,889 shares of Globis Common Stock 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 of Common Stock issuable upon exercise
of such warrants (as calculated in accordance with Section 13(d) of the Exchange Act).
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(4)
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Includes
631,614 Ordinary Shares of New Forafric that will have been issued to Lighthouse Settlement upon conversion of the FAHL Related Party
Loans. Lighthouse Settlement is the sole shareholder of Lighthouse Capital Limited. 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 disclaims beneficial ownership over these securities except to the extent of its pecuniary interest therein.
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INFORMATION
ABOUT FAHL
Unless
otherwise indicated or the context otherwise requires, references in this section to “FAHL,” “we,” “us,”
“our,” the “group” and other similar terms refer to FAHL and its subsidiaries prior to the Business Combination
and to New Forafric and its consolidated subsidiaries after giving effect to the Business Combination as the context may require.
Overview
Forafric
Agro Holdings Limited is a private company limited by shares incorporated in Gibraltar under the laws of Gibraltar. We are registered
with the Registrar of Companies in Gibraltar under registration number 114436. We are a holding company, and substantially all of our
operations are conducted through our subsidiaries. Our corporate headquarters is located at Madison Building, Midtown, Queensway,
Gibraltar GX11 1AA. Our registered office is located at 57/63 Line Wall Road, Gibraltar GX11 1AA.
FAHL
is an integrated, global business involved in the purchase, storage, transport, processing and sale of agricultural commodities and commodity
products while managing risk across various product lines. The principal agricultural commodities that we handle are flour and semolina,
and secondary processing products such as pasta and couscous.
Our
subsidiary Forafric Maroc is the combination of two former family owned businesses, Forafric (Maymouna) and Tria Group. Forafric (Maymouna) was
acquired by FAHL in April 2015 and the Tria Group was acquired by FAHL in January 2016.
Tria
Group was established in 1923 in Morocco under the name Minoterie Biscuiterie d’Anfa. The brand Tria was created in 1949. Tria
Group was purchased by Mr. Mohammed Jamaleddine (father of Mustapha Jamaleddine, CEO of the group) in 1974. At this time the group
had only one mill with a total capacity of 70T per day. In 1981, a first investment was made to increase the capacity to 150T/day. The
production of pasta and couscous was launched in 1989. In 1995, a second investment to increase the capacity was made. In 2004, Tria
formed the Ceraelis trading company, and in 2008, Finalog, a logistics company, with storage facilities in Casablanca. Tria
Group was managed by the Jamaleddine family until 2016 and its acquisition by Forafric.
Forafric
(Maymouna) was created in 1943. It initially specialized in the import-export of cereals and various products of the land (legumes, sugar,
tea, aromatic plants, etc.) which in 1997 evolved into industrial flour milling by buying and then building its own mills. In 2003,
Forafric decided to market its own brand, MayMouna.
Today,
we sell processed commodity products to customers
in approximately forty-five countries in Europe, Asia, Africa and the Middle East. The principal purchasers of our products are
wholesale foods manufacturers and distributors.
We
have developed an extensive global logistics network including storage facilities with direct access to ports by rail. We contract with
third parties for transport services. To better serve our customer base and develop our global distribution and logistics capabilities,
we have agreements with third parties in storage and in transportation.
Industry
Overview
We
operate primarily in the large and growing African food market, providing base products such as flour, semolina pasta and couscous,
which are staple products for most consumers in this and other developing markets. We foresee continued market growth with the projected
demographical increase and urbanization in the region. The African population was approximately 1.3 billion in 2020 and according to
the Organisation for Economic Co-operation and Development will reach approximately 2.5 billion by 2050. Urbanization in Africa is projected
to reach 1.5 billion by 2050, adding 950 million people since 2015. 36% of the world’s undernourished population is in Africa.
Such increase in urbanization is expected to lead to increased demand for more processed products.
Wheat
is unique as a source of the gluten proteins that alone have the dough-forming properties needed to make the variety of foods that rely
on the rheology of dough, namely, leavened breads, pasta, noodles, flat/pocket breads, steamed breads, biscuits, cakes, pastries and
various food ingredients. Therefore wheat, an essential part of the diet of most of the world’s population, is prominent in world
trade. Its quality traits are the most critical of all the grains.
Research
has shown that fiber may play a large role in maintaining bowel health, lowering cholesterol, stabilizing blood glucose levels and controlling
weight gain. In recent years, the awareness of the health benefits of high fiber diets has increased. Wheat flour is known for its high
fiber, as well as a source of thiamin, riboflavin, niacin, and vitamin E. It is also considered to be a good source of several minerals
such as iron, calcium, selenium, manganese, copper, phosphorous, and folate. It offers a number of health benefits, which has led to
increased demand for wheat flour among end users. Skin protection, nourishment, and energy are some of the basic health benefits offered
by the consumption of wheat flour.
The
high fiber content in wheat is known to promote gut health and reduce the risk of colon cancer. Consumption of wheat flour has also showed
positive effects on blood sugar levels and cholesterol levels, which are some of the reasons that are contributing to change in dietary
preferences of individuals. We do not believe that concerns regarding gluten intolerance and celiac disease, which impact only small
percentages of the population, will have any appreciable impact on projected sales growth.
Most
of our assets are based in Morocco. The total consumption in Morocco is 5 metric tons (MT) of wheat and 0.8MT of durum per year for
a total production of 4MT of flour and 600 kilotons (KT) of semolina. The total consumption of wheat-based product per person in Morocco
is the second highest in the world with 200kg per person per year. This is 3 times the average consumption per person per year of the
rest of the world as bread remains a staple of both the Moroccan diet and of Moroccan culture. The population of Morocco is projected
to grow from approximately 36 million to 46 million by 2050.
Our
Strengths
Leader
in the Moroccan market
We
are a leader in the Moroccan market in respect of the wheat milling business, with a milling capacity of 2,200T per day. This position
enables FAHL to have better access to raw materials, to improve its productivity and to benefit from the power of its two main brands,
Maymouna and Tria (See Our Brands and Products).
Raw materials
are the key to profitability in our industry. Raw material accounts for up to 80% of total cost. With a total volume of 500,000T
per year, the group has great bargaining power, ahead of many international providers of wheat, and has, accordingly, had access to excellent
conditions of purchasing.
As
with every industrial business, productivity is key to performance. With 7 milling units in Morocco, we improved our productivity over
the past 3 years and reduced our industrial cost. We are now among the most best performing industrial units in our industry.
Maymouna
and Tria are our two main brands in the Moroccan market. Maymouna is the most popular brand for Moroccan households and Tria is our
most popular brand for industrial clients in Morocco.
Stable Product Demand
Our
products are basic food staples in Morocco and Africa. Accordingly, demand for our products has been stable in Morocco and fast-growing
in Sub-Saharan Africa and Angola, even in periods of economic uncertainty.
Our business did not suffer any crisis of decrease of demand during the economic disruptions that impacted Africa and Asia in
2020-2021. During the recent pandemic crisis of COVID-19, demand for our products continued to remain high.
Near-term
and long-term Opportunities
Near-term
opportunities
The Moroccan flour sector is
changing. Though in the 1960s Morocco was largely self-sufficient, producing more than 80% of the wheat for domestic consumption, only
60% of the total domestic demand for wheat was met by the end the 20th century. Despite the introduction of improved wheat varieties
and significant increases in yields, yield levels remain below both the global average of over 3 metric tons per Hectare (t/ha) and the
African average of 2.3 t/ha. Consequently, Morocco continued to import large volumes, making wheat the most important (in both volume
and value terms) of all agricultural imports. Governmental efforts to support yield growth are expected to continue, including the use
of new technologies for better seed-delivery and to increase crop yield. The transformation of the sector will create immediate
opportunities to grow and gain market share. As the leader on this market, we expect to benefit from this transformation.
Due to abundant rains, wheat production in Morocco is expected to triple to 7.54 million tons, according to a recent Global Agricultural
Information Network report from the US Department of Agriculture and New Forafric is expected to benefit from this increase.
According
to the International Grains Council, the global forecast for world stocks at the end of 2021-22 has been lowered to 274 million tons
(down 4 million tons from the previous year), representing the first global drawdown in three seasons, due to sharp reduction in output
in Iran as a result of drought, as well as downgrades in Kazakhstan, Algeria and the European Union. At the same time, world wheat consumption
is currently at record levels, creating both potential sales opportunities for New Forafric as well as increases in raw material costs.
Supply chain shortages did not
have a material adverse effect on the our operations in 2021, and though there have been predictions that such disruptions will
ease in 2022, the risk remains that transportation costs could still increase if supply chain disruptions continue.
Long-term
opportunities
We
believe that the market in which we operate is sustainable and growing. We expect future growth in our market will be led by:
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Continued
demographical growth in the African continent from approximately 1.3 billion in 2020 to approximately 2.5 billion by 2050;
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Increasing
urbanization in Africa, projected to reach 1.5 billion by 2050, adding 950 million people since 2015; and
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The
continued growth in the consumption of our products in the region, which are and are excepted to not only remain staple products,
but to gain further traction with increasing urbanization.
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Our
Business Strategy
FAHL
considers sustainable growth to be the pillar of its business management strategy, through which it consolidates its position as a benchmark
business group in its areas of activity and as a sound, innovative, sustainable, responsible enterprise, committed to: (i) social well-being,
diversity, environmental balance and social and economic progress; and (ii) tax responsibility, respect of human rights and prevention
of corruption and other illegal conduct.
This
entails developing a business model focusing on the generation of value, taking into consideration the interests of its human team, shareholders
and investors, customers, suppliers, the media, the communities in which FAHL operates and the environment.
In
this regard, FAHL looks beyond the exclusive goal of achieving financial yield and includes environmental, social and ethical criteria
alongside economic variables in its decision-making processes.
FAHL
thus undertakes, as an essential principle in its actions, the creation of a business model that is respectful of and sustainable for
the environment and society overall and, while ensuring value, profitability and competitiveness, it promotes diversity, respect for
human rights, tax responsibility and the prevention of corruption, thus contributing towards the progress of society and generating trust
among our stakeholders.
Our
Fundamental Values
Nutrition:
We ensure the supply of products essential for human nutrition by contributing to the health and well-being of consumers. Our brands
are symbols of quality and good nutrition.
Proximity:
We maintain lasting relationships with consumers, our customers and suppliers, by constantly listening to them. We build relationships
of trust based on mutual respect. We support the social and economic well-being of our growers, suppliers and local communities.
Integrity:
We are responsible for our actions and performance. We expect similar behavior from our partners.
Excellence:
We aim for the best quality for our products, and process for the contribution of our teams. We are aware of our responsibility to provide
high quality product and product our customers from damaging additives and chemical residues.
Sustainability:
We always act with respect for our environment, and incorporate sustainability in all areas of our business, from operation of our facilities,
to engagement with customers, suppliers and communities. Long term sustainability and environmental responsibility are fundamental to
the future of our business. We are dedicated to reducing our carbon footprint by reduction of power consumption.
Our
Business Model
FAHL
has established itself as a leading wheat milling player in Morocco. It owns six milling plants across Morocco (four dedicated to common
wheat and two to durum wheat) with total processing capacity of 2,200 tons per day and a total milling capacity of 700,000 tons per year.
FAHL also has 1 secondary processing unit, 2 logistics platforms, and 250,000 tons of grain storage facilities in Morocco. It is also
the owner of PRODELA, an animal feed processing company in Morocco, which was established in 1991 to commercialize the bran created by
the mills.
Our
products are exported to 45 countries. Our primary activities include the production and sale of a variety of wheat flours, Semolina
and Pasta and Couscous in Morocco and in more than 45 countries. Our two main brands in Morocco are MAYMOUNA and TRIA (see Our Brands
and Products).
Our
Brands and Products
Forafric
owns two leading brands: Tria and MayMouna.
Tria
Tria
brand was born more than 60 years ago from a family that had a passion for the transmission of Moroccan culinary traditions,
associated with a high level of quality.
As
a result, Tria brand quickly established itself as a key player in the flour milling sector and in the transformation of wheat
grains into pasta and couscous. Its growing success with Moroccans was the result of strong commitments from the brand, which
since 1958 has perpetuated the tradition by offering products of constant quality with good ancestral taste.
For
several generations, Tria has strived to keep intact the fundamentals that have made its reputation, from the selection of an high
quality raw materials, to constantly reinventing its products in order to support changing consumer needs, or even
anticipating them.
Tria
continues to be a highly respected brand for packaged flour, precooked couscous and packaged pasta on the Moroccan market.
Today, Tria perfectly combines modernity and tradition, which makes it one of the favorite brands of Moroccans, representing a precious
heritage that is passed from mother to daughter and from generation to generation. Tria has approximately 15% of the overall market in
Morocco of couscous and approximately 28% in the market of packaged couscous. Tria also has approximately 9% of the overall market of
pasta in Morocco.
Tria
branded products include:
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TRIA
DAKIK MINE NAWH MOUMTAZ for Flour, Pasta and Couscous
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TRIA
COUSCOUS DE QUALITE SUPERIEURE for Couscous
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TRIA
PATES DE QUALITE SUPERIEURE for Pasta
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TRIA
FARINE DE QUALITE SUPERIEURE for Flour
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MayMouna
Maymouna, whose Arabic name
derives from “Youmn” which intimates values of kindness and blessing, has been a success story since its
initial launch.
Recognized for being a brand
that innovates to make life easier for every housewife. The Maymouna brand has redefined the rules on the Moroccan
market, by adopting a daring strategy which is reflected in its unique packaging, and establishing a color code allowing the clear
identification of each of its products. The brand also integrates this time into its packaging culinary presentations allowing
each housewife to easily recognize the right product capable of meeting each of their needs.
Maymouna is appreciated for
its quality but also for the richness of its range. The brand has, on a regular basis, introduced new products to attract
the average housewife, its primary consumer (e.g., under the registered trademark Finette) and meet the needs of professionals
(e.g., Farine Boulangère). This has enabled Maymouna to maintain its popularity and reputation.
In 2014, Maymouna was nominated
at the Morocco’s National Agricultural Fair (SIAM) for an award in the Innovation Brand category, and was awarded
the prize of best price and quality at the SIAM 2014 and 2016 editions.
MayMouna
offers a diversified range of products segmented into two categories: soft wheat products and durum wheat products. In order to meet market demands, the products are sold in polypropylene packaging for the traditional circuit (wholesalers, groceries), in kraft paper
for mass distribution. The industry, on the other hand, is delivered in bulk by tanker.
Soft
wheat products: Soft wheat is the most widely used and cultivated variety of wheat in the world. It is used to produce flour, particularly
for making bread and pastries. All our soft wheat flours are enriched with iron and vitamins.
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Pastry
flour - Flower flour comes from the heart of the grain (the almond), the extraction of which produces the noblest and whitest flour.
Thanks to its milling know-how, MayMouna has developed a flour that is 100% flower and guaranteed without lumps, with a mineralization
rate not exceeding 0.38%. Ideal for the daily needs of the housewife, this flour is perfect for fine culinary preparations: pastries,
béchamel, sauces, harira. MayMouna Pastry flour is available in 1kg, 2kg, 5kg and 10kg kraft packaging.
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Extra
white - Used mainly by pastry and bakery professionals, MayMouna Extra white flour is very fluid. Guaranteed lump-free, it offers
excellent hold for all kinds of preparation. It is distinguished by its purity and by its whiteness with a mineralization rate not
exceeding 0.42%. MayMouna Extra white is available in 5kg, 10kg and 25kg polypropylene packaging.
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The
Baker - This flour suitable for breadmaking is intended exclusively for the baking industry. MayMouna La Boulangère is available
in 25kg and 50kg polypropylene packaging.
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We
also sell products in Morocco under the AMBRE and BRIO brands, which include LA AMBRA, AL DENTE Flour, AMBRA Flour, AMBRE Flour,
ASSALA, BRIO and BRIO, MLAOUI, BAGHRIR for pasta and couscous. BRIO is also used for export to Europe.
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Durum
wheat products: As in most Mediterranean countries and the Maghreb, durum wheat is part of the traditional meal in Morocco. Naturally
rich in fiber, it benefits from recognized digestive virtues. Durum wheat can be transformed into semolina for the production of pasta
and couscous, but also into flour for making bread. In Morocco, the main use of durum wheat is in breadmaking and couscous.
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Whole
meal Flour - Naturally rich in fiber, MayMouna Whole meal flour has the particularity of giving a whole hard wheat bread with recognized
digestive and dietary virtues. MayMouna Whole meal Flour is available in 2kg, 5kg and 10kg kraft, 5kg, 10kg and 25kg polypropylene
packaging.
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Finot
- A flagship product of the entire range, this very fine semolina is ideal for delicate preparations, for golden and well-leavened
homemade bread. MayMouna Finot also makes it possible to achieve flaky and crispy msemens, a traditional Moroccan type of
pancake. MayMouna Finot is available in kraft 5kg and 10kg, polypropylene 5kg, 10kg and 20kg packaging.
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Fine
semolina - This semolina is used mainly by industrial manufacturers of couscous and pasta. It is also used by housewives and bakers
for light and golden baghrirs, which is a traditional Moroccan type of pancake or crepe, various semolina cakes, and harcha,
a Moroccan pan-fried bread.
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MayMouna
Fine Semolina is available in 1kg and 5kg kraft packaging, 5kg, 10kg and 25kg polypropylene.
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Course
semolina - MayMouna Semoule Grosse is mainly intended for the preparation of artisan couscous. With a regular grain size, this semolina
is ideal to be worked by hand, in the pure respect of tradition. MayMouna Semoule Grosse is available in 5kg kraft, 5kg, 10kg and
25kg polypropylene packaging.
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Finette
- It is an exclusive product of MayMouna, specially created to offer the consumer a flour suitable for the preparation of homemade
bread. Recognized for its baking qualities, Finette is very fluid. Finette by MayMouna is available in 5kg, 10kg and 25kg polypropylene
packaging.
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Though
Tria and Maymouna are our most popular and well-known brands, our products are sold under a number of other brand names, including:
LES
GRANDES SEMOULERIES DU MAROC : Semolina
LAMSAMDA:
Flour
TARGA:
Flour
EXTRA
BLANCHE: Flour
HOUYAM:
Flour
AL
FADANE: Flour
EL
GHALA: Flour
FARINOR:
Flour
SANABIL:
Semolina
LMLIH,
EL FEN: Semolina
DIAMANDA
: Flour
SABA:
Pasta and Couscous
JAWDA:
Flour
BADIA:
Flour
LA
BELLA, ZERDA: Pasta and Couscous
SANABIL:
Semolina
CH’RIFA:
Flour
AL
BACHA: Flour
AYLA:
Flour
F’DILA:
Flour
CH’MICHA:
Flour
SOUIRA:
Flour
Sourcing
and Processing
We
are dedicated to providing our customers with high quality, nutritious and healthy products and our production process is designed to
achieve these goals:
Supply: In addition to the choice of excellent
raw materials, at harvest time, samples are tested for the quality and quantity of protein and for the presence
of heavy metals, pesticide residues, and other harmful chemicals.
Reception: On delivery of the wheat, a representative
sample undergoes a battery of analyzes ensuring compliance with FAHL’s quality stnadards. From the pit, the wheat then undergoes
a pre-cleaning to eliminate any large waste.
Cleaning:
At this stage, the wheat undergoes a second cleaning which consists of eliminating the impurities (foreign seeds, straw, dust,
etc.). The stone remover makes it possible to remove the stones by density difference.
The
wheat is then wet in order to facilitate its grinding and damaged grains or those whose color does not conform are removed using
a machine equipped with a camera.
Grinding:
The wheat then goes to milling. This operation dissociates the bran and the floury part thanks to a succession of grinding
and sieving. The various finished products are evaluated according to their grain size, protein level, humidity, color, etc. These analyzes
are supplemented by use tests in the bakery, in particular to test the breadmaking. A series of sanitary analyzes is added to ensure
the wholesomeness of each product in compliance with the required standards.
Conditioning:
The various flours and semolina obtained are packaged in food packaging suitable for their good conservation. Each batch is strictly
controlled to ensure compliance with specifications and standards in force.
Trading
and Storage
FORAFRIC
has a unique storage infrastructure in Morocco. The group has 2 units dedicated to storage and more than 250,000 tons of grain storage
capacity in Morocco. This organization allows it to optimize and best meet the needs of all of its mills and to effectively manage the
costs of its supply chain.
Two
of our trading companies, Forafric and Cerelis aim to import and sell wheat. Cerelis is based in Morocco and dedicated to meet
the needs of the group in raw materials.
Our Finalog
subsidiary, with a capacity of 79,000 metric tons, which is based in Casablanca, manages transport, handling and storage activities.
The Finalog’s multimodal platform (Road / Rail) is devoted 100% to cereals and is linked to the port of Casablanca by rail.
Finalog has a daily reception capacity of 7,000 tons and 3,000 tons per day for delivery. Though most of its revenues are generated by
FAHL, Finalog also rents part of its facilities to other companies.
Significant
Events and Transactions
FAHL has emerged
as the leading wheat milling player in Morocco through the acquisition and consolidation of well-known businesses Forafric (Maymouna)
and the Tria Group. Forafric (Maymouna) was created in 1943 with focus on imports, repositioning its core activity on milling
in the 2000s and recently developing its branding strategy to becoming a leading wheat flour brand in Morocco. Forafric (Maymouna)
was acquired by FAHL in April 2015. The Tria group was created in 1949 under the name Minoterie Biscuiterie d’Anfa,
with focus on milling activity, and was acquired by FAHL in January 2016.
Effective on November
5, 2020, pursuant to an investment and shareholders agreement (“Trigola Agreement”) dated November 5, 2020, FAHL entered
into an agreement with Trigola, SU, LDA (“Trigola”), an entity incorporated in the Republic of Angola and owned by the Parent
for a majority share in Trigola’s equity of 75%. Pursuant to the terms of the agreement, FAHL would provide financial investments
in Trigola 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. FAHL
agreed to fund Trigola for operational cash flow needs and bear the risk of Trigola’s losses from operations and Trigola agreed
that FAHL would be entitled to 75% of Trigola’s net profits, if any.
Effective on April
30, 2021, FAHL completed a share purchase acquisition of Moulins du Sahel Mali S.A. (“MDS Mali”). By way of the acquisition,
FAHL acquired a 70.35% stake in a wheat milling business in Mali. The investment in MDS Mali enables FAHL to obtain a strategic
footprint in west Africa. Details of the acquisition are included in the footnotes to the financial statements.
Effective
on July 30, 2021, FAHL completed a share purchase acquisition of Moulin du Sahel Burkina
(“MDS Burkina”). By way of the acquisition, the Company acquired a 78.21%
stake in a wheat milling business in Burkina. Details of the acquisition are included in
the footnotes to the financial statements.
On
July 30, 2021, FAHL acquired 37.10% of the capital stock of GMT Niger headquartered in Niger, which is a non-operational wheat milling
facility. FAHL has accounted for this investment as an equity method investment.
In
October 2021, FAHL acquired a majority stake in Moulin Sanabil based in Meknes Morocco. The strategy of the group in Morocco is to expand
its capacity to reach 20% of market share and to expand geographically to reach all important customers in Morocco. Meknes is based in
the center region of Morocco where Forafric did not have mills. This opportunity enables the group to enter into this region with a huge
capacity to expand. This region is also the main producer of wheat in Morocco so thanks to this new acquisition, the whole group will
benefit from good conditions on the acquisition of local wheat produced in this region.
In 2021, the price of raw materials went up dramatically as reflected in the increase in the group’s
cost of goods. See Management’s Discussion And Analysis Of Financial Condition And Results Of Operations Of FAHL - Results of
Operations.
Impact
of COVID-19 on the Business
The
World Health Organization declared the global outbreak of COVID-19, a disease caused by the novel coronavirus, a pandemic in March 2020.
This pandemic has resulted in worldwide government authorities and businesses issuing public health guidelines and enacting emergency
measures intended to limit the spread of the virus. These measures include shelter-in-place orders, social distancing, mask requirements,
travel restrictions, border closures, and unnecessary business shutdown. In response to the pandemic, we have implemented measures to
ensure the health and safety of our employees and customers, including allowing our entire workforce to work remotely, restricting physical
contact between our employees, and establishing safety protocols for the offices. As we produce a staple food product, we have to date
not experienced any material negative impact on our sales due to Covid 19. The only change was on the seasonality of our sales and on
the access to foreign currency in 2020. There can be no assurance that if the pandemic worsens, or new variants emerge, that our business
will not be negatively affected.
Key
Factors Affecting Operating Results
Government
Regulation
We
are subject to a variety of laws in each of the countries in which we operate which govern various aspects of our business, including
the processing, handling, storage, transport and sale of our products; risk management activities; land-use and ownership of land, including
laws regulating the acquisition or leasing of rural properties by certain entities and individuals; and environmental, health and safety
matters. To operate our facilities, we must obtain and maintain numerous permits, licenses and approvals from governmental agencies and
our facilities are subject to periodic inspection by governmental agencies. In addition, we are subject to other laws and government
policies affecting the food and agriculture industries, including food and feed safety, nutritional and labeling requirements and food
security policies. In particular, the National Office for Food Safety in Morocco (Office National de Securité Sanitaire des Produits
Alimentaires, “ONSSA”) requires various certifications for the export of products to Morocco. ONSSA certifications have been
obtained for the following subsidiaries of FAHL: Forafric SA; Finalog; Maymouna GrainLes Grands Moulins de Tensift; Les Grandes Semouleries
de Casablanca; Les Grandes Semouleries de Safi; Tria Group; and Arzak.
From
time to time, agricultural production shortfalls in certain regions and growing demand for agricultural commodities for feed, food and
fuel use have caused prices for relevant agricultural commodities to rise. High commodity prices and regional crop shortfalls have led,
and in the future may lead, governments to impose price controls, tariffs, export restrictions and other measures designed to assure
adequate domestic supplies and/or mitigate price increases in their domestic markets, as well as increase the scrutiny of competitive
conditions in their markets.
Environmental
Matters
We
are subject to various environmental protection and occupational health and safety laws and regulations in the countries in which we
operate. Our operations may emit or release certain substances, which may be regulated or limited by applicable laws and regulations.
In addition, we handle and dispose of materials and wastes classified as hazardous or toxic by one or more regulatory agencies. Our operations
are also subject to laws relating to environmental licensing of facilities, restrictions on land use in certain protected areas and water
use. We incur costs to comply with health, safety and environmental regulations applicable to our activities and have made and expect
to make substantial capital expenditures on an ongoing basis to continue to ensure our compliance with environmental laws and regulations.
However, due to our extensive operations across multiple industries and jurisdictions globally, we are exposed to the risk of claims
and liabilities under environmental regulations. Violation of these laws and regulations can result in substantial fines, administrative
sanctions, criminal penalties, revocations of operating permits and/or shutdowns of our facilities.
Additionally,
our business could be affected in the future by regulation or taxation of greenhouse gas emissions, or policies related to national emission
reduction plans. It is difficult to assess the potential impact of any resulting regulation of greenhouse gas emissions. Potential consequences
could include increased energy, transportation and raw material costs, and we may be required to make additional investments to modify
our facilities, equipment and processes. Climate change could also lead to stronger production variability than today which could result
in price volatility. Climate change could cause temperature increases and rainfall changes that could lead to lower yields in Morocco
and other semi-arid Mediterranean countries in the future. In response to such concerns, the effects of additional climate change regulatory
initiatives could have adverse impacts on our business and results of operations. Compliance with environmental laws and regulations
did not materially affect our earnings or competitive position in 2021.
Competition
The
markets for our products are highly price competitive. Competition is based on a number of factors, including delivered price, product
offering and quality, location, raw material procurement, production efficiency, brand recognition, nutritional profile, dietary trends,
logistics and distribution capabilities, and customer service, including, in some cases, customer financing terms. FAHL faces competition
in each of its businesses and has numerous competitors. Competition is based on a variety of factors, including price, raw material procurement,
brand recognition, nutritional profile, dietary trends and distribution capabilities. Our major competitors in Morocco include: Moulins
du Maghreb, Zine Cereales, Rica Maroc, Casagrains and Dari Couspate. These competitors would be at an advantage if they are able to obtain
superior financing capabilities. In addition, other regional or international Agribusinesses may expand into our marketplaces increasing
competition.
To
compete effectively, we must continuously focus on improving efficiency in our production and distribution operations, as well as developing
and maintaining appropriate market share and customer relationships, and brand reputations for quality.
Legal
Proceedings
From
time to time, FAHL and its subsidiaries may become subject to various legal proceedings. There are currently three separate actions pending
against FAHL for unfair dismissal by former employees; however, none of such proceedings, individually, or in the aggregate, would have
a material adverse effect on the FAHL or its operations if decided adversely against FAHL.
Insurance
In
each country where FAHL conducts business, our operations and assets are subject to varying degrees of risk and uncertainty. We insure
our businesses and assets in each country in a manner that it deems appropriate for a company of our size and activities, based on an
analysis of the relative risks and costs. If we were to incur a significant loss or liability for which we were not fully insured, it
could have a materially adverse effect on our business, financial condition and results of operations. FAHL believes that it maintains
adequate policies of insurance to insure its operations against such risks as can be reasonably anticipated in the markets in which it
operates.
Seasonality
There
is a degree of seasonality in the growing season and procurement of our principal raw materials. Further, in the Moroccan market where
the bulk of our business originates and where we operate four flour mills, soft wheat cannot be freely imported during the calendar year.
All our soft wheat must be imported before end of April and from beginning of September or October depending on the harvests of local
wheat in Morocco. This is designed to protect local Moroccan producers of wheat by enabling them to sell their production on the local
market. Accordingly, the third fiscal quarters of the year has generally been our weakest in terms of financial results.
Employees
and Human Capital Resources
As
of December 31, 2021, we had approximately 750 employees, located in 4 countries. None of our employees are represented by labor unions.
In general, we consider our employee relations to be good.
Our
international workforce naturally results in a diversity of cultural, national and religious representation. We care about our people,
and seek to promote their welfare, development and personal growth. New Forafric is dedicated to creating incentive programs to encourage
and reward innovation and dedication.
Properties
As
of December 31, 2020, FAHL owns and leases 10 refining, packing and milling facilities throughout the world with an aggregate production
capacity of 2.800 metric tons per day, including 7 facilities in Morocco with an aggregate capacity of 2.200 metric tons per day. We
also have 2 storage facilities in Morocco with an aggregate storage capacity of 250,000 metric tons.
Our
corporate headquarters in Gibraltar, occupies approximately 1200 square feet of space under a lease that expires in June 2025. We also
own or lease other office space for our operations worldwide.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS OF FAHL
Unless
otherwise 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 and
its consolidated subsidiaries after giving effect to the Business Combination. The following discussion and analysis summarizes the significant
factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our company as of and for the
periods presented below. The following discussion and analysis should be read in conjunction with our consolidated financial statements
and the related notes thereto included elsewhere in this proxy statement/prospectus and our unaudited consolidated financial statements
and related notes and other information included elsewhere in this proxy statement/prospectus. The discussion contains forward-looking
statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management.
Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors,
including those discussed below and elsewhere in this proxy statement/prospectus, particularly in the sections entitled “Risk Factors”
and “Cautionary Note Regarding Forward-Looking Statements.” Additionally, FAHL’s historical results are not necessarily
indicative of the results that may be expected for any period in the future.
Overview
Key
Factors 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
of flour/Semolina
|
|
|
|
|
|
|
●
|
Price
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.
Key
Performance Metrics
The
Key Performance Metrics are the crushing cost and the average selling price of finished products.
The
crushing cost includes all industrial costs of units (equipment, labor, financial cost).
Impact
of COVID-19
As
we produce a staple food product, we did not have any negative impact on our sales due to COVID-19. The only change was on the seasonality
of our sales and on the access to foreign currency in 2020.
Key
Components 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 + subsidies;
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. Raw material increased in 2021
over 2020.
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.
Results
of Operations
Net sales of grain products increased
7.3% to $196.6 million in 2020 compared to $183.2 million in 2019, due to increased sales primarily in our
market share in Morocco. For the nine month period ended September 30, 2021, net sales totaled $185.5 million, increasing 27.1%
from $145.9 million during the comparable period in 2020.
Cost of goods sold increased
5.9% to $156.1 million in 2020 compared to $147.5 million in 2019 as a result of higher volume of commodity acquired.
The average global price of wheat declined 3%, in 2020 compared to 2019. For the nine month period ended September 30, 2021, cost
of sales totaled $157.2 million, increasing 31.9% from $119.1 million during the same nine month period in 2020, reflecting increases
in raw material and shipping costs.
Gross profit increased 13.1%
to $40.4 million in 2020 from $35.7 million in 2019, primarily driven by an increase of the average selling price and
efficiencies in wheat acquisition by taking advantage of price and freight changes, and changes in the foreign currency markets.
Gross profits for the nine month period ended September 30, 2021, totaled $28.3 million, increasing 5.6% from $26.8 million during
the nine month period ended September 30, 2020.
SG&A expenses were $30.5
million in 2020 compared to $31.7 million in 2019, a decrease of 3.8%. SG&A benefitted in 2020 from decreases of
fixed cost, due to a significant restructuring. SG&A expenses for the nine-month period ended September 30, 2021, totaled
$24.4 million, as compared to $19.7 million for the nine month period ended September 30, 2020.
Other income (expenses) –
Other expenses increased to $9.9 million for the year ended December 31, 2020, compared to other expenses of $9.6 million for
the year ended December 31, 2019, with the increase expenses attributable to an increase in foreign exchange losses to $3.0 million for the year ended December 31, 2020, from $10.1 million for the year ended December 31, 2019,
offsetting reductions in net interest expenses to $6.8 million for the year ended December 31, 2020 from $9.4 million for the year ended
December 31, 2019.
For the nine
month period ended September 30, 2021, other expenses totaled $8.1 million, increasing 13.7% from $7.1 million during the same nine month
period in 2020, reflecting increases in interest expense to $7.4 million for the nine month period ended September 30, 2021, from $5.4
million for the nine month period ended September 30, 2020, a 37% increase offsetting a 41% reduction in foreign currency exchange losses
to $1.0 million for the period ended September 30, 2021, from $1.7 million for the period ended September 20, 2020.
Liquidity
and Capital Resources
Working
Capital and Working Capital Facilities. Working capital deficits were $66.5 million at December 31, 2020, an increase of $5.6 million,
or 9%, from a working capital deficit of $60.9 million at December 31, 2019.
FAHL
has available to it revolving working capital credit lines in the amount of $74.0 million. As of December 31, 2020, FAHL
had borrowed $65.2 million and had unused availability of $8.8 million under such credit lines. As of September 30,
2021, FAHL had borrowed $58.8 million and had unused availability of $14.2 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 $90.0 million as of December 31, 2020 and $130.0 million as
of September 30, 2021. The Wheat Credit Facilities are secured by the Company’s inventory. The Wheat Credit Facilities must be
renewed on a semi-annual basis. As of December 31, 2020, FAHL had borrowed $48.0 million under the Wheat Credit Facilities, with unused
availability of approximately $42.0 million. As of September 30, 2021, FAHL had borrowed $90.5 million under the Wheat Credit Facilities,
with unused availability of approximately $39.5 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 September 30, 2021, FAHL has, in addition to its obligations under the working capital
credit lines and the Wheat Credit Facilities, $7.54 million in lease obligations and obligations to invest an additional $3.7 million
and $3.6 million in MDS Mali and MDS Burkina, respectively. FAHL believes it has sufficient capital available to it to fulfill
such obligations.
Cash
and Cash Equivalents - Cash and cash equivalents were $12.7 million at December 31, 2020, an increase of $3.7 million from $9.0
million at December 31, 2019. 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.
Trade
accounts receivable, net - Trade accounts receivable, net were $27.5 million at December 31, 2020, a decrease of $0.48 million from
$27.9 million at December 31, 2019.
lnventories
- Inventories were $26.5 million at December 31, 2020, an increase of $11.6 million from $14.9 million at December 31, 2019.
The increase is primarily related to higher volume and cost of raw materials at end of December 2020.
COMMITMENTS
AND CONTINGENCIES
FAHL
has commitments with banks to finance its operating activities. FAHL has provided collateral and mortgages to banks of $25,464 and $119,474,
respectively, as of December 31, 2020 and 2019. From time to time FAHL 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, FAHL 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 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 2020 and 2019. As of the nine month period ended September 30, 2021, 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 consolidated 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 the consolidated
financial statements for calendar year 2021.
Critical
Accounting 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
U.S. 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 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 recognized when there is a formal agreement with the customer, delivery is arranged, revenue
amount can be measured in a reliable way, and when it is likely that the economic benefits associated with the transaction return to
FAHL.
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.
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
years
|
|
Machinery
and equipment (technical installations)
|
|
30-50
years
|
|
Other
assets
|
|
5-30
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
|
|
Patents,
trademarks, and licenses
|
|
10
years
|
|
Computer
software
|
|
10
years
|
|
Other
intangible assets
|
|
3-10
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.
Recent
Accounting Pronouncements
Adopted
In
December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12 - Income Taxes (Topic 740): Simplifying
the Accounting for Income Taxes, which removes certain exceptions to the general principles in Topic 740 and improves consistent application
of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for fiscal
years and interim periods within those years beginning after December 15, 2020, with early adoption permitted. Amendments are to be applied
prospectively, except for certain amendments that are to be applied either retrospectively or with a modified retrospective approach
through a cumulative effect adjustment recorded to retained earnings. FAHL adopted this guidance effective January 1, 2019. Adoption
of the guidance had no impact on our results of operations, balance sheet, or cash flows.
In
June 2016, the FASB issued guidance ASU No. 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments which changes the accounting for credit losses for certain instruments, including accounts receivable, from
an incurred loss method to a current expected loss method. The measurement of expected credit losses is based on relevant information
about past events, including historical experience, current conditions, and reasonable and supportable forecasts. FAHL adopted this guidance
effective January 1, 2019. Adoption of the guidance had no impact on our results of operations, balance sheet, or cash flows.
Not
Yet Adopted
In
March 2020, the FASB issued ASU 2020-04, 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, 2020 through December 31, 2022. FAHL is currently evaluating the impact
of this new ASU on its consolidated financial statements and related disclosures.
Quantitative
and Qualitative Disclosures About Market Risk
Risk
Management
As
a result of our global activities, we are exposed to changes in, among other things, agricultural commodity prices, transportation costs,
foreign currency exchange rates, which may affect our results of operations and financial position. We actively monitor and manage these
various market risks associated with our business activities. Our risk management decisions take place in various locations, but exposure
limits are centrally set and monitored, operating under a global governance framework.
We
use derivative instruments for the purpose of managing the exposures associated with commodity prices, foreign currency exchange rates,
and for positioning our overall portfolio relative to expected market movements in accordance with established policies and procedures.
We enter into derivative instruments primarily with commodity exchanges in the case of commodity futures and options, major financial
institutions, or approved exchange clearing shipping companies in the case of ocean freight. While these derivative instruments are subject
to fluctuations in value, for hedged exposures those fluctuations are generally offset by the changes in the fair value of the underlying
exposures. The derivative instruments that we use for hedging purposes are intended to reduce the volatility of our results of operations.
However, they can occasionally result in earnings volatility, which may be material.
Commodities
Risk
We
operate in many areas of the food industry, from agricultural raw materials to the production and sale of branded food products. As a
result, we purchase and produce various materials, many of which are agricultural commodities, including: Flour, Semolina, Pasta and
Couscous
Agricultural
commodities are subject to price fluctuations due to a number of unpredictable factors that may create price risk.
We
enter into various derivative contracts with the primary objective of managing our exposure to adverse price movements in the agricultural
commodities used and produced in our business operations. We have established policies that limit the amount of unhedged fixed price
agricultural commodity positions permissible for our operating companies, which are generally a combination of volumetric, drawdown,
and value-at-risk (“VaR”) limits. We measure and review our commodity positions on a daily basis. We also employ stress-testing
techniques in order to quantify our exposures to price and liquidity risks under non-normal or event driven market conditions.
Currency
Risk
Our
global operations require participation in foreign exchange markets. Our primary foreign currency exposures are the US dollar
and the Euro. To reduce the risk arising from foreign exchange rate fluctuations, we enter into derivative instruments, such as
foreign currency forward contracts, swaps and options. The changes in market value of such contracts have a high correlation to the price
changes in the related currency exposures.
The
potential loss in fair value for such net currency positions resulting from a hypothetical 10% adverse change in foreign currency exchange
rates as of December 31, 2020 was not material.
Derivative
Instruments
Foreign
Exchange Derivatives-We use a combination of foreign exchange forward, swap, futures and option contracts in certain of our operations
to mitigate the risk of exchange rate fluctuations in connection with certain commercial and balance sheet exposures. The foreign exchange
forward swap and option contracts may be designated as cash flow or fair value hedges.
EXECUTIVE
COMPENSATION OF FAHL
As
an emerging growth company, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting
companies” as such term is defined in the rules promulgated under the Securities Act, which require compensation disclosure for
its principal executive officer and its two other most highly compensated executive officers. References in this section to “we”,
“our”, “us”, the “Company” and “FAHL”, generally refer FAHL prior to the Business Combination
and to New Forafric following the Business Combination.
This
section discusses the material components of the executive compensation program offered to the executive officers of FAHL who would have
been “named executive officers” for 2021 and who will serve as executive officers of New Forafric following the consummation
of the Business Combination. Such executive officers consist of the following persons, referred to herein as our named executive officers
(the “NEOs”):
|
|
●
|
Saad
Bendidi, our Chairman;
|
|
|
●
|
Mustapha
Jamaleddine, our Chief Executive Officer of Forafric Maroc; and
|
|
|
●
|
Julien
Benitah, our Chief Financial Officer.
|
Each
of our NEOs will serve New Forafric in the same capacities after the closing of the Business Combination.
This
discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations
regarding future compensation programs. Actual compensation programs that New Forafric adopts following the closing of the Business Combination
could vary significantly from our historical practices and currently planned programs summarized in this discussion.
2021
Summary Compensation Table
The
following table presents information regarding the compensation earned or received by our NEOs for services rendered during the fiscal
year ended December 31, 2021.
|
Name
and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)(1)
|
|
|
All
Other Compensation ($)(2)
|
|
|
Total
($)
|
|
|
Saad Bendidi,
|
|
|
2021
|
|
|
|
212,709
|
|
|
|
|
|
|
|
27,702
|
|
|
|
240,411
|
|
|
Chairman
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mustapha Jamaleddine,
|
|
|
2021
|
|
|
|
433,673
|
|
|
|
|
|
|
|
93,536
|
|
|
|
527,209
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julien Benitah,
|
|
|
2021
|
|
|
|
149,245
|
|
|
|
—
|
|
|
|
20,774
|
|
|
|
217,219
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
No determination in respect of these bonuses for the
fiscal year 2021 has yet been made but the New Forafric Board will do so in 2022.
|
|
(2)
|
Other
compensation includes employer contributions and social security paid by FAHL, a car allowance, and the value of other perquisites.
|
Narrative
Disclosure to Summary Compensation Table
Base
Salaries
Each
of the NEOs is paid a base salary commensurate with the executive’s skill set, experience, role and responsibilities. For Fiscal
Year 2021, the annual base salaries Messers Bendidi, Jaamleddine and Benitah were $212,709, $433,673 and $149,245, respectively. The
base salaries for Messers. Bendidi, Jaamleddine and Benitah will remain $212,709, $433,673 and $149,245 respectively for Fiscal Year
2022.
Annual
Cash Bonuses
In Fiscal year 2020, Mr.
Benitah was awarded a cash bonus of $47,200. Mr. Benitah was eligible to earn his bonus based on the attainment of pre-determined
company and individual performance metrics, which were comprised of company key performance indicators and individual goals. In fiscal
year 2021, Mr. Benitah, Mr. Bendidi and Mr. Jamaleddine were each eligible to earn a cash bonus equal upon the attainment
of pre-determined Company and individual performance metrics, which were comprised of Company key performance indicators and individual
goals established by the FAHL board of directors. No determination in respect of these bonuses has yet been made, but the New Forafric
Board will do so in 2022.
Employment
Agreements with Our Named Executive Officers
FAHL
does not have written employment agreements with any of its officers. The employment arrangements with our NEOs are all oral and on an
at-will basis. FAHL has no written, or unwritten understandings with any NEO regarding severance or other post-employment obligations
in the event of termination by FAHL
Outstanding
Equity Awards at 2021 Fiscal Year-End
FAHL did not have any outstanding
equity awards as of December 31, 2021.
Employee
Benefit and Equity Compensation Plans and Arrangements
The
Forafric 2021 Long Term Employee Share Incentive Plan (the “FAHL 2021 Plan”) was adopted on June 22, 2021. The FAHL 2021
Plan allows for the grant of awards, consisting of nominal cost options or phantom options to employees, directors and consultants of
FAHL or any of its subsidiaries.
The
board of directors of FAHL (the “FAHL Board”) is responsible for the administration of the FAHL 2021 Plan and may, from time
to time, make or amend regulations for the administration of the FAHL 2021 Plan. The decision of the FAHL Board on all matters relating
to the administration of the FAHL 2021 Plan, including the resolution of any ambiguity of the rules in the FAHL 2021 Plan, is final and
binding. The FAHL Board may also terminate or, from time to time, suspend the grant of awards. The FAHL Board may also make, subject
to certain restrictions, amendments to the rules of the FAHL 2021 Plan or any subplans.
Generally,
an award is granted by the execution by FAHL of an award certificate, which provides information regarding the award’s date of
grant, the number of shares in respect of which an option is granted pursuant to the award, vesting schedule, and exercisability. The
exercise price for nominal cost options is 50% of the nominal value of the shares, and in the case of phantom options is the market value
of the shares less 50% of their nominal value.
With
the exception of an individual’s death or in the event of a corporate transaction, awards are not capable of being transferred,
charged or otherwise alienated. Any time an award holder purports to make one of these transfers, the award shall lapse immediately.
The
maximum number of shares which may be the subject of awards under the FAHL 2021 Plan may not exceed 10% of the issued share capital
of FAHL from time to time.
Subject
to certain provisions of the FAHL 2021 Plan, no award can be exercised after the tenth anniversary of the date of grant. With the exception
of certain special circumstances, an award can only be exercised while the award holder is employed or engaged by FAHL or any of its
subsidiaries. Subject to certain provisions, a vested award may be exercised in whole or in part at any time after its date of grant.
When
there are certain corporate transactions related to FAHL, such as a compulsory acquisition, a general offer, a reconstruction, a merger
or division of FAHL, the winding up of FAHL, or the sale of FAHL’s business or subsidiary, the FAHL Board has discretion (subject
to certain requirements) to allow all awards (vested or unvested) to be exercised in whole or in part. In certain circumstances, if the
FAHL Board exercises such discretion and the awards are not exercised, they will instead lapse. If FAHL is acquired, all award holders
are required to release their awards in consideration of the grant of a new award.
An
award can lapse when it has not been exercised after the tenth anniversary of the date of grant. It can also lapse when the award holder
ceases to be a director, an employee, or a consultant with FAHL or any of its subsidiaries. An award will lapse when an order is made
by a court (or when a resolution is passed) for the compulsory winding up of FAHL. Finally, an award lapses when the award holder becomes
bankrupt, enters into a compromise with their creditors generally except as permitted under certain circumstances. Prior to the exercise
of an award, an award holder has no rights in respect of any shares.
In
the event of a reorganization, vesting conditions may be adjusted by the FAHL Board, subject to an auditors’ confirmation that
the adjustment is fair and reasonable and notice to the award holder.
An
award may not vest or be exercised until the FAHL Board is satisfied that the award holder will be able to pay for any tax or social
security liability that is owed by the holder.
As of December
31, 2021, no awards had been made under the FAHL 2021 Plan. Following the consummation of the Business Combination the FAHL 2021 Plan
shall be replaced by the Equity Incentive Plan.
Following
the consummation of the Business Combination the FAHL 2021 Plan shall be terminated, and outstanding awards, if any, shall be
surrendered, cancelled, and exchanged in substitution for awards on substantially the same terms in the Equity Incentive Plan.
Related
Person Transactions
See
Certain Relationships and Related Person Transactions – FAHL Related Person Transactions.
Director
Compensation of FAHL
The
following table presents the total compensation for each person who served as a non-employee director of the Board during fiscal year
2021. Both Saad Bendidi, an NEO who served on the Board, and Michael Elbaz, a consultant engaged by FAHL, who also serves on the Board,
did not receive any additional compensation from FAHL for services on its board of directors.
|
Name
|
|
Fees
earned or paid in cash ($)
|
|
|
Total
($)
|
|
|
Ariel Belilo
|
|
|
23,059
|
|
|
|
23,059
|
|
|
Franco Cassar
|
|
|
0
|
|
|
|
0
|
|
We
will reimburse all reasonable out-of-pocket expenses incurred by directors for their attendance at meetings of the FAHL Board or any
committee thereof.
Employee
directors or those engaged as consultants will receive no additional compensation for their service as a director.
MANAGEMENT
OF NEW FORAFRIC FOLLOWING THE BUSINESS COMBINATION
The following table
sets forth certain information, as of the date of this proxy statement/prospectus, concerning the persons who are expected to serve as
executive officers of New Forafric following the completion of the Business Combination.
|
Name
|
|
Age
|
|
Position(s)
|
|
Saad
Bendidi
|
|
63
|
|
Chairman
|
|
Mustapha
Jamaleddine
|
|
60
|
|
CEO
|
|
Julien
Benitah
|
|
39
|
|
CFO
|
|
Mustapha
Ghazali
|
|
50
|
|
CTO
|
|
Oury
Marciano
|
|
37
|
|
VP
Business Development
|
New
Forafric Board following the Business Combination is expected to be comprised of six directors. Each director will hold office until
his or her term expires at the next annual meeting of stockholders for such director’s class or until his or her death, resignation,
removal or the earlier termination of his or her term of office. The following table sets forth certain information, as of the date of
this proxy statement/prospectus, concerning the persons who are expected to serve as directors following the completion of the Business
Combination.
|
Name
|
|
Age
|
|
|
Position(s)
|
|
Saad
Bendidi
|
|
|
63
|
|
|
Director
|
|
Julien
Benitah
|
|
|
39
|
|
|
Director
|
|
Franco
Cassar
|
|
|
61
|
|
|
Director
|
|
James
Lasry
|
|
|
54
|
|
|
Director
|
|
Paul
Packer
|
|
|
50
|
|
|
Director
|
|
Ira
Greenstein
|
|
|
61
|
|
|
Director
|
Executive
Officers and Directors
Saad Bendidi, 63 – Mr. Bendidi has served
as the Chairman of FAHL since March 2018. He is the chairman and a partner of Mediterrania Capital Partners, private equity fund since
October 2013. Mr. Bendidi was the CEO of Saham Group, from December 2013 to October 2017. Prior to Saham, Mr. Bendidi served as the chairman
and CEO of ONA (now Al Mada) from January 2005 to April 2008. Mr. Bendidi holds a master’s degree in engineering from Ecole centrale
de Paris, a master’s degree in political science from Innovation & Economic Prosperity Universities (IEP), and a master’s
degree of Business Administration from Hautes Études Commerciales (HEC).
Mustapha Jamaleddine, 60 – Mr. Jamaleddine
has served as the CEO of Forafric Maroc since March 2018. Mr. Jamaleddine was the Vice president of Forafric Maroc from March 2016 to
March 2018 and the CEO of Tria Group, from March 2011 to February 2020. Mr. Jamaleddine holds a master’s degree in Engineering
from the Ecole Nationale Des Travaux Publics De L’Etat (ENTPE).
Julien Benitah, 39 – Mr. Benitah has served
as Chief Financial Officer of FAHL since March 2018. Mr. Benitah was the COO of Ycap Asset Management (now Homa Capital), from January
2016 to October 2017. Prior to Homa Capital, Mr. Benitah served as Partner and COO of Smart Equity from January 2011 to September 2015.
Mr. Benitah holds a master’s degree in Management from the EM Lyon.
Mustapha Ghazali, 50 – Mr. Ghazali has served
as the CTO of Forafric Maroc since June 2018. Mr Ghazali was a plant manager at TRIA Group from January 2013 to May 2018, later, Mr Ghazali
served as the Technical Director from March 1996 to December 2012. Mr Ghazali was educated at University of Economics of Casablanca,
and he holds a degree from the National School of Milling and Cereal Industries in Casablanca and Paris.
Oury Marciano, 37 – Mr. Marciano has served
as VP Business Development of FAHL since July 2016. Mr. Marciano was an analyst from June 2009 to December 2011 at Societe Generale Corporate
and Investment Banking both in New York and Paris. He managed his own real estate acquisitions business in New York from January 2012
to June 2016. Mr. Marciano holds a master’s degree in Banking Finance and Insurance from Dauphine University in Paris, and he received
an M.A. in International Economics and Finance from Brandeis University in Massachusetts.
Franco
Cassar, 61 – Mr. Cassar has served as a member of the board of directors of FAHL since 2016. Mr. Cassar has held senior management
positions at Abacus Financial Services Ltd, SG Hambros Private Bank, Barclays Gibraltar and NatWest Gibraltar. Mr. Cassar was educated
at Uxbridge, Harrow and West London Colleges, UK.
James
Lasry, 54 – Mr. Lasry will be appointed to the board of directors of New Forafric following the Business Combination. Mr. Lasry
is a Partner and Head of the Funds Team at Hassans International Law Firm, Gibraltar, and is President of Gibraltar-US Chamber of Commerce
(AmCham Gibraltar). Mr. Lasry was educated at Bar-Ilan University and Johns Hopkins University.
Paul
Packer, 50 – Mr. Packer has been Globis’ Chief Executive Officer, Chief Financial Officer and a Director since inception.
Mr. Packer has served as the Managing Member of Globis Capital Advisors LLC, an investment advisory firm, since founding the firm in
2001. Since October 2017, Mr. Packer has served as Chairman of The United States Commission for the Preservation of America’s Heritage
Abroad, when he was first appointed by President Donald J. Trump. He has served on the board of directors of Zedge, Inc. (NYSE AMERICAN:
ZDGE), a provider of content distribution platforms, since April 2020. Mr. Packer also serves as a director on the board of Elementor
Ltd., a privately held company that offers an intuitive, front-end site builder for WordPress. Previously, he served on the boards of
directors of Wakingapp Ltd., an augmented reality technology company, from October 2014 until its sale to Scope AR in October 2019 and
Penguin Digital, Inc., a mobile application developer, before it was acquired by Shutterfly Inc. in 2012. Mr. Packer received a B.A.
from Yeshiva University. We believe Mr. Packer’s extensive knowledge of the capital markets, corporate finance, and public company
governance practices as a result of his investment experience, together with his significant board experience at companies in the technology
sector, makes him well-qualified to serve on our board of directors.
Ira Greenstein, 61 – Mr. Greenstein will be
appointed to the board of directors of New Forafric following the Business Combination. Mr. Greenstein served as Senior Advisor to Qrypt,
Inc., a quantum cryptography company from 2019-2021. He served as Deputy Assistant and Strategist to President Trump from 2017-2018.
Prior to serving in the Trump Administration, Mr. Greenstein was President of Genie Energy, Ltd., a retail energy and oil and gas exploration
company that was spun off from IDT Corp., an international telecommunications carrier, from 2011-2017. Mr. Greenstein served as President
and Counsel to the Chairman of IDT, from 2000-2011, and counsel and advisor to various companies, including Net2Phone, Inc., a pioneer
in voice over the internet protocol. Prior to joining IDT, Mr. Greenstein was a partner in Morrison & Foerster LLP, where he served
as the Chairman of that firm’s New York office’s Business Department. Mr. Greenstein was an associate in the New York and
Toronto offices of Skadden, Arps, Slate, Meagher & Flom LLP and served on the Securities Advisory Committee and as secondment counsel
to the Ontario Securities Commission. At the OSC, Mr. Greenstein advised on the implementation of the US-Canada Multijurisdictional Disclosure
System and on the securities law aspects of NAFTA. Mr. Greenstein served on the Boards of Directors of NanoVibronixInc. and Regal Bank
of New Jersey. Mr. Greenstein served on the Boards of Trustees of Young Israel of Scarsdale, Ramaz, SAR Academy and Friends of Jerusalem
College of Technology. Mr. Greenstein received a B.S. from Cornell University School of Industrial and Labor Relations (1981)
and a J.D. from Columbia University Law School (1985) where he currently serves as a member of the Dean’s Council.
Corporate
Governance Guidelines and Code of Business Conduct
Board
Composition
As
discussed more fully under the section entitled “Shareholder Proposal 5: Director Election Proposal”, as a condition to the
closing of the Business Combination, the board of directors of New Forafric will initially consist of six directors, four of whom
will be designated by Seller and two of whom will be designated by Global SPAC LLC. Our Board has nominated Saad Bendidi, Julien Benitah,
Franco Cassar, James Lasry, Paul Packer, Ira Greenstein to serve on New Forafric’s board of directors effective as of the closing
of the Business Combination.
Director
Independence
In
connection with the Business Combination, New Forafric’s Ordinary Share will be listed on the Nasdaq. Under the rules of the Nasdaq,
independent directors must comprise a majority of a listed company’s board of directors. In addition, the rules of the Nasdaq require
that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating committees be independent.
Audit committee members must also satisfy the additional independence criteria set forth in Rule 10A-3 under the Exchange Act and the
rules of the Nasdaq. Compensation committee members must also satisfy the additional independence criteria set forth in Rule 10C-1 under
the Exchange Act and the rules of the Nasdaq.
In
order to be considered independent for purposes of Rule 10A-3 under the Exchange Act and under the rules of the Nasdaq, a member of an
audit committee of a listed company may not, other than in his or her capacity as a member of the committee, the board of directors,
or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed
company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.
To
be considered independent for purposes of Rule 10C-1 under the Exchange Act and under the rules of Nasdaq, the board of directors must
affirmatively determine that the member of the compensation committee is independent, including a consideration of all factors specifically
relevant to determining whether the director has a relationship to the company which is material to that director’s ability to
be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (i) the
source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the company to such director;
and (ii) whether such director is affiliated with the company, a subsidiary of the company or an affiliate of a subsidiary of the company.
The
New Forafric Board has undertaken a review of the independence of each director and considered whether each director of New Forafric
has a material relationship with New Forafric that could compromise his or her ability to exercise independent judgment in carrying out
his or her responsibilities. As a result of this review, New Forafric anticipates that
will be considered “independent directors” as defined under the listing requirements and rules of the Nasdaq and the applicable
rules of the Exchange Act.
Controlled Company Exception
Upon completion of the Business Combination,
we may meet the definition of a “controlled company” under the Nasdaq listing standards, and thus we may qualify for the
“controlled company” exemption to the board of directors and committee composition requirements under the Nasdaq listing
standards. If we were to rely on this exemption, we would be exempt from the requirements that (1) our board of directors be comprised
of a majority of independent directors, (2) we have a nominating and corporate governance committee composed entirely of independent
directors, and (3) our compensation committee be comprised solely of independent directors. The “controlled company” exception
does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of the Sarbanes-Oxley
Act and the Nasdaq listing standards, which require that our audit committee be composed of at least three members and entirely of independent
directors within one year from the date of this prospectus.
We have taken all actions necessary
to comply with the Nasdaq listing standards without reliance on the “controlled company” exemption, including appointing
a majority of independent directors to the board and establishing certain committees composed entirely of independent directors within
the time frames set forth under the Nasdaq listing standards. However, to the extent that New Forafric qualifies, and as long as it remains,
a “controlled company,” these requirements will not apply to New Forafric and New Forafric may, in the future, seek to utilize
some or all of these exemptions.
Board
Leadership Structure
New
Forafric believes that the structure of New Forafric Board and its committees will provide strong overall management of New Forafric.
Committees
of New Forafric Board
New
Forafric Board will have an audit committee, compensation committee and nominating and corporate governance committee. The composition
and responsibilities of each of the committees of New Forafric Board is described below. Members will serve on these committees until
their resignation or until as otherwise determined by New Forafric Board.
Audit
Committee
,
and will serve as members of our Audit Committee. Under the Nasdaq rules and applicable SEC rules, all the directors on the Audit Committee
must be independent; our board of directors has determined that each of , and are independent under the Nasdaq rules and applicable SEC
rules. will serve as the Chairman of the Audit Committee. Each member of the Audit Committee is financially literate and our board of
directors has determined that qualifies as an “audit committee financial expert”
as defined in applicable SEC rules. New Forafric’s Audit Committee will be responsible for, among other things:
|
|
●
|
selecting
a qualified firm to serve as the independent registered public accounting firm to audit New Forafric’s financial statements;
|
|
|
●
|
helping
to ensure the independence and performance of the independent registered public accounting firm;
|
|
|
|
|
|
|
●
|
discussing
the scope and results of the audit with the independent registered public accounting firm and reviewing, with management and the
independent registered public accounting firm, New Forafric’s interim and year-end financial statements;
|
|
|
|
|
|
|
●
|
developing
procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
|
|
|
|
|
|
|
●
|
reviewing
and overseeing New Forafric’s policies on risk assessment and risk management, including enterprise risk management;
|
|
|
|
|
|
|
●
|
reviewing
the adequacy and effectiveness of internal control policies and procedures and New Forafric’s disclosure controls and procedures;
and
|
|
|
|
|
|
|
●
|
approving
or, as required, pre-approving, all audit and all permissible non-audit services, other than de minimis non-audit services, to be
performed by the independent registered public accounting firm.
|
New
Forafric Board will adopt a written charter for the Audit Committee which will be available on New Forafric’s website upon the
completion of the Business Combination.
Compensation
Committee
,
and will serve as members of our Compensation Committee. Under the Nasdaq rules, we are required to have a Compensation Committee composed
entirely of independent directors; our Board of Directors has determined that each of , and are independent. will serve as Chairman of
the Compensation Committee. New Forafric’s Compensation Committee will be responsible for, among other things:
|
|
●
|
reviewing,
approving and determining the compensation of New Forafric’s officers and key employees;
|
|
|
|
|
|
|
●
|
reviewing,
approving and determining compensation and benefits, including equity awards, to directors for service on New Forafric Board or any
committee thereof;
|
|
|
|
|
|
|
●
|
administering
New Forafric’s equity compensation plans;
|
|
|
|
|
|
|
●
|
reviewing,
approving and making recommendations to New Forafric Board regarding incentive compensation and equity compensation plans; and
|
|
|
|
|
|
|
●
|
establishing
and reviewing general policies relating to compensation and benefits of New Forafric’s employees.
|
New
Forafric Board will adopt a written charter for the Compensation Committee, which will be available on its website upon the completion
of the Business Combination.
Nominating
and Corporate Governance Committee
The
nominating and corporate governance committee will be responsible for making recommendations to New Forafric’s board of directors
regarding candidates for directorships and the size and composition of New Forafric’s board of directors. In addition, the nominating
and corporate governance committee will be responsible for overseeing New Forafric’s corporate governance policies and reporting
and making recommendations to New Forafric’s board of directors concerning governance matters.
The initial members of New
Forafric’s nominating and corporate governance committee will be , and
, with serving as the chair of the committee. Each of the members of New Forafric nominating
and corporate governance committee will be an independent director as defined in the listings standards. Our board of directors plans
to adopt a written charter for the nominating and corporate governance committee, which will be available on our corporate website upon
the completion of the Business Combination. The information on our website is not part of this proxy statement/prospectus.
Code
of Ethics
Following
the Business Combination, New Forafric intends to post its Code of Conduct and Ethics and to post any amendments to or any waivers from
a provision of its Code of Conduct and Ethics on its website, and also intends to disclose any amendments to or waivers of certain provisions
of its Code of Conduct and Ethics in a manner required by applicable rules or regulations of the SEC or securities exchange.
Compensation
Committee Interlocks and Insider Participation
None
of New Forafric’s officers currently serves, and in the past year has not served, (i) as a member of the compensation committee
or the board of directors of another entity, one of whose officers served on New Forafric’s compensation committee, or (ii) as
a member of the compensation committee of another entity, one of whose officers served on New Forafric Board.
Related
Person Policy of New Forafric
New
Forafric will adopt a formal written policy that will be effective upon the Business Combination that sets forth the following policies
and procedures for the review and approval or ratification of related person transactions.
A
“Related Person Transaction” is a transaction, arrangement or relationship in which New Forafric or any of its subsidiaries
was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had, has or will have
a direct or indirect material interest. A “Related Person” means:
|
|
●
|
any
person who is, or at any time during the applicable period was, one of New Forafric’s officers or one of New Forafric’s
directors;
|
|
|
|
|
|
|
●
|
any
person who is known by New Forafric to be the beneficial owner of more than five percent (5%) of its voting stock;
|
|
|
|
|
|
|
●
|
any
immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law,
father-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, officer or a beneficial owner of more than five percent
(5%) of its voting stock, and any person (other than a tenant or employee) sharing the household of such director, officer or beneficial
owner of more than five percent (5%) of its voting stock; and
|
|
|
|
|
|
|
●
|
any
firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in
which such person has a ten percent (10%) or greater beneficial ownership interest.
|
It
is also anticipated that New Forafric will enact policies and procedures designed to minimize potential conflicts of interest arising
from any dealings it may have with its affiliates and to provide appropriate procedures for the disclosure of any real or potential conflicts
of interest that may exist from time to time. Specifically, pursuant to its charter, the Audit Committee will have the responsibility
to review related person transactions.
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Globis
Related Person Transactions
Private
Placement
Simultaneously
with the closing of the IPO, Globis consummated the Private Placement of (i) 4,188,889 Private Placement Warrants at a price of $0.75
per Private Placement Warrant to the Sponsors and (ii) 100,833 Private Placement Units at a price of $10.00 per Unit to a Sponsor, generating
gross proceeds of $4,150,000. Each Private Placement Warrant is exercisable for one share of Common Stock at a price of $11.50 per share.
A portion of the proceeds from the sale of the Private Placement Warrants were added to the proceeds from the IPO to be held in the Trust
Account. If Globis does not complete a business combination within the Combination Period, the Private Placement Warrants will expire
worthless. The Private Placement Warrants are non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor
or its permitted transferees.
FAHL
Bonds
In
connection with the proposed Business Combination, between December 31, 2021 and January 3, 2022, affiliates (each a “Bond Investor”)
of Up and Up Capital, LLC and Globis SPAC LLC, the sponsors of Globis, subscribed for convertible bonds of FAHL, as issuer, in an aggregate
principal amount of $9.5 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. The FAHL Bonds are unsecured obligations
of FAHL and are not transferable without the consent of FAHL (such consent not to be unreasonably withheld). Unless earlier converted
or redeemed in accordance with the terms of the FAHL Bonds, the FAHL Bonds will mature and be redeemed on June 15, 2026. Interest shall
accrue on the FAHL Bonds at a rate of 6% per annum and the Bond Investors are entitled to certain customary information rights. Pursuant
to the current terms of the FAHL Bonds, upon consummation of the Business Combination, the FAHL Bonds will automatically convert into
ordinary shares of New Forafric at a price per share that is a 10% discount to the PIPE Investment, subject to certain adjustments. The
number of ordinary shares will be equal to the quotient that results from dividing the aggregate principal amount of the respective FAHL
Bond by $9.45, subject to certain adjustments.
Registration
Rights
Pursuant
to a registration rights agreement entered into on December 10, 2020 (the “Registration Rights Agreement”), the holders
of the Common Stock, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Common
Stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital
Loans) are entitled to registration rights. The holders of these securities are entitled to make up to three demands, excluding short
form demands, that New Forafric register such securities. In addition, the holders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to the completion of the Business Combination. However, the Registration
Rights Agreement provides that New Forafric will not permit any registration statement filed under the Securities Act to become effective
until termination of the applicable lock-up period. New Forafric will bear the expenses incurred in connection with the filing of any
such registration statements.
Globis
Related Parties Loans
Pursuant
to an unsecured promissory note issued to Globis SPAC LLC on January 11, 2021 (the “Note”), Globis may borrow from
time to time up to $1,000,000 from Globis SPAC LLC or its assignees or successors. The Note is non-interest bearing and payable upon
the consummation of a Business Combination. On various dates during the nine months ended September 30, 2021, Globis drew a total of
$700,000 under the Note in accordance with the Working Capital Loans. On April 28, 2021, the Note was amended to terminate the
option for a holder to convert the amount outstanding under the Note into Private Warrants. On July 19, 2021, the Note was amended to
increase the principal amount of the Note from $1,000,000 to $2,000,000. On October 13, 2021, the Note was amended to increase the principal
amount of the Note from $2,000,000 to $3,000,000. On December 29, 2021, 2021, the Note was amended to increase the principal amount of
the Note from $3,000,000 to $5,000,000. Globis has drawn down $5,000,000 under the Note.
Post-Business
Combination Arrangements
In
connection with the Business Combination, certain agreements were entered into or will be entered into pursuant to the Business Combination
Agreement. The agreements described in this section, or forms of such agreements as they will be in effect substantially concurrently
with the completion of the Business Combination, are filed as exhibits to the registration statement of which this prospectus forms a
part, and the following descriptions are qualified by reference thereto. These agreements include:
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●
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Sponsor
Letter Agreement (see the section entitled “Proposal 3: The Business Combination Proposal — Certain Agreements Related
to the Business Combination — Sponsor Letter Agreement”);
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●
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Registration
Rights Agreement (see the section entitled “Proposal 3: The Business Combination Proposal — Certain Agreements Related
to the Business Combination — Registration Rights Agreement”); and
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●
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Equity
Incentive Plan (see the section entitled “Proposal 3: The Business Combination Proposal — Certain Agreements Related
to the Business Combination — Equity Incentive Plan”).
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FAHL
Related Person Transactions
Lease
agreement
In
2015, FAHL entered into a building lease agreement for the headquarters of Forafric Maroc, a wholly owned subsidiary, with a lease term
through 2024. The Seller owns 100% of the company that owns the building. Total rent is approximately $420,000 per year.
Exclusive
Supply Agreement
Pursuant
to Framework Contract for Delegation of Purchases and Terms of Application, between Forafric Maroc and Millcorp Geneve SA (“Millcorp”),
a wholly owned subsidiary of the Seller, FAHL is obligated to obtain at least 80% of its annual requirements of common wheat, durham
wheat, or any other cereal, for the five year period which began on April 1, 2018 and ends on March 31, 2023, will commissions payable
to Millcorp. As agreed upon by the parties. Millcorp is currently providing 100% of the imported grain to FAHL. The purchases incurred
were $94,015,000 and $101,208,000, as of September 30, 2021 and 2020, respectively.
In
the beginning of 2021, FAHL received management fees of $500,000 from Millcorp Geneve SA.
Related
Party Loans
Certain
parties affiliated with FAHL hold outstanding loans issued to FAHL (the “FAHL Related
Party Loans”), which, in the aggregate, equaled $10,852,000 and $387,000 as of September 30, 2021 and December 31, 2020,
respectively. The FAHL Related Party Loans are interest-free loans with no maturity date: As of December 31, 2021, the outstanding amounts
held under the FAHL Related Party Loans were as follows:
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●
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the
Seller in the amount of $673,124;
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the
sole shareholder of the Seller in the amount of $6,631,951;
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Michael
Elbaz, a director FAHL and the Seller, in the amount of $4,926,915; and
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●
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a
beneficiary of the discretionary trust which is the sole shareholder of the Seller, in the amount of $2,942,233.
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Pursuant
to the Business Combination Agreement, FAHL may incur additional FAHL Related Party Loans up to an aggregate of $20 million. Upon
consummation of the Business Combination, all FAHL Related Party Loans will be converted into Ordinary Shares of New Forafric at
a price of $10.50 per share.
Statement
of Policy Regarding Transactions with Related Persons Following the Business Combination
New
Forafric will adopt a formal written policy that will be effective upon the completion of the Business Combination providing that New
Forafric’s officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of New Forafric’s
capital stock, any member of the immediate family of any of the foregoing persons and any firm, corporation or other entity in which
any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a
5% or greater beneficial ownership interest, are not permitted to enter into a related party transaction with New Forafric without the
approval of New Forafric’s audit committee, subject to certain exceptions. For more information, see the section entitled “Management
of New Forafric Following the Business Combination — Related Person Policy of New Forafric.”
Indemnification
of Directors and Officers
Subject
to article 297 of New Forafric’s Memorandum and Articles of Association, a relevant director of New Forafric or an associated company
may be indemnified out of New Forafric’s assets against any liability which by virtue of any rule of law would otherwise attach
to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to New Forafric.
Article 297 provides that the above does not authorize any indemnity which would be prohibited or rendered void by any provision
of the Act or by any other provision of law.
Under
section 231 of the Companies Act, any provision (whether in the articles or in a contract with a company) exempting or indemnifying any
officer of New Forafric for negligence, default or breach of duty is void. However, New Forafric may, if permitted by its articles or
a contract:
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(a)
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indemnify
a director as to the costs of successful court proceedings; and/or
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(b)
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purchase
and maintain for any director insurance for any liability referred to in section 231.
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Any
person not being New Forafric may indemnify a director against any liability referred to in section 231.
SECURITIES
ACT RESTRICTIONS ON RESALE OF NEW FORAFRIC’S SECURITIES
Pursuant
to Rule 144 under the Securities Act (“Rule 144”), a person who has beneficially owned restricted ordinary shares
or warrants of New Forafric for at least six months would be entitled to sell their securities provided that (i) such person is not deemed
to have been an affiliate of New Forafric at the time of, or at any time during the three months preceding, a sale and (ii) New Forafric
is subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required
reports under Section 13 or 15(d) of the Exchange Act during the twelve months (or such shorter period as New Forafric was required to
file reports) preceding the sale.
Persons
who have beneficially owned restricted ordinary shares or warrants of New Forafric for at least six months but who are affiliates
of New Forafric at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions,
by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater
of:
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●
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1%
of the total number of ordinary shares of New Forafric then outstanding (as of the date of this proxy statement/prospectus, Globis
has 15,050,833 shares of common stock outstanding); or
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●
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the
average weekly reported trading volume of New Forafric ordinary shares during the four calendar weeks preceding the filing of a notice
on Form 144 with respect to the sale.
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Sales
by affiliates of New Forafric under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability
of current public information about New Forafric.
Restrictions
on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule
144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell
companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to
this prohibition if the following conditions are met:
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the
issuer of the securities that was formerly a shell company has ceased to be a shell company;
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●
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the
issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
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●
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the
issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding
twelve months (or such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports;
and
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●
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at
least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status
as an entity that is not a shell company.
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As
a result, the Sponsors will be able to sell their ordinary shares and private placement warrants, as applicable, pursuant to Rule
144 without registration one year after Globis has completed its initial business combination.
Globis
anticipates that following the completion of the Business Combination, New Forafric will no longer be a shell company, and so, once the
conditions set forth in the exceptions listed above are satisfied, Rule 144 will become available for the resale of the above noted restricted
securities.
Registration
Rights
See
the section entitled “Description of New Forafric Securities — Registration Rights” above.
SHAREHOLDER
PROPOSALS AND NOMINATIONS
Shareholder
Proposals
New
Forafric’s proposed Memorandum and Articles of Association establish an advance notice procedure for shareholders who wish to present
a proposal (as described in, and in compliance with, Rule 14a-8 of the Exchange Act; such shareholder proposal hereinafter being referred
to as a “proposal”) before an annual general meeting which is to be included by the New Forafric Board in a notice and any
proxies relating to an annual general meeting (or any adjournment thereof). New Forafric’s proposed Memorandum and Articles of
Association provide that the only business that may be conducted at an annual general meeting is business that is (i) specified in the
notice of such meeting (or any supplement or amendment thereto, as well as any notice of an adjourned meeting) given by or at the direction
of the New Forafric Board, (ii) otherwise brought at such meeting by or at the direction of the New Forafric Board, or (iii) to the extent
that New Forafric is subject to section 14 of the Exchange Act, otherwise brought at such meeting following a proposal made by a shareholder
who is a shareholder of record on the date of giving of the notice and on the record date for determination of shareholders entitled
to vote at such meeting who has complied with the procedures specified in New Forafric’s proposed Memorandum and Articles of Association
for the submission of a proposal. In order to comply with the procedures specified in New Forafric’s proposed Memorandum and Articles
of Association for the submission of a shareholder proposal so that these may be included in a notice and any proxies relating to an
annual general meeting, New Forafric’s secretary must receive the written notice containing the shareholder proposal at New Forafric’s
registered office address:
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not earlier than the 120th day; and
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●
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not later than the 90th
day
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before
the one-year anniversary of the preceding year’s annual general meeting.
In
the event that no general meeting was held in the previous year or New Forafric holds its annual general meeting more than 30 days before
or more than 70 days following after the one-year anniversary of a preceding year’s annual general meeting, notice of a shareholder
proposal must be received no later than the 10th day following the day on which the public announcement (including an announcement
on the website of New Forafric) of such date was first made.
Accordingly,
for New Forafric’s 2022 General Meeting, assuming the meeting is held on
,
, notice of a nomination or proposal
must be delivered to New Forafric no later than
,
, and no earlier than
,
. Nominations and proposals also
must satisfy other requirements set
forth in the Memorandum and Articles of Association. The Chairperson of the New Forafric Board may refuse to acknowledge the
introduction of any shareholder proposal not made in compliance with the foregoing procedures.
Under
Rule 14a-8 of the Exchange Act, a shareholder proposal to be included in the proxy statement and proxy card for the 2022 annual
general meeting pursuant to Rule 14a-8 must be received at our principal office on or before
,
and must comply with Rule
14a-8.
Shareholder
Director Nominees
New
Forafric’s proposed Memorandum and Articles of Association permit shareholders to nominate directors for election at an annual
general meeting of shareholders. No person other than a director retiring by rotation shall be appointed a director at any general meeting
unless: (i) that person is recommended by the New Forafric Board; or (ii) not less than three nor more than forty-two days before the
date of the annual general meeting, a notice executed by any shareholder qualified to vote at the meeting (not being the person to be
proposed) has been received by New Forafric of the intention to propose that person for appointment stating the particulars (i.e., full
name, residential address, date of birth, nationality and profession) which would, if he were so appointed, be required to be included
in the register of directors of New Forafric, together with confirmation in writing executed by that person of their willingness to be
so appointed as a director of New Forafric.
Foreign
Private Issuer Status
If
the Business Combination is completed prior to June 30, 2022, we anticipate that as of June 30, 2022 New Forafric will qualify as a “foreign
private issuer” as defined in the Exchange Act and, beginning January 1, 2023, will be exempt from certain rules under the Exchange
Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act.
As
noted above, to the extent that New Forafric is not subject to such rules under the Exchange Act, shareholders of New Forafric may be
limited in their ability to present a proposal before an annual general meeting.
APPRAISAL
RIGHTS
Dissenters’
rights or appraisal rights are statutory rights that enable stockholders who object to certain extraordinary transactions to demand that
the corporation pay such stockholders the fair value of their shares instead of receiving the consideration offered to stockholders in
connection with the extraordinary transaction. However, appraisal rights are not available in all circumstances. Appraisal rights are
not available to Globis Stockholders or warrant holders in connection with the Merger, the Redomiciliation or the Business Combination.
STOCKHOLDER
COMMUNICATIONS
Stockholders
and interested parties may communicate with the Globis Board, any committee chairperson or the non-management directors as a group by
writing to the Globis Board or committee chairperson at Globis Acquisition Corp., 7100 W. Camino Real, Suite 302-48, Boca Raton, FL 33433
(if sent before the Business Combination) or with New Forafric Board or any committee chairperson or the non-management directors as
a group, to (if sent after the Business Combination). Each communication
will be forwarded, depending on the subject matter, to the applicable board, the appropriate committee chairperson or all non-management
directors.
LEGAL
MATTERS
The
legality of the Ordinary Shares offered by this proxy statement/prospectus and certain other Gibraltar legal matters will be passed upon
for New Forafric by Hassans International Law Firm Limited. Certain other legal matters relating to U.S. law will be passed upon by McDermott
Will & Emery LLP, New York, New York.
EXPERTS
The
financial statements of Globis Acquisition Corp. as of December 31, 2020 and for the period from August 21, 2020 (inception) through
December 31, 2020, appearing in this prospectus have been audited by Marcum LLP, independent registered public accounting firm, as set
forth in their report thereon, appearing elsewhere in this proxy statement/prospectus, and are included in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
The
consolidated financial statements of Forafric Agro Holdings Limited and Subsidiaries at December 31, 2019 and 2020, and for each of the
two years in the period ended December 31, 2020, included in the Proxy Statement of Globis Acquisition Corp., which is referred to and
made a part of this Prospectus and Registration Statement, have been audited by UHY LLP, independent registered public accounting firm,
as set forth in their report appearing elsewhere herein, and are included in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
DELIVERY
OF DOCUMENTS TO SHAREHOLDERS
Pursuant
to the rules of the SEC, Globis and the services that it employs to deliver communications to its shareholders are permitted to deliver
to two or more shareholders sharing the same address a single copy of each of Globis’ annual report to shareholders and Globis’
proxy statement/prospectus. Upon written or oral request, Globis will deliver a separate copy of the annual report to shareholder and/or
proxy statement/prospectus to any shareholder at a shared address to which a single copy of each document was delivered and who wishes
to receive separate copies of such documents. Shareholders receiving multiple copies of such documents may likewise request that Globis
deliver single copies of such documents in the future. Shareholders receiving multiple copies of such documents may request that Globis
deliver single copies of such documents in the future. Shareholders may notify Globis of their requests by calling or writing Globis
at 7100 W. Camino Real, Suite 302-48, Boca Raton, Florida 33433 (if before the Business Combination) or (if
after the Business Combination).
TRANSFER
AGENT
The
transfer agent for Globis’ securities is VStock Transfer, LLC.
SUBMISSION
OF PROPOSALS
The
Globis Board is aware of no other matter that may be brought before the Stockholders Meeting. If any matter other than the Proposals
or related matters should properly come before such meetings, however, the persons named in the enclosed proxies will vote proxies in
accordance with their judgment on those matters.
Under
the laws of Delaware, only business stated in the notice of a special meeting of stockholders may be transacted at such meeting.
ENFORCEABILITY
OF CIVIL LIABILITY
Globis
is a Delaware corporation. If Globis changes its jurisdiction of incorporation from Delaware to Gibraltar effecting the Redomiciliation,
you may have difficulty serving legal process within the United States upon Globis. You may also have difficulty enforcing, both in
and outside the United States, judgment you may obtain in U.S. courts against Globis in any action, including actions based upon the
civil liability provisions of U.S. federal or state securities laws. Furthermore, there is doubt that the courts of the Gibraltar would
enter judgments in original actions brought in those courts predicated on U.S. federal or state securities laws. However, Globis may
be served with process in the United States with respect to actions against Globis arising out of or in connection with violation of
U.S. federal securities laws relating to offers and sales of Globis’ securities by serving Globis’ U.S. agent irrevocably
appointed for that purpose.
WHERE
YOU CAN FIND MORE INFORMATION
Globis
Nevada has filed a registration statement on Form S-4 to register the issuance of securities described elsewhere in this proxy statement/prospectus.
This proxy statement/prospectus is a part of that registration statement. This proxy statement/prospectus does not contain all of the
information included in the registration statement. For further information pertaining to Globis Nevada and its securities, you should
refer to the registration statement and to its exhibits. Whenever reference is made in this proxy statement/prospectus to any of Globis
Nevada or Globis’ contracts, agreements or other documents, the references are not necessarily complete, and you should refer to
the annexes to the proxy statement/prospectus and the exhibits attached to the registration statement for copies of the actual contract,
agreement or other document.
Upon
the effectiveness of the registration statement of which this proxy statement/prospectus forms a part, Globis Nevada will be subject
to the information and periodic reporting requirements of the Exchange Act and will file annual, quarterly and current reports, proxy
statements and other information with the SEC.
Globis
files reports, proxy statements and other information with the SEC as required by the Exchange Act. You may access information on Globis
at the SEC web site containing reports, the registration statement and other information at: http://www.sec.gov.
This
proxy statement/prospectus is available without charge to stockholders of Globis upon written or oral request. If you would like additional
copies of this proxy statement/prospectus or if you have questions about the Business Combination or the Proposals to be presented at
the Stockholders Meeting, you should contact Globis in writing at Globis Acquisition Corp., 7100 W. Camino Real, Suite 302-48, Boca Raton, FL 33433 or by telephone at (212) 847-3248.
If you have questions about the
Proposals or this proxy statement/prospectus, would like additional copies of this proxy statement/prospectus, or need to obtain proxy
cards or other information related to the proxy solicitation, please contact , our proxy solicitor, by calling , or banks and brokers
can call collect , or by emailing . You will not be charged for any of the documents that you request.
To
obtain timely delivery of the documents, you must request them no later than five business days before the date of the meetings, or no
later than , 2022.
Information
and statements contained in this proxy statement/prospectus or any annex to this proxy statement/prospectus are qualified in all respects
by reference to the copy of the relevant contract or other annex filed as an exhibit to this proxy statement/prospectus.
All
information contained in this document relating to Globis has been supplied by Globis and all such information relating to FAHL has been
supplied by the Seller. Information provided by Globis or FAHL does not constitute any representation, estimate or projection of the
other.
INDEX
TO FINANCIAL STATEMENTS
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Globis
Acquisition Corp.
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Financial
Statements as of December 31, 2020
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Report
of Independent Registered Public Accounting Firm
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F-2
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Balance
Sheets as of December 31, 2020 (as restated)
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F-3
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Statement
of Operations for the period from August 21, 2020 (inception) through December 31, 2020 (as Restated)
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F-4
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Statement
of Changes in Shareholders’ Equity for the period from August 21, 2020 (inception) through December 31, 2020 (as Restated)
|
F-5
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|
Statement
of Cash Flows for the period from August 21, 2020 (inception) through December 31, 2020 (as Restated)
|
F-6
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Notes
to Financial Statements
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F-7
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Unaudited
Condensed Financial Statements as of September 30, 2021
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Condensed
Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020 (as Restated)
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F-17
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Condensed
Statements of Operations for the Three and Nine Months Ended September 30, 2021 and for the period from August 21, 2020 (inception)
through September 30, 2020 (Unaudited)
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F-18
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Condensed
Statement of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2021 and for the period
from August 21, 2020 (inception) through September 30, 2020 (Unaudited)
|
F-19
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|
Condensed
Statement of Cash Flows for the Nine Months Ended September 30, 2021 and for the period from August 21, 2020 (inception) through
September 30, 2020 (Unaudited)
|
F-20
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Notes
to Unaudited Condensed Financial Statements
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F-21
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Forafric
Agro Holdings Limited
|
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Consolidated
Financial Statements for the years ended December 31, 2020 and 2019
|
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Report
of Independent Registered Public Accounting Firm
|
F-33
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Consolidated
Balance Sheets as of December 31, 2020 and December 31, 2019
|
F-34
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|
Consolidated
Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2020 and December 31, 2019
|
F-35
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|
Consolidated
Statement of Changes in Stockholder’s Equity (Deficit) for the years ended December 31, 2020 and December 31, 2019
|
F-36
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Consolidated
Statements of Cash Flows for the years ended December 31, 2020 and December 31, 2019
|
F-37
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|
Notes
to Consolidated Financial Statements
|
F-38
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Condensed
Consolidated Financial Statements as of September 30, 2021 and December 31, 2020 and for the Nine Months Ended September 30, 2021 and
2020
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Condensed
Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020
|
F-54
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Condensed
Consolidated Statements of Operations and Comprehensive Loss for the Nine Months Ended September 30, 2021 and September 30, 2020
(Unaudited)
|
F-55
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|
Condensed
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Nine Months Ended September 30, 2021 and September
30, 2020 (Unaudited)
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F-56
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|
Condensed
Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2021 and September 30, 2020 (Unaudited)
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F-57
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Notes
to Condensed Consolidated Financial Statements
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F-58
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and Board of Directors of
Globis
Acquisition Corp.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheet of Globis Acquisition Corp. (the “Company”) as of December 31, 2020, the related
statements of operations, changes in stockholders’ equity and cash flows for the period from August 21, 2020 (inception) through
December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of
its operations and its cash flows for the period from August 21, 2020 (inception) through December 31, 2020, in conformity with accounting
principles generally accepted in the United States of America.
Restatement
of 2020 Financial Statements
As discussed
in Note 2 to the financial statements, the accompanying financial statements as of December 31, 2020 and for the period from August 21,
2020 (inception) through December 31, 2020 have been restated.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.
/s/ Marcum
llp
Marcum llp
We have served
as the Company’s auditor since 2020.
Melville, NY
March
31, 2021, except for the effects of the restatement discussed in Notes 2, 3 and 8 as to which the date is December 7, 2021.
GLOBIS
ACQUISITION CORP.
BALANCE
SHEET
DECEMBER
31, 2020
(As
Restated)
The
accompanying notes are an integral part of these financial statements.
GLOBIS
ACQUISITION CORP.
STATEMENT
OF OPERATIONS
(As
Restated)
FOR
THE PERIOD FROM AUGUST 21, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020
The
accompanying notes are an integral part of these financial statements.
GLOBIS
ACQUISITION CORP.
STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY
(As
Restated)
FOR
THE PERIOD FROM AUGUST 21, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020
The
accompanying notes are an integral part of these financial statements.
GLOBIS
ACQUISITION CORP.
STATEMENT
OF CASH FLOWS
(As
Restated)
FOR
THE PERIOD FROM AUGUST 21, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020
The
accompanying notes are an integral part of these financial statements.
GLOBIS
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Globis
Acquisition Corp. (the “Company”) was incorporated in Delaware on August 21, 2020. The Company is a blank check company formed
for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses or entities (the “Business Combination”).
The
Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early
stage and emerging growth companies.
As
of December 31, 2020, the Company had not commenced any operations. All activity for the period from August 21, 2020 (inception) through
December 31, 2020 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which
is described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the
earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public
Offering.
The
registration statement for the Company’s Initial Public Offering was declared effective on December 10, 2020. On December 15, 2020,
the Company consummated the Initial Public Offering of 11,500,000
units (the “Units” and, with respect
to the shares of common stock included in the Units sold, the “Public Shares,” which included the full exercise by the underwriter
of its over-allotment option in the amount of 1,500,000
Units, at $10.00
per Unit), generating gross proceeds of $115,000,000,
which is described in Note 4.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 4,188,889
warrants (the “Private Warrants”)
at a price of $0.75
per Private Warrant and 100,833
units (the “Placement Units” and,
together with the Private Warrants, the “Private Securities”) at a price of $10.00
per Placement Unit in a private placement to
Globis SPAC LLC and Up and Up Capital, LLC, an affiliate of Chardan Capital Markets, LLC, the representative of the underwriters (“Up
and Up” and, collectively with Globis SPAC LLC, the “Sponsors”), which is described in Note 5.
Transaction
costs amounted to $6,541,841
consisting of $2,300,000
of underwriting fees, $4,025,000
representing 402,500
shares of common stock issued, which the underwriters
are entitled to receive upon the consummation of a Business Combination (the “equity participation shares”), and $216,841
of other offering costs.
Following
the closing of the Initial Public Offering on December 15, 2020, an amount of $116,150,000
($10.10
per Unit) from the net proceeds of the sale of
the Units in the Initial Public Offering and the sale of the Private Securities was placed in a trust account (the “Trust Account”),
located in the United States and held as cash or invested only in U.S. government securities, within the meaning set forth in Section
2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself
out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by
the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account,
as described below.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of the Private Securities, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company
must complete a Business Combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding
taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The
Company intends to only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register
as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
The
Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem
all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting
called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated
to be $10.10 per
Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to
pay its tax or dissolution obligations). There will be no redemption rights upon the completion of a Business Combination with respect
to the Company’s warrants.
GLOBIS
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001
immediately prior to or upon such consummation
of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business
Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or
other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated
Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange
Commission (“SEC”) and file tender offer documents with the SEC containing substantially the same information as would be
included in a proxy statement prior to completing a Business Combination. If, however, stockholder approval of the transaction is required
by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares
in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks
stockholder approval in connection with a Business Combination, the Sponsors have agreed to vote their Founder Shares (as defined in
Note 6), Placement Shares (as defined in Note 6) and any Public Shares purchased during or after the Initial Public Offering in favor
of approving a Business Combination. The underwriters have also agreed to vote their equity participation shares and any public shares
they own in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares
irrespective of whether they vote for or against the proposed transaction or do not vote at all.
Notwithstanding
the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender
offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of
such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section
13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares
with respect to more than an aggregate of 20% or more of the Public Shares, without the prior consent of the Company.
The
Sponsors and the Company’s officers and directors will agree (a) to waive redemption rights with respect to the Founder Shares,
Placement Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an
amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation
to allow redemption in connection with the Company’s initial Business Combination and certain amendments to the Amended and Restated
Certificate of Incorporation or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with
respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless the Company
provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The
Company will have until December 15, 2021 to complete a Business Combination; provided, however, if the Company anticipates that it may
not be able to consummate a Business Combination by December 15, 2021, the Company may, by resolution of the board of directors if requested
by Globis SPAC LLC, extend the period of time to consummate a Business Combination up to two times, each by an additional three months
(up until June 15, 2022 to complete a Business Combination), subject to the deposit of additional funds into the Trust Account by one
or both of the Sponsors or their affiliates or designees (the “Combination Period”). The Company’s stockholders will
not be entitled to vote or redeem their shares in connection with any such extension. Pursuant
to the terms of the Company’s Amended and Restated Certificate of Incorporation, in order for the time available for the Company
to consummate a Business Combination to be extended, one or both of the Sponsors or their affiliates or designees, upon five days’
advance notice prior to the applicable deadline, must deposit into the trust account $1,150,000 ($0.10 per Unit, up to an aggregate of
$2,300,000), on or prior to the date of the applicable deadline, for each three month extension. Any
such payments would be made in the form of a non-interest bearing loan and would be repaid, if at all, from funds released to the Company
upon completion of a Business Combination.
If
the Company is unable to complete a Business Combination within the Combination Period and stockholders do not approve an amendment to
the Amended and Restated Certificate of Incorporation to extend this date, the Company will (i) cease all operations except for the purpose
of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the Trust Account including interest (which interest shall be net of taxes
payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption
will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any), subject to applicable law, and (iii)
as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and
the Company’s board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) to the Company’s
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption
rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to
complete a Business Combination within the Combination Period.
The
holders of the Founder Shares and Placement Shares have agreed to waive liquidation rights with respect to such shares if the Company
fails to complete a Business Combination within the Combination Period. However, if the Sponsors acquire Public Shares in or after the
Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails
to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their liquidation rights with
respect to the equity participation shares (see Note 7) in the event the Company does not complete a Business Combination within the
Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available
to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets
remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.10).
GLOBIS
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
In
order to protect the amounts held in the Trust Account, the Sponsors will agree to be liable to the Company if and to the extent any
claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has
discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.10
per Public Share or (ii) such lesser amount per
Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of trust
assets, in each case net of the interest which may be withdrawn to pay the Company’s tax obligation and up to $100,000
for liquidation expenses, except as to any claims
by a third party who executed a waiver of any and all rights to seek access to the Trust Account (even if such waiver is deemed to be
unenforceable) and except as to any claims under the Company’s indemnity of the underwriters of Initial Public Offering against
certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover,
in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsors will not be responsible to the
extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsors will have to indemnify
the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or
other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim
of any kind in or to monies held in the Trust Account.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could
have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Liquidity
The
Company has principally financed its operations from inception using proceeds from the sale of its equity securities to its stockholders
prior to the Initial Public Offering and such amount of proceeds from the Initial Public Offering that were placed in an account outside
of the Trust Account for working capital purposes. As of December 31, 2020, the Company had cash of $202,068
held outside of the Trust Account, $116,150,000
held in the Trust Account to be used for a Business
Combination, and adjusted working capital of $432,087,
which excludes $12,314
of franchise taxes payable.
The
Company may raise additional capital through loans or additional investments from the Sponsors, officers, directors, or their affiliates.
Other than as described above and in Note 6, the Company’s officers, directors and the Sponsors and their affiliates may, but are
not obligated to, loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet
the Company’s working capital needs.
The
Company does not believe it will need to raise additional funds in order to meet expenditures required for operating its business following
its issuance of an unsecured convertible promissory note on January 11, 2021 (the “Note”) to Globis SPAC LLC, or its assigns
or successors in interest (the “Lender”), providing for borrowings from time to time of up to an aggregate of $1,000,000.
None of the Sponsors, nor any of the stockholders, officers or directors, or third parties are under any obligation to advance funds
to, or invest in, the Company, except as discussed above. Accordingly, the Company may not be able to obtain additional financing. If
the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could
include, but not necessarily be limited to, suspending the pursuit of a potential transaction. The Company cannot provide any assurance
that new financing will be available to it on commercially acceptable terms, if at all. Even if the Company can obtain sufficient financing
or raise additional capital, it only has until December 15, 2021 to consummate a Business Combination (or June 15, 2022 if the Company
extends the period of time to consummate a Business Combination up to two times, each by an additional three months). There is no assurance
that the Company will be able to do so prior to December 15, 2021 (or June 15, 2022 if the Company extends the period of time to consummate
a Business Combination up to two times, each by an additional three months).
NOTE
2 — RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In
connection with the preparation of the Company’s financial statements, management identified errors made in its historical financial
statements where, at the closing of the Company’s Initial Public Offering, the Company improperly valued its common stock subject
to possible redemption. The Company previously determined the common stock subject to possible redemption to be equal to the redemption
value, while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001.
Management determined that the Public Shares underlying the Units issued during the Initial Public Offering can be redeemed or become
redeemable subject to the occurrence of future events considered outside the Company’s control. Therefore, management concluded
that temporary equity should include all shares of common stock subject to possible redemption, resulting in the common stock subject
to possible redemption being equal to their redemption value. As a result, management has noted a classification error related to temporary
equity and permanent equity. This resulted in an adjustment to the initial carrying value of the common stock subject to possible redemption
with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and common stock.
In
connection with the change in presentation for the common stock subject to possible redemption, the Company also restated its income
(loss) per common share calculation to allocate net income (loss) evenly to all common stock. This presentation contemplates a Business
Combination as the most likely outcome, in which case, all shares of common stock share pro rata in the income (loss) of the Company.
There
has been no change in the Company’s total assets, liabilities or operating results.
SCHEDULE
OF ERROR CORRECTIONS AND PRIOR PERIOD ADJUSTMENTS
|
|
|
As
Previously
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Balance Sheet as of December 15, 2020 (Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible
redemption
|
|
$
|
111,652,086
|
|
|
$
|
4,497,914
|
|
|
$
|
116,150,000
|
|
|
Common stock
|
|
$
|
401
|
|
|
$
|
(45
|
)
|
|
$
|
356
|
|
|
Additional paid-in capital
|
|
$
|
5,007,172
|
|
|
$
|
(4,497,869
|
)
|
|
$
|
509,303
|
|
|
Accumulated deficit
|
|
$
|
(7,571
|
)
|
|
$
|
—
|
|
|
$
|
(7,571
|
)
|
|
Total Stockholders’ Equity
|
|
$
|
5,000,002
|
|
|
$
|
(4,497,914
|
)
|
|
$
|
502,088
|
|
|
Number of shares of common stock subject to
possible redemption
|
|
|
11,054,662
|
|
|
|
445,338
|
|
|
|
11,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet as of December 31, 2020 (Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible redemption
|
|
$
|
111,569,772
|
|
|
$
|
4,580,228
|
|
|
$
|
116,150,000
|
|
|
Common stock
|
|
$
|
400
|
|
|
$
|
(45
|
)
|
|
$
|
355
|
|
|
Additional paid-in capital
|
|
$
|
5,089,487
|
|
|
$
|
(4,580,183
|
)
|
|
$
|
509,304
|
|
|
Accumulated deficit
|
|
$
|
(89,886
|
)
|
|
$
|
—
|
|
|
$
|
(89,886
|
)
|
|
Total Stockholders’ Equity
|
|
$
|
5,000,001
|
|
|
$
|
(4,580,228
|
)
|
|
$
|
419,773
|
|
|
Number of shares of common stock subject to
possible redemption
|
|
|
11,046,512
|
|
|
|
453,488
|
|
|
|
11,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows
for the Period from August 21, 2020 (Inception) through December 31, 2020 (Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial classification of common stock subject
to possible redemption
|
|
$
|
111,652,086
|
|
|
$
|
4,497,914
|
|
|
$
|
116,150,000
|
|
|
Change in value of Common Stock subject to
possible redemption
|
|
$
|
(82,314
|
)
|
|
$
|
82,314
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Changes
in Stockholders’ Equity for the Period Ended December 31, 2020 (Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 11,500,000
Units, net of underwriter discounts and offering expenses
|
|
$
|
112,483,159
|
|
|
$
|
(112,483,159
|
)
|
|
$
|
—
|
|
|
Initial value of Common Stock subject to redemption
|
|
$
|
111,569,772
|
|
|
$
|
(111,569,772
|
)
|
|
$
|
—
|
|
|
Redemption adjustment for Common Stock to redemption
amount
|
|
$
|
—
|
|
|
$
|
(3,666,841
|
)
|
|
$
|
(3,666,841
|
)
|
|
Total Shareholders’ Equity
|
|
$
|
5,000,001
|
|
|
$
|
(4,580,228
|
)
|
|
$
|
419,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
for the Period from August 21, 2020 (Inception) Through December 31, 2020 (Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding,
common stock subject to possible redemption
|
|
|
11,054,662
|
|
|
|
(9,534,001
|
)
|
|
|
1,520,661
|
|
|
Basic and diluted net income per share, common
stock subject to possible redemption
|
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
Basic and diluted weighted average shares outstanding,
Non-redeemable common stock
|
|
|
2,717,799
|
|
|
|
(58,887
|
)
|
|
|
2,658,912
|
|
|
Basic and diluted net loss (income) per share,
Non-redeemable common stock
|
|
$
|
(0.03
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
NOTE
3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of
2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved.
GLOBIS
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not
have any cash equivalents as of December 31, 2020.
Marketable
Securities Held in Trust Account
At
December 31, 2020, substantially all of the assets held in the Trust Account were held in money market funds which invest U.S. Treasury
securities.
Common
Stock Subject to Possible Redemption (Restated,
see Note 2)
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified
as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features
redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not
solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’
equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at
redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
The
Company recognizes changes in redemption value as they occur and adjusts the carrying value of redeemable common stock to equal the redemption
value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges
against additional paid-in capital and accumulated deficit.
At
December 31, 2020, the common stock subject to possible redemption reflected in the balance sheet is reconciled in the following table:
SCHEDULE
OF COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION REFLECTED IN BALANCE SHEET
|
|
|
|
|
|
|
Gross
Proceeds
|
|
|
115,000,000
|
|
|
Less:
|
|
|
|
|
|
Common stock issuance costs
|
|
|
(2,516,841
|
)
|
|
Add:
|
|
|
|
|
|
Accretion of carrying
value to redemption value
|
|
|
3,666,841
|
|
|
Common
stock subject to possible redemption
|
|
|
116,150,000
|
|
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under ASC Topic 740, “Income Taxes.” Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
ASC
Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than
not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. There were no
unrecognized tax benefits and no amounts accrued
for interest and penalties as of December 31, 2020. The Company is currently not aware of any issues under review that could result in
significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing
authorities since inception.
GLOBIS
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
On
March 27, 2020, the CARES Act was enacted in response to COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws
are recognized in the period which the new legislation is enacted. The CARES Act made various tax law changes including among other things
(i) increasing the limitation under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019
and 2020 to permit additional expensing of interest (ii) enacting a technical correction so that qualified improvement property can be
immediately expensed under IRC Section 168(k), (iii) making modifications to the federal net operating loss rules including permitting
federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate
a refund of previously paid income taxes and (iv) enhancing the recoverability of alternative minimum tax credits. Given the Company’s
full valuation allowance position and capitalization of all costs, the CARES Act did not have an impact on the financial statements.
Net
Loss per Common Stock (Restated, see Note
2)
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss)
per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period.
The Company applies the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Common
Stock is excluded from earnings per share as the redemption value approximates fair value.
The
calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the (i) Initial
Public Offering, and (ii) the private placement, as described in Note 5, since the exercise of the warrants is contingent upon the occurrence
of future events. The warrants are exercisable to purchase 15,789,722
Common Stock in the aggregate. As of December
31 2020, the Company did not have any other dilutive securities or other contracts that could, potentially, be exercised or converted
into common shares and then share in the earnings of the Company. As a result, diluted net loss per common share is the same as basic
net loss per common share for the periods presented.
The
following table reflects the calculation of basic and diluted net loss per common share (in dollars, except per share amounts):
SCHEDULE OF CALCULATION OF BASIC AND DILUTED NET LOSS PER COMMON SHARE
|
|
|
Redeemable
common stock
|
|
|
Non-redeemable
common stock
|
|
|
|
|
For the Period
from August 21,
|
|
|
|
|
2020 (Inception)
Through
|
|
|
|
|
December
31, 2020
|
|
|
|
|
Redeemable
common stock
|
|
|
Non-redeemable
common stock
|
|
|
Basic and diluted net
loss per common stock
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Allocation
of net loss, as adjusted
|
|
$
|
(32,703
|
)
|
|
$
|
(57,183
|
)
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted
average shares outstanding
|
|
|
1,520,661
|
|
|
|
2,658,912
|
|
|
Basic and diluted net
loss per common stock
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution
which, at times may exceed the Federal Depository Insurance Coverage of $250,000.
The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such
account.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value
Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term
nature.
Recent
Accounting Standards
Management
does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect
on the accompanying financial statements.
NOTE
4. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 11,500,000
Units, which included a full exercise by the
underwriters of their over-allotment option in the amount of 1,500,000
Units, at a price of $10.00
per Unit. Each Unit consists of one share of
common stock and one redeemable warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one share
of common stock at a price of $11.50
per share, subject to adjustment (see Note 8).
NOTE
5. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, Globis SPAC LLC purchased 3,688,889
Private Warrants at a purchase price of $0.75
per Private Warrant, for an aggregate purchase
price of $2,766,667
and Up and Up purchased 500,000
Private Warrants at a purchase price of $0.75
per Private Warrant, for an aggregate purchase
price of $375,000.
Each Private Warrant entitles the holder to purchase one share of common stock at a price of $11.50
per share, subject to adjustment (see Note 8).
In addition, Up and Up purchased an aggregate of 100,833
Placement Units at a purchase price of $10.00
per Placement Unit, or $1,008,333
in the aggregate. Each Placement Unit consists
of one share of common stock (“Placement Share”) and one redeemable warrant (“Placement Warrant”). Each Placement
Warrant entitles the holder to purchase one share of common stock at a price of $11.50
per share, subject to adjustment (see Note 8).
GLOBIS
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
proceeds from the sale of the Private Securities were added to the net proceeds from the Initial Public Offering held in the Trust Account.
If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Securities
held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and
the Private Securities and all underlying securities will expire worthless.
NOTE
6. RELATED PARTY TRANSACTIONS
Founder
Shares
On
September 1, 2020, Globis SPAC LLC purchased 2,875,000
shares of the Company’s common stock for
an aggregate price of $25,000.
On December 7, 2020, the Company sold an additional 172,500
shares of the Company’s common stocks to
Up and Up for an aggregate price of $1,500,
resulting in a total of shares of common stock being sold to the Sponsors
(the “Founder Shares”) and being issued and outstanding, of which an aggregate of up to 397,500
shares were subject to forfeiture to the extent
that the underwriters’ over-allotment option was not exercised in full or in part, so that the Sponsors would own approximately
21%
of the Company’s issued and outstanding
shares after the Initial Public Offering. As a result of the underwriters’ election to fully exercise their over-allotment option
on December 15, 2020, no Founder Shares are currently subject to forfeiture.
The
Sponsors agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the date of the consummation
of a Business Combination or the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or
other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common
stock for cash, securities or other property.
Administrative
Support Agreement
The
Company entered into an agreement, commencing on December 15, 2020 the effective date of the Initial Public Offering, to pay an affiliate
of Globis SPAC LLC a total of $10,000
per month for office space, secretarial and administrative
support. Upon completion of the Business Combination or the Company’s liquidation, the Company will cease paying these monthly
fees. For the period from August 21, 2020 (inception) through December 31, 2020, the Company incurred $5,000
in fees for these services, of which amount is
included in accrued expenses in the accompanying balance sheet.
Advances
from Related Party
As
of December 2, 2020, the Sponsor advanced the Company $to fund certain offering cost in connection with
the Initial Public Offering. The outstanding balance under these advances was repaid upon the closing of the Initial Public Offering
on December 15, 2020.
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsors or an affiliate of the Sponsors, or the Company’s
officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital
Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business
Combination, without interest, or, at the lender’s discretion, the notes may be converted upon completion of a Business Combination
into warrants at a price of $0.75
per warrant. Such warrants would be identical
to the Private Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside
the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. As of December 31, 2020, the Company had no outstanding borrowings under the Working Capital Loans.
NOTE
7. COMMITMENTS
Registration
Rights
Pursuant
to a registration rights agreement entered into on December 10, 2020, the holders of the Founder Shares, Private Securities, equity participation
shares and any warrants that may be issued upon conversion of the Working Capital Loans (and any shares of common stock issuable upon
the exercise of the Private Securities or warrants issued upon conversion of Working Capital Loans) will be entitled to registration
rights. The holders of a majority of these securities are entitled to make up to three demands that the Company register such securities.
The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months
prior to the date on which these shares of common stock are to be released from escrow. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The Company
will bear the expenses incurred in connection with the filing of any such registration statements.
GLOBIS
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
Underwriting
Agreement
The
underwriters are entitled to receive the 402,500
equity participation shares upon the consummation
of a Business Combination. The equity participation shares have been placed in escrow until the consummation of a Business Combination.
If a Business Combination is not consummated, the equity participation shares will be forfeited by the underwriters. The Company accounted
for the equity participation shares as an expense of the Initial Public Offering, resulting in a charge directly to stockholders’
equity. The fair value of the equity participation shares is estimated to be $4,025,000,
based upon the offering price of the Units of $10.00
per Unit.
NOTE
8. STOCKHOLDERS’ EQUITY (Restated,
see Note 2)
STOCKHOLDER’S EQUITY
Preferred
Stock — On December 10, 2020, the Company amended its Certificate of Incorporation such that it is now authorized to issue
up to 1,000,000 shares
of preferred stock with a par value of $0.0001
per share with such designations, voting and
other rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2020,
there were no shares of preferred stock issued or outstanding.
Common
Stock — The Company is authorized to issue 100,000,000
shares of common stock with a par value of $0.0001
per share. At December 31, 2020, there were 3,550,833
shares of common stock issued and outstanding,
excluding 11,500,000 shares
of common stock subject to possible redemption which are presented as temporary equity.
Warrants
— The Public Warrants will become exercisable on the later of (a) the completion of a Business Combination or (b) 12 months
from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination
or earlier upon redemption or liquidation.
Notwithstanding
the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the warrants is not effective
within 90 days from the consummation of our initial business combination, warrant holders may, until such time as there is an effective
registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise
warrants on a cashless basis pursuant to the exemption from registration provided by Section 3(a)(9) of the Securities Act provided that
such exemption is available.
Once
the warrants become exercisable, the Company may redeem the Public Warrants:
|
|
●
|
in
whole and not in part;
|
|
|
●
|
at
a price of $0.01 per warrant;
|
|
|
●
|
at
any time while the warrants are exercisable;
|
|
|
●
|
upon
not less than 30 days’ prior written notice of redemption to each warrant holder;
|
|
|
●
|
if,
and only if, the reported last sale price of the shares of common stock 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 shares of common stock 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.
|
If
and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register
or qualify the underlying securities for sale under all applicable state securities laws. If the Company calls the Public Warrants for
redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless
basis,” as described in the warrant agreement.
The
exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including
in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the
warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company
be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period
and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to
their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect
to such warrants. Accordingly, the warrants may expire worthless.
In
addition, if (x) the Company issues additional common stock or equity-linked securities for capital raising purposes in connection with
the closing of a Business Combination at an issue price or effective issue price of less than $9.50 per share of common stock (with such
issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any
such issuance to the Sponsors or their affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates,
as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent
more than 60%
of the total equity proceeds, and interest thereon,
available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and
(z) the volume weighted average trading price of the common stock during the 10 trading day period starting on the trading day prior
the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.50
per share, then the exercise price of the warrants
will be adjusted (to the nearest cent) to be equal to 115%
of the higher of the Market Value and the Newly
Issued Price, and the $16.50
per share redemption trigger price will be adjusted
(to the nearest cent) to be equal to 165%
of the higher of the Market Value and the Newly
Issued Price.
GLOBIS
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
Private Warrants and Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering,
except that the Private Warrants and the Placement Warrants are exercisable on a cashless basis, non-redeemable and holders of the Private
Warrants and the Placement Warrants have the option to calculate the fair market value based upon the last reported sale price of the
shares of common stock for the trading day prior to the date of exercise in lieu of the average reported last sale price of the shares
of common stock for the 10 trading days ending on the third trading day prior to the date of exercise.
NOTE
9. INCOME TAX
The
Company’s net deferred tax assets are as follows:
SCHEDULE
OF DEFERRED TAX ASSETS
|
|
|
December
31,
|
|
|
|
|
2020
|
|
|
Deferred tax assets
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
2,586
|
|
|
Startup and organizational costs
|
|
|
16,290
|
|
|
Total deferred tax assets
|
|
|
18,876
|
|
|
Valuation Allowance
|
|
|
(18,876
|
)
|
|
Deferred tax assets, net valuation allowance
|
|
$
|
—
|
|
The
income tax provision consists of the following:
SCHEDULE
OF INCOME TAX PROVISION
|
|
|
December
31,
|
|
|
|
|
2020
|
|
|
Federal
|
|
|
|
|
|
Current
|
|
$
|
—
|
|
|
Deferred
|
|
|
(18,876
|
)
|
|
|
|
|
|
|
|
State and Local
|
|
|
|
|
|
Current
|
|
|
—
|
|
|
Deferred
|
|
|
—
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
18,876
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
—
|
|
As
of December 31, 2020, the Company had $89,886 of
U.S. federal net operating loss carryovers available to offset future taxable income.
In
assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all
of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies
in making this assessment. After consideration of all of the information available, management believes that significant uncertainty
exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the
period from August 21, 2020 (inception) through December 31, 2020, the change in the valuation allowance was $18,876.
A
reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows:
SCHEDULE
OF EFFECTIVE INCOME TAX RATE RECONCILIATION
|
|
|
December
31, 2020
|
|
|
|
|
|
|
|
Statutory federal income tax rate
|
|
|
21.0
|
%
|
|
State taxes, net of federal tax benefit
|
|
|
0.0
|
%
|
|
Valuation allowance
|
|
|
(21.0
|
)%
|
|
Income tax provision
|
|
|
0.0
|
%
|
GLOBIS
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
The
Company files income tax returns in the U.S. federal jurisdiction and is subject to examination by the various taxing authorities. The
Company’s tax returns since inception remain open to examination by the taxing authorities. The Company considers New York to be
a significant state tax jurisdiction.
NOTE
10. FAIR VALUE MEASUREMENTS
The
Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each
reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would
have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company
seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable
inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is
used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and
liabilities:
|
|
Level
1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions
for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
|
|
|
Level
2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
|
|
Level
3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at December
31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
SCHEDULE
OF FAIR VALUE ASSETS MEASURED ON RECURRING BASIS
|
Description
|
|
Level
|
|
|
December
31,
2020
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Marketable securities held in
Trust Account
|
|
|
1
|
|
|
$
|
116,150,000
|
|
NOTE
11. SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements
were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have
required adjustment or disclosure in the financial statements.
On
January 11, 2021, the Company issued the Note to the Lender, which provides for borrowings from time to time of up to an aggregate of
$1,000,000.
The Note bears no interest and is due and payable upon the date on which the Company consummates its initial Business Combination. At
the election of the Lender, all or a portion of the unpaid principal amount of the Note may be converted upon the consummation of the
Company’s initial Business Combination into a number of warrants of the Company, with each warrant being exercisable for one share
of common stock of the Company (the “Conversion Warrants”), equal to: (x) the portion of the principal amount of the Note
being converted, divided by (y) $0.75,
rounded up to the nearest whole number of warrants. The Conversion Warrants are identical to the Private Warrants issued. On February
2, 2021, the Company borrowed $100,000
in accordance with the Note.
GLOBIS
ACQUISITION CORP.
CONDENSED
BALANCE SHEETS
The
accompanying notes are an integral part of the unaudited condensed financial statements.
GLOBIS
ACQUISITION CORP.
CONDENSED
STATEMENTS OF OPERATIONS
(UNAUDITED)
The
accompanying notes are an integral part of the unaudited condensed financial statements.
GLOBIS
ACQUISITION CORP.
CONDENSED
STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
(UNAUDITED)
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
FOR
THE PERIOD FROM AUGUST 21, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
(Deficit)
|
|
|
Balance
— August 21, 2020
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Balance
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Founder Shares to Sponsor
|
|
|
2,875,000
|
|
|
|
288
|
|
|
|
24,712
|
|
|
|
—
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,000
|
)
|
|
|
(1,000
|
)
|
|
Balance
– September 30, 2020
|
|
|
2,875,000
|
|
|
$
|
288
|
|
|
$
|
24,712
|
|
|
$
|
(1,000
|
)
|
|
$
|
(24,000
|
)
|
|
Balance
|
|
|
2,875,000
|
|
|
$
|
288
|
|
|
$
|
24,712
|
|
|
$
|
(1,000
|
)
|
|
$
|
(24,000
|
)
|
The
accompanying notes are an integral part of the unaudited condensed financial statements.
GLOBIS
ACQUISITION CORP.
CONDENSED
STATEMENT OF CASH FLOWS
(UNAUDITED)
The
accompanying notes are an integral part of the unaudited condensed financial statements.
GLOBIS
ACQUISITION CORP.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021
(UNAUDITED)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Globis
Acquisition Corp. (the “Company”) was incorporated in Delaware on August 21, 2020. The Company is a blank check company formed
for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses or entities (the “Business Combination”).
The
Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early
stage and emerging growth companies.
As
of September 30, 2021, the Company had not commenced any operations. All activity for the period from August 21, 2020 (inception) through
September 30, 2021 relates to the Company’s formation, initial public offering (“Initial Public Offering”), which is
described below, and search for a Business Combination. The Company will not generate any operating revenues until after the completion
of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds
derived from the Initial Public Offering.
The
registration statement for the Company’s Initial Public Offering was declared effective on December 10, 2020. On December 15, 2020,
the Company consummated the Initial Public Offering of 11,500,000
units (the “Units” and, with respect
to the shares of common stock included in the Units sold, the “Public Shares,” which included the full exercise by the underwriter
of its over-allotment option in the amount of 1,500,000
Units, at $10.00
per Unit), generating gross proceeds of $115,000,000,
which is described in Note 4.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 4,188,889
warrants (the “Private Warrants”)
at a price of $0.75
per Private Warrant and 100,833
units (the “Placement Units” and,
together with the Private Warrants, the “Private Securities”) at a price of $10.00
per Placement Unit in a private placement to
Globis SPAC LLC and Up and Up Capital, LLC, an affiliate of Chardan Capital Markets, LLC, the representative of the underwriters (“Up
and Up” and, collectively with Globis SPAC LLC, the “Sponsors”), which is described in Note 5.
Transaction
costs amounted to $6,541,841
consisting of $2,300,000
of underwriting fees, $4,025,000
representing 402,500
shares of common stock issued, which the underwriters
are entitled to receive upon the consummation of a Business Combination (the “equity participation shares”), and $216,841
of other offering costs.
Following
the closing of the Initial Public Offering on December 15, 2020, an amount of $116,150,000
($10.10
per Unit) from the net proceeds of the sale of
the Units in the Initial Public Offering and the sale of the Private Securities was placed in a trust account (the “Trust Account”),
located in the United States and held as cash or invested only in U.S. government securities, within the meaning set forth in Section
2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself
out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by
the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account,
as described below.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of the Private Securities, although substantially all of the net proceeds are intended to be applied generally toward completing
a Business Combination. The Company must complete a Business Combination having an aggregate fair market value of at least 80%
of the assets held in the Trust Account (excluding taxes payable on income earned on the Trust Account) at the time of the agreement
to enter into an initial Business Combination. The Company intends to only complete a Business Combination if the post-Business Combination
company owns or acquires 50%
or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for
it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment
Company Act”). There is no assurance that the Company will be able to complete a Business Combination successfully.
The
Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a
Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means
of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender
offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for
a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.10
per Public Share, plus any pro rata interest
earned on the funds held in the Trust Account and not previously released to the Company to pay its tax or dissolution obligations).
There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
GLOBIS
ACQUISITION CORP.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021
(UNAUDITED)
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001
immediately prior to or upon such consummation
of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business
Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or
other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated
Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange
Commission (“SEC”) and file tender offer documents with the SEC containing substantially the same information as would be
included in a proxy statement prior to completing a Business Combination. If, however, stockholder approval of the transaction is required
by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares
in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks
stockholder approval in connection with a Business Combination, the Sponsors have agreed to vote their Founder Shares (as defined in
Note 6), Placement Shares (as defined in Note 6) and any Public Shares purchased during or after the Initial Public Offering in favor
of approving a Business Combination. The underwriters have also agreed to vote their equity participation shares and any public shares
they own in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares,
without voting, and if they do vote, irrespective of whether they vote for or against the proposed Business Combination.
Notwithstanding
the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender
offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of
such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section
13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares
with respect to more than an aggregate of 20% or more of the Public Shares, without the prior consent of the Company.
The
Sponsors and the Company’s officers and directors will agree (a) to waive redemption rights with respect to the Founder Shares,
Placement Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an
amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation
to allow redemption in connection with the Company’s initial Business Combination and certain amendments to the Amended and Restated
Certificate of Incorporation or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with
respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless the Company
provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The
Company will have until December 15, 2021 to complete a Business Combination; provided, however, if the Company anticipates that it may
not be able to consummate a Business Combination by December 15, 2021, the Company may, by resolution of the board of directors if requested
by Globis SPAC LLC, extend the period of time to consummate a Business Combination up to two times, each by an additional three months
(up until June 15, 2022 to complete a Business Combination), subject to the deposit of additional funds into the Trust Account by one
or both of the Sponsors or their affiliates or designees (the “Combination Period”). The Company’s stockholders will
not be entitled to vote or redeem their shares in connection with any such extension. Pursuant
to the terms of the Company’s Amended and Restated Certificate of Incorporation, in order for the time available for the Company
to consummate a Business Combination to be extended, one or both of the Sponsors or their affiliates or designees, upon five days’
advance notice prior to the applicable deadline, must deposit into the trust account $1,150,000 ($0.10 per Unit, up to an aggregate of
$2,300,000), on or prior to the date of the applicable deadline, for each three month extension. Any
such payments would be made in the form of a non-interest bearing loan and would be repaid, if at all, from funds released to the Company
upon completion of a Business Combination.
If
the Company is unable to complete a Business Combination within the Combination Period and stockholders do not approve an amendment to
the Amended and Restated Certificate of Incorporation to extend this date, the Company will (i) cease all operations except for the purpose
of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the Trust Account including interest (which interest shall be net of taxes
payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption
will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any), subject to applicable law, and (iii)
as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and
the Company’s board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) to the Company’s
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption
rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to
complete a Business Combination within the Combination Period.
The
holders of the Founder Shares and Placement Shares have agreed to waive liquidation rights with respect to such shares if the Company
fails to complete a Business Combination within the Combination Period. However, if the Sponsors acquire Public Shares in or after the
Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails
to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their liquidation rights with
respect to the equity participation shares (see Note 7) in the event the Company does not complete a Business Combination within the
Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available
to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets
remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.10).
GLOBIS
ACQUISITION CORP.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021
(UNAUDITED)
In
order to protect the amounts held in the Trust Account, the Sponsors will agree to be liable to the Company if and to the extent any
claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has
discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.10
per Public Share or (ii) such lesser amount per
Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of trust
assets, in each case net of the interest which may be withdrawn to pay the Company’s tax obligation and up to $100,000
for liquidation expenses, except as to any claims
by a third party who executed a waiver of any and all rights to seek access to the Trust Account (even if such waiver is deemed to be
unenforceable) and except as to any claims under the Company’s indemnity of the underwriters of Initial Public Offering against
certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover,
in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsors will not be responsible to the
extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsors will have to indemnify
the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or
other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim
of any kind in or to monies held in the Trust Account.
Liquidity
The
Company has principally financed its operations from inception using proceeds from the sale of its equity securities to its stockholders
prior to the Initial Public Offering and such amount of proceeds from the Initial Public Offering that were placed in an account outside
of the Trust Account for working capital purposes. As of September 30, 2021, the Company had cash of $8,413
held outside of the Trust Account, $116,155,627
held in the Trust Account to be used for a Business
Combination, and adjusted working capital deficit of $1,037,663,
which excludes $150,000 of
franchise taxes payable.
The
Company may raise additional capital through loans or additional investments from the Sponsors, officers, directors, or their affiliates.
Other than as described above and in Note 6, the Company’s officers, directors and the Sponsors and their affiliates may, but are
not obligated to, loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet
the Company’s working capital needs.
The
Company does not believe it will need to raise additional funds in order to meet expenditures required for operating its business following
its issuance of an unsecured convertible promissory note on January 11, 2021 (the “Note”) to Globis SPAC LLC, or its assigns
or successors in interest (the “Lender”), providing for borrowings from time to time of up to an aggregate of $1,000,000.
On July 19, 2021 the Note was amended to increase the principal amount of the Note to $2,000,000
and on October 13, 2021, the Note was further
amended to increase the principal amount of the Note to $3,000,000.
None of the Sponsors, nor any of the stockholders, officers or directors, or third parties are under any obligation to advance funds
to, or invest in, the Company, except as discussed above. Accordingly, the Company may not be able to obtain additional financing. If
the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could
include, but not necessarily be limited to, suspending the pursuit of a potential Business Combination. The Company cannot provide any
assurance that new financing will be available to it on commercially acceptable terms, if at all. Even if the Company can obtain sufficient
financing or raise additional capital, it only has until December 15, 2021 to consummate a Business Combination (or June 15, 2022 if
the Company extends the period of time to consummate a Business Combination up to two times, each by an additional three months). There
is no assurance that the Company will be able to do so prior to December 15, 2021 (or June 15, 2022 if the Company extends the period
of time to consummate a Business Combination up to two times, each by an additional three months).
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could
have a negative effect on the Company’s financial position and/or search for a target company, the specific impact is not readily
determinable as of the date of the financial statement. The financial statement does not include any adjustments that might result from
the outcome of this uncertainty.
NOTE
2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In
connection with the preparation of the Company’s financial statements as of September 30, 2021, management determined it should
restate the Company’s previously reported financial statements. During the quarter ended September 30, 2021, the Company determined
that at the closing of the Company’s Initial Public Offering (including the sale of the shares issued pursuant to the exercise
of the underwriters’ overallotment) it had improperly valued its common stock subject to possible redemption at the closing of
the Company’s Initial Public Offering and at the closing of the sale of shares pursuant to the exercise of the underwriters’
overallotment, it had improperly classified certain of its common stock subject to possible redemption. The Company previously determined
the common stock subject to possible redemption to be equal to the redemption value of $10.10
per share of common stock while also taking into
consideration that in accordance with the Company’s Charter, a redemption cannot result in net tangible assets being less than
$5,000,001.
Management determined that the common stock issued in the Initial Public Offering and pursuant to the exercise of the underwriters’
overallotment can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s
control. Therefore, management concluded that temporary equity should include all common stock subject to possible redemption, resulting
in the common stock subject to possible redemption being equal to its redemption value. As a result, management has noted a classification
adjustment related to temporary equity and permanent equity. This resulted in an adjustment to the initial carrying value of the common
stock subject to possible redemption with the offset recorded to additional paid-in capital and common stock
In
connection with the change in presentation for the common stock subject to redemption, the Company also restated its income (loss) per
share of common stock calculation to allocate net income (loss) evenly to the total shares of common stock. This presentation contemplates
a Business Combination as the most likely outcome, in which case, all shares of common stock share pro rata in the income (loss) of the
Company.
The
impact of the restatement on the Company’s historical financial statements is reflected in the following tables:
SCHEDULE
OF ERROR CORRECTIONS AND PRIOR PERIOD ADJUSTMENTS
|
|
|
As
Previously
Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Condensed Balance Sheet as of March 31, 2021
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible
redemption
|
|
$
|
111,205,807
|
|
|
$
|
4,944,193
|
|
|
$
|
116,150,000
|
|
|
Common stock
|
|
$
|
404
|
|
|
$
|
(49
|
)
|
|
$
|
355
|
|
|
Additional paid-in capital
|
|
$
|
5,453,448
|
|
|
$
|
(4,944,144
|
)
|
|
$
|
509,304
|
|
|
Accumulated deficit
|
|
$
|
(453,845
|
)
|
|
$
|
—
|
|
|
$
|
(453,845
|
)
|
|
Total Stockholders’ Equity (Deficit)
|
|
$
|
5,000,007
|
|
|
$
|
(4,944,193
|
)
|
|
$
|
55,814
|
|
|
Number of shares of common stock subject to
possible redemption
|
|
|
11,010,476
|
|
|
|
(489,524
|
)
|
|
|
11,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Balance Sheet as of June 30, 2021
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible redemption
|
|
$
|
110,858,319
|
|
|
$
|
5,291,681
|
|
|
$
|
116,150,000
|
|
|
Common stock
|
|
$
|
407
|
|
|
$
|
(52
|
)
|
|
$
|
355
|
|
|
Additional paid-in capital
|
|
$
|
5,800,933
|
|
|
$
|
(5,291,629
|
)
|
|
$
|
509,304
|
|
|
Accumulated deficit
|
|
$
|
(801,336
|
)
|
|
$
|
—
|
|
|
$
|
(801,336
|
)
|
|
Total Stockholders’ Equity (Deficit)
|
|
$
|
5,000,004
|
|
|
$
|
(5,291,681
|
)
|
|
$
|
(291,677
|
)
|
|
Number of shares of common stock subject to
possible redemption
|
|
|
10,976,071
|
|
|
|
523,929
|
|
|
|
11,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Operations for the
Three Months Ended March 31, 2021 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding,
common stock subject to possible redemption
|
|
|
11,046,512
|
|
|
|
453,488
|
|
|
|
11,500,000
|
|
|
Basic and diluted net income (loss) per share,
common stock subject to possible redemption
|
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
Basic and diluted weighted average shares outstanding,
Non-redeemable common stock
|
|
|
4,004,321
|
|
|
|
(453,488
|
)
|
|
|
3,550,833
|
|
|
Basic and diluted net income (loss) per share,
Non-redeemable common stock
|
|
$
|
(0.09
|
)
|
|
$
|
0.07
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations for the Three Months
Ended June 30, 2021 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding,
common stock subject to possible redemption
|
|
|
11,010,476
|
|
|
|
489,524
|
|
|
|
11,500,000
|
|
|
Basic and diluted net income (loss) per share,
common stock subject to possible redemption
|
|
$
|
—
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
Basic and diluted weighted average shares outstanding,
Non-redeemable common stock
|
|
|
4,040,357
|
|
|
|
(489,524
|
)
|
|
|
3,550,833
|
|
|
Basic and diluted net income (loss) per share,
Non-redeemable common stock
|
|
$
|
(0.09
|
)
|
|
$
|
0.07
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations for the Six Months
Ended June 30, 2021 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding,
common stock subject to possible redemption
|
|
|
11,028,394
|
|
|
|
471,606
|
|
|
|
11,500,000
|
|
|
Basic and diluted net income (loss) per share,
common stock subject to possible redemption
|
|
$
|
—
|
|
|
$
|
(0.05
|
)
|
|
$
|
(0.05
|
)
|
|
Basic and diluted weighted average shares outstanding,
Non-redeemable common stock
|
|
|
4,022,439
|
|
|
|
(471,606
|
)
|
|
|
3,550,833
|
|
|
Basic and diluted net income (loss) per share,
Non-redeemable common stock
|
|
$
|
(0.18
|
)
|
|
$
|
0.13
|
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Statement of Changes in Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2021 (unaudited)
|
|
|
As
Previously
Reported
|
|
|
|
Adjustment
|
|
|
|
As
Restated
|
|
|
Change in value of common stock subject to
possible redemption
|
|
$
|
363,065
|
|
|
$
|
(363,065
|
)
|
|
$
|
—
|
|
|
Total Stockholders’ Equity
|
|
$
|
5,000,007
|
|
|
|
(4,944,193
|
)
|
|
$
|
55,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Changes
in Stockholders’ Equity (Deficit) for the Three Months Ended June 30, 2021 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to
possible redemption
|
|
$
|
347,488
|
|
|
$
|
(347,488
|
)
|
|
$
|
—
|
|
|
Total Stockholders’ Equity (Deficit)
|
|
$
|
5,000,004
|
|
|
$
|
(5,291,681
|
)
|
|
$
|
(291,677
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Cash Flows for the
three months ended March 31, 2021 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to
possible redemption
|
|
$
|
(363,965
|
)
|
|
$
|
363,965
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Cash
Flows for the six months ended June 30, 2021 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to
possible redemption
|
|
$
|
(711,453
|
)
|
|
$
|
711,453
|
|
|
$
|
—
|
|
NOTE
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial
reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position,
results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include
all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating
results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K
as filed with the SEC on March 31, 2021, as amended by the Amendment No. 1 to the Annual Report on Form 10-K/A as filed with the SEC
on December 7, 2021. The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the
results to be expected for the year ending December 31, 2021 or for any future periods.
GLOBIS
ACQUISITION CORP.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021
(UNAUDITED)
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of
2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of September 30, 2021 or December 31, 2020.
Marketable
Securities Held in Trust Account
At
September 30, 2021 and December 31, 2020, substantially all of the assets held in the Trust Account were held in money market funds which
invest U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities.
Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from
the change in fair value of investments held in Trust Account are included in interest earned on marketable securities held in the Trust
Account in the accompanying condensed statements of operations. The estimated fair values of investments held in the Trust Account are
determined using available market information.
Common
Stock Subject to Possible Redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified
as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features
redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not
solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’
equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at
redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to
equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company
recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable common stock
resulted in charges against additional paid-in capital and accumulated deficit.
At
September 30, 2021 and December 31, 2020, the common stock reflected in the condensed balance sheets are reconciled in the following
table:
SCHEDULE
OF CONDENSED BALANCE SHEET
|
Gross
proceeds
|
|
$
|
115,000,000
|
|
|
Less:
|
|
|
|
|
|
Common
Stock issuance costs
|
|
$
|
(2,516,841
|
)
|
|
Plus:
|
|
|
|
|
|
Accretion
of carrying value to redemption value
|
|
$
|
3,666,841
|
|
|
Common
Stock subject to possible redemption
|
|
$
|
116,150,000
|
|
Income
Taxes
The
Company accounts for income taxes under ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition
of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets
and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally
requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not
be realized.
GLOBIS
ACQUISITION CORP.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021
(UNAUDITED)
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an company’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more -likely -than -not to be sustained upon
examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income
tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of September 30, 2021 and December 31, 2020. The Company is currently
not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The
Company has been subject to income tax examinations by major taxing authorities since inception.
On
March 27, 2020, the CARES Act was enacted in response to COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws
are recognized in the period which the new legislation is enacted. The CARES Act made various tax law changes including among other things
(i) increasing the limitation under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019
and 2020 to permit additional expensing of interest (ii) enacting a technical correction so that qualified improvement property can be
immediately expensed under IRC Section 168(k), (iii) making modifications to the federal net operating loss rules including permitting
federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate
a refund of previously paid income taxes and (iv) enhancing the recoverability of alternative minimum tax credits. Given the Company’s
full valuation allowance position and capitalization of all costs, the CARES Act did not have an impact on the financial statements.
Net
Income (Loss) per Common Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss)
per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period.
The Company applies the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Common
Stock is excluded from earnings per share as the redemption value approximates fair value.
The
calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the (i) Initial
Public Offering, and (ii) the private placement, as described in Note 5, since the exercise of the warrants is contingent upon the occurrence
of future events. The warrants are exercisable to purchase 15,789,722
Common Stock in the aggregate. As of September
30, 2021 and 2020, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted
into common shares and then share in the earnings of the Company. As a result, diluted net loss per common share is the same as basic
net loss per common share for the periods presented.
The
following table reflects the calculation of basic and diluted net loss per common share (in dollars, except per share amounts):
SCHEDULE
OF CALCULATION OF BASIC AND DILUTED NET LOSS PER COMMON SHARE
|
|
|
Redeemable
|
|
|
Non-redeemable
|
|
|
Redeemable
|
|
|
Non-redeemable
|
|
|
Non-redeemable
|
|
|
|
|
|
|
|
|
|
|
For the Period
from
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months Ended
|
|
|
August 21,
2020
(Inception)
Through
|
|
|
|
|
September 30,
2021
|
|
|
September 30,
2021
|
|
|
September 30, 2020
|
|
|
|
|
Redeemable
|
|
|
Non-redeemable
|
|
|
Redeemable
|
|
|
Non-redeemable
|
|
|
Non-redeemable
|
|
|
|
|
common stock
|
|
|
common
stock
|
|
|
common stock
|
|
|
common
stock
|
|
|
common
stock
|
|
|
Basic and diluted net loss per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of
net loss, as adjusted
|
|
$
|
(680,303
|
)
|
|
$
|
(210,056
|
)
|
|
$
|
(1,223,906
|
)
|
|
$
|
(377,903
|
)
|
|
$
|
(1,000
|
)
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted
average shares outstanding
|
|
|
11,500,000
|
|
|
|
3,550,833
|
|
|
|
11,500,000
|
|
|
|
3,550,833
|
|
|
|
2,500,000
|
|
|
Basic and diluted net loss
per common share
|
|
$
|
(0.06
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.00
|
)
|
GLOBIS
ACQUISITION CORP.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021
(UNAUDITED)
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution
which, at times may exceed the Federal Depository Insurance Coverage of $250,000.
The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such
account.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value
Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheet, primarily due to their
short-term nature.
Fair
Value Measurements
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
|
●
|
Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
|
|
|
●
|
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;
and
|
|
|
●
|
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
Recent
Accounting Standards
In
August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts
to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU
2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early
adoption permitted. The Company adopted ASU 2020-06 effective as of January 1, 2021. The adoption of ASU 2020-06 did not have an impact
on the Company’s financial statements.
Management
does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on the accompanying condensed financial statements.
NOTE
4. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 11,500,000
Units, which included a full exercise by the
underwriters of their over-allotment option in the amount of 1,500,000
Units, at a price of $10.00
per Unit. Each Unit consists of one share of
common stock and one redeemable warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one share
of common stock at a price of $11.50
per share, subject to adjustment (see Note 8).
GLOBIS
ACQUISITION CORP.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021
(UNAUDITED)
NOTE
5. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, Globis SPAC LLC purchased 3,688,889
Private Warrants at a purchase price of $0.75
per Private Warrant, for an aggregate purchase
price of $2,766,667
and Up and Up purchased 500,000
Private Warrants at a purchase price of $0.75
per Private Warrant, for an aggregate purchase
price of $375,000.
Each Private Warrant entitles the holder to purchase one share of common stock at a price of $11.50
per share, subject to adjustment (see Note 8).
In addition, Up and Up purchased an aggregate of 100,833
Placement Units at a purchase price of $10.00
per Placement Unit, or $1,008,333
in the aggregate. Each Placement Unit consists
of one share of common stock (“Placement Share”) and one redeemable warrant (“Placement Warrant”). Each Placement
Warrant entitles the holder to purchase one share of common stock at a price of $11.50
per share, subject to adjustment (see Note 8).
The
proceeds from the sale of the Private Securities were added to the net proceeds from the Initial Public Offering held in the Trust Account.
If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Securities
held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and
the Private Securities and all underlying securities will expire worthless.
NOTE
6. RELATED PARTY TRANSACTIONS
Founder
Shares
On
September 1, 2020, Globis SPAC LLC purchased 2,875,000
shares of the Company’s common stock for
an aggregate price of $25,000.
On December 7, 2020, the Company sold an additional 172,500
shares of the Company’s common stocks to
Up and Up for an aggregate price of $1,500,
resulting in a total of shares of common stock being sold to the Sponsors
(the “Founder Shares”) and being issued and outstanding, of which an aggregate of up to 397,500
shares were subject to forfeiture to the extent
that the underwriters’ over-allotment option was not exercised in full or in part, so that the Sponsors would own approximately
21%
of the Company’s issued and outstanding shares after the Initial Public Offering. As a result of the underwriters’ election
to fully exercise their over-allotment option on December 15, 2020, no Founder Shares are currently subject to forfeiture.
The
Sponsors agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the date of the consummation
of a Business Combination or the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or
other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common
stock for cash, securities or other property.
Administrative
Support Agreement
The
Company entered into an agreement, commencing on December 15, 2020 the effective date of the Initial Public Offering, to pay an affiliate
of Globis SPAC LLC a total of $10,000
per month for office space, secretarial and administrative
support. Upon completion of the Business Combination or the Company’s liquidation, the Company will cease paying these monthly
fees. For the three and nine months ended September 30, 2021, the Company incurred $30,000
and $90,000,
respectively, in fees for these services. At September 30, 2021, $5,000
is reflected in accrued expenses related to this
agreement.
Advances
from Related Party
As
of December 2, 2020, the Sponsor advanced the Company $to fund certain offering costs in connection
with the Initial Public Offering. The outstanding balance under these advances was repaid upon the closing of the Initial Public Offering
on December 15, 2020.
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsors or an affiliate of the Sponsors, or the Company’s
officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital
Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business
Combination, without interest, or, at the lender’s discretion.
On
January 11, 2021, the Company issued the Note to the Lender, which provides for borrowings from time to time of up to an aggregate of
$1,000,000.
The Note bears no interest and is due and payable upon the date on which the Company consummates its initial Business Combination. On
various dates during the nine months ended September 30, 2021, the Company drew a total of $700,000
under the Note in accordance with the Working
Capital Loans.
On
April 28, 2021, the Note was amended to terminate the option for the Lender to convert the amount outstanding under the Note into Private
Warrants.
On
July 19, 2021, the Note was amended to increase the principal amount of the Note to $2,000,000.
On
October 13, 2021, the Note was amended to increase the principal amount of the Note to $3,000,000.
NOTE
7. COMMITMENTS
Registration
Rights
Pursuant
to a registration rights agreement entered into on December 10, 2020, the holders of the Founder Shares, Private Securities, equity participation
shares and any warrants that may be issued upon conversion of the Working Capital Loans (and any shares of common stock issuable upon
the exercise of the Private Securities or warrants issued upon conversion of Working Capital Loans) will be entitled to registration
rights. The holders of a majority of these securities are entitled to make up to three demands that the Company register such securities.
The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months
prior to the date on which these shares of common stock are to be released from escrow. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The Company
will bear the expenses incurred in connection with the filing of any such registration statements.
GLOBIS
ACQUISITION CORP.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021
(UNAUDITED)
Underwriting
Agreement
The
underwriters are entitled to receive the 402,500
equity participation shares upon the consummation
of a Business Combination. The equity participation shares have been placed in escrow until the consummation of a Business Combination.
If a Business Combination is not consummated, the equity participation shares will be forfeited by the underwriters. The Company accounted
for the equity participation shares as an expense of the Initial Public Offering, resulting in a charge directly to stockholder’s
equity. The fair value of the equity participation shares is estimated to be $4,025,000,
based upon the offering price of the Units of $10.00
per Unit.
NOTE
8. STOCKHOLDER’S EQUITY
Preferred
Stock — On December 10, 2020, the Company amended its Certificate of Incorporation such that it is now authorized to issue
up to 1,000,000 shares
of preferred stock with a par value of $0.0001
per share with such designations, voting and other rights and
preferences as may be determined from time to time by the Company’s board of directors. At September 30, 2021 and December 31,
2020, there were no shares of preferred stock issued or outstanding.
Common
Stock — The Company is authorized to issue 100,000,000
shares of common stock with a par value of $0.0001
per share. At September 30, 2021 and December
31, 2020, there were 3,550,833
shares of common stock issued and outstanding,
excluding 11,500,000 shares
of common stock subject to possible redemption which are presented as temporary equity.
Warrants
— The Public Warrants will become exercisable on the later of (a) the completion of a Business Combination or (b) 12 months
from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination
or earlier upon redemption or liquidation.
Notwithstanding
the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the warrants is not effective
within 90 days from the consummation of the Company’s initial business combination, warrant holders may, until such time as there
is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration
statement, exercise warrants on a cashless basis pursuant to the exemption from registration provided by Section 3(a)(9) of the Securities
Act provided that such exemption is available.
Once
the warrants become exercisable, the Company may redeem the Public Warrants:
|
|
●
|
in
whole and not in part;
|
|
|
●
|
at
a price of $0.01 per
warrant;
|
|
|
●
|
at
any time while the warrants are exercisable;
|
|
|
●
|
upon
not less than 30
days’ prior written notice of redemption
to each warrant holder;
|
|
|
●
|
if,
and only if, the reported last sale price of the shares of common stock 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 shares of common stock 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.
|
If
and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register
or qualify the underlying securities for sale under all applicable state securities laws. If the Company calls the Public Warrants for
redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless
basis,” as described in the warrant agreement.
The
exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including
in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the
warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company
be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period
and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to
their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect
to such warrants. Accordingly, the warrants may expire worthless.
In
addition, if (x) the Company issues additional common stock or equity-linked securities for capital raising purposes in connection with
the closing of a Business Combination at an issue price or effective issue price of less than $9.50 per share of common stock (with such
issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any
such issuance to the Sponsors or their affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates,
as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent
more than 60%
of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation
of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the common stock during the 10 trading
day period starting on the trading day prior the day on which the Company consummates a Business Combination (such price, the “Market
Value”) is below $9.50
per share, then the exercise price of the warrants
will be adjusted (to the nearest cent) to be equal to 115%
of the higher of the Market Value and the Newly Issued Price, and the $16.50
per share redemption trigger price will be adjusted
(to the nearest cent) to be equal to 165%
of the higher of the Market Value and the Newly Issued Price.
The
Private Warrants and Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering,
except that the Private Warrants and the Placement Warrants are exercisable on a cashless basis, non-redeemable and holders of the Private
Warrants and the Placement Warrants have the option to calculate the fair market value based upon the last reported sale price of the
shares of common stock for the trading day prior to the date of exercise in lieu of the average reported last sale price of the shares
of common stock for the 10 trading days ending on the third trading day prior to the date of exercise.
GLOBIS
ACQUISITION CORP.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021
(UNAUDITED)
NOTE
9. FAIR VALUE MEASUREMENTS
The
Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each
reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The
fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would
have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company
seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable
inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is
used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and
liabilities:
|
|
Level
1:
|
Quoted
prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions
for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
|
|
|
Level
2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
|
|
Level
3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September
30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such
fair value:
SCHEDULE
OF FAIR VALUE ASSETS MEASURED ON RECURRING BASIS
|
Description
|
|
Level
|
|
|
September
30,
2021
|
|
|
December
31,
2020
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities held in Trust Account
|
|
|
1
|
|
|
$
|
116,155,627
|
|
|
$
|
116,150,000
|
|
NOTE
10. SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements
were issued. Based upon this review, other than described below and the restatement discussed in Note 2, the Company did not identify
any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
In
October 2021, the Company increased the principal amount available under the Note (as defined in Note 1 under Liquidity) to $3,000,000.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2020 AND 2019
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Stockholder and the Board of Directors of Forafric Agro Holdings Limited
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying Consolidated Balance Sheets of Forafric Agro Holdings Limited (the “Company”), as of December
31, 2020 and 2019, the related Consolidated Statement of Operations and Comprehensive Income (Loss), Stockholder’s Equity (Deficit)
and Cash Flows for the years ended December 31, 2020 and 2019 and the related notes (collectively referred to as the “Consolidated
Financial Statements”). In our opinion, the Consolidated Financial Statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2020 and 2019, and the Consolidated results of its operations and its cash flows for the years
ended December 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
Consolidated Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s Consolidated Financial Statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
Consolidated Financial Statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal controls over financial reporting. As part of our audits, we are required to
obtain an understanding of internal controls over financial reporting, but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion. Our audits included performing
procedures to assess the risks of material misstatement of the Consolidated Financial Statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the Consolidated Financial Statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the Consolidated Financial Statements. We believe that
our audits provide a reasonable basis for our opinion.
We
have served as the Company’s auditor since 2021
Melville, New York
December
17, 2021
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(In
thousands, except share and per share data)
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
12,683
|
|
|
$
|
8,994
|
|
|
Accounts receivable, net of allowance for credit losses of $13,532 and $9,439,
respectively
|
|
|
27,482
|
|
|
|
27,949
|
|
|
Amount due from related parties
|
|
|
387
|
|
|
|
3,209
|
|
|
Other receivables
|
|
|
12,283
|
|
|
|
9,249
|
|
|
Inventories, net
|
|
|
26,545
|
|
|
|
14,864
|
|
|
Other assets, current
|
|
|
24
|
|
|
|
24
|
|
|
Total current assets
|
|
|
79,404
|
|
|
|
64,289
|
|
|
Property, plant, and equipment, net
|
|
|
89,621
|
|
|
|
86,445
|
|
|
Right-of-use assets, net
|
|
|
16,634
|
|
|
|
16,299
|
|
|
Goodwill
|
|
|
48,072
|
|
|
|
44,669
|
|
|
Intangible assets, net
|
|
|
363
|
|
|
|
448
|
|
|
Other assets, noncurrent
|
|
|
484
|
|
|
|
427
|
|
|
Total assets
|
|
$
|
234,578
|
|
|
$
|
212,577
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Lines of credit – working capital
|
|
$
|
65,176
|
|
|
$
|
67,726
|
|
|
Lines of credit – wheat inventories
|
|
|
47,975
|
|
|
|
20,375
|
|
|
Accounts payable
|
|
|
9,683
|
|
|
|
13,728
|
|
|
Accrued expenses
|
|
|
11,410
|
|
|
|
10,801
|
|
|
Contract liabilities
|
|
|
3,620
|
|
|
|
4,351
|
|
|
Current portion of long-term debt
|
|
|
7,371
|
|
|
|
7,336
|
|
|
Other liabilities, current
|
|
|
659
|
|
|
|
828
|
|
|
Total current liabilities
|
|
|
145,894
|
|
|
|
125,145
|
|
|
Long-term debt
|
|
|
6,143
|
|
|
|
11,201
|
|
|
Stockholder loan
|
|
|
8,683
|
|
|
|
128,255
|
|
|
Deferred tax liabilities
|
|
|
21,864
|
|
|
|
22,059
|
|
|
Total liabilities
|
|
|
182,584
|
|
|
|
286,660
|
|
|
Commitments and contingencies (Note 16)
|
|
|
|
|
|
|
|
|
|
Stockholder’s equity (deficit):
|
|
|
|
|
|
|
|
|
|
Common stock, $1 par value; 120,000,000 shares authorized, issued, and outstanding
at December 31, 2020 and 3,690 shares authorized, issued, and outstanding at December 31, 2019
|
|
|
120,000
|
|
|
|
4
|
|
|
Accumulated deficit
|
|
|
(74,397
|
)
|
|
|
(74,622
|
)
|
|
Accumulated other comprehensive income
|
|
|
6,309
|
|
|
|
535
|
|
|
Non-controlling interest
|
|
|
82
|
|
|
|
-
|
|
|
Total stockholder’s equity (deficit)
|
|
|
51,994
|
|
|
|
(74,083
|
)
|
|
Total liabilities and stockholder’s equity
|
|
$
|
234,578
|
|
|
$
|
212,577
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In
thousands, except share and per share data)
|
|
|
Years ended
|
|
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
196,596
|
|
|
$
|
183,209
|
|
|
Cost of sales
|
|
|
156,188
|
|
|
|
147,498
|
|
|
Gross profit
|
|
|
40,408
|
|
|
|
35,711
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
30,517
|
|
|
|
31,733
|
|
|
Total operating expenses
|
|
|
30,517
|
|
|
|
31,733
|
|
|
Operating income
|
|
|
9,891
|
|
|
|
3,978
|
|
|
Other expense (income):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(3
|
)
|
|
|
(5
|
)
|
|
Interest expense
|
|
|
6,847
|
|
|
|
9,432
|
|
|
Foreign Exchange loss
|
|
|
3,043
|
|
|
|
141
|
|
|
Total other expense
|
|
|
9,887
|
|
|
|
9,568
|
|
|
Income (loss) before income taxes
|
|
|
4
|
|
|
|
(5,590
|
)
|
|
Income tax expense
|
|
|
143
|
|
|
|
2,509
|
|
|
Net loss
|
|
|
(139
|
)
|
|
|
(8,099
|
)
|
|
Net loss attributable to non-controlling interest
|
|
|
(29
|
)
|
|
|
-
|
|
|
Net loss attributable to the Company
|
|
$
|
(110
|
)
|
|
$
|
(8,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share - basic and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(2,194.85
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding - basic and diluted
|
|
|
3,620,017
|
|
|
|
3,690
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(139
|
)
|
|
|
(8,099
|
)
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
5,774
|
|
|
|
535
|
|
|
Total other comprehensive income
|
|
|
5,774
|
|
|
|
535
|
|
|
Comprehensive income (loss)
|
|
|
5,635
|
|
|
|
(7,564
|
)
|
|
less: Comprehensive loss attributable to non-controlling interest
|
|
|
(29
|
)
|
|
|
-
|
|
|
Comprehensive income (loss) attributable to the Company
|
|
$
|
5,664
|
|
|
$
|
(7,564
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY (DEFICIT)
(In
thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Controlling
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Deficit
|
|
|
Income
|
|
|
Interest
|
|
|
Equity
|
|
|
Balance, January 1, 2019
|
|
|
3,690
|
|
|
$
|
4
|
|
|
$
|
(66,523
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(66,519
|
)
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,099
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,099
|
)
|
|
Foreign exchange gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
535
|
|
|
|
-
|
|
|
|
535
|
|
|
Balance, December 31, 2019
|
|
|
3,690
|
|
|
$
|
4
|
|
|
$
|
(74,622
|
)
|
|
$
|
535
|
|
|
$
|
-
|
|
|
$
|
(74,083
|
)
|
|
Consolidation of variable interest entity
|
|
|
-
|
|
|
|
-
|
|
|
|
335
|
|
|
|
-
|
|
|
|
111
|
|
|
|
446
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(110
|
)
|
|
|
-
|
|
|
|
(29
|
)
|
|
|
(139
|
)
|
|
Foreign exchange gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,774
|
|
|
|
-
|
|
|
|
5,774
|
|
|
Conversion of stockholder loan to common stock
|
|
|
119,996,310
|
|
|
|
119,996
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
119,996
|
|
|
Balance, December 31, 2020
|
|
|
120,000,000
|
|
|
$
|
120,000
|
|
|
$
|
(74,397
|
)
|
|
$
|
6,309
|
|
|
$
|
82
|
|
|
$
|
51,994
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
thousands, except share and per share data)
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(139
|
)
|
|
$
|
(8,099
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment
|
|
|
3,639
|
|
|
|
3,740
|
|
|
Amortization of intangible assets
|
|
|
149
|
|
|
|
137
|
|
|
Amortization of right-of-use assets
|
|
|
1,183
|
|
|
|
1,168
|
|
|
Bad debt expense
|
|
|
1,508
|
|
|
|
3,010
|
|
|
Deferred income taxes
|
|
|
(1,876
|
)
|
|
|
388
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
3,289
|
|
|
|
30,982
|
|
|
Other receivables
|
|
|
(3,034
|
)
|
|
|
6,855
|
|
|
Inventories
|
|
|
(11,681
|
)
|
|
|
19,904
|
|
|
Accounts payable
|
|
|
(4,045
|
)
|
|
|
(58,956
|
)
|
|
Other payables and liabilities
|
|
|
(122
|
)
|
|
|
(466
|
)
|
|
Net cash used in operating activities
|
|
|
(11,129
|
)
|
|
|
(1,337
|
)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant, and equipment
|
|
|
(657
|
)
|
|
|
(1,387
|
)
|
|
Sales of property, plant, and equipment
|
|
|
236
|
|
|
|
1,659
|
|
|
Additions to intangible assets
|
|
|
(278
|
)
|
|
|
(100
|
)
|
|
Additions to right-of-use assets
|
|
|
(353
|
)
|
|
|
(242
|
)
|
|
Net cash used in investing activities
|
|
|
(1,052
|
)
|
|
|
(70
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Borrowings on long-term debt
|
|
|
108,301
|
|
|
|
92,180
|
|
|
Repayments on long-term debt
|
|
|
(89,535
|
)
|
|
|
(130,112
|
)
|
|
Net cash provided by (used in) financing activities
|
|
|
18,766
|
|
|
|
(37,932
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(2,896
|
)
|
|
|
(434
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
3,689
|
|
|
|
(39,773
|
)
|
|
Cash and cash equivalents, beginning of year
|
|
|
8,994
|
|
|
|
48,767
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
12,683
|
|
|
$
|
8,994
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Conversion of stockholder loan to common stock
|
|
$
|
119,996
|
|
|
$
|
-
|
|
|
Consolidation of variable interest entity
|
|
$
|
446
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
6,847
|
|
|
$
|
9,432
|
|
|
Net income taxes paid
|
|
$
|
1,904
|
|
|
$
|
2,122
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2020 and 2019
|
|
1.
|
NATURE
OF OPERATIONS AND BASIS OF PRESENTATION
|
Nature
of 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”).
Effective
on November 5, 2020, pursuant to an investment and shareholders agreement (“Trigola Agreement”) dated November 5, 2020, the
Company entered into an agreement with Trigola, SU, LDA (“Trigola” or “VIE”), an entity incorporated in the Republic
of Angola and owned by the Parent for a majority 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 agreed to fund Trigola for operational cash flow needs and bear the risk of Trigola’s losses from operations
and Trigola agrees that the Company has rights to 75% of Trigola’s net profits, if any. Trigola is determined to be a variable
interest entity (“VIE”). Refer to Note 2 – Summary of Significant Accounting Policies and Note 14 – Variable
Interest Entities for further information.
As
of December 31, 2020, 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 consolidated
financial statements. Refer below to Basis of Presentation for further information.
Basis
of Presentation - These consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States (“GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”).
Based on an evaluation of the guidance under Staff Accounting Bulletin (“SAB”) Topic 5.Z.7, Accounting for the spin-off
of a subsidiary, it was determined that the Restructuring should be reflected as a change in reporting entity. As such, the accompanying
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 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 18 — Related Parties for further information regarding the Company’s related party transactions.
|
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Use
of Estimates - The preparation of our 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 consolidated financial statements.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Principles
of Consolidation – The accompanying 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 consolidated financial statements
from the date that control commences until the date that control ceases.
Cash
Equivalents - We consider temporary cash investments with an original maturity of three months or less to be cash equivalents.
Inventories
- Inventories are stated at the lower of cost or net realizable value. The Company’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
years
|
|
Machinery
and equipment (technical installations)
|
|
30-50
years
|
|
Other
assets
|
|
5-30
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. The Company’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
|
|
Patents,
trademarks, and licenses
|
|
10
years
|
|
Computer
software
|
|
10
years
|
|
Other
intangible assets
|
|
3-10
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.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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, the Company concludes based on the income
approach, and uses the market approach to corroborate, as the Company 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.
Revenue
Recognition – The Company 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 the Company’s contracts with customers
have one performance obligation and a contract duration of one year or less. The Company applies the practical expedient in Accounting
Standards Codification (“ASC”) paragraph 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 recognized when there is a formal agreement with the customer, delivery is arranged, revenue
amount can be measured in a reliable way, and when it is likely that the economic benefits associated with the transaction return to
the Company.
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 – The Company 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.
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.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Foreign
Currency 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 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).
Fair
Value – Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Certain assets and liabilities may be presented in the financial statements
at fair value. Assets and liabilities measured at fair value on a non-recurring basis may include property and equipment.
We
assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair
value are observable in the market:
|
|
●
|
Level
1 – inputs include quoted prices for identical instruments and are the most observable.
|
|
|
●
|
Level
2 – inputs include quoted prices for similar assets and observable inputs such as interest rates, currency exchange rates and
yield curves.
|
|
|
●
|
Level
3 – inputs are not observable in the market and include management’s judgments about the assumptions market participants
would use in pricing the asset or liability.
|
Credit
Risk – Financial instruments potentially subject to concentration of credit risk consist primarily of cash and cash equivalents
and trade accounts receivable. At times during the periods presented, the Company had funds in excess of Deposit Insurance programs in
Morocco, on deposit at various financial institutions. Management believes the Company is not exposed to significant credit risk due
to the financial position of the depository institutions in which those deposits are held.
The
Company’s trade accounts receivable are unsecured and geographically dispersed. No single client’s trade accounts receivable
balance as of December 31, 2020 and 2019 exceeded 10% of the Company’s consolidated accounts receivable, net.
Variable
Interest Entities – The Company entered into an agreement with Trigola, an entity incorporated in the Republic of Angola. The
Company has a direct majority ownership in Trigola and has been actively involved in their operations and has the power to direct the
activities and significantly impact Trigola’s economic performance. The Company also bears the risk of losses and has the right
to receive 75% of the benefits from Trigola. As such, in accordance with ASC 810-10-25-38A through 25-38J, Trigola is considered a VIE
of the Company and the financial statements of Trigola were consolidated from the date that the control existed, November 5, 2020.
Non-Controlling
Interests – Non-controlling interests on the consolidated statements of operations and comprehensive income (loss) 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
ISSUED ACCOUNTING PRONOUNCEMENTS
|
Adopted
In
December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12 - Income Taxes (Topic 740): Simplifying
the Accounting for Income Taxes, which removes certain exceptions to the general principles in Topic 740 and improves consistent
application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective
for fiscal years and interim periods within those years beginning after December 15, 2020, with early adoption permitted. Amendments
are to be applied prospectively, except for certain amendments that are to be applied either retrospectively or with a modified retrospective
approach through a cumulative effect adjustment recorded to retained earnings. The Company adopted this guidance effective January 1,
2019. Adoption of the guidance had no impact on our results of operations, balance sheet, or cash flows.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
In
June 2016, the FASB issued guidance ASU No. 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments which changes the accounting for credit losses for certain instruments, including accounts receivable,
from an incurred loss method to a current expected loss method. The measurement of expected credit losses is based on relevant information
about past events, including historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted
this guidance effective January 1, 2019. Adoption of the guidance had no impact on our results of operations, balance sheet, or cash
flows.
Not
yet adopted
In
March 2020, the FASB issued ASU 2020-04, 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, 2020 through December 31, 2022. The Company is currently evaluating
the impact of this new ASU on its consolidated financial statements and related disclosures.
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 four 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
|
|
December 31,
|
|
|
|
|
Classification
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
(in thousands)
|
|
|
Assets
|
|
|
|
|
|
|
Operating leases
|
|
Right-of-use assets
|
|
$
|
1,818
|
|
|
$
|
1,982
|
|
|
Finance leases
|
|
Right-of-use assets
|
|
|
14,816
|
|
|
|
14,317
|
|
|
Total assets
|
|
|
|
$
|
16,634
|
|
|
$
|
16,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
Current portion of long-term debt
|
|
$
|
729
|
|
|
$
|
667
|
|
|
Finance leases
|
|
Current portion of long-term debt
|
|
|
2,749
|
|
|
|
2,719
|
|
|
Total current liabilities
|
|
|
|
|
3,478
|
|
|
|
3,386
|
|
|
Noncurrent liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
Long-term debt
|
|
|
1,216
|
|
|
|
1,383
|
|
|
Finance leases
|
|
Long-term debt
|
|
|
4,566
|
|
|
|
6,245
|
|
|
Total noncurrent liabilities
|
|
|
|
|
5,782
|
|
|
|
7,628
|
|
|
Total liabilities
|
|
|
|
$
|
9,260
|
|
|
$
|
11,014
|
|
Right-of-use
assets and their corresponding lease liabilities are measured and recognized based on the present value of the future minimum lease payments
over the lease term at the commencement date.
Discount
Rates
For
the majority of its leases, the Company uses the rate implicit in the lease. For leases without an implicit rate, the Company uses its
incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments
for those leases.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The
weighted-average discount rates for the Company’s leases were as follows:
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Operating leases
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
|
Finance leases
|
|
|
6.1
|
%
|
|
|
6.1
|
%
|
Lease
Payments
The
Company includes lease payments under options to extend or terminate the lease in the measurement of the right-of-use asset and lease
liability when it is reasonably certain that it will exercise such options. Fixed lease costs represent the explicitly quantified lease
payments prescribed by the lease agreement and are included in the measurement of the right-of-use asset and corresponding lease liability.
The
weighted-average remaining lease term of the Company’s leases were as follows:
|
|
|
|
December
31,
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
Operating leases
|
|
|
2.2
years
|
|
|
|
3.2
years
|
|
|
Finance leases
|
|
|
2.9
years
|
|
|
|
3.8
years
|
|
The
components of lease expense were as follows:
|
|
|
Year ended
|
|
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Operating lease cost
|
|
$
|
674
|
|
|
$
|
590
|
|
|
Finance lease cost:
|
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
|
509
|
|
|
|
578
|
|
|
Interest on lease liabilities
|
|
|
655
|
|
|
|
604
|
|
|
Total lease cost
|
|
$
|
1,838
|
|
|
$
|
1,772
|
|
As
of December 31, 2020, future maturities of lease liabilities were as follows:
|
|
|
Operating Leases
|
|
|
Finance Leases
|
|
|
|
|
(in thousands)
|
|
|
2021
|
|
$
|
729
|
|
|
$
|
2,749
|
|
|
2022
|
|
|
693
|
|
|
|
2,710
|
|
|
2023
|
|
|
616
|
|
|
|
2,400
|
|
|
2024
|
|
|
59
|
|
|
|
491
|
|
|
Total lease payments
|
|
|
2,097
|
|
|
|
8,350
|
|
|
Less: Interest
|
|
|
(152
|
)
|
|
|
(1,035
|
)
|
|
Present value of lease liabilities
|
|
$
|
1,945
|
|
|
$
|
7,315
|
|
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Other
information related to leases were as follows:
|
|
|
Year ended
|
|
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Cash paid for amounts included in the measurement
|
|
|
|
|
|
|
|
|
|
of lease liabilities:
|
|
|
|
|
|
|
|
|
|
Operating cash flows used for operating leases
|
|
$
|
674
|
|
|
$
|
590
|
|
|
Operating cash flows used for finance leases
|
|
$
|
509
|
|
|
$
|
578
|
|
|
Financing cash flows used for finance leases
|
|
$
|
655
|
|
|
$
|
604
|
|
The
gross and realizable value of accounts receivable are detailed in the chart below:
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Accounts receivable
|
|
$
|
41,014
|
|
|
$
|
37,388
|
|
|
Allowance for credit losses
|
|
|
(13,532
|
)
|
|
|
(9,439
|
)
|
|
Total
|
|
$
|
27,482
|
|
|
$
|
27,949
|
|
Changes
in allowances for credit losses consisted of:
|
|
|
Allowance for
|
|
|
|
|
Accounts Receivable
|
|
|
|
|
|
(in
thousands)
|
|
|
Balance at January 1, 2019
|
|
$
|
(7,248
|
)
|
|
Current period provision for expected credit losses
|
|
|
(2,516
|
)
|
|
Foreign currency exchange adjustments
|
|
|
325
|
|
|
Balance at December 31, 2019
|
|
|
(9,439
|
)
|
|
Current period provision for expected credit losses
|
|
|
(549
|
)
|
|
Foreign currency exchange adjustments
|
|
|
(3,544
|
)
|
|
Balance at December 31, 2020
|
|
$
|
(13,532
|
)
|
|
|
6.
|
OTHER
CURRENT RECEIVABLES
|
Other
current receivables consist of:
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Government subsidies
|
|
$
|
3,222
|
|
|
$
|
3,537
|
|
|
Value-added tax receivable
|
|
|
4,575
|
|
|
|
3,479
|
|
|
Prepaid income taxes
|
|
|
2,737
|
|
|
|
1,531
|
|
|
Other receivables
|
|
|
1,749
|
|
|
|
702
|
|
|
Total
|
|
$
|
12,283
|
|
|
$
|
9,249
|
|
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7.
INVENTORIES, NET
Inventories,
net, are detailed as follows:
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Merchandise
|
|
$
|
7,424
|
|
|
$
|
1,814
|
|
|
Raw materials and consumable supplies
|
|
|
15,338
|
|
|
|
9,197
|
|
|
Finished products
|
|
|
4,928
|
|
|
|
4,916
|
|
|
Inventory reserves
|
|
|
(1,145
|
)
|
|
|
(1,063
|
)
|
|
Total
|
|
$
|
26,545
|
|
|
$
|
14,864
|
|
|
|
8.
|
PROPERTY
PLANT AND EQUIPMENT
|
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Land
|
|
$
|
23,133
|
|
|
$
|
23,133
|
|
|
Buildings
|
|
|
50,338
|
|
|
|
50,364
|
|
|
Machinery and equipment
|
|
|
34,898
|
|
|
|
34,678
|
|
|
Construction in progress
|
|
|
1,284
|
|
|
|
1,363
|
|
|
Others
|
|
|
8,558
|
|
|
|
8,427
|
|
|
Total
|
|
|
118,211
|
|
|
|
117,965
|
|
|
Less accumulated depreciation
|
|
|
(34,934
|
)
|
|
|
(31,295
|
)
|
|
Foreign exchange difference
|
|
|
6,344
|
|
|
|
(225
|
)
|
|
Total
|
|
$
|
89,621
|
|
|
$
|
86,445
|
|
Depreciation
expense was $3,639 and $3,740 for the years ended December 31, 2020 and 2019, respectively, included in cost of sales in the consolidated
statements of operations and comprehensive income (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 wholly owned subsidiaries, the Tria Group and Maymouna Food Group, in 2015. The
Company performed the annual impairment assessment as of December 31, 2020 and December 31, 2019, which did not result in impairment
losses.
Changes
in the carrying amount of goodwill allocated to its reporting units for the years ended December 31, 2020 and 2019 are as follows:
|
|
|
Soft
|
|
|
Durum
|
|
|
Couscous
|
|
|
|
|
|
|
|
|
|
|
Wheat
|
|
|
Wheat
|
|
|
and
Pasta
|
|
|
Other
|
|
|
Total
|
|
|
|
|
(in
thousands)
|
|
|
Balance
at January 1, 2019
|
|
$
|
17,506
|
|
|
$
|
3,787
|
|
|
$
|
6,091
|
|
|
$
|
17,598
|
|
|
$
|
44,982
|
|
|
Foreign
currency exchange adjustments
|
|
|
(122
|
)
|
|
|
(27
|
)
|
|
|
(43
|
)
|
|
|
(121
|
)
|
|
|
(313
|
)
|
|
Balance
at December 31, 2019
|
|
|
17,384
|
|
|
|
3,760
|
|
|
|
6,048
|
|
|
|
17,477
|
|
|
|
44,669
|
|
|
Foreign
currency exchange adjustments
|
|
|
1,324
|
|
|
|
287
|
|
|
|
461
|
|
|
|
1,331
|
|
|
|
3,403
|
|
|
Balance
at December 31, 2020
|
|
$
|
18,708
|
|
|
$
|
4,047
|
|
|
$
|
6,509
|
|
|
$
|
18,808
|
|
|
$
|
48,072
|
|
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Changes
in the carrying amount of intangible assets for the years ended December 31, 2020 and 2019 are as follows:
|
|
|
Intangible
|
|
|
|
|
Assets
|
|
|
|
|
|
(in
thousands)
|
|
|
Balance at January 1, 2019
|
|
$
|
558
|
|
|
Acquisitions
|
|
|
100
|
|
|
Disposals
|
|
|
(68
|
)
|
|
Amortization
|
|
|
(137
|
)
|
|
Foreign currency exchange adjustments
|
|
|
(5
|
)
|
|
Balance at December 31, 2019
|
|
|
448
|
|
|
Acquisitions
|
|
|
278
|
|
|
Disposals
|
|
|
(262
|
)
|
|
Amortization
|
|
|
(149
|
)
|
|
Foreign currency exchange adjustments
|
|
|
48
|
|
|
Balance at December 31, 2020
|
|
$
|
363
|
|
As
of December 31, 2020, the weighted-average remaining amortization period for intangibles other than goodwill is 9.1 years and future
intangible amortization is expected to total the following:
|
|
|
(in thousands)
|
|
|
2021
|
|
$
|
41
|
|
|
2022
|
|
|
41
|
|
|
2023
|
|
|
40
|
|
|
2024
|
|
|
39
|
|
|
2025
|
|
|
37
|
|
|
Thereafter
|
|
|
165
|
|
|
Total amortization
|
|
$
|
363
|
|
Accrued
expenses consist of:
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Accrued government subsidies and taxes
|
|
$
|
8,143
|
|
|
$
|
6,367
|
|
|
Accrued interest
|
|
|
1,451
|
|
|
|
1,693
|
|
|
Accrued salaries and benefits
|
|
|
700
|
|
|
|
866
|
|
|
Accruals to social agencies
|
|
|
577
|
|
|
|
717
|
|
|
Other accrued expenses
|
|
|
539
|
|
|
|
1,158
|
|
|
Total
|
|
$
|
11,410
|
|
|
$
|
10,801
|
|
11. LINES OF CREDIT
Lines
of Credit – working capital
The
Company has entered into unsecured revolving credit agreements with several financial institutions to fund working capital requirements
(“WC Lines of Credit”). The WC Lines of Credit provide the Company with the ability to borrow funds under consolidated lines
of credit of up to approximately $74,000. 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.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Lines
of Credit – wheat inventories
The
Company has entered into credit agreements with several financial institutions for asset-based credit facilities in order to fund wheat
raw material purchases (“Wheat Credit Facilities”). The Wheat Credit Facilities provide the ability to borrow funds under
consolidated lines of credit of up to approximately $90,000, 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.
The
long-term debt is presented as follows:
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Loans
|
|
$
|
4,254
|
|
|
$
|
7,523
|
|
|
Leases
|
|
|
9,260
|
|
|
|
11,014
|
|
|
Total outstanding debt
|
|
|
13,514
|
|
|
|
18,537
|
|
|
Less current portion
|
|
|
(7,371
|
)
|
|
|
(7,336
|
)
|
|
Total long-term debt
|
|
$
|
6,143
|
|
|
$
|
11,201
|
|
The
term loans and other financial liabilities are evaluated according to the amortized cost method using the effective interest rate of
the loan. The loan issuance costs and premiums are determined at inception and are amortized over the useful life of the loan via the
effective interest rate.
Term
Loans
The
Company maintains term loans with several financial institutions (the “Term Loans”). The Term Loans are unsecured and have
fixed monthly payments ranging from approximately $18 to $95. Interest on the Term Loans range from 5.8%-6.1% per annum. The Term Loans
mature and will be fully repaid throughout 2021.
Lease
Obligations
The
Company owes $9,260 and $11,014 related to its leases as of December 31, 2020 and 2019, respectively. Lease obligations are payable in
monthly installments of principal and interest and are collateralized by the related assets financed. Refer to Note 4 for additional
information regarding the Company’s leases.
The
scheduled maturities of outstanding debt as of December 31, 2020 are as follows:
|
|
|
(in thousands)
|
|
|
2021
|
|
$
|
7,371
|
|
|
2022
|
|
|
3,764
|
|
|
2023
|
|
|
1,829
|
|
|
2024
|
|
|
550
|
|
|
Total outstanding debt
|
|
$
|
13,514
|
|
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The
following table presents the components of the December 31, 2020 and December 31, 2019 provision for income taxes:
|
|
|
Year ended
|
|
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Current
|
|
$
|
1,904
|
|
|
$
|
2,122
|
|
|
Deferred
|
|
|
(1,761
|
)
|
|
|
387
|
|
|
Total income tax expense
|
|
$
|
143
|
|
|
$
|
2,509
|
|
The
current tax expense corresponds to the amounts paid or pending of payment in short-term to the tax authorities for the period, according
to the applicable regulations and of the special agreements.
The
following is a reconciliation of income tax expense computed at the Moroccan statutory tax rate to the income tax expense reported in
the consolidated statements of operations:
|
|
|
Year ended
|
|
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Net loss
|
|
$
|
(139
|
)
|
|
$
|
(8,099
|
)
|
|
Income tax expense for the period
|
|
|
143
|
|
|
|
2,509
|
|
|
Income (loss) before tax
|
|
|
4
|
|
|
|
(5,590
|
)
|
|
Effective tax rate
|
|
|
3575
|
%
|
|
|
-45
|
%
|
|
Permanent differences not deductible for tax purposes
|
|
|
(3,192
|
)
|
|
|
2,083
|
|
|
Change in valuation allowance
|
|
|
3,536
|
|
|
|
2,124
|
|
|
Other differences
|
|
|
(202
|
)
|
|
|
35
|
|
|
Recalculated tax expense
|
|
$
|
1
|
|
|
$
|
(1,733
|
)
|
|
Statutory tax rate in Morocco
|
|
|
31
|
%
|
|
|
31
|
%
|
The
tax effects of temporary differences giving rise to deferred income tax assets (liabilities) were:
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Goodwill adjustment
|
|
$
|
120
|
|
|
$
|
159
|
|
|
Fixed assets and intangible assets
|
|
|
(22,445
|
)
|
|
|
(21,036
|
)
|
|
Loss carryforward
|
|
|
5,660
|
|
|
|
2,124
|
|
|
Receivables depreciation
|
|
|
445
|
|
|
|
381
|
|
|
Lease assets
|
|
|
(2,184
|
)
|
|
|
(1,564
|
)
|
|
Lease liabilities
|
|
|
2
|
|
|
|
1
|
|
|
Others
|
|
|
2,198
|
|
|
|
-
|
|
|
Less: valuation allowance
|
|
|
(5,660
|
)
|
|
|
(2,124
|
)
|
|
Deferred tax liabilities, net
|
|
$
|
(21,864
|
)
|
|
$
|
(22,059
|
)
|
During
the years ended December 31, 2020 and 2019, the Company has $5,660 and $2,124, respectively, as net operating losses that begin to expire
within four years.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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 $5,660 in 2020 and $2,124 in 2019 against its net operating losses.
|
|
14.
|
VARIABLE
INTEREST ENTITIES
|
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 agrees that the Company has rights to 75% of Trigola’s
net profits, if any.
Summary
of Key Terms of the Trigola Agreement (“VIE”):
|
●
|
Forafric is the exclusive manager of
the VIE.
|
|
|
|
|
●
|
The VIE shall not directly or indirectly accept
the same or similar services from other parties.
|
|
|
|
|
●
|
Forafric agrees to fund the VIE’s operational
needs and bear the risk of VIE’s losses from operations and the VIE agrees that the Company has rights to 75% of the VIE’s
net profits, if any.
|
The
Company did not provide financial or other support to the VIE for the period presented that the Company was not previously contractually
required to provide.
As
of December 31, 2020, there were no pledges or collateralization of the VIE’s assets that can only be used to settle obligations
of the VIE.
The
carrying amount of the VIE’s assets and liabilities included in the consolidated financial statements are as follows at December
31, 2020:
|
Cash
|
|
$
|
2,475
|
|
|
Accounts receivable
|
|
|
161
|
|
|
Inventory
|
|
|
939
|
|
|
Other current assets
|
|
|
2
|
|
|
Property, plant, and equipment
|
|
|
44
|
|
|
Total assets
|
|
$
|
3,621
|
|
|
Accounts payable
|
|
$
|
3,232
|
|
|
Other current liabilities
|
|
|
58
|
|
|
Total liabilities
|
|
$
|
3,290
|
|
Approximately
$2,700 in accounts payable included above are payables due to the Company and were eliminated in consolidation at December 31, 2020.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The
operating results of the VIE included in the consolidated financial statements are as follows for the period from November 5, 2020 through
December 31, 2020:
|
|
|
(in thousands)
|
|
|
Revenues
|
|
$
|
384
|
|
|
Net loss
|
|
$
|
(115
|
)
|
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 3,620,017 and 3,690
for the years ended December 31, 2020 and 2019, 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
|
The
Company has commitments with banks to finance its operating activities. The Company has provided collateral and mortgages to banks of
$25,464 and $119,474, respectively, as of December 31, 2020 and 2019.
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 consolidated financial statements in 2020 and 2019.
The
Company manages operations on a company-wide basis, thereby making determinations as to the allocation of resources in total rather than
on a segment-level basis. The Company has designated reportable segments based on how management views its business. The Company does
not segregate assets between segments for internal reporting. Therefore, asset-related information has not been presented. The reportable
segments, as presented below, are consistent with the manner in which the Company reports its results to the Chief Operating Decision
Maker.
The
principal products that comprise each segment are as follows:
Soft
Wheat – The Soft Wheat segment includes the production and sale of soft wheat yielding flour that is used to make desserts
and sauces.
Durum
Wheat - The Durum Wheat segment includes the production and sale of hard wheat yielding flour that is used to make pasta.
Couscous
and Pasta – The Couscous and Pasta segment includes the secondary processing of products including couscous and pasta sold
to end customers.
Other
– The Other segment includes distribution, trading and logistics, animal nutrition, and other operating activities.
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.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Financial
information relating to the Company’s reportable segments is as follows:
|
|
|
Year ended
|
|
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
Sales to external customers:
|
|
|
|
|
Soft Wheat
|
|
$
|
115,273
|
|
|
$
|
112,963
|
|
|
Durum Wheat
|
|
|
33,548
|
|
|
|
28,086
|
|
|
Couscous & Pasta
|
|
|
26,725
|
|
|
|
16,977
|
|
|
Other
|
|
|
21,050
|
|
|
|
25,183
|
|
|
Total
|
|
$
|
196,596
|
|
|
$
|
183,209
|
|
|
Direct operating income (loss):
|
|
|
|
|
|
|
|
|
|
Soft Wheat
|
|
|
5,940
|
|
|
|
670
|
|
|
Durum Wheat
|
|
|
1,413
|
|
|
|
(482
|
)
|
|
Couscous & Pasta
|
|
|
2,954
|
|
|
|
922
|
|
|
Other
|
|
|
(416
|
)
|
|
|
2,868
|
|
|
Operating income
|
|
$
|
9,891
|
|
|
$
|
3,978
|
|
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 $112,538 and $74,035 as of December 31, 2020 and 2019,
respectively.
The
Company’s amounts due from related parties were $387 and $3,209 as of December 31, 2020 and 2019, respectively.
The
Company maintains an interest-free loan with no maturity date to the Parent Company in the amount of $8,683 and $128,255 as of December
31, 2020 and 2019, respectively. During 2020, a portion of the loan was converted into common shares of the Company in the amount of
$119,996.
The
Company has not entered into any significant transactions with other related parties.
In
preparing the consolidated financial statements through the December 31, 2020, the Company has evaluated subsequent events for recognition
and disclosure through December 17, 2021, the date that these consolidated financial statements and accompanying notes were available
for issuance.
On
April 30, 2021, the Company completed a share purchase acquisition of Moulins du Sahel Mali S.A. (“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 capital increase for a total amount of $9,579, $5,912 of which
have already been completed.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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. This transaction is expected to
close in 2022, subject to approval by the SEC and the shareholders of the SPAC.
On
July 30, 2021, pursuant to a Share Sale and Asset Acquisition Agreement, the Company acquired a controlling interest of 78.21% in certain
assets of Moulin du Sahel Burkina (“MDS Burkina”). The net assets acquired included a non-operational wheat mill, milling
equipment and other current liabilities. The total consideration paid for the aforementioned assets upon closing was $2,622 in cash,
$3,531 in assumed liabilities and $1,714 in non-controlling interests.
On
July 30, 2021, the Company acquired 37.10% of the capital stock of Grands Moulins du Tenere Niger (“GMT Niger”) headquartered
in Niger, which is a non-operational wheat milling facility.
In
October 2021, the Company acquired a controlling interest in Moulins Sanabil SA’s (“Sanabil SA”) capital stock, for
cash consideration of approximately $3,000. The company is privately-held and headquartered in Meknes, Morocco and is a soft wheat flour
manufacturer. The company offers a complete line of soft wheat and baking flour products. The Company has not yet completed a valuation
of the fair values of assets acquired and liabilities assumed.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AS
OF SEPTEMBER 30, 2021 AND DECEMBER 31, 2020
AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
thousands, except share and per share data)
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
UNAUDITED
|
|
|
AUDITED
|
|
|
|
|
(AS RESTATED)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
20,040
|
|
|
$
|
12,683
|
|
|
Accounts receivable, net of allowance for credit losses of $13,827 and $13,532,
respectively
|
|
|
31,030
|
|
|
|
27,482
|
|
|
Amount due from related parties
|
|
|
5,565
|
|
|
|
387
|
|
|
Other receivables
|
|
|
17,603
|
|
|
|
12,283
|
|
|
Inventories
|
|
|
44,298
|
|
|
|
26,545
|
|
|
Other assets, current
|
|
|
166
|
|
|
|
24
|
|
|
Total current assets
|
|
|
118,702
|
|
|
|
79,404
|
|
|
Property, plant, and equipment, net
|
|
|
101,885
|
|
|
|
89,621
|
|
|
Right-of-use assets
|
|
|
16,190
|
|
|
|
16,634
|
|
|
Goodwill
|
|
|
61,946
|
|
|
|
48,072
|
|
|
Intangible assets, net
|
|
|
349
|
|
|
|
363
|
|
|
Other assets, noncurrent
|
|
|
1,691
|
|
|
|
484
|
|
|
Total assets
|
|
$
|
300,763
|
|
|
$
|
234,578
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Lines of credit – working capital
|
|
$
|
58,750
|
|
|
$
|
65,176
|
|
|
Lines of credit – wheat inventories
|
|
|
90,497
|
|
|
|
47,975
|
|
|
Accounts payable
|
|
|
15,945
|
|
|
|
9,683
|
|
|
Accrued expenses
|
|
|
14,646
|
|
|
|
11,410
|
|
|
Contract liabilities
|
|
|
1,600
|
|
|
|
3,620
|
|
|
Current portion of long-term debt
|
|
|
13,658
|
|
|
|
7,371
|
|
|
Other liabilities, current
|
|
|
4,323
|
|
|
|
659
|
|
|
Total current liabilities
|
|
|
199,419
|
|
|
|
145,894
|
|
|
Long-term debt
|
|
|
13,603
|
|
|
|
6,143
|
|
|
Stockholder loan
|
|
|
15,399
|
|
|
|
8,683
|
|
|
Deferred tax liabilities
|
|
|
19,348
|
|
|
|
21,864
|
|
|
Total liabilities
|
|
|
247,769
|
|
|
|
182,584
|
|
|
Commitments and contingencies (Note 17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder’s equity (deficit):
|
|
|
|
|
|
|
|
|
|
Common stock, $1 par value; 120,000,000 shares authorized; issued, and outstanding at September
30, 2021 and December 31, 2020
|
|
|
120,000
|
|
|
|
120,000
|
|
|
Accumulated deficit
|
|
|
(77,933
|
)
|
|
|
(74,397
|
)
|
|
Accumulated other comprehensive income
|
|
|
5,039
|
|
|
|
6,309
|
|
|
Non-controlling interest
|
|
|
5,888
|
|
|
|
82
|
|
|
Total stockholder’s equity (deficit)
|
|
|
52,994
|
|
|
|
51,994
|
|
|
Total liabilities and stockholder’s equity
|
|
$
|
300,763
|
|
|
$
|
234,578
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(In
thousands, except share and per share data)
|
|
|
Nine months ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(AS RESTATED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
185,517
|
|
|
$
|
145,938
|
|
|
Cost of sales
|
|
|
157,202
|
|
|
|
119,130
|
|
|
Gross profit
|
|
|
28,315
|
|
|
|
26,808
|
|
|
Operating expenses:
|
|
|
15.3
|
%
|
|
|
18.4
|
%
|
|
Selling, general and administrative expenses
|
|
|
24,415
|
|
|
|
19,735
|
|
|
Total operating expenses
|
|
|
24,415
|
|
|
|
19,735
|
|
|
Operating income
|
|
|
3,900
|
|
|
|
7,073
|
|
|
Other expense (income):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(282
|
)
|
|
|
(2
|
)
|
|
Interest expense
|
|
|
7,387
|
|
|
|
5,399
|
|
|
Foreign Exchange loss
|
|
|
1,004
|
|
|
|
1,734
|
|
|
Total other expense
|
|
|
8,109
|
|
|
|
7,131
|
|
|
Loss before income taxes
|
|
|
(4,209
|
)
|
|
|
(58
|
)
|
|
Income tax (benefit) expense
|
|
|
(831
|
)
|
|
|
1,407
|
|
|
Net loss
|
|
|
(3,378
|
)
|
|
|
(1,465
|
)
|
|
Net income attributable to noncontrolling interest
|
|
|
158
|
|
|
|
-
|
|
|
Net loss attributable to the Company
|
|
$
|
(3,536
|
)
|
|
$
|
(1,465
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share - basic and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(396.98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding - basic and diluted
|
|
|
120,000,000
|
|
|
|
3,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(3,378
|
)
|
|
|
(1,465
|
)
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(1,373
|
)
|
|
|
(2,660
|
)
|
|
Total other comprehensive loss
|
|
|
(1,373
|
)
|
|
|
(2,660
|
)
|
|
Comprehensive loss
|
|
|
(4,751
|
)
|
|
|
(4,125
|
)
|
|
less: Comprehensive income attributable to non-controlling interest
|
|
|
55
|
|
|
|
-
|
|
|
Comprehensive loss attributable to the Company
|
|
$
|
(4,806
|
)
|
|
$
|
(4,125
|
)
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY (DEFICIT)
(UNAUDITED)
(In
thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
Total
|
|
|
|
|
Common Stock
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Controlling
|
|
|
Equity
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Deficit
|
|
|
Income (Loss)
|
|
|
Interest
|
|
|
(Deficit)
|
|
|
Balance, December 31, 2019
|
|
|
3,690
|
|
|
$
|
4
|
|
|
$
|
(74,622
|
)
|
|
$
|
535
|
|
|
$
|
-
|
|
|
$
|
(74,083
|
)
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,465
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,465
|
)
|
|
Foreign exchange loss
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(2,660
|
)
|
|
|
-
|
|
|
|
(2,660
|
)
|
|
Balance, September 30, 2020
|
|
|
3,690
|
|
|
$
|
4
|
|
|
$
|
(76,087
|
)
|
|
$
|
(2,125
|
)
|
|
$
|
-
|
|
|
$
|
(78,208
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
|
|
120,000,000
|
|
|
$
|
120,000
|
|
|
$
|
(74,397
|
)
|
|
$
|
6,309
|
|
|
$
|
82
|
|
|
$
|
51,994
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,536
|
)
|
|
|
-
|
|
|
|
158
|
|
|
|
(3,378
|
)
|
|
Foreign exchange loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,270
|
)
|
|
|
(103
|
)
|
|
|
(1,373
|
)
|
|
Consolidation of variable interest entities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,751
|
|
|
|
5,751
|
|
|
Balance, September 30, 2021, as restated
|
|
|
120,000,000
|
|
|
$
|
120,000
|
|
|
$
|
(77,933
|
)
|
|
$
|
5,039
|
|
|
$
|
5,888
|
|
|
$
|
52,994
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In
thousands, except share and per share data)
|
|
|
September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(AS RESTATED)
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,378
|
)
|
|
$
|
(1,465
|
)
|
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment
|
|
|
2,713
|
|
|
|
2,670
|
|
|
Amortization of intangible assets
|
|
|
39
|
|
|
|
101
|
|
|
Amortization of right-of-use assets
|
|
|
881
|
|
|
|
861
|
|
|
Bad debt expense
|
|
|
523
|
|
|
|
249
|
|
|
Deferred income taxes
|
|
|
(2,193
|
)
|
|
|
182
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(3,602
|
)
|
|
|
2,377
|
|
|
Other receivables
|
|
|
(7,940
|
)
|
|
|
(7,179
|
)
|
|
Inventories
|
|
|
(16,214
|
)
|
|
|
(31,059
|
)
|
|
Accounts payable
|
|
|
1,852
|
|
|
|
19,883
|
|
|
Other payables and liabilities
|
|
|
3,941
|
|
|
|
(142
|
)
|
|
Net cash used in operating activities
|
|
|
(23,378
|
)
|
|
|
(13,522
|
)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Acquisition of businesses, net of cash acquired
|
|
|
(15,503
|
)
|
|
|
-
|
|
|
Purchase of equity method investment
|
|
|
(1,098
|
)
|
|
|
-
|
|
|
Advances to related parties
|
|
|
(5,287
|
)
|
|
|
-
|
|
|
Purchases of property, plant, and equipment
|
|
|
(352
|
)
|
|
|
(519
|
)
|
|
Sales of property, plant, and equipment
|
|
|
16
|
|
|
|
34
|
|
|
Additions to intangible assets
|
|
|
(16
|
)
|
|
|
20
|
|
|
Net cash used in investing activities
|
|
|
(22,240
|
)
|
|
|
(465
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Borrowings on long-term debt
|
|
|
63,775
|
|
|
|
34,901
|
|
|
Repayments on long-term debt
|
|
|
(10,188
|
)
|
|
|
(8,736
|
)
|
|
Net cash provided by financing activities
|
|
|
53,587
|
|
|
|
26,165
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(612
|
)
|
|
|
837
|
|
|
Net increase in cash and cash equivalents
|
|
|
7,357
|
|
|
|
13,015
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
12,683
|
|
|
|
8,994
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
20,040
|
|
|
$
|
22,009
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Consolidation of variable interest entities related to business acquisitions
|
|
$
|
5,751
|
|
|
$
|
-
|
|
|
Fair value of assets acquired in business acquisitions
|
|
$
|
34,043
|
|
|
$
|
-
|
|
|
Fair value of liabilities assumed in business acquisitions
|
|
$
|
27,216
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
6,651
|
|
|
$
|
5,471
|
|
|
Net income taxes paid
|
|
$
|
1,362
|
|
|
$
|
1,877
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For
the period ended September 30, 2021
1.
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature
of 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”).
Effective on July 30, 2021, the Company
completed a share purchase acquisition of Moulin du Sahel Burkina (“MDS Burkina”). By way of the acquisition, we acquired
a 78.21% stake in a wheat milling business in Burkina Faso. The investment in MDS Burkina enables the Company to continue to expand its
strategic footprint in west Africa. The total consideration paid upon closing was $6,153 million in cash, $3,531 million in assumed liabilities
and $1,714 million in non-controlling interests. MDS Burkina is determined to be a variable interest entity (“VIE”). Refer
to Note 2 – Summary of Significant Accounting Policies and Note 15 – Variable Interest Entities and Acquisitions for further
information.
Effective
on April 30, 2021, the Company completed a share purchase acquisition of Moulins du Sahel Mali S.A. (“MDS Mali”). By way
of the acquisition, the Company acquired a 70.35% stake in a wheat milling business in Mali. The investment in MDS Mali enables Forafric
to obtain a strategic footprint in west Africa. MDS Mali added incremental net revenues of $8,919 and incremental net income of $334
for the period from April 30, 2021 to September 30, 2021. As of the balance sheet date, the total investment for this transaction is
approximately $9,579, including an additional $3,667 due to be paid. MDS Mali is determined to be a VIE. Refer to Note
2 – Summary of Significant Accounting Policies and Note 15 – Variable Interest Entities and Acquisitions for
further information.
Effective
on November 5, 2020, pursuant to an investment and shareholders agreement (“Trigola Agreement”) dated November 5, 2020, the
Company entered into an agreement with Trigola, SU, LDA (“Trigola”), an entity incorporated in the Republic of Angola and
owned by the Parent for a majority 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 agreed to fund Trigola for operational cash flow needs and bear the risk of Trigola’s losses from operations and Trigola
agrees that the Business has rights to 75% of Trigola’s net profits, if any. Trigola is determined to be a VIE. Refer
to Note 2 – Summary of Significant Accounting Policies and Note 15 – Variable Interest Entities for further information.
As
of December 31, 2020, 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. Refer below to Basis of Presentation for further information.
Based
on an evaluation of the guidance under Staff Accounting Bulletin (“SAB”) Topic 5.Z.7, Accounting for the spin-off of a
subsidiary, 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 18 — Related Parties for further information regarding the Company’s related party transactions.
Basis
of 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, 2020.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant
Accounting 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, 2020,
unless otherwise noted.
Use
of Estimates - The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to
use judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the 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.
Principles
of 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.
Foreign
Currency 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).
Credit
Risk – Financial instruments potentially subject to concentration of credit risk consist primarily of cash and cash equivalents
and trade accounts receivable. At times during the periods presented, the Company had funds in excess of Deposit Insurance programs in
Morocco, on deposit at various financial institutions. Management believes the Company is not exposed to significant credit risk due
to the financial position of the depository institutions in which those deposits are held.
The
Company’s trade accounts receivable are unsecured and geographically dispersed. No single client’s trade accounts receivable
balance as of September 30, 2021 and December 31, 2020 exceeded 10% of the Company’s consolidated accounts receivable, net.
Variable
Interest Entities - 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, April 30, 2021.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The
Company entered into an agreement with Trigola, an entity incorporated in the Republic of Angola. The Company has a direct majority ownership
in Trigola and has been actively involved in their operations and has the power to direct the activities and significantly impact Trigola’s
economic performance. The Company also bears the risk of losses and has the right to receive 75% of the benefits from Trigola. As such,
in accordance with ASC 810-10-25-38A through 25-38J, Trigola is considered a VIE of the Company and the financial statements of Trigola
were consolidated from the date that the control existed, November 5, 2020.
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, July 30, 2021.
Equity
Method 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. Equity method investment is included in other assets, noncurrent, on the accompanying
condensed consolidated balance sheets.
Non-Controlling
Interests – Non-controlling interests on the condensed consolidated statements of operations and comprehensive loss
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 condensed consolidated balance sheets represent the portion of equity in a consolidated subsidiary owned by non-controlling
stockholders.
3.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Adopted
None.
Not
yet adopted
In
March 2020, the FASB issued the Accounting Standards Update (ASU) 2020-04, 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, 2020 through December
31, 2022. The Company is currently evaluating the impact of this new ASU on its condensed consolidated financial statements and related
disclosures.
4.
RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company determined that the previously issued
financial statements for the period ending September 30, 2021 should no longer be relied upon due to errors in such condensed consolidated
financial statements related to the Company’s acquisition of MDS Burkina previously disclosed as an asset acquisition. The Company
determined the transaction represents a business combination as MDS Burkina meets the definition of a business per ASC 805, Business
Combinations.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The following reflects the restatement adjustments
recorded in connection with the Company’s restatement of its condensed consolidated financial statements:
|
|
|
As
of September 30, 2021
|
|
|
Assets
|
|
AS
PREVIOUSLY REPORTED
|
|
|
ADJUSTMENT
|
|
|
AS
RESTATED
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
20,040
|
|
|
$
|
-
|
|
|
$
|
20,040
|
|
|
Accounts
receivable, net of allowance for credit losses of $13,827
|
|
|
30,933
|
|
|
|
97
|
|
|
|
31,030
|
|
|
Amount
due from related parties
|
|
|
10,852
|
|
|
|
(5,287
|
)
|
|
|
5,565
|
|
|
Other
receivables
|
|
|
16,975
|
|
|
|
628
|
|
|
|
17,603
|
|
|
Inventories
|
|
|
44,242
|
|
|
|
56
|
|
|
|
44,298
|
|
|
Other
assets, current
|
|
|
166
|
|
|
|
-
|
|
|
|
166
|
|
|
Total
current assets
|
|
|
123,208
|
|
|
|
(4,506
|
)
|
|
|
118,702
|
|
|
Property,
plant, and equipment, net
|
|
|
101,618
|
|
|
|
267
|
|
|
|
101,885
|
|
|
Right-of-use
assets
|
|
|
16,190
|
|
|
|
-
|
|
|
|
16,190
|
|
|
Goodwill
|
|
|
52,915
|
|
|
|
9,031
|
|
|
|
61,946
|
|
|
Intangible
assets, net
|
|
|
349
|
|
|
|
-
|
|
|
|
349
|
|
|
Other
assets, noncurrent
|
|
|
1,630
|
|
|
|
61
|
|
|
|
1,691
|
|
|
Total
assets
|
|
$
|
295,910
|
|
|
$
|
4,853
|
|
|
$
|
300,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDER’S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lines
of credit – working capital
|
|
$
|
58,407
|
|
|
$
|
343
|
|
|
$
|
58,750
|
|
|
Lines
of credit – wheat inventories
|
|
|
90,497
|
|
|
|
-
|
|
|
|
90,497
|
|
|
Accounts
payable
|
|
|
15,287
|
|
|
|
658
|
|
|
|
15,945
|
|
|
Accrued
expenses
|
|
|
11,835
|
|
|
|
2,811
|
|
|
|
14,646
|
|
|
Contract
liabilities
|
|
|
1,444
|
|
|
|
156
|
|
|
|
1,600
|
|
|
Current
portion of long-term debt
|
|
|
9,095
|
|
|
|
4,563
|
|
|
|
13,658
|
|
|
Other
liabilities, current
|
|
|
4,323
|
|
|
|
-
|
|
|
|
4,323
|
|
|
Total
current liabilities
|
|
|
190,888
|
|
|
|
8,531
|
|
|
|
199,419
|
|
|
Long-term
debt
|
|
|
11,994
|
|
|
|
1,609
|
|
|
|
13,603
|
|
|
Stockholder
loan
|
|
|
20,686
|
|
|
|
(5,287
|
)
|
|
|
15,399
|
|
|
Deferred
tax liabilities
|
|
|
19,348
|
|
|
|
-
|
|
|
|
19,348
|
|
|
Total
liabilities
|
|
|
242,916
|
|
|
|
4,853
|
|
|
|
247,769
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder’s
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $1 par value; 120,000,000 shares authorized; issued, and outstanding at September 30, 2021 and December 31, 2020
|
|
|
120,000
|
|
|
|
-
|
|
|
|
120,000
|
|
|
Accumulated
deficit
|
|
|
(77,933
|
)
|
|
|
-
|
|
|
|
(77,933
|
)
|
|
Accumulated
other comprehensive income
|
|
|
5,039
|
|
|
|
-
|
|
|
|
5,039
|
|
|
Non-controlling
interest
|
|
|
5,888
|
|
|
|
-
|
|
|
|
5,888
|
|
|
Total
stockholder’s equity
|
|
|
52,994
|
|
|
|
-
|
|
|
|
52,994
|
|
|
Total
liabilities and stockholder’s equity
|
|
$
|
295,910
|
|
|
$
|
4,853
|
|
|
$
|
300,763
|
|
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
|
|
|
Nine
months ended September 30, 2021
|
|
|
|
|
AS
PREVIOUSLY REPORTED
|
|
|
ADJUSTMENT
|
|
|
AS
RESTATED
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,378
|
)
|
|
$
|
-
|
|
|
$
|
(3,378
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
of property, plant and equipment
|
|
|
2,713
|
|
|
|
-
|
|
|
|
2,713
|
|
|
Amortization
of intangible assets
|
|
|
39
|
|
|
|
-
|
|
|
|
39
|
|
|
Amortization
of right-of-use assets
|
|
|
881
|
|
|
|
-
|
|
|
|
881
|
|
|
Bad
debt expense
|
|
|
523
|
|
|
|
-
|
|
|
|
523
|
|
|
Deferred
income taxes
|
|
|
(2,193
|
)
|
|
|
-
|
|
|
|
(2,193
|
)
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(3,602
|
)
|
|
|
-
|
|
|
|
(3,602
|
)
|
|
Other
receivables
|
|
|
(2,762
|
)
|
|
|
(5,178
|
)
|
|
|
(7,940
|
)
|
|
Inventories
|
|
|
(16,214
|
)
|
|
|
-
|
|
|
|
(16,214
|
)
|
|
Accounts
payable
|
|
|
1,852
|
|
|
|
-
|
|
|
|
1,852
|
|
|
Other
payables and liabilities
|
|
|
3,941
|
|
|
|
-
|
|
|
|
3,941
|
|
|
Net
cash used in operating activities
|
|
|
(18,200
|
)
|
|
|
(5,178
|
)
|
|
|
(23,378
|
)
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
of business, net of cash acquired
|
|
|
(9,350
|
)
|
|
|
(6,153
|
)
|
|
|
(15,503
|
)
|
|
Purchase
of equity method investment
|
|
|
(1,098
|
)
|
|
|
-
|
|
|
|
(1,098
|
)
|
|
Advances
to related parties
|
|
|
(10,465
|
)
|
|
|
5,178
|
|
|
|
(5,287
|
)
|
|
Purchases
of property, plant, and equipment
|
|
|
(6,505
|
)
|
|
|
6,153
|
|
|
|
(352
|
)
|
|
Sales
of property, plant, and equipment
|
|
|
16
|
|
|
|
-
|
|
|
|
16
|
|
|
Additions
to intangible assets
|
|
|
(16
|
)
|
|
|
-
|
|
|
|
(16
|
)
|
|
Net
cash used in investing activities
|
|
|
(27,418
|
)
|
|
|
5,178
|
|
|
|
(22,240
|
)
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
on long-term debt
|
|
|
63,775
|
|
|
|
-
|
|
|
|
63,775
|
|
|
Repayments
on long-term debt
|
|
|
(10,188
|
)
|
|
|
-
|
|
|
|
(10,188
|
)
|
|
Net
cash provided by financing activities
|
|
|
53,587
|
|
|
|
-
|
|
|
|
53,587
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(612
|
)
|
|
|
-
|
|
|
|
(612
|
)
|
|
Net
increase in cash and cash equivalents
|
|
|
7,357
|
|
|
|
|
|
|
|
7,357
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
12,683
|
|
|
|
-
|
|
|
|
12,683
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
20,040
|
|
|
$
|
-
|
|
|
$
|
20,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation
of variable interest entitiy related to asset acquisition
|
|
$
|
1,714
|
|
|
$
|
(1,714
|
)
|
|
$
|
-
|
|
|
Consolidation
of variable interest entity related to business acquisition
|
|
$
|
4,037
|
|
|
$
|
1,714
|
|
|
$
|
5,751
|
|
|
Fair
value of assets acquired in business acquisition
|
|
$
|
25,067
|
|
|
$
|
8,976
|
|
|
$
|
34,043
|
|
|
Fair
value of liabilities assumed in business acquisition
|
|
$
|
17,077
|
|
|
$
|
10,139
|
|
|
$
|
27,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
6,651
|
|
|
$
|
-
|
|
|
$
|
6,651
|
|
|
Net
income taxes paid
|
|
$
|
1,362
|
|
|
$
|
-
|
|
|
$
|
1,362
|
|
5.
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 four years.
The
Company does not record leases with a term of 12 months or less on the balance sheet.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Supplemental
balance sheet information related to leases was as follows:
|
|
|
Balance Sheet
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
Classification
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
(in thousands)
|
|
|
Assets
|
|
|
|
|
|
|
Operating leases
|
|
Right-of-use assets
|
|
$
|
1,479
|
|
|
$
|
1,818
|
|
|
Finance leases
|
|
Right-of-use assets
|
|
|
14,711
|
|
|
|
14,816
|
|
|
Total assets
|
|
|
|
$
|
16,190
|
|
|
$
|
16,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
Current portion of long-term debt
|
|
$
|
661
|
|
|
$
|
729
|
|
|
Finance leases
|
|
Current portion of long-term debt
|
|
|
2,340
|
|
|
|
2,749
|
|
|
Total current liabilities
|
|
|
|
|
3,001
|
|
|
|
3,478
|
|
|
Noncurrent liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
Long-term debt
|
|
|
948
|
|
|
|
1,216
|
|
|
Finance leases
|
|
Long-term debt
|
|
|
3,590
|
|
|
|
4,566
|
|
|
Total noncurrent liabilities
|
|
|
|
|
4,538
|
|
|
|
5,782
|
|
|
Total liabilities
|
|
|
|
$
|
7,539
|
|
|
$
|
9,260
|
|
Right-of-use
assets and their corresponding lease liabilities are measured and recognized based on the present value of the future minimum lease payments
over the lease term at the commencement date.
Discount
Rates
For
the majority of its leases, the Company uses the rate implicit in the lease. For leases without an implicit rate, the Company uses its
incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments
for those leases.
The
weighted-average discount rates for the Company’s leases were as follows:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Weighted-average discount rate
|
|
|
|
|
|
|
|
Operating leases
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
|
Finance leases
|
|
|
6.2
|
%
|
|
|
6.1
|
%
|
Lease
Payments
The
Company includes lease payments under options to extend or terminate the lease in the measurement of the right-of-use asset and lease
liability when it is reasonably certain that it will exercise such options. Fixed lease costs represent the explicitly quantified lease
payments prescribed by the lease agreement and are included in the measurement of the right-of-use asset and corresponding lease liability.
The
weighted-average remaining lease term of the Company’s leases were as follows:
|
|
|
|
September
30,
|
|
|
|
December
31,
|
|
|
|
|
|
2021
|
|
|
|
2020
|
|
|
Weighted-average remaining lease term
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
1.6
years
|
|
|
|
2.2
years
|
|
|
Finance leases
|
|
|
2.3
years
|
|
|
|
2.9
years
|
|
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The
components of lease expense were as follows:
|
|
|
Nine months ended
|
|
|
|
|
September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(in thousands)
|
|
|
Operating lease cost
|
|
$
|
591
|
|
|
$
|
473
|
|
|
Finance lease cost:
|
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
|
353
|
|
|
|
413
|
|
|
Interest on lease liabilities
|
|
|
350
|
|
|
|
423
|
|
|
Total lease cost
|
|
$
|
1,294
|
|
|
$
|
1,309
|
|
As
of September 30, 2021, future maturities of lease liabilities were as follows:
|
|
|
Operating Leases
|
|
|
Finance Leases
|
|
|
|
|
(in thousands)
|
|
|
Remainder of 2021
|
|
$
|
191
|
|
|
$
|
681
|
|
|
2022
|
|
|
775
|
|
|
|
2,711
|
|
|
2023
|
|
|
674
|
|
|
|
2,407
|
|
|
2024
|
|
|
118
|
|
|
|
507
|
|
|
2025
|
|
|
4
|
|
|
|
5
|
|
|
Total lease payments
|
|
|
1,762
|
|
|
|
6,311
|
|
|
Less: Interest
|
|
|
(154
|
)
|
|
|
(380
|
)
|
|
Present value of lease liabilities
|
|
$
|
1,608
|
|
|
$
|
5,931
|
|
Other
information related to leases were as follows:
|
|
|
Nine months ended
|
|
|
|
|
September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(in thousands)
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
|
Operating cash flows used for operating leases
|
|
$
|
591
|
|
|
$
|
314
|
|
|
Operating cash flows from finance leases
|
|
$
|
353
|
|
|
$
|
413
|
|
|
Financing cash flows from finance leases
|
|
$
|
350
|
|
|
$
|
334
|
|
6.
ACCOUNTS RECEIVABLE
The
gross and realizable value of accounts receivable are detailed in the chart below:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(in thousands)
|
|
|
Accounts receivable
|
|
$
|
44,857
|
|
|
$
|
41,014
|
|
|
Allowance for credit losses
|
|
|
(13,827
|
)
|
|
|
(13,532
|
)
|
|
Total
|
|
$
|
31,030
|
|
|
$
|
27,482
|
|
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Changes
in allowances for credit losses consisted of:
|
|
|
Allowance for
|
|
|
|
|
Accounts Receivable
|
|
|
|
|
|
(in
thousands)
|
|
|
Balance at January 1, 2019
|
|
$
|
(7,248
|
)
|
|
Current period provision for expected credit losses
|
|
|
(2,516
|
)
|
|
Foreign currency exchange adjustments
|
|
|
325
|
|
|
Balance at January 1, 2020
|
|
|
(9,439
|
)
|
|
Current period provision for expected credit losses
|
|
|
(549
|
)
|
|
Foreign currency exchange adjustments
|
|
|
(3,544
|
)
|
|
Balance at December 31, 2020
|
|
|
(13,532
|
)
|
|
Current period provision for expected credit losses
|
|
|
(522
|
)
|
|
Foreign currency exchange adjustments
|
|
|
227
|
|
|
Balance at September 30, 2021
|
|
$
|
(13,827
|
)
|
7.
OTHER CURRENT RECEIVABLES
Other
current receivables consist of:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(in thousands)
|
|
|
Government subsidies
|
|
$
|
8,649
|
|
|
$
|
3,222
|
|
|
Value-added tax receivable
|
|
|
4,578
|
|
|
|
4,575
|
|
|
Prepaid income taxes
|
|
|
2,234
|
|
|
|
2,737
|
|
|
Other receivables
|
|
|
2,142
|
|
|
|
1,749
|
|
|
Total
|
|
$
|
17,603
|
|
|
$
|
12,283
|
|
8.
INVENTORIES, NET
Inventories,
net, are detailed as follows:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(in thousands)
|
|
|
Merchandise
|
|
$
|
18,601
|
|
|
$
|
7,424
|
|
|
Raw materials and consumable supplies
|
|
|
20,225
|
|
|
|
15,338
|
|
|
Finished products
|
|
|
6,598
|
|
|
|
4,928
|
|
|
Inventory reserves
|
|
|
(1,126
|
)
|
|
|
(1,145
|
)
|
|
Total
|
|
$
|
44,298
|
|
|
$
|
26,545
|
|
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
9.
PROPERTY PLANT AND EQUIPMENT
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(in thousands)
|
|
|
Land
|
|
$
|
25,697
|
|
|
$
|
23,133
|
|
|
Buildings
|
|
|
55,663
|
|
|
|
50,338
|
|
|
Machinery and equipment
|
|
|
43,920
|
|
|
|
34,898
|
|
|
Construction in progress
|
|
|
9,870
|
|
|
|
1,284
|
|
|
Others
|
|
|
10,211
|
|
|
|
8,558
|
|
|
Total
|
|
|
145,361
|
|
|
|
118,211
|
|
|
Less accumulated depreciation
|
|
|
(42,918
|
)
|
|
|
(34,934
|
)
|
|
Foreign exchange difference
|
|
|
(558
|
)
|
|
|
6,344
|
|
|
Total
|
|
$
|
101,885
|
|
|
$
|
89,621
|
|
Depreciation
expense was $2,713 and $2,670 for the nine months ended September 2021 and 2020, respectively, included in cost of sales in the in the
condensed consolidated statements of operations and comprehensive loss.
10.
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 condensed consolidated balance sheet resulted from the acquisition of MDS Mali and MDS Burkina in 2021 and the acquisitions
of wholly owned subsidiaries, the Tria Group in 2016 and Maymouna Food Group in 2015.
Changes
in the carrying amount of goodwill allocated to its reporting units for the nine months ended September 30, 2021 and the year ended December
31, 2020 are as follows:
|
|
|
Soft
|
|
|
Durum
|
|
|
Couscous
|
|
|
|
|
|
|
|
|
|
|
Wheat
|
|
|
Wheat
|
|
|
and Pasta
|
|
|
Other
|
|
|
Total
|
|
|
|
|
(in thousands)
|
|
|
Balance at December 31, 2019
|
|
|
17,384
|
|
|
|
3,760
|
|
|
|
6,048
|
|
|
|
17,477
|
|
|
|
44,669
|
|
|
Foreign currency exchange adjustments
|
|
|
1,324
|
|
|
|
287
|
|
|
|
461
|
|
|
|
1,331
|
|
|
|
3,403
|
|
|
Balance at December 31, 2020
|
|
$
|
18,708
|
|
|
$
|
4,047
|
|
|
$
|
6,509
|
|
|
$
|
18,808
|
|
|
$
|
48,072
|
|
|
Acquisitions
|
|
|
14,656
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,656
|
|
|
Foreign currency exchange adjustments
|
|
|
(304
|
)
|
|
|
(66
|
)
|
|
|
(106
|
)
|
|
|
(306
|
)
|
|
|
(782
|
)
|
|
Balance at September 30, 2021
|
|
$
|
33,060
|
|
|
$
|
3,981
|
|
|
$
|
6,403
|
|
|
$
|
18,502
|
|
|
$
|
61,946
|
|
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Changes
in the carrying amount of intangible assets for the nine months ended September 30, 2021 and the year ended December 31, 2020 are as
follows:
|
|
|
Intangible
|
|
|
|
|
Assets
|
|
|
|
|
|
(in
thousands)
|
|
|
Balance at December 31, 2019
|
|
$
|
448
|
|
|
Acquisitions
|
|
|
278
|
|
|
Disposals
|
|
|
(262
|
)
|
|
Amortization
|
|
|
(149
|
)
|
|
Foreign currency exchange adjustments
|
|
|
48
|
|
|
Balance at December 31, 2020
|
|
$
|
363
|
|
|
Acquisitions
|
|
|
30
|
|
|
Amortization
|
|
|
(34
|
)
|
|
Foreign currency exchange adjustments
|
|
|
(10
|
)
|
|
Balance at September 30, 2021
|
|
$
|
349
|
|
As
of September 30, 2021, the weighted-average remaining amortization period for intangibles other than goodwill is 8.6 years and future
intangible amortization is expected to total the following:
|
|
|
(in thousands)
|
|
|
Remainder of 2021
|
|
$
|
12
|
|
|
2022
|
|
|
41
|
|
|
2023
|
|
|
40
|
|
|
2024
|
|
|
39
|
|
|
2025
|
|
|
37
|
|
|
Thereafter
|
|
|
180
|
|
|
Total amortization
|
|
$
|
349
|
|
11.
ACCRUED EXPENSES
Accrued
expenses consist of:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(in thousands)
|
|
|
Accrued government subsidies and taxes
|
|
$
|
7,231
|
|
|
$
|
8,143
|
|
|
Accrued interest
|
|
|
4,498
|
|
|
|
1,451
|
|
|
Accrued salaries and benefits
|
|
|
535
|
|
|
|
700
|
|
|
Accruals to social agencies
|
|
|
526
|
|
|
|
577
|
|
|
Other accrued expenses
|
|
|
1,856
|
|
|
|
539
|
|
|
Total
|
|
$
|
14,646
|
|
|
$
|
11,410
|
|
12.
LINES OF CREDIT
Lines
of Credit – working capital
The
Company has entered into unsecured revolving credit agreements with several financial institutions to fund working capital requirements
(“WC Lines of Credit”). The WC Lines of Credit provide the Company with the ability to borrow funds under consolidated lines
of credit of up to approximately $58,800. 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.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Lines
of Credit – wheat inventories
The
Company has entered into credit agreements with several financial institutions for asset-based credit facilities in order to fund wheat
raw material purchases (“Wheat Credit Facilities”). The Wheat Credit Facilities provide the ability to borrow funds under
consolidated lines of credit of up to approximately $130,000, 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.
13.
LONG-TERM DEBT
The
long-term debt of is presented as follows:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(in thousands)
|
|
|
Loans
|
|
$
|
19,722
|
|
|
$
|
4,254
|
|
|
Leases
|
|
|
7,539
|
|
|
|
9,260
|
|
|
Total outstanding debt
|
|
|
27,261
|
|
|
|
13,514
|
|
|
Less current portion
|
|
|
(13,658
|
)
|
|
|
(7,371
|
)
|
|
Total long-term debt
|
|
$
|
13,603
|
|
|
$
|
6,143
|
|
The
term loans and other financial liabilities are evaluated according to the amortized cost method using the effective interest rate of
the loan. The loan issuance costs and premiums are determined at inception and are amortized over the useful life of the loan via the
effective interest rate.
Term
Loans
The
Company maintains term loans with several financial institutions (the “Term Loans”). The Term Loans are unsecured and have
fixed monthly payments ranging from approximately $770. 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 2029.
Lease
Obligations
The
Company owes $7,539 and $9,260 related to its leases as of September 30, 2021 and December 31, 2020, 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 September 30, 2021 are as follows:
|
|
|
(in
thousands)
|
|
|
Remainder
of 2021
|
|
$
|
5,990
|
|
|
2022
|
|
|
10,155
|
|
|
2023
|
|
|
3,597
|
|
|
2024
|
|
|
1,746
|
|
|
2025
|
|
|
1,209
|
|
|
Thereafter
|
|
|
4,564
|
|
|
Total
outstanding debt
|
|
$
|
27,261
|
|
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
14.
INCOME TAXES
The
Company’s effective tax rate was 20.0% and -2,414% for the nine months ended September 30, 2021 and 2020, respectively. The effective
tax rate was lower than the Moroccan statutory rate primarily due to unrecognized tax losses and Permanent differences not deductible
(taxable) for tax purposes.
During
the periods ended September 30, 2021 and December 31, 2020, the Company has $23,810 and $5,660, respectively, as net operating losses
that begin to expire within four years.
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 $3,224 as of September 30, 2021 and $5,660 in 2020 against its net operating losses.
15.
VARIABLE INTEREST ENTITIES AND ACQUISITIONS
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 capital increase for a total
amount of $9,579, $5,912 of which have already been completed as of September 30, 2021. The amount invested will be used first to recapitalize
the company, balance the financial situation and then finance the working capital.
The
Company thus agrees to fund MDS Mali for operational cash flow needs and bear the risk of its losses from operations and MDA Mali agrees
that the Business has rights to 70.35% of MDS Mali’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
|
|
$
|
9,579
|
|
|
Assumed
debt
|
|
|
9,768
|
|
|
Noncontrolling
interest
|
|
|
4,037
|
|
|
Total
consideration paid
|
|
$
|
23,384
|
|
|
|
|
|
|
|
|
Net
assets acquired:
|
|
|
|
|
|
Current
assets
|
|
|
16,772
|
|
|
Property,
plant and equipment
|
|
|
8,273
|
|
|
Software
|
|
|
20
|
|
|
Other
assets
|
|
|
2
|
|
|
Current
liabilities
|
|
|
(7,309
|
)
|
|
Total
net assets acquired
|
|
|
17,758
|
|
|
Goodwill
|
|
|
5,626
|
|
|
Total
consideration paid
|
|
$
|
23,384
|
|
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The
carrying amount of MDS Mali’s assets and liabilities included in the condensed consolidated financial statements are as follows
at September 30, 2021:
|
|
|
September
30,
|
|
|
|
|
2021
|
|
|
|
|
(in
thousands)
|
|
|
Cash
|
|
$
|
2,492
|
|
|
Accounts
receivable
|
|
|
1,177
|
|
|
Inventory
|
|
|
1,452
|
|
|
Other
current assets
|
|
|
7,466
|
|
|
Property,
plant, and equipment
|
|
|
7,550
|
|
|
Intangible
assets
|
|
|
14
|
|
|
Goodwill
|
|
|
5,624
|
|
|
Total
assets
|
|
$
|
25,775
|
|
|
Accounts
payable
|
|
$
|
3,756
|
|
|
Other
current liabilities
|
|
|
1,001
|
|
|
Long-term
debt
|
|
|
7,415
|
|
|
Total
liabilities
|
|
$
|
12,172
|
|
The
operating results from the date of acquisition to September 30, 2021 of MDS Mali included in the condensed consolidated financial statements
are as follows:
|
Revenues
|
|
$
|
8,919
|
|
|
Net
income
|
|
$
|
334
|
|
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 capital increase for a
total amount of $6,153, $2,622 of which have already been completed as of September 30, 2021. The amount invested will be used first
to repay the debt, recapitalize the company and provide 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 MDS Burkina
agrees that the Company has rights to 78.21% of MDS Burkina’s net profits, if any.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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
|
|
|
6,515
|
|
|
Noncontrolling
interest
|
|
|
1,714
|
|
|
Total
consideration paid
|
|
$
|
14,382
|
|
|
|
|
|
|
|
|
Net
assets acquired:
|
|
|
|
|
|
Current
assets
|
|
|
781
|
|
|
Property,
plant and equipment
|
|
|
8,134
|
|
|
Other
assets
|
|
|
61
|
|
|
Current
liabilities
|
|
|
(3,625
|
)
|
|
Total
net assets acquired
|
|
|
5,351
|
|
|
Goodwill
|
|
|
9,031
|
|
|
Total
consideration paid
|
|
$
|
14,382
|
|
The
carrying amount of MDS Burkina’s assets and liabilities included in the condensed consolidated financial statements are as follows
at September 30, 2021:
|
|
|
September
30,
|
|
|
|
|
2021
|
|
|
|
|
|
(in
thousands)
|
|
|
Accounts
receivable
|
|
$
|
97
|
|
|
Inventory
|
|
|
56
|
|
|
Other
current assets
|
|
|
628
|
|
|
Property,
plant, and equipment
|
|
|
5,574
|
|
|
Goodwill
|
|
|
9,031
|
|
|
Total
assets
|
|
$
|
15,386
|
|
|
Accounts
payable
|
|
$
|
657
|
|
|
Other
current liabilities
|
|
|
2,969
|
|
|
Long-term
debt
|
|
|
6,514
|
|
|
Total
liabilities
|
|
$
|
10,140
|
|
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.
Summary
of Key Terms of the Trigola Agreement:
|
●
|
Forafric
is the exclusive manager of Trigola.
|
|
|
|
|
●
|
Trigola
shall not directly or indirectly accept the same or similar services from other parties.
|
|
|
|
|
●
|
Forafric
agrees to fund Trigola’s operational needs and bear the risk of Trigola’s losses from operations and Trigola agrees that
the Company has rights to 75% of the Trigola’s net profits, if any.
|
The
Company did not provide financial or other support to Trigola for the period presented that the Company was not previously contractually
required to provide.
As
of September 30, 2021, there were no pledges or collateralization of the Trigola’s assets that can only be used to settle obligations
of Trigola.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
The
carrying amount of the Trigola’s assets and liabilities included in the condensed consolidated financial statements are as follows
at September 30, 2021 and December 31, 2020:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(in thousands)
|
|
|
Cash
|
|
$
|
29
|
|
|
$
|
2,475
|
|
|
Accounts receivable
|
|
|
135
|
|
|
|
161
|
|
|
Inventory
|
|
|
3,860
|
|
|
|
939
|
|
|
Other current assets
|
|
|
5
|
|
|
|
2
|
|
|
Property, plant, and equipment
|
|
|
66
|
|
|
|
44
|
|
|
Total assets
|
|
$
|
4,095
|
|
|
$
|
3,621
|
|
|
Accounts payable
|
|
$
|
3,533
|
|
|
$
|
3,232
|
|
|
Other current liabilities
|
|
|
—
|
|
|
|
58
|
|
|
Total liabilities
|
|
$
|
3,533
|
|
|
$
|
3,290
|
|
Approximately
$3,025 in accounts payable included above are payables due to the Company and were eliminated in consolidation at September 30, 2021
($2,700 at December 31, 2020).
The
operating results of Trigola included in the condensed consolidated financial statements are as follows for the nine months ended September
30, 2021:
|
Revenues
|
|
$
|
1,072
|
|
|
Net income
|
|
$
|
201
|
|
On
July 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
period ending September 30, 2021, as such, no gain or loss representing the Company’s portion of ownership was recorded.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
16.
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 120,000,000 and
3,690 for the periods ended September 31, 2021 and 2020, 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.
17.
COMMITMENTS AND CONTINGENCIES
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 September 30, 2021 and December 31, 2020.
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 September 30, 2021.
18.
SEGMENT INFORMATION
The
Company manages operations on a company-wide basis, thereby making determinations as to the allocation of resources in total rather than
on a segment-level basis. The Company has designated reportable segments based on how management views its business. The Company does
not segregate assets between segments for internal reporting. Therefore, asset-related information has not been presented. The reportable
segments, as presented below, are consistent with the manner in which the Company reports its results to the Chief Operating Decision
Maker.
The
principal products that comprise each segment are as follows:
Soft
Wheat – The Soft Wheat segment includes the production and sale of soft wheat yielding flour that is used to make desserts
and sauces.
Durum
Wheat - The Durum Wheat segment includes the production and sale of hard wheat yielding flour that is used to make pasta.
Couscous
and Pasta – The Couscous and Pasta segment includes the secondary processing of products including couscous and pasta sold
to end customers.
Other
– The Other segment includes distribution, trading and logistics, animal nutrition, and other operating activities.
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).
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
Financial
information relating to the Company’s reportable segments is as follows:
|
|
|
Nine months ended
|
|
|
|
|
September 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(in thousands)
|
|
|
Sales to external customers:
|
|
|
|
|
Soft Wheat
|
|
$
|
119,178
|
|
|
$
|
79,861
|
|
|
Durum Wheat
|
|
|
37,730
|
|
|
|
24,500
|
|
|
Couscous & Pasta
|
|
|
18,551
|
|
|
|
19,112
|
|
|
Other
|
|
|
10,058
|
|
|
|
22,465
|
|
|
Total
|
|
$
|
185,517
|
|
|
$
|
145,938
|
|
|
Direct operating income (loss):
|
|
|
|
|
|
|
|
|
|
Soft Wheat
|
|
|
(1,134
|
)
|
|
|
3,497
|
|
|
Durum Wheat
|
|
|
6,532
|
|
|
|
284
|
|
|
Couscous & Pasta
|
|
|
556
|
|
|
|
1,444
|
|
|
Other
|
|
|
(2,054
|
)
|
|
|
1,848
|
|
|
Operating income
|
|
$
|
3,900
|
|
|
$
|
7,073
|
|
19.
LONG TERM EMPLOYEE SHARE INCENTIVE PLAN
The
Forafric 2021 Long Term Employee Share Incentive Plan (the “FAHL 2021 Plan”) was adopted on June 22, 2021. The FAHL 2021
Plan allows for the grant of awards, consisting of nominal cost options or phantom options to employees, directors and consultants of
FAHL or any of its subsidiaries.
As
of September 30, 2021, no nominal cost options or phantom options were outstanding under the FAHL 2021 Plan. Following the consummation
of the impending Proposed Merger and Business Combination with Globis Acquisition Corp. (see Note 21 – Subsequent events) the FAHL
2021 Plan shall be surrendered, cancelled, and exchanged in substitution for awards on substantially the same terms in the Forafric 2022
Long Term Employee Share Incentive Plan.
20.
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 $94,015 and $101,208 as of September 30, 2021 and 2020,
respectively. In the beginning of 2021, the Company received management fees of $500 from Millcorp.
The
Company’s amounts due from related parties were $5,565 and $387 as of September 30, 2021 and December 31, 2020, respectively.
The
Company maintains an interest-free loan with no maturity date to the sole stockholder of the Parent in the amount of $15,399 and
$8,683 as of September 30, 2021 and December 31, 2020, respectively.
The
Company has not entered into any significant transactions with other related parties.
21.
SUBSEQUENT EVENTS
In
preparing the consolidated financial statements through the September 30, 2021, the Company has evaluated subsequent events for recognition
and disclosure through January 12, 2021, the date that these consolidated financial statements and accompanying notes were available
for issuance.
FORAFRIC
AGRO HOLDINGS LIMITED AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
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 January 12,
2021, the transaction is in the process of being finalized and is expected to close in 2022, subject to approval by the SEC and the shareholders
of the SPAC.
In
October 2021, the Company acquired a controlling interest in Moulins Sanabil SA’s (“Sanabil SA”) capital stock, for
cash consideration of approximately $3,000. The company is privately-held and headquartered in Meknes, Morocco and is a soft wheat flour
manufacturer. The company offers a complete line of soft wheat and baking flour products. The Company has not yet completed a valuation
of the fair values of assets acquired and liabilities assumed.
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.
On
December 31, 2021 the Company authorized the issuance of convertible bonds of up to $40,000,000 with an annual interest rate of 6.00%
through December 31, 2026. As of January 12, 2021, $9,500,000 of convertible bonds have been subscribed.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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Item
20.
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Indemnification
of directors and officers and Financial Statements Schedules
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Companies
Act 2014 of the Laws of Gibraltar
The
general common law position that a company can indemnify its directors has been circumscribed in Gibraltar by statutory enactment. Section
231 of the Companies Act imposes certain limits on the extent and scope of indemnification relieving directors of indemnification under
Gibraltar law. Section 231(1) prohibits indemnification for liability arising from their own negligence, default, breach of duty or breach
of trust. A provision in the articles of a company or a specific contract seeking to provide such indemnification is void. However, it
follows that apart from such restrictions, directors can in certain circumstances be indemnified (i.e. for matters not expressly prohibited).
The
Memorandum and Articles of Association provide that, subject to any indemnity which would be prohibited or rendered void by any provision
of the Companies Act or by any other provision of law, a relevant director of New Forafric or an associated company may be indemnified
out of New Forafric’s assets against any liability which by virtue of any rule of law would otherwise attach to him in respect
of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to New Forafric. A “relevant
director” means any director or former director of the company or an associated company. Companies are “associated”
if one is a subsidiary of the other or both are subsidiaries of the same body corporate.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
D&O
Insurance and Indemnification Agreements
Under
the Memorandum and Articles of Association, the directors may decide to purchase and maintain insurance, at the expense of the company,
for the benefit of any relevant director in respect of any relevant loss. In this paragraph: A “relevant loss” means any
loss or liability which has been or may be incurred by a relevant director in connection with that director’s duties or powers
in relation to the company, any associated company or any pension fund or employees’ share scheme of the company or associated
company.
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Item
21.
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Exhibits
and Financial Statements Schedules.
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(a)
Exhibits.
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4.1
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Warrant
Agreement, dated December 10, 2020, between Globis Acquisition Corp. and VStock Transfer, LLC. (incorporated by reference to Exhibit
4.1 of Globis' Form 8-K (File No. 001-39786 ), filed with the SEC on December 15, 2020).
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5.1*
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Opinion
of Hassans International Law Firm Limited.
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5.2*
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Opinion
of McDermott Will & Emery LLP.
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8.1*
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Tax
Opinion of McDermott Will & Emery LLP.
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10.1
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Letter
Agreement, dated December 10, 2020, among Globis Acquisition Corp., the Sponsors and each of the officers and directors of Globis Acquisition
Corp. (incorporated by reference to Exhibit 10.1 of Globis' Form 8-K (File No. 001-39786), filed with the SEC on December 15, 2020).
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10.2
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Registration
Rights Agreement, dated December 10, 2020, between Globis Acquisition Corp. and the Sponsors (included as Annex G to this
proxy statement/prospectus). (incorporated by reference to Exhibit 10.4 of Globis' Form 8-K (File No. 001-39786 ), filed with
the SEC on December 15, 2020).
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10.3†
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Subscription
Agreement, dated December 31, 2021, by and between Globis Acquisition Corp. and the undersigned
subscriber party thereto. (incorporated by reference to Exhibit 10.1 of Globis' Form 8-K
(File No. 001-39786 ), filed with the SEC on January 4, 2022).
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10.4†
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Bond
Subscription Deed, dated as of December 31, 2021, by and among Forafric Agro Holdings Limited, Lighthouse Capital Limited and the
Bond Investors (incorporated by reference to Exhibit 10.2 of Globis' Form 8-K (File No. 001-39786 ), filed with the SEC on January
4, 2022).
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10.5*
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Form
of Forafric 2022 Long Term Employee Share Incentive Plan (included as Annex H to the proxy statement/prospectus).
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10.6*
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Agreement, dated March 29, 2018, by and between Forafric
Maroc and Millcorp Geneve
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10.7*
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Summary of terms of loans owed by Forafric Agro Holdings
Limited to Yariv Elbaz, Michael Elbaz, Lighthouse Settlement and Lighthouse Capital Limited
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10.8*
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Lease Agreement, dated January 2, 2018, by and between
Forafric Maroc and Darafric SARL AU for the rent of the headquarters of Forafric Maroc in Casablanca
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23.1
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Consent of Marcum LLP, independent registered accounting firm for Globis Acquisition Corp..
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23.2
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Consent of UHY LLP, independent registered accounting firm for FAHL.
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23.3*
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Consent
of Hassans International Law Firm Limited (included as part of Exhibit 5.1).
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23.4*
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Consent
of McDermott Will & Emery LLP (included as part of Exhibit 5.2).
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24.1*
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Power
of Attorney (included on signature page).
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99.1*
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Form
of Proxy Card for Stockholders Meeting.
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99.2*
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Consent
of Saad Bendidi to be named as a Director.
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99.3*
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Consent
of Julien Benitah to be named as a Director.
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99.4*
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Consent
of Franco Cassar to be named as a Director.
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99.5*
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Consent
of James Lasry to be named as a Director.
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99.6*
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Consent
of Ira Greenstein to be named as a Director.
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*
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To
be filed by amendment
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†
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Certain
of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant
agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
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1.
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The
undersigned Registrant hereby undertakes:
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(a)
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To
file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
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(i)
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To
include any prospectus required by section 10(a)(3) of the Securities Act;
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(ii)
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To
reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
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(iii)
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To
include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration Statement.
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(b)
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That,
for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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(c)
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To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
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(d)
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That,
for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b)
as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date
it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is
part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first
use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such date of first use.
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(e)
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That,
for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution
of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such purchaser:
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(i)
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Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule
424;
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(ii)
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Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by
the undersigned registrant;
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(iii)
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The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and
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(iv)
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Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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2.
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The
undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
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3.
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The
registrant undertakes that every prospectus: (1) that is filed pursuant to the immediately preceding paragraph, or (2) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment
is effective, and that, for purposes of determining any liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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4.
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The
undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form S-4, within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to
the effective date of the Registration Statement through the date of responding to the request.
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5.
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The
undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction,
and New Forafric being acquired involved therein, that was not the subject of and included in the Registration Statement when it
became effective.
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6.
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Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
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SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the city of New York, State of New York, on January 12, 2022.
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Globis
NV Merger Corp
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By:
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/s/ Paul Packer
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Name:
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Paul
Packer
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Title:
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Chief
Executive Officer and Chief Financial Officer
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POWER
OF ATTORNEY
KNOW
ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and appoints Paul Packer his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for such person and in his name, place and stead, in any and all capacities,
to sign this Registration Statement on Form S-1 (including all pre-effective and post-effective amendments and registration statements
filed pursuant to Rule 462 under the Securities Act of 1933), and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that any such attorney-in-fact
and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities
and on January 12, 2022:
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Name
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Position
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/s/
Paul Packer
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Chief
Executive Officer, Chief Financial Officer and Director (Principal Executive Officer and Principal Accounting Officer)
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Paul
Packer
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