EDGAR 10-K Filing

Company CIK: 1848898
Filing Year: 2024
Filename: 1848898_10-K_2024_0001213900-24-033098.json

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ITEM 1. BUSINESS
Item 1. Business

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
In addition to the factors discussed elsewhere in this Report, the following risks and uncertainties could materially and adversely affect the Company’s business, financial condition, results of operations, and cash flows. Additional risks and uncertainties not presently known to the Company also may impair the Company’s business operations and financial condition.
Risk Factors Summary
Investing in our securities involves risks. You should carefully consider the risks described in “Risk Factors” beginning on page 32 before making a decision to invest in our common stock. If any of these risks actually occurs, our business, financial condition and results of operations would likely be materially adversely affected. In such case, the trading price of our securities would likely decline, and you may lose all or part of your investment. Set forth below is a summary of some of the principal risks we face:
Risks Related to Our Business and Industry
● We do not currently have sufficient funds to continue our operations and require additional capital immediately, and our independent registered public accountants and management have expressed substantial doubt as to our ability to continue as a going concern.;
● We have a limited operating history on which to judge our business prospects and management, and we cannot assure you that we will achieve or sustain profitability;
● Our business is affected by fluctuations in agricultural commodity prices, transportation costs, energy prices, interest rates, and foreign currency exchange rates, and our risk management strategies may not be successful in minimizing our exposure to these fluctuations;
● Our earnings may be negatively impacted by declining demand for our product based on a variety of factors, including end-demand for crops, supply and quality issues, or any other reason;
● We may be unable to successfully negotiate binding offtake agreements, which could harm our commercial prospects;
● Our use of the 20,000 hectares located at the LFT Farm is subject to a 50-year land use right provided pursuant to a Republic of Senegal Presidential Decree (as of December 29, 2023, approximately 38 years will remain under this decree), which subjects us to risks including early termination or modification of such decree, which may result in a loss of anticipated future revenue, which could have an adverse effect on our ability to operate our business, our financial results and customer demand for our products and services;
● We rely upon irrigation systems and public water sources, and in the event that the government or another regulatory body limits the Company’s ability to divert stream waters to its irrigation systems, the result could have a negative impact on the Company’s ability to continue with its agricultural operations and development plans;
● The presence of the novel coronavirus disease, COVID-19, or any other pandemics, public health crisis or disease, such as Ebola virus or dengue, may have an adverse impact our business, including depressing demand for our products and preventing our employees, agents and consumers from travelling and conducting business activities;
● Due to the international nature of our proposed business, we are exposed to various risks of international operations, including adverse trade policies, changes in laws, inflation, exchange controls, sovereign risk, changes in a region’s economic or political condition, and civil or political instability;
Risks Related to our Future Growth
● If we fail to manage our recent and future growth effectively, we may be unable to execute our business plan or adequately address competitive challenges.
● Because of the significant number of redemptions by our public stockholders, we only received approximately $2.89 million in distributions from the Trust Account in connection with our Business Combination, all of which was used to fund business expenses. We will require significant additional financing to achieve our goals and a failure to obtain this capital on acceptable terms, or at all, may adversely impact our ability to support our business growth strategy.
● Our results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations, resulting in a decline in the price of our common stock.
● Forecasts of market growth in this prospectus may not be accurate.
Risks Related to Intellectual Property
● If we fail to protect, or incur significant costs in defending, our intellectual property and other proprietary rights, then our business and results of operations could be materially harmed.
● Third parties may assert that we are infringing upon their intellectual property rights, which could divert management’s attention, cause us to incur significant costs, and prevent us from selling or using the technology to which such rights relate.
Risk Related to Our Securities
● Provisions in our Charter may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our common stock and could entrench management.
● Future resales of common stock may cause the market price of our securities to drop significantly, even if our business is doing well.
● Our stock price may be volatile and may decline regardless of our operating performance.
● There can be no assurance that our common stock will be able to comply with the continued listing standards of Nasdaq.
● We are currently an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and that status could make our securities less attractive to investors.
Risk Factors
An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not known to us or that we consider immaterial as of the date of this Form 10-K. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment.
Risks Related to Our Business and Industry
We do not currently have sufficient funds to service our operations and expenses and other liquidity needs and require additional capital immediately, and our independent registered public accountants and management have expressed substantial doubt as to our ability to continue as a going concern.
We do not currently have sufficient funds to service our operations and our expenses and other liquidity needs and require additional capital immediately, and our independent registered public accountants and management have expressed substantial doubt as to our ability to continue as a going concern. At December 31, 2023 we had a working capital deficit of approximately $24.6 million. At December 31, 2023, we had approximately $2.8 million in cash. We received approximately $8.6 million in gross proceeds from the Closing, inclusive of proceeds from the Trust Account and funds received in connection with the Cash-Settled Equity Derivative Transaction agreement entered into with Vellar Opportunities Fund Master, Ltd. (the “CSED”). We have incurred substantial transaction expenses in connection with the Business Combination and approximately $2.0 million of transaction expenses were settled at the Closing. However, we continue to have substantial transaction expenses accrued and unpaid subsequent to the Closing. We intend to seek delays on certain payments and explore other ways of potentially reducing immediate expenses with the goal of preserving cash until any potential additional financing is secured, but these efforts may not be successful or sufficient in amount or on a timely basis to meet our ongoing capital requirements.
We are in discussions with certain financing sources to attempt to secure additional interim financing, which is needed to continue operations and fund other liquidity needs. In the absence of additional sources of liquidity, management anticipates that existing cash resources will not be sufficient to meet ongoing operating and liquidity needs. However, there is no assurance that we will be able to timely secure such additional liquidity or be successful in raising additional funds or that such required funds, if available, will be available on acceptable terms or that they will not have a significant dilutive effect on our existing stockholders. In addition, we are unable to determine at this time whether any of these potential sources of liquidity will be adequate to support our operations or provide sufficient cash flows to us to meet our obligations as they become due and continue as a going concern. In the event we determine that additional sources of liquidity will not be available to us or will not allow us to meet our obligations as they become due, we may need to file a voluntary petition for relief under the United States Bankruptcy Code in order to implement a restructuring plan or liquidation. If sufficient funds are not available, we will have to delay, reduce the scope of, or eliminate some or all of our business activities, which would adversely affect our business prospects and our ability to continue our operations. In addition, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and/or seek protection under Chapters 7 or 11 of the United States Bankruptcy Code. This could potentially cause us to cease operations and result in a total loss of your investment in our common stock.
Our independent auditor’s report on its financial statements included an explanatory paragraph that indicates that the financial statements were prepared assuming that we would continue as a going concern. As discussed in Note 1 to the financial statements for the year ended December 31, 2023, we have a history of net losses incurred for the current and prior years as of December 31, 2022. We also do not have sufficient cash on hand or available liquidity to meet our obligations through the twelve months following December 31, 2023. These conditions raise substantial doubt about our ability to continue as a going concern. The ability to continue as a going concern is dependent upon generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. There can be no assurance that we will be successful in our plans described above or in attracting equity or alternative financing on acceptable terms, or if at all. The financial statements contained elsewhere in this proxy statement/prospectus do not include any adjustments that might result from our inability to continue as a going concern.
Because the proceeds from the Business Combination and CSED are not adequate to cover our accrued and unpaid expenses and provide the cash and liquidity necessary to operate and grow our business, we continue to seek additional financing, including debt and equity financing, and other sources of financing such as senior convertible notes and other sources of capital, including with related parties. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted. The terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders.
If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all. Further, the perception that we may be unable to continue as a going concern may impede our ability to pursue any potential strategic opportunities or operate our business due to concerns regarding our ability to discharge our contractual obligations. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop further hectarage for production. In addition, our ability to raise necessary financing could be impacted by macro-economic conditions, such as an inflationary period or economic slowdown, and market impacts as a result of geopolitical events, including relating to Russia’s invasion of Ukraine and the State of Israel’s war against Hamas. If we are unable to obtain sufficient funding on a timely basis and on acceptable terms and continue as a going concern, we may be required to significantly curtail, delay or discontinue our development programs or to otherwise reduce or discontinue our operations. If we are ultimately unable to continue as a going concern, we may have to seek the protection of bankruptcy laws or liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and in these circumstances, it is likely that our stockholders will lose all or a part of their investment.
We have a limited operating history on which to judge our business prospects and management.
We were incorporated in May 2021 and have only recently commenced commercial operations. An evaluation of our business and prospects can only be made through our pilot program and the operations of our wholly owned subsidiaries. Operating results for future periods are subject to numerous uncertainties and we cannot assure that we will achieve or sustain profitability. Our prospects must be considered in light of the risks encountered by companies in the early stage of development, particularly companies in new and rapidly evolving markets. Future operating results will depend upon many factors, including our success in attracting and retaining motivated and qualified personnel, our ability to establish short term credit lines or obtain financing from other sources, our ability to develop and market new products or control costs, and general economic conditions. We cannot assure that we will successfully address any of these contingencies.
We have a history of net losses.
For the fiscal year ended December 31, 2023 we incurred a net loss of approximately $43.1 million. and used cash in continuing operations of $4.0 million. We also incurred a net loss of approximately $26.3 million and used cash in continuing operations of $2.7 million for the year ended December 31, 2022. Our operations have historically been financed principally by loans from our majority shareholder, Global Commodities and Investments Limited, and its affiliated entities. Our primary sources of liquidity to date are loans from Global Commodities, sales of unneeded fixed assets from the prior ownership, various convertible and short-term debt instruments as well as the sale of alfalfa, which began during the second quarter of 2022.
There can be no assurance that we will be able to bring the business to operating profitability in the near-term or at all. As of December 31, 2023 we did not hold cash and cash equivalents in an amount sufficient to finance our operations for the next twelve months. There can be no assurance that we will obtain sufficient liquidity to continue operations or initiatives or for our business. Our cash flows may be impacted by a number of factors, including changing market conditions, reduction in demand for our crops as well as operating losses that are being incurred. There can be no assurance that we will be successful in raising additional capital necessary to fund our operations in the near or long term. The failure to raise any necessary additional capital on acceptable terms, or at all, may have a material adverse effect on our future business and results of operations.
The loss of any member or change in structure of our senior management team could adversely affect our business.
Our success depends in large part upon the skills, experience and performance of members of our executive management team and others in key leadership positions as we depend on key management to run our business. The efforts of these persons will be critical to us as we continues to develop and scale our business. If we were to lose one or more key executives, including Michael Rhodes, our Chief Executive Officer, Harry Green, our Chief Financial Officer, and Edward Meiring, our Chief Operating Officer, among others, we may experience difficulties in competing effectively and implementing our business strategy. Only certain of our executives have employment contracts, and the majority of our employees are at-will, which means that either we or any employee may terminate their employment at any time or in the notice period set forth in an executive’s contract. We do not carry key person insurance for any of our executives or employees. The loss of one or more of our executive officers or other key personnel or our inability to locate suitable or qualified replacements could be significantly detrimental to product development efforts and could have a material adverse effect on our business, financial condition and results of operations.
In addition, we must attract and retain highly qualified personnel, including certain foreign nationals who are not citizens or permanent residents of Senegal or Niger, many of whom are highly skilled and constitute an important part of our workforce. Our ability to hire and retain these employees and their ability to remain and work in our countries of operations. are impacted by laws and regulations, as well as by procedures and enforcement practices of various government agencies. Changes in immigration laws, regulations or procedures, including those that may be enacted by the current presidential administrations may adversely affect our ability to hire or retain such workers, increase operating expenses and negatively impact our ability to deliver products and services, any of which would adversely affect our business, financial condition and results of operations.
We may not be able to manage our future growth effectively, which could make it difficult to execute our business strategy.
Our expected future growth could create a strain on the organizational, administrative and operational infrastructure, including farming operations and logistics. We may not be able to maintain the quality of or expected delivery times for its products or satisfy customer demand as it grows. Our ability to manage our growth effectively will require us to continue to improve our operational, financial and management controls, as well as our reporting systems and procedures. As we grow, any failure of our controls or interruption of our facilities or systems could have a negative impact on our business and financial operations. We plan to expand into the fishery logistics and carbon offset production businesses, which will affect a broad range of business processes and functional areas. The time and resources required to implement these new systems is uncertain, and failure to complete these activities in a timely and efficient manner could adversely affect our operations. If we are unable to manage our growth effectively, it may be difficult for us to execute our business strategy and our business could be harmed.
Our use of the 20,000 hectares located at the LFT Farm is subject to a 50-year land use right provided pursuant to a Republic of Senegal Presidential Decree, which subjects us to risks including early termination.
Our right to utilize the 20,000 hectares of land upon which its LFT Farm is located in Les Fermes de la Teranga in Northern Senegal, is granted pursuant to a Republic of Senegal Presidential Decree controlled by our wholly owned subsidiary, Agro Industries. While we have no reason to believe that the Republic of Senegal will terminate the Senegal Presidential Decree, the Republic of Senegal has the right to modify, curtail or terminate such decrees without prior notice at its convenience. In the event of any such termination or modification, we may not be entitled to recover any of our incurred or committed costs relating to the development of the LFT Farm. The termination or any modification or curtailment of the Senegal Presidential Decree would result in a loss of anticipated future revenue attributable to the LFT Farm, which could have an adverse effect on our ability to operate our business, our financial results, and customer demand for our products and services.
Our risk management strategies may not be effective.
Our business is affected by fluctuations in agricultural commodity prices, transportation costs, energy prices, interest rates, and foreign currency exchange rates. We may engage in hedging transactions to manage these risks. However, our exposure may not always be fully hedged, and our hedging strategies may not be successful in minimizing our exposure to these fluctuations. In addition, our risk management strategies may seek to position our overall portfolio relative to expected market movements. While we have implemented a broad range of risk monitoring and control procedures and policies to mitigate potential losses, we may not in all cases be successful in anticipating a significant risk exposure and protecting us from losses that have the potential to impair our financial position.
Our relative crop yields may not be consistent with our pilot experience.
We have undertaken a pilot programs for rice, sweet potato, and most recently alfalfa in order to understand soil quality, water and agronomy that generated substantive growth results. While our alfalfa pilot program has also generated consistent results and, along with the results of our rice and sweet potato programs, enhanced our confidence in potential alfalfa crop yields, these results may have been aberrational and there is no guarantee that they will be sustained in larger commercial practice.
Our earnings can be negatively impacted by declining demand brought on by varying factors, many of which are out of our control.
Demand for our product depends upon a variety of factors, including end-demand for the crops. For example, a severe downturn in the dairy industry could have a negative effect on sales of alfalfa hay, and as a result, the demand for our alfalfa in the markets in which we sell. In addition, demand for our products could decline because of other supply and quality issues or for any other reason, including products of competitors that might be considered superior by end users. A decline in demand for our products could have a material adverse effect on our business, results of operations and financial condition.
We rely upon irrigation systems and public water sources and a loss of access to public water sources could have detrimental effects on our ability to produce alfalfa.
We remain engaged in farming and harvesting operations relating to alfalfa to be utilized for cattle feed. We incur significant risks relating to the cost of growing and maintaining alfalfa and producing and selling the alfalfa. We rely on water sourced from our irrigation systems, which divert water from streams and development tunnels into a network of ditches, tunnels, flumes, siphons and reservoirs. In the event that the government or another regulatory body limits our ability to divert stream waters to our irrigation systems, the result could have a negative impact on our ability to continue with our agricultural operations and development plans.
We may be unable to successfully negotiate binding offtake agreements, which could harm our commercial prospects.
We cannot assure you that we will be able to negotiate one or more offtake agreements or that, if such offtake agreements are completed, the terms would enable us to market our crop at a favorable margin. Although we are engaged in discussions with respect to such offtake agreements, we may fail to successfully negotiate offtake agreements in a timely manner or on favorable terms, which may force us to dedicate additional resources to sales in spot markets. Furthermore, should we remain dependent on spot market sales, our profitability will remain vulnerable to short-term fluctuations in the price and demand for alfalfa and competing substitutes. A failure to have offtake agreements in place may affect the willingness of investors to make an investment in us, which could impair our ability to raise additional capital.
A pandemic, epidemic, outbreak of an infectious disease, including the outbreak of a novel strain of coronavirus (“COVID-19”) or other public health crisis could adversely impact our business operations and financial results.
If a pandemic, epidemic, or outbreak of an infectious disease, including the resurgence of COVID-19 or the outbreak of a novel strain of COVID-19, or other public health crisis were to affect our markets, facilities or our customers, our business could be adversely affected. The global spread of COVID-19 has disrupted certain aspects of our operations, including the ability of certain of our employees to collaborate in-person, and may adversely impact our business operations and financial results, including our ability to execute on our business strategy and goals. Specifically, the continued spread of COVID-19, the potential future spread of other infectious diseases and related precautionary measures may result in delays or disruptions in our supply chain, delays in the launch or execution of certain of our customers’ projects and a decrease of our operational efficiency in the development of our systems, products, technologies and services. We continue to take measures within our business operations to ensure the health and safety of our employees. However, there can be no assurance that these measures will prevent disruptions due to COVID-19 or other infectious diseases within our workforce.
The COVID-19 pandemic has also resulted in, and other infectious diseases could result in, significant disruption and volatility of global financial markets. This disruption and volatility may adversely impact our ability to access capital. In the future, this could negatively affect our liquidity and capital resources. Given the rapid and evolving nature of the impact of the virus, responsive measures taken by governmental authorities and the continued uncertainty about its impact on society and the global economy, we cannot predict the extent to which it will affect our operations, particularly if these impacts persist or worsen over an extended period of time. To the extent COVID-19 adversely affects our business operations and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
Outbreaks of other disease may adversely affect our business operations and financial condition.
Significant outbreaks of contagious diseases, and other adverse public health developments, could have a material impact on our business operations and financial condition. Many of our operations are currently, and will likely remain in the near future, in developing countries which are susceptible to outbreaks of disease and may lack the resources to effectively contain such an outbreak quickly. Such outbreaks may impact our ability to operate by limiting access to qualified personnel, increasing costs associated with ensuring the safety and health of its personnel, restricting transportation of personnel, equipment, and supplies to and from its areas of operation and diverting the time, attention and resources of government agencies which are necessary to conduct its operations. In addition, any losses we experience as a result of such outbreaks of disease which impact sales or delay production may not be covered by our insurance policies.
Epidemics of both Ebola virus and dengue have been reported in recent years in West Africa. An epidemic of the Ebola virus disease occurred in parts of West Africa in 2014 and continued through 2015. A substantial number of deaths were reported by the World Health Organization (“WHO”) in West Africa, and the WHO declared it a global health emergency. A localized outbreak of dengue was reported in 2016. It is impossible to predict the effect and potential spread of new outbreaks of the Ebola virus or dengue in West Africa and surrounding areas. Should another Ebola virus or dengue outbreak occur, including to the countries in which we operate, or not be satisfactorily contained, our operations could be delayed, or interrupted after commencement. Any changes to these operations could significantly increase costs of operations.
There is potential for competitive cattle feed or alternate protein sources.
Beef cattle can utilize roughages of both low and high quality, including pasture forage, hay, silage, corn (maize) fodder, straw, and grain by-products. Cattle also utilize nonprotein nitrogen in the form of urea and biuret feed supplements, which can supply from one-third to one-half of all the protein needs of beef animals. Nonprotein nitrogen is relatively cheap and abundant and is usually fed in a grain ration or in liquid supplements with molasses and phosphoric acid or is mixed with silage at ensiling time; it also may be used in supplement blocks for range cattle or as part of range pellets. Other additions to diet include corn (maize), sorghum, milo, wheat, barley, or oats. Whey protein and pea protein have recently emerged as competitive protein sources to alfalfa, albeit at materially lower yields.
We are subject to global and regional economic downturns and related risks.
The level of demand for our products is affected by global and regional demographic and macroeconomic conditions, including population growth rates and changes in standards of living. A significant downturn in global economic growth, or recessionary conditions in major geographic regions, may lead to reduced demand for agricultural commodities and food products, which could adversely affect our business and results of operations. Further, deteriorating economic and political conditions in our major markets affected by the COVID-19 pandemic, such as increased unemployment, decreases in disposable income, declines in consumer confidence, or economic slowdowns or recessions, could cause a decrease in demand for our products.
Additionally, weak global economic conditions and adverse conditions in global financial and capital markets, including constraints on the availability of credit, have in the past adversely affected, and may in the future adversely affect, the financial condition and creditworthiness of some of our customers, suppliers and other counterparties, which in turn may negatively impact our financial condition and results of operations.
Adverse weather and other farming conditions, including as a result of climate change, may adversely affect the availability, quality and price of agricultural commodities and agricultural commodity products, as well as our operations and operating results.
Adverse weather conditions have historically caused volatility in the agricultural commodity industry and consequently in our operating results by causing crop failures or significantly reduced harvests, which may affect the supply and pricing of the agricultural commodities that we sell and use in our business, reduce demand for our fertilizer products and negatively affect the creditworthiness of agricultural producers who do business with us.
Severe adverse weather conditions, such as severe storms, may also result in extensive property damage, extended business interruption, personal injuries and other loss and damage to our business. Our operations also rely on dependable and efficient transportation services. A disruption in transportation services, as a result of weather conditions or otherwise, may also significantly adversely impact our operations.
Additionally, the potential physical impacts of climate change are uncertain and may vary by region. These potential effects could include changes in rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities, and changing temperature levels that could adversely impact our costs and business operations, the location, costs and competitiveness of global agricultural commodity production and related storage and processing facilities and the supply and demand for agricultural commodities. These effects could be material to our results of operations, liquidity or capital resources.
Although alfalfa is a well-adapted plant that usually gives good production for many years, it can be severely affected by weeds. Weeds compete with alfalfa plants in water and nutrient, resulting in thin and underperforming plants. We may have to consult local farmers and/or agronomists in order to understand the most recent information on the weeds most commonly found in our region. Then we will have to plan a solid (pre and after sowing) weed management policy, taking into account the local legal framework and the agronomist’s suggestion. Some chemicals widely used in some countries are strictly forbidden in other countries.
We operate in areas subject to natural disasters and which may be adversely affected by climate change.
Climate change poses a threat to Senegal’s socio-economic development. In general, climate models suggest that West African countries will likely experience increased temperatures, decreased annual rainfall, increases in the intensity and frequency of heavy rainfall events, and a rise in sea level. Climate change in Senegal will have wide reaching impacts on many aspects of life in Senegal. Climate change is expected to cause an increase in average temperatures over west Africa by between 1.5 and 4 °C (3 °F and 7 °F) by the middle of this century, relative to 1986 - 2005. Projections of rainfall indicate an overall decrease in rainfall and an increase in intense mega-storm events over the Sahel. The sea level is expected to rise faster in West Africa than the global average. Although Senegal is currently not a major contributor to global greenhouse gas emissions, it is one of the most vulnerable countries to climate change. Extreme drought is impacting agriculture, and causing food and job insecurity. More than 70% of the population is employed in the agricultural sector. Sea level rise and resulting coastal erosion is expected to cause damage to coastal infrastructure and displace a large percentage of the population living in coastal areas. Climate change also has the potential to increase land degradation that will likely increase desertification in eastern Senegal, leading to an expansion of the Sahara.
Senegal and other West African countries are also prone to floods, droughts and other natural disasters. The effects of climate change, a significant seismic event where our operations are concentrated, abundance of insects or locusts, or other natural disasters could adversely impact our ability to deliver labor to the crops, deliver crops to the marketplace, and receive water and could adversely affect our costs of operations and profitability.
We are subject to fluctuations in agricultural commodity and other raw material prices, energy prices and other factors outside of our control that could adversely affect our operating results.
Prices for agricultural commodities and their by-products, like those of other commodities, are often volatile and sensitive to local and international changes in supply and demand caused by factors outside of our control, including farmer planting and selling decisions, currency fluctuations, government agriculture programs and policies, pandemics (such as the COVID-19 pandemic), governmental restrictions or mandates, global inventory levels, demand for biofuels, weather and crop conditions, and demand for and supply of competing commodities and substitutes. These factors may cause volatility in our operating results.
Additionally, our operating costs and the selling prices of certain of its products are sensitive to changes in energy prices. Our industrial operations utilize significant amounts of electricity, natural gas and coal, and our transportation operations are dependent upon diesel fuel and other petroleum-based products. Significant increases in the cost of these items and currency fluctuations could adversely affect our operating costs and results. The selling prices of the agricultural commodities and commodity products that we sell are also sensitive to changes in the market price for biofuels, and consequently world petroleum prices.
We are vulnerable to the effects of supply and demand imbalances in our industries.
Historically, the market for some agricultural commodities has been cyclical, with periods of high demand and capacity utilization stimulating new plant investment and the addition of incremental processing or production capacity by industry participants to meet the demand. The timing and extent of this expansion may then produce excess supply conditions in the market, which, until the supply/demand balance is again restored, negatively impacts product prices and operating results. During times of reduced market demand, we may suspend or reduce production.
Our business may require significant capital expenditures.
Our business is capital intensive, particularly in the redevelopment of the land and rehabilitation of water infrastructure. On an annual basis, we could spend significant sums of money for additions to, or replacement of, land, land improvements, irrigation and farming equipment. We must obtain funds for these capital projects from operations or new capital raises. We cannot provide assurance that available sources of funds will be adequate or that the cost of funds will be at levels permitting us to earn a reasonable rate of return.
Ruminant livestock generates Greenhouse Gas Emissions, which contribute to climate change, and any global scrutiny on alfalfa as a source of cattle nutrition could adversely affect our operating results.
Ruminant livestock generates a significant proportion of anthropogenic Greenhouse Gas Emissions, which contributes to climate change. Global scrutiny on Greenhouse Gas Emissions may serve to increase scrutiny on alfalfa as a source of cattle nutrition, which could adversely affect our costs of operations and profitability.
Ruminants such as cattle, sheep, and goats produce meat and milk through enteric fermentation, a digestive process in which microbes decompose and ferment food in the digestive tract or rumen. This process produces methane which is emitted via digestion. The amount of methane produced is directly related to the type of food consumed and the level of intake, in addition to other factors such as animal size, growth rate, production level, and environmental temperature. The loss of methane from ruminants also represents a loss of dietary energy, so initiatives to reduce emissions also represent an opportunity to improve the efficiency of livestock production. Methane is naturally occurring, and typically decomposes over a 10-year half-life, and has recently been recalibrated according to a new scoring methodology, the GWP* methodology, by the University of Oxford.
Crop insurance may not be available or not be adequate to cover losses.
We do not currently have property insurance covering our facilities and the LFT Farm. The insurance industry in Senegal is still at an early stage of development. Insurance companies in Senegal offer limited insurance products and the cost of such insurance is high. We have determined that the risks of disruption or liability from our business, the loss or damage to our property, including our facilities and equipment, the cost of insuring for these risks, and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to purchase such insurance. Any uninsured occurrence of loss or damage to property, or litigation or business disruption may result in the incurrence of substantial costs and the diversion of resources, which could have an adverse effect on our operating results.
In addition, certain crops and certain land locations are either not eligible or eligible at a reduced level for crop insurance. We intend to grow crops in areas where full insurance is available, but the consistent availability and reasonable cost of such insurance cannot be guaranteed. Further, if an insurance claim is made, the amount of funds received might not be sufficient to cover costs and provide debt service.
Our earnings may be affected, to large extent, by volatility in the market value of our crops.
We intend to grow primarily organic alfalfa. The price of alfalfa, like other commodity crops, can vary widely, thereby directly impacting our revenue. In addition, we may not have a diverse customer base to which we are selling our product. If a single material buyer should fail to take or pay for its production, we would have to sell to other purchasers who might pay higher or lower prices than specified in our contracts.
If we are unable to plant enough alfalfa crop during the planting season that occurs in the first quarter of the year prior to the Senegal rainy season to meet our projections and fulfill anticipated demand for that year, the loss of revenue may have a material adverse effect on our results of operations and financial condition.
Should events such as adverse weather, such as drought or floods (which are difficult to anticipate and which cannot be controlled), production or transportation interruptions, delays in obtaining available inputs such as fertilizer or equipment due to supply chain or other local disruptions, or lack of seasonal labor, and contractor availability, we may be unable to plant enough crops during the first quarter of the year, which we refer to as the planting season, to meet our projections and anticipated demand. Failure to plant our targeted crops amounts for any year may result in reduced revenue without the opportunity to recover until the following planting season, which could have a material adverse effect on our results of operations and financial condition.
Our ability to cultivate, husband and harvest our crop may be compromised by availability of labor and equipment.
When the crop is ready to harvest, we are dependent on seasonal labor and contractors for harvesting. During harvest season, there is demand for such seasonal labor from other farming operations which will compete with our demand. The availability of seasonal farm labor is also affected by uncertain national immigration policies and politically volatile enforcement practices. Thus, adequate labor might not be available when our crops are ready to harvest. This could delay revenue or decrease revenue.
The inability to obtain certain materials could adversely impact our ability to deliver on our contractual commitments which could negatively impact our results of operations and cash flows.
Although most materials essential to our business are generally available from multiple sources, some key materials, while currently available to us from multiple sources, are at times subject to industry-wide availability constraints and pricing pressures. If the supply of a key or single-sourced material to us were to be delayed or curtailed or in the event of a delayed shipment of completed products to us, our ability to ship product in desired quantities, and in a timely manner, could be adversely affected. Our business and financial performance could also be adversely affected depending on the time required to obtain sufficient quantities from the original source, or to identify and obtain sufficient quantities from an alternative source. Continued availability of these components may be affected if suppliers were to decide to concentrate on the production of common components instead of components customized to meet our requirements. We attempt to mitigate these potential risks by working closely with these and other key suppliers on product introduction plans, strategic inventories, coordinated product introductions, and internal and external manufacturing schedules and levels. Consistent with industry practice, we aquire materials through a combination of formal purchase orders, supplier contracts, and open orders based on projected demand information. However, adverse changes in our vendors’ supply chain may adversely impact the supply of key materials.
Reliance on third-party manufacturers may result in increased or volatile costs.
The alfalfa products we offer require a limited number of third-party manufacturers to produce, and as a result we may be subject to price fluctuations or demand disruptions. Our operating results would be negatively impacted by increases in the costs of such suppliers, and there is no guarantee that costs will not rise. In addition, as we expand into new categories and product types we expect that we may not have strong purchasing power in these new areas, which could lead to higher costs than it has historically seen in its current categories. We may not be able to pass increased costs on to consumers, which could adversely affect its operating results. Moreover, in the event of a significant disruption in the supply of the materials used in the manufacture of the products we offer, we and our vendors might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price.
Risks Related to Operations Outside of the United States
We are subject to economic, political and other risks of doing business globally and in emerging markets.
We will be a multi-national business and our business strategies may involve expanding or developing our business in emerging market regions, including Eastern Europe, Asia-Pacific, the Middle East and Africa. Due to the international nature of our business, we are exposed to various risks of international operations, including:
● adverse trade policies or trade barriers on agricultural commodities and commodity products; government regulations and mandates in response to the COVID-19 pandemic;
● inflation and hyperinflation and adverse economic effects resulting from governmental attempts to control inflation, such as the imposition of wage and price controls and higher interest rates;
● changes in laws and regulations or their interpretation or enforcement in the countries where AFRAG operate, such as tax laws;
● difficulties in enforcing agreements or judgments and collecting receivables in foreign jurisdictions;
● exchange controls or other currency restrictions and limitations on the movement of funds, such as on the remittance of dividends by subsidiaries;
● inadequate infrastructure and logistics challenges;
● sovereign risk and the risk of government intervention, including through expropriation, or regulation of the economy or natural resources, including restrictions on foreign ownership of land or other assets; while we may adopt insurance coverage to cover expropriation risk, convertibility, transfer and other risks, this may not sufficient to cover business risks;
● the requirement to comply with a wide variety of laws and regulations that apply to international operations, including, without limitation, economic sanctions regulations, labor laws, import and export regulations, anti-corruption and anti-bribery laws;
● challenges in maintaining an effective internal control environment with operations in multiple international locations, including language differences, varying levels of accounting expertise in international locations and multiple financial information systems;
● changes in a country’s or region’s economic or political condition; and
● labor disruptions, civil unrest, significant political instability, coup attempts, wars or other armed conflict or acts of terrorism.
Emerging markets are subject to different risks as compared to more developed markets. Operating a business in an emerging market can involve a greater degree of risk than operating a business in more developed markets, including, in some cases, increased political, economic and legal risks. Emerging market governments and judiciaries often exercise broad, unchecked discretion and are susceptible to abuse and corruption. Moreover, financial turmoil in any emerging market country tends to adversely affect the value of investments in all emerging market countries as investors move their money to more stable, developed markets. As has happened in the past, financial problems or an increase in the perceived risks associated with investing in companies in emerging economies could dampen foreign investment and adversely affect the local economy. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved in, and are familiar with, investing in emerging markets.
Finally, international trade disputes can adversely affect agricultural commodity trade flows by limiting or disrupting trade between countries or regions. We cannot predict the effects that future trade policy or the terms of any negotiated trade agreements and their impact on our business could have. These risks could adversely affect our operations, business strategies and operating results.
We are subject to a number of risks in its supply chain including failure in telecommunication systems, subcontractor and vendor failure to perform and the disruption of transportation networks. The distances between areas of operations in Niger and Senegal are vast, as are the distances between our African operations and that of our consumer markets which leaves us exposed to variability in supply chains.
Our operations in Senegal have resulted in, and as our business expands may result in, claims that these operations have had or will have a detrimental effect on the local communities in which the operations are located.
Historically, certain areas of Africa have a limited history of formal land ownership, and as a result certain communities have made, and may in the future make additional, land claims with respect to our properties or insist on further involvement in our operations.
Claims may continue to be made that will require substantial management resources to address. There can be no assurance that any such claim will not be adjudicated to be valid, and if so determined may result in concessions of granted land or other compensation.
Our operations in Senegal have resulted in, and as its business expands may result in, claims from local communities asserting ownership of certain of our properties.
Historically, certain areas of Africa have a limited history of formal land ownership, and as a result certain communities have made, and may in the future make additional, land claims with respect to our properties or insist on further outside involvement in our operations. For example, certain organizations purporting to advance the interests of Senegalese communities recently sent a letter to one of our technical advisors highlighting such a land claim and questioning the propriety of the advisor’s relationship with us. While we believe the claims and questions set forth in the letter are without merit, there can be no assurance that such claims or any similar future claims will not be adjudicated to be valid, and if so determined may result partially or wholly in the loss of land granted to us that are subject to such claims or the payment of other compensation to claimants. Claims may continue to be made that will require substantial management resources to address.
Our ongoing operations in Niger may be affected by the geopolitical instability in the country.
The U.S. issued a travel advisory related to Niger on August 2. 2023. On July 26, 2023, President Mohamed Bazoum was placed under house arrest amidst efforts to overthrow the democratically elected government of Niger. Subsequent events have severely limited flight options to and from Niger. Given this development, on August 2, 2023, the U.S. government ordered the departure of non-emergency U.S. government employees and eligible family members from Embassy Niamey. The U.S. Embassy in Niamey has temporarily reduced its personnel, suspended routine services, and is only able to provide emergency assistance to U.S. citizens in Niger. Current, and future, instability in Niger could adversely affect our operations, business strategies and operating results.
Our operations in Africa are subject to risk associated with lack of infrastructure.
Our growth strategy depends in part on its ability to expand its operations in Africa. However, Africa may have greater political, economic and currency volatility and greater vulnerability to infrastructure and labor disruptions than more established markets. Engaging in business practices prohibited by laws and regulations with extraterritorial reach, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, or local anti-bribery laws may be more common. These laws generally prohibit companies and their employees, contractors or agents from making improper payments to government officials, including in connection with obtaining permits or engaging in other actions necessary to do business. Failure to comply with these laws could subject us to civil and criminal penalties that could materially and adversely affect our reputation, financial condition and results of operations.
Disruptions in water and power supply may adversely affect our operations.
Our operations are reliant upon stable supply of electricity, availability of water and access to transportation routes in order to optimally run its operations and/or move its products. The infrastructure in some countries in which we operate, such as rail infrastructure, inland water systems, electricity and water supply, may need to be further upgraded and expanded, and in certain instances, possibly at our own cost. Should we not have access to reliable electricity supply, or should we have limited access to water or experience infrastructure challenges in the regions in which we operate, this could have a material adverse effect on our business, operating results, cash flows, financial condition and future growth. Reliable supply of electricity is important to run our business optimally. The African power system remains very tight. Unplanned power outages may have a negative impact on our production volumes, cost and profitability.
Water, as a resource, is becoming increasingly limited as global demand for water increases. A significant part of our operations requires the use of large volumes of water. Africa is generally an arid continent and prolonged periods of drought or significant changes to current water laws could increase the cost or availability of our water supplies or otherwise impact our operations. A deterioration in water quality may contribute to an increase in costs. Although various technological advances may improve the water efficiency of our processes, they are capital intensive. We may experience limited water availability due to periodic drought events, deterioration in water quality and other infrastructure challenges related to our African operations, which could have a material adverse effect on our business, operating results, cash flows, financial condition and future growth.
Senegal and other countries in which we may operate may experience civil or political unrest or acts of terrorism.
Outbreaks of civil and political unrest and acts of terrorism have occurred in countries in Europe, Africa, South America, and the Middle East, including countries where we currently operate or plan to operate. For example, in May 2023 Senegal experienced political unrest and rioting predicated on the incarceration of a government opposition leader for criminal activity. The Senegalese government’s response to the rioting resulted in deaths of Senegal citizens and the slowdown of commercial activity throughout the country. Continued or escalated civil and political unrest and acts of terrorism in the countries in which we operate could result in our curtailing operations or delays in project completions. In the event that countries in which we operate experience civil or political unrest or acts of terrorism, especially in events where such unrest leads to an unseating of the established government, our operations could be materially impaired. our potential international operations may also be adversely affected, directly or indirectly, by laws, policies, and regulations of the United States affecting foreign trade and taxation, including U.S. trade sanctions. Realization of any of the factors listed above could materially and adversely affect our financial condition, results of operations, or cash flows.
Risks Related to Cybersecurity, Privacy and Information Technology
Failure to comply with federal, state and foreign laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current or the enactment of new laws or regulations relating to privacy, data protection and consumer protection, could adversely affect our business and our financial condition.
We collect, store, process, and use personal information and other customer data, and rely in part on third parties that are not directly under our control to manage certain of these operations and to collect, store, process and use payment information. Due to the volume and sensitivity of the personal information and data we and these third parties manage and expect to manage in the future, as well as the nature of our customer base, the security features of our information systems are critical. A variety of federal, state and foreign laws and regulations govern the collection, use, retention, sharing and security of this information. Laws and regulations relating to privacy, data protection and consumer protection are evolving and subject to potentially differing interpretations. These requirements may not be harmonized, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. As a result, our practices may not have complied or may not comply in the future with all such laws, regulations, requirements and obligations.
We expect that new industry standards, laws and regulations will continue to be proposed regarding privacy, data protection and information security in many jurisdictions. We cannot yet determine the impact such future laws, regulations and standards may have on our business. Complying with these evolving obligations is costly.
As we expand our international presence, we may also become subject to additional privacy rules, many of which, such as the General Data Protection Regulation promulgated by the European Union (the “GDPR”) and international laws supplementing the GDPR, such as in the United Kingdom, are significantly more stringent than those currently enforced in the United States. The law requires companies to meet stringent requirements regarding the handling of personal data of individuals located in the EEA. These more stringent requirements include expanded disclosures to inform customers about how we may use their personal data through external privacy notices, increased controls on profiling customers and increased rights for data subjects (including customers and employees) to access, control and delete their personal data. In addition, there are mandatory data breach notification requirements. The law also includes significant penalties for non-compliance, which may result in monetary penalties of up to the higher of €20.0 million or 4% of a group’s worldwide turnover for the preceding financial year for the most serious violations. The GDPR and other similar regulations require companies to give specific types of notice and informed consent is required for the placement of a cookie or similar technologies on a user’s device for online tracking for behavioral advertising and other purposes and for direct electronic marketing, and the GDPR also imposes additional conditions in order to satisfy such consent, such as a prohibition on pre-checked tick boxes and bundled consents, thereby requiring customers to affirmatively consent for a given purpose through separate tick boxes or other affirmative action.
A significant data breach or any failure, or perceived failure, by us to comply with any federal, state or foreign privacy or consumer protection-related laws, regulations or other principles or orders to which it may be subject or other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in claims, investigations, proceedings or actions against us by governmental entities or others or other penalties or liabilities or require us to change our operations and/or cease using certain data sets. Depending on the nature of the information compromised, we may also have obligations to notify users, law enforcement or payment companies about the incident and may need to provide some form of remedy, such as refunds, for the individuals affected by the incident.
Failures in our technology infrastructure could damage our business, reputation and brand and substantially harm our business and results of operations.
If our main data center or cloud infrastructure were to fail, or if it were to suffer an interruption or degradation of services at our main data center, we could lose important manufacturing and technical data, which could harm our business. Our facilities are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cyber security attacks, terrorist attacks, power losses, telecommunications failures and similar events. In the event that our or any third-party provider’s systems or service abilities are hindered by any of the events discussed above, our ability to operate may be impaired. A decision to close the facilities without adequate notice, or other unanticipated problems, could adversely impact our operations. Any of the aforementioned risks may be augmented if our or any third-party provider’s business continuity and disaster recovery plans prove to be inadequate. The facilities also could be subject to break-ins, computer viruses, sabotage, intentional acts of vandalism and other misconduct. Any security breach, including personal data breaches, or incident, including cybersecurity incidents, that we experience could result in unauthorized access to, misuse of or unauthorized acquisition of our or our customers’ data, the loss, corruption or alteration of this data, interruptions in our operations or damage to our computer hardware or systems or those of our customers. Moreover, negative publicity arising from these types of disruptions could damage our reputation. We may not carry sufficient business interruption insurance to compensate us for losses that may occur as a result of any events that cause interruptions in its service. Significant unavailability of our services and due to attacks could cause users to cease using our services and materially and adversely affect our business, prospects, financial condition and results of operations.
Risks Related to Legal, Regulatory and Compliance
Government policies and regulations affecting the agricultural sector and related industries could adversely affect our operations and profitability.
Agricultural commodity production and trade flows are significantly affected by government policies and regulations. Governmental policies affecting the agricultural industry, such as taxes, tariffs, duties, subsidies, import and export restrictions, price controls on agricultural commodities and energy policies (including biofuels mandates), can influence industry profitability, the planting of certain crops versus other uses of agricultural resources, the location and size of crop production, whether unprocessed or processed commodity products are traded, and the volume and types of imports and exports. Additionally, regulation of financial markets and instruments internationally may create uncertainty as these laws are adopted and implemented and may impose significant additional risks and costs that could impact our risk management practices. Future governmental policies, regulations or actions impacting our industries may adversely affect the supply of, demand for and prices of our products, restrict our ability to do business in existing and target markets, or engage in risk management activities and otherwise cause our financial results to suffer.
Expenses or liabilities resulting from litigation could materially adversely affect our results of operations and financial condition.
We have and may become party to various legal proceedings and other claims that arise in the ordinary course of business, or otherwise in the future. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. In addition, any such claims or litigation may be time-consuming and costly, divert management resources, require us to change our platform or have other adverse effects on its business. While we cannot assure the ultimate outcome of any legal proceeding or contingency in which we are or may become involved, we do not believe that any pending legal claim or proceeding arising in the ordinary course will be resolved in a manner that would have a material adverse effect on its business. However, if one or more of these legal matters resulted in a substantial monetary judgment against us, such a judgment could harm its results of operations and financial condition.
African Agriculture Holdings Inc. is a holding company with no operations of its own and, as such, it depends on its subsidiaries for cash to fund all of its operations and expenses, including future dividend payments, if any.
Our operations are conducted entirely through our subsidiaries and our ability to generate cash to meet our debt service obligations or to make future dividend payments, if any, is highly dependent on the earnings and the receipt of funds from our subsidiaries via dividends or intercompany loans. Some of our subsidiaries may become subject to agreements that restrict the sale of assets and significantly restrict or prohibit the payment of dividends or the making of distributions, loans or other payments to stockholders, partners or members. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock.
Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
Following the consummation of the Business Combination, we became subject to the reporting requirements of the Securities Act, the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. We expect that the requirements of these rules and regulations will increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on personnel, systems and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are currently an Exchange Act reporting company required to file reports with the SEC, and we are continuing to develop and refine our disclosure controls, internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed in such reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed such reports is accumulated and communicated to our principal executive and financial officers. We note that 10X II filed a Form NT 10-Q for the quarter ended September 30, 2023 indicating that it was unable to file its quarterly report for such quarter within the prescribed time period because its independent registered accounting firm was unable to complete its review of the financial statements for such quarter prior to the prescribed due date. We may have similar difficulty filing timely Exchange Act reports in the future.
As part of the SEC review process in connection with our Form S-1 initially filed on March 31, 2022, AFRAG identified certain errors in its financial statements related to the acquisition of its wholly owned subsidiary, LFT, in 2018 as follows:
AFRAG determined that its acquisition LFT in 2018 should have been accounted for as an asset acquisition instead of a business combination. As a result, in 2018 AFRAG overstated its land use right intangible asset and should not have recognized a bargain purchase gain.
AFRAG determined that a related party payable owed to the prior owner of LFT was relinquished in the acquisition of LFT and, as a result, AFRAG should not have recognized this related party payable in 2018. As a result, AFRAG should not have accrued an operating expense for this related party payable in 2018.
As a direct result of the above two error corrections imputed interest on the related party payable and amortization of the land use right asset were overstated. The reduction in the related party payable also impacted the calculation of the foreign currency translation adjustment and the allocation to the non-controlling interest.
See Note 3 to the unaudited consolidated financial statements of AFRAG for the year ended December 31, 2022 and 2021 contained elsewhere in this prospectus.
While we are taking action to update our controls to identify any future errors, any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect our operating results or cause us to fail to meet our reporting obligations and may result in additional restatements of our financial statements for prior periods. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports to be filed with the SEC under Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information.
In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended and anticipate that we will continue to expend significant resources, including accounting-related costs, and provide significant management oversight in the regular context of business operations. Any failure to maintain the adequacy of our internal controls, or our consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially and adversely affect our ability to operate its business. In the event that our internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and the price of our stock could decline.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an emerging growth company or a non-accelerated filer. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results.
Risk Related to Our Securities
We may issue additional shares of Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.
We may issue additional shares of Common Stock or other equity securities of equal or senior rank in the future in connection with, among other things, future farm acreage development, future acquisitions, repayment of outstanding indebtedness or under the African Agriculture Holdings Inc. 2023 Incentive Plan, without stockholder approval, in a number of circumstances.
The issuance of additional shares of Common Stock or other equity securities of equal or senior rank could have the following effects:
● your proportionate ownership interest will decrease;
● the relative voting strength of each previously outstanding share of Common Stock may be diminished; or
● the market price of your shares of Common Stock may decline.
We will incur increased costs as a result of being a public company
As a publicly traded company, we will incur significant legal, accounting, and other expenses that AFRAG was not required to incur in the past, particularly after we are no longer an “emerging growth company.” In addition, new and changing laws, regulations, and standards relating to corporate governance and public disclosure, including changing regulations of the SEC and Nasdaq, have created uncertainty for public companies and have increased the costs and the time that our board of directors and management must devote to compliance. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy, which could negatively affect our business, results of operations, and financial condition.
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare its performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of the Common Stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of its reliance on these exemptions, the trading prices of its securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
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 an election to opt out is irrevocable. We have 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, as an emerging growth company, we can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our 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.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of the Common Stock held by non-affiliates exceeds $250 million as of the prior June 30, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of the Common Stock held by non-affiliates exceeds $700 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, we may also make comparison of our financial statements with other public companies difficult or impossible.
Our directors, executive officers and principal stockholders have substantial control over the company, which could limit our ability to influence the outcome of key transactions, including a change of control.
Our executive officers, directors and principal stockholders and their affiliates own 42,741,705 shares of Common Stock, or approximately 75.9% of the outstanding shares of Common Stock. As a result, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to our interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale and might ultimately affect the market price of our Common Stock.
Warrants will become exercisable for Common Stock, which, if exercised, would increase the number of shares eligible for future resale in the public market and result in dilution to its shareholders.
Outstanding warrants to purchase an aggregate of 6,911,100 shares of Common Stock will become exercisable in accordance with the terms of the warrant agreement. These warrants will become exercisable 30 days after Closing. The exercise price of these warrants is $11.50 per share. To the extent such warrants are exercised, additional shares of Common Stock will be issued, which will result in dilution to the holders of Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the prevailing market prices of Common Stock. However, there is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.
The terms of the warrants may be amended in a manner adverse to a holder if holders of at least 50% of the then outstanding public warrants approve of such amendment.
The public warrants were issued in registered form under a warrant agreement between us and Continental, as warrant agent. 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 or correct any mistake, but requires the approval by the holders of at least 50% of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash, shorten the exercise period or decrease the number of shares of Common Stock purchasable upon exercise of a warrant.
We may redeem a warrant holder’s unexpired warrants prior to their exercise at a time that may be disadvantageous to such warrant holder, thereby making its warrants worthless.
We have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like for certain issuances of public shares and equity-linked securities for capital raising purposes in connection with the closing of its initial business combination) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders. If and when the warrants become redeemable, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force a warrant holder to: (i) exercise its warrants and pay the exercise price at a time when it may be disadvantageous for such warrant holder to do so; (ii) sell its warrants at the then-current market price when a warrant holder might otherwise wish to hold its warrants; or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of a warrant holder’s warrants.
The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants. None of the private placement warrants will be redeemable, subject to certain circumstances, so long as they are held by their initial purchasers or their permitted transferees.
The warrants may not be exercised at all or may be exercised on a “cashless basis” under certain circumstances, and we may not receive any cash proceeds from the exercise of such warrants.
The exercise price of the warrants may be higher than the prevailing market price of the underlying shares of common stock. The exercise price of the warrants is subject to market conditions and may not be advantageous if the prevailing market price of the underlying shares of common stock is lower than the exercise price. The cash proceeds associated with the exercise of the warrants to purchase our common stock are contingent upon our stock price. The value of our common stock will fluctuate and may not align with the exercise price of the warrants at any given time. We believe that if the warrants are “out of the money,” meaning the exercise price is higher than the market price of our common stock, there is a high likelihood that warrant holders may choose not to exercise their warrants. As a result, we may not receive any proceeds from the exercise of the warrants.
Furthermore, the warrant agreement provides that in the following circumstances holders of warrants who seek to exercise their warrants will not be permitted to do for cash and will, instead, be required to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act: (i) if the Common Stock issuable upon exercise of the warrants are not registered under the Securities Act in accordance with the terms of the warrant agreement; (ii) if we have so elected and the Common Stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of “covered securities” under Section 18(b)(1) of the Securities Act; and (iii) if we have so elected and we call the public warrants for redemption. If you exercise your public warrants on a cashless basis, you would pay the warrant exercise price by surrendering all of 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 excess of the “fair market value” of the Common Stock (as defined in the next sentence) over the exercise price of the warrants by (y) the fair market value. The “fair market value” is the average reported closing price of the Common Stock 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 the warrants. As a result, you would receive fewer shares of Common Stock from such exercise than if you were to exercise such warrants for cash.
There can be no assurance that our public warrants will be in the money at the time they become exercisable, and they may expire worthless.
The exercise price for the outstanding public warrants is $11.50 per share. There can be no assurance that such warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the warrants may expire worthless.
The warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of the warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes.
The warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of the warrants shall be deemed to have notice of and to have consented to the forum provisions in the warrant agreement. If any action, the subject matter of which is within the scope of the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.
This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes, which may discourage such lawsuits. Alternatively, if a court were to find this provision of the warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
An active, liquid trading market for our securities may not develop, which may limit your ability to sell such securities.
Although our Common Stock and public warrants are listed on Nasdaq under the ticker symbols “AAGR” and “AAGRW”, respectively, an active trading market for such securities may never develop or be sustained. A public trading market having the desirable characteristics of depth, liquidity and orderliness depends upon the existence of willing buyers and sellers at any given time, such existence being dependent upon the individual decisions of buyers and sellers over which neither we nor any market maker has control. The failure of an active and liquid trading market to develop and continue would likely have a material adverse effect on the value of Common Stock and warrants. An inactive market may also impair our ability to raise capital to continue to fund operations.
Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of its common shares.
Securities research analysts may establish and publish their own periodic projections for us. These projections may vary widely and may not accurately predict the results we actually achieve. Our share price may decline if our actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline.
In addition, fluctuations in the price of our securities could contribute to the loss of all or part of your investment. The trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.
Factors affecting the trading price of our securities may include:
● actual or anticipated fluctuations in our financial results or the financial results of companies perceived to be similar to us;
● changes in the market’s expectations about our operating results;
● success of our competitors;
● operating results failing to meet the expectations of securities analysts or investors in a particular period;
● changes in financial estimates and recommendations by securities analysts concerning us or the industry in which we operate in general;
● operating and stock price performance of other companies that investors deem comparable to ours;
● ability to grow and sell certain crops;
● changes in laws and regulations affecting our business;
● commencement of, or involvement in, litigation;
● changes in our capital structure, such as future issuances of securities or the incurrence of debt;
● the volume of shares Common Stock available for public sale;
● any major change in our board or management;
● sales of substantial amounts of our Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and
● general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your securities at or above the price at which it was acquired. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
We may fail to meet our publicly announced guidance or other expectations about our business, which would cause our stock price to decline.
We expect to provide guidance regarding our expected financial and business performance, such as projections regarding sales and product development, as well as anticipated future revenues, gross margins, profitability and cash flows. Correctly identifying key factors affecting business conditions and predicting future events is inherently an uncertain process and our guidance may not be accurate. If our guidance is not accurate or varies from actual results due to our inability to meet our assumptions or the impact on our financial performance that could occur as a result of various risks and uncertainties, the market value of our Common Stock could decline significantly.
We do not intend to pay cash dividends for the foreseeable future.
We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and do not intend to pay cash dividends for the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our board of directors deems relevant. As a result, capital appreciation, if any, of Common Stock will be your sole source of gain for the foreseeable future.
We are subject to changing law and regulations regarding regulatory matters, corporate governance and public disclosure that have increased both our costs and the risk of non-compliance.
We are subject to rules and regulations by various governing bodies, including, for example, the SEC, which are charged with the protection of investors and the oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws and regulations have resulted in increased general and administrative expenses and a diversion of management time and attention.
Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalty and our business may be harmed.
Investors may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions against us our management based on foreign laws.
Although we are a Delaware corporation, we anticipate conducting a substantial part of our business in certain foreign jurisdictions such as the Middle East and Africa, and a significant portion of our assets are located in Africa. In addition, our officers may reside within Africa for a significant portion of the time. Countries where we operate may not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States. As a result, it may not be possible for investors to serve process upon those persons, or to enforce against them, any judgments obtained from U.S. courts. As a result, it may be difficult for you to effect service of process upon us or those persons. It may also be difficult for you to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against our officers and directors who do not reside in the United States or have substantial assets located in the United States. In addition, there is uncertainty as to whether the courts in Senegal or other non-U.S. jurisdictions would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws.
Our business and operations could be negatively affected if we become subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of business and growth strategy and impact our stock price.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing recently. Volatility in the stock price of the Common Stock or other reasons may in the future cause us to become the target of securities litigation or stockholder activism. Securities litigation and stockholder activism, including potential proxy contests, could result in substantial costs and divert management’s and our board of directors’ attention and resources from our business. Additionally, such securities litigation and stockholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with suppliers, service providers and customers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and activist stockholder matters.
Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and stockholder activism.
We will need, but may be unable to obtain, funding on satisfactory terms, which could dilute our stockholders and investors, or impose burdensome financial restrictions on our business.
We have relied upon cash from financing activities and in the future, we intend to rely on revenues generated from operations to fund all of the cash requirements of our activities. Future financings may not be available on a timely basis, in sufficient amounts or on terms acceptable to us, if at all. Any debt financing or other financing of securities senior to the Common Stock will likely include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants may cause an event of default and acceleration of the obligation to pay the debt, which would have a material adverse effect on our business, prospects, financial condition and results of operations and we could lose existing sources of funding and impair our ability to secure new sources of funding. There can be no assurance that we will be able to generate any further investor interest in our securities or other types of funding, in which case investors would likely lose the entirety of their investment.
We could be subject to changes in tax rates or the adoption of new tax legislation, whether in or out of the United States, or could otherwise have exposure to additional tax liabilities, which could harm our business.
As a multinational business, we will be subject to income and other taxes in both the United States and various foreign jurisdictions. Changes to tax laws or regulations in the jurisdictions in which we will operate, or in the interpretation of such laws or regulations, could significantly increase our effective tax rate and reduce our cash flow from operating activities, and otherwise have a material adverse effect on our financial condition. For example, the Inflation Reduction Act of 2022 signed into law in the United States on August 16, 2022 introduced a 15% corporate minimum tax on certain corporations and a 1% excise tax on certain stock repurchases by certain corporations, among other changes. There can be no assurance regarding whether other such changes will occur and, if so, the ultimate impact on our business or results of its operation.
In addition, other factors or events, including business combinations and investment transactions, changes in the valuation of our deferred tax assets and liabilities, adjustments to taxes upon finalization of various tax returns or as a result of deficiencies asserted by taxing authorities, increases in expenses not deductible for tax purposes, changes in available tax credits, changes in transfer pricing methodologies, other changes in the apportionment of our income and other activities among tax jurisdictions, and changes in tax rates, could also increase our effective tax rate.
Our tax filings will be subject to review or audit by the U.S. Internal Revenue Service (the “IRS”) and state, local and foreign taxing authorities. We may also be liable for taxes in connection with businesses we acquire. Our determinations will not be binding on the IRS or any other taxing authorities, and accordingly the final determination in an audit or other proceeding may be materially different than the treatment reflected in our tax provisions, accruals and returns. An assessment of additional taxes because of an audit could harm our business.
Further changes in the tax laws of foreign jurisdictions could arise, in particular, as a result of the base erosion and profit shifting project that was undertaken by the Organization for Economic Co-operation and Development (the “OECD”). The OECD, which represents a coalition of member countries, recommended changes to numerous longstanding tax principles. As of November 4, 2021, 137 member jurisdictions of the G20/OECD Inclusive Framework on BEPS have joined the “Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy” which sets forth the key terms of such two-pillar solution, including a reallocation of taxing rights among market jurisdictions under Pillar One and a global minimum tax rate of 15% under Pillar Two. These changes, if adopted, could increase tax uncertainty and may adversely affect our provision for income taxes and increase its tax liabilities.
Delaware law and our Governing Documents contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Our Governing Documents, and the DGCL, contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by the AAGR Board and therefore depress the trading price of the Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the AAGR Board or taking other corporate actions, including effecting changes in our management. Among other things, the Governing Documents include provisions regarding:
● providing for a classified board of directors with staggered, three-year terms;
● the ability of the AAGR Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
● our Charter prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
● the limitation of the liability of, and the indemnification of, our directors and officers;
● removal of the ability of our stockholders to take action by written consent in lieu of a meeting;
● the requirement that a special meeting of stockholders may be called only by or at the direction of the AAGR Board, the chairperson of the AAGR Board or our chief executive officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors;
● controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings;
● the ability of the AAGR Board to amend the bylaws, which may allow the AAGR Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and
● advance notice procedures with which stockholders must comply to nominate candidates to the AAGR Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the AAGR Board, and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of AFRAG PubCo.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the AAGR Board or management.
Our Charter designates the Delaware Court of Chancery or the United States federal district courts as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders, employees or agents.
Our Charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for state law claims for (i) any derivative action or proceeding brought on our behalf; (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers or other employees, agents or stockholders to to us or to our stockholders, (iii) any action, suit or proceeding asserting a claim against us, our current or former directors, officers, employees, agents or stockholders arising pursuant to any provision of the DGCL or our Charter or Bylaws, or (iv) any action, suit or proceeding asserting a claim against us, our current or former directors, officers, employees, agents or stockholders governed by the internal affairs doctrine. The foregoing provisions will not apply to any claims as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of such court, which is rested in the exclusive jurisdiction of a court or forum other than such court (including claims arising under the Exchange Act), or for which such court does not have subject matter jurisdiction, or to any claims arising under the Securities Act and, unless we consent in writing to the selection of an alternative forum, the United States District Court for the District of Delaware will be the sole and exclusive forum for resolving any action asserting a claim arising under the Securities Act.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules or regulations thereunder. Accordingly, both state and federal courts have jurisdiction to entertain such Securities Act claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our Charter provides that, unless we consent in writing to the selection of an alternative forum, United States District Court for the District of Delaware shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. There is uncertainty as to whether a court would enforce the forum provision with respect to claims under the federal securities laws.
This choice of forum provision in the Charter may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find the choice of forum provision contained in the Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition. Furthermore, investors cannot waive compliance with the federal securities laws and rules and regulations thereunder.
Our Charter provides for indemnification of our officers and directors at our expense, which may result in a significant cost and hurt the interests of our stockholders because corporate resources may be expended for the benefit of officers and/or directors.
Our Charter and applicable Delaware law provide for the indemnification of our directors and officers, under certain circumstances, against any liability, action, proceeding, claim, demand, costs, damages or expenses, including legal expenses, whatsoever which they or any of them may incur as a result of any act or failure to act in carrying out their functions, other than such liability (if any) that they may incur by reason of their own actual fraud, dishonesty, willful neglect or willful default. We will also bear the expenses of such litigation for any of our directors or officers, upon such person’s undertaking to repay any amounts paid, advanced, or reimbursed by us if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us that we will be unable to recoup.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
See “Item 1. Business” under “Current Operations” section.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
We may be subject to various legal proceedings and claims that arise in the ordinary course of our business. Although the outcome of these and other claims cannot be predicted with certainty, we do not believe the ultimate resolution of the current matters will have a material adverse effect on our business, financial condition, results of operations or cash flows.
Frank Timis is the majority shareholder of Global Commodities, our largest shareholder as well as the majority owner of Timiscorp. On June 13, 2019, an investigation was launched by the Dean of the Investigating Judges of the General High Court of Dakar in Senegal over the sale of gas contracts to British energy multinational BP. The contracts had been acquired by Timiscorp, a company of which Mr. Timis is the controlling shareholder. The 19-month investigation involved two other publicly traded companies in the United States, BP and Kosmos. The BBC reported BP bought the Timiscorp stake in certain Senegalese gas fields for a cash consideration in 2017, in addition to a royalty payout. The examining magistrate heard evidence regarding allegations from numerous sources per court transcripts over 18 months and found all allegations unproven. On December 29, 2020, the High Court’s conclusion was that there were no grounds to pursue any persons for any offenses related to the allegations contained in the BBC report. The judge dismissed the case in its entirety, citing lack of evidence, on all counts.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURE
None.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
AAGR’s shares of common stock and warrants are traded on the Nasdaq Global Market under the ticker symbols “AAGR” and “AAGRW”, respectively.
As of March 25 there were 65 holders of record of AAGR common stock and 3 holders of record of AAGR warrants.
Dividend Policy
We have never declared or paid cash dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.
Recent sales of unregistered securities
On February 18, 2021, the Sponsor purchased 7,666,667 of 10X II’s Class B ordinary shares for an aggregate purchase price of $25,000, or approximately $0.003 per share. Prior to the Sponsor’s initial investment in 10X II of $25,000, 10X II had no assets.
On October 19, 2021, the Sponsor forfeited, at no cost, 1,000,000 of 10X II’s Class B ordinary shares in connection with the election by the underwriter of 10X II’s Public Offering not to exercise an option granted to the underwriter to cover over-allotments.
In connection with the Public Offering, the Anchor Investors agreed to purchase a certain percentage of 10X II’s Units in the Public Offering. In connection with each Anchor Investor’s agreement to purchase a specified percentage of Units to be sold in 10X II’s Public Offering, the Sponsor agreed to transfer a certain number of its Founder Shares to such Anchor Investor, which could be purchased by the Anchor Investor as early as the Close Date. Following the Close Date, the Sponsor transferred an aggregate of 1,334,339 Founder Shares to the Anchor Investors for the same price originally paid by the Sponsor for such shares.
Simultaneously with the consummation of 10X II’s Public Offering, 10X II consummated the private placement of an aggregate of 655,000 Private Placement Units to the Sponsor and Cantor at a price of $10.00 per Private Placement Unit, generating total gross proceeds of $6,550,000. No underwriting discounts or commissions were paid with respect to the Private Placement. The issuance of the Private Placement Units was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. In the Private Placement, the Sponsor purchased 455,000 Private Placement Units and Cantor purchased 200,000 Private Placement Units. The Private Placement Units were identical to the Units, except that the Private Placement Units (including the underlying securities) were subject to certain transfer restrictions and the holders thereof were entitled to certain registration rights, and, if held by the original holder or their permitted assigns, the underlying Private Placement Warrants (i) may be exercised on a cashless basis, (ii) are not subject to redemption and (iii) with respect to such Private Placement Warrants held by Cantor, will not be exercisable more than five years from the commencement of sales in the Public Offering. If the Private Placement Units are held by holders other than the initial purchasers or their permitted transferees, then the Private Placement Warrants included in the Private Placement Units will be redeemable by us and exercisable by the holders on the same basis as the Public Warrants included in the Units sold in the Public Offering.
Concurrently with the execution of the AA Merger Agreement, on November 4, 2022 and on November 8, 2022, the 10X II Investors entered into the Non-Redemption Agreements with the Sponsor. Pursuant to the Non-Redemption Agreements, the 10X II Investors agreed for the benefit of the Company to (i) vote the Subject 10X II Equity Securities, representing 3,705,743 ordinary shares in the aggregate, in favor of the Extension Proposal and (ii) not redeem the Subject 10X II Equity Securities in connection with such proposal. In connection with these commitments from the 10X II Investors, the Sponsor agreed to transfer to each 10X II Investor an amount of its Founder Shares on or promptly after the consummation of the Business Combination.
The sales of the above securities, including the shares to be offered and sold in connection with the Non-Redemption Agreements, by us have not been registered under the Securities Act in reliance upon the exemption provided in Section 4(a)(2) thereof.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]
Not applicable to a smaller reporting company

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited financial statements and related notes thereto included elsewhere in this annual report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in “Forward-Looking Statements” and “Risk Factors.”
Overview
Our wholly owned subsidiary, LFT, is developing a commercial farming business based in Northern Senegal initially focusing on the production and sale of alfalfa for cattle feed and nutrition purposes. We will sell alfalfa to owners and suppliers of cattle for feed and nutritional purposes. Over the next 2-3 years we expect to raise sufficient capital to enable the development of 25,000 hectares, or 62,000 acres, of land located at LFT. We further aim to expand the growing footprint within Senegal, Niger and potentially to other West African countries.
Our predecessor company acquired LFT during the first quarter of 2018. Since that time considerable effort has been expended on preparing the farm for commercial operations, including ensuring the integrity of the water channels and other water assets, conducting soil analysis and feasibility studies, and beginning to clear and prepare the farm pivots for commercial operations. As such, prior to 2022, there has been no commercial revenue and related contribution. The growing activity to that point has been on a small pilot scale with the resultant produce of rice and sweet potato largely being donated to the local communities. In addition, the intended strategy of the prior owners was to focus on farming a crop significantly different than alfalfa and as such various assets that had been acquired by the prior owners and taken over by our company were not suitable for farming of alfalfa.
During the third quarter of 2021, we began preparing the soil, land, pivots, irrigation and infrastructure to begin planting our pilot program. We began planting alfalfa in January 2022 across 305 hectares. Since our initial harvest in April 2022, we have experienced harvests on average of approximately 2.4 tons of alfalfa per hectare and a 15% to 24% protein yield. Initial cuts are typically lower yield in an alfalfa system due to the establishment of the root systems, and therefore the result of our initial planting is in line with global averages and our expectations. After the initial period of root establishment, it is our expectation, based on global historical experience and published scientific data, that the crop rotation cycle will occur approximately every four to six weeks, allowing up to ten turns during an annual period. From a seasonality perspective, it is our expectation that after the initial crops have been planted, other than potentially during a short rainy season, little seasonality should impact the rotation. Based on the yield and protein outcome results of the pilot, we expect to expand the pilot program to further test input and conditions to maximize yield before we begin the program of incremental planting expansion. Subject to our ability to generate future revenue from operations and sourcing additional investment into AFRAG, none of which are guaranteed, we anticipate our program will grow to 5,000 hectares within 18-24 months and ultimately to occupy as much of the 25,000 hectares as is practical. At 5,000 hectares, we would expect our annualized run-rate yield to be approximately 125,000 tons. Our initial expectations are that we will yield approximately 25 tons of alfalfa per hectare per year, based on 10 cuts per year and 2.5 tons per cut. Warmer climate experiences in geographies such as California, and colder climates such as Romania and Canada, give credence to these historical yield expectations. While the results of our pilot program enhanced our confidence in our potential alfalfa crop yields, there is no guarantee that our production estimates will be sustained in a larger commercial practice. Further, any expansion of our operations beyond our 305 hectare pilot program will be dependent on our ability to generate future revenue from operations and sourcing additional outside investment into AFRAG, none of which are guaranteed.
We targeted alfalfa as a strategic crop. Alfalfa delivers high protein content as a cattle feed, which can deliver meaningful weight gain for cattle. The demand for global consumption of protein is expected to grow at 6.8% per year over the next 10 years and the United Nations projected that global agricultural output will need to grow by 70% to meet the growing population by 2050. West Africa is home to as many as 100 million head of cattle offering a vibrant domestic market for our product. In addition, the Gulf region is currently hamstrung by legislation preventing the growth of forage crops, its scarce water and limited arable land, and hence the region imports approximately 85 percent of total food consumed, according to the 2022 GCC Food Report.
We are committed to advancing the interests of the communities where we operate by providing long-term career opportunities to the local workforce, partnering with educational institutions, such as Louisiana State University (LSU) and Michigan State University (MSU), to create programs that mutually benefit students, researchers and our own operations and to lay the foundation for our ambition for our LFT operations to become the agricultural technology capital of West Africa. Our partnership with LSU will also be focused on studying and benefiting from research comparing U.S. and world leading crop yields, fertigation processes and other leading edge industry leading practices and research. We have also signed a letter of intent with the College of Agriculture and Natural Resources at MSU College of Agriculture and Natural Resources (CANR), to further develop the fields of soil science, agronomy, cattle nutrition, emissions, and animal genetics in Mauritania.
The Business Combination
On November 2, 2022, we entered into the Merger Agreement by and among the Company, Merger Sub and AFRAG.
Prior to the Closing of the Business Combination, the Company carried out the Domestication pursuant to which (i) the Company’s jurisdiction of incorporation was changed from the Cayman Islands to the State of Delaware, (ii) the Company changed its name to “African Agriculture Holdings Inc”, (iii) each issued and outstanding Class A ordinary share of the Company was converted, on a one-for-one basis, into a share of Class A Common Stock, (iv) each issued and outstanding Class B ordinary share of the Company was converted, on a one-for-one basis, into a share of Class B Common Stock, and (v) each issued and outstanding whole warrant to purchase Class A ordinary shares of the Company became exercisable for Class A Common Stock beginning 30 days after the Closing at an exercise price of $11.50 per share.
Upon Closing of the Business Combination on December 6, 2023, Merger Sub merged with and into AFRAG, with AFRAG being the surviving company. On December 7, 2023, the shares of Common Stock began trading on Nasdaq under the symbol “AAGR”.
In accordance with the terms and subject to the conditions set forth in the Merger Agreement, the Company agreed to pay to equity holders of AFRAG, as merger consideration, a number of shares of newly issued Common Stock, valued at $10.00 per share, equal to the product of the number of outstanding shares of common stock of AFRAG at the Closing, multiplied by the Exchange Ratio.
The “Exchange Ratio” was equal to the quotient of (A) the sum of (i) $450.0 million and (ii) the aggregate amount of principal and accrued interest underlying certain convertible promissory notes of AFRAG issued by AFRAG after the signing of the Merger Agreement that were converted into shares of Common Stock at the Closing, divided by (B) ten dollars ($10.00), divided by (C) the fully diluted common stock of AFRAG immediately prior to Closing.
In addition, in consideration of the Company waiving certain closing conditions set forth in the Merger Agreement, at Closing each share of Common Stock for which redemption was not requested (a “Former SPAC Share”) was granted a pro rata right to receive a portion of 3,000,000 additional shares of Common Stock, with (i) holders of Former SPAC Shares that were public holders receiving shares in the form of Common Stock that were assigned to a pool for the benefit of such holders by a former stockholder of AFRAG and (ii) holders of Former SPAC Shares that were not public holders receiving Common Stock in the form of newly issued shares on a private placement basis.
Factors Affecting Our Financial Condition and Results of Operations
We expect to expend substantial resources as we:
● complete the development of LFT to full capacity production covering the majority of the 62,000 acres available;
● implement a world class technology driven scalable operation that will result in high yields, and low costs driven by scale, technology, unique access to water and AI driven processes that can be expanded to other locations;
● enhance all aspects of our supply chain, distribution systems and logistics;
● develop and operate an owned renewable power supply program with adequate generation capability to, at a minimum, provide LFT with a reliable continuous and cheap source of power to operate;
● conduct further feasibility programs and develop the aquaculture program locally with a view for expansion across other coastal areas on the continent;
● conduct feasibility programs and develop the reforestation carbon credit program locally with a view for expansion across suitable areas on the continent; and
● incur additional general administration expenses, including increased finance, legal and accounting expenses, associated with being a public company and growing operations.
Business Combination and Public Company Costs
As the Business Combination has now closed, we are an SEC-registered and Nasdaq-listed company, which will require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees, media, market data, public and investor relations.
The Business Combination is being accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, 10X II, who is the legal acquirer, is being treated as the “acquired” company for financial reporting purposes and AFRAG is being treated as the accounting acquirer. Accordingly, for accounting purposes, the Business Combination is being treated as the equivalent of a reverse recapitalization transaction in which AFRAG issued stock for the net assets of 10X II. The net assets of 10X II are being stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of AFRAG.
Our future results of consolidated operations and financial position may not be comparable to historical results as a result of the expanded business operations of the Company.
Critical Accounting Policies and Use of Estimates
Accounting policies are an integral part of our financial statements. A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and our financial position. Management believes that the critical accounting policies and estimates discussed below involve the most difficult management judgments, due to the sensitivity of the methods and assumptions used. Our significant accounting policies are described in Note 2 to our consolidated financial statements included elsewhere in this report.
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other accounting standards setting bodies that we adopt as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued accounting standards that are not yet effective will not have a material impact on our consolidated financial position or consolidated results of operations under adoption.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States, or GAAP, requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities and provisions, income and expenses and the disclosure of contingent assets and liabilities at the date of these financial statements. Estimates are used for, but not limited to, the selection of the useful lives of fixed assets, allowance for doubtful debt associated with accounts receivable, fair values, revenue recognition, and taxes. Management believes that the most material areas involving the use of estimates are the determination of the intangible asset relating to the land use right provided by the Senegal Presidential Decree, the most likely outcome of the claims incorporated in the contingent liability, the imputed interest rate related to the related party payable and the discount rates used for leases.
Intangible Asset - The intangible asset consists of a land use right of 20,000 hectares provided by way of a Senegal Presidential decree. The value of the intangible was established based on the allocation of the purchase price for LFT to the fair value of the assets, including this intangible asset, at the time of the acquisition of LFT in 2018. Amortization of the intangible asset is calculated on a straight-line basis over the remaining term of the decree, which at the time of the acquisition had 44 years of a 50-year term remaining. Refer to Note 6 of the consolidated audited financial statements for further discussion.
Contingent Liability - The Company has created a contingent liability representing, in the Company’s opinion, based on our outside counsel’s review, probable loss outcome for legal claims. As of December 31, 2023, and December 31, 2022, the contingent liability provision is approximately $2.3 million. Refer to Note 13 in the audited consolidated financial statements for further discussion.
Imputed interest in related party payable - As the related party payables have no stated interest rate, an imputed interest rate has been applied against such loan to represent an arms-length arrangement between the Company and the related parties. Refer to Note 8 of the Audited financial statements included elsewhere in this Form 10-K for further discussion.
Interest rate in right-of-use lease assets and the associated lease liabilities - The present value of our lease liability and the right-of-use lease asset is determined using an incremental borrowing rate, which we estimate to be the rate of interest that we would have to pay to borrow on a collateralized basis over a similar lease term an amount equal to the lease payments in a similar economic environment.
Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results could differ from those estimates and assumptions.
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other accounting standards setting bodies that we adopt as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued accounting standards that are not yet effective will not have a material impact on our consolidated financial position or consolidated results of operations under adoption.
Foreign Currency Translation
The accompanying consolidated financial statements are presented in United States dollars (“$”), which is the reporting currency of the Company. The functional currency of the Company is the United States dollar. The functional currency of the Company’s subsidiaries located in Senegal and Niger is the West African Franc (“CFA”). CFA is the official currency of eight countries in West Africa and is issued by the Central Bank of West African States. The CFA is pegged to the euro. For the entities whose functional currencies are the CFA, results of operations and cash flows are translated at average exchange rates during the period, per the table below. Assets and liabilities are translated at the current exchange rate at the end of the period as per the table below, and equity is translated at historical exchange rates. The resulting translation adjustments are included in determining other comprehensive loss. Transaction gains and losses are reflected in the consolidated statements of operations.
1 CFA:$ Period
Average Period
End
December 31, 2023 $ 0.001652 $ 0.001683
December 31, 2022 $ 0.001604 $ 0.001628
Key Components of Statement of Operations
Basis of Presentation
Currently, we conduct business largely through one operating segment. Our activities to date were conducted in the United States and locally in Senegal at LFT. For more information about our basis of presentation, refer to Note 2 in the Audited AFRAG Statements.
The consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern within one year from the date of issuance of these consolidated financial statements.
The Audited Statements include a summary of our significant accounting policies and should be read in conjunction with the discussion below.
Revenue
The Company began generating sales from its pilot program during the second quarter of 2022. The Company recognizes revenue for its products based upon purchase orders, contracts or other persuasive evidence of an arrangement with the customer that include fixed or determinable prices and that do not include right of return or other similar provisions or other post-delivery obligations. Revenue for products is recognized upon delivery, customer acceptance and when collectability is reasonably assured.
Cost of Sales
The costs for establishing the pivots including seeds, land preparation and various phytosanitary products that are applied prior to and in conjunction with the initial seeding, but which will not be reapplied during the growing and harvesting stages are allocated quarterly to the cost of production over the seed cycle, which we estimate will be three years. The remaining direct costs related to the growth and harvesting of alfalfa, including additional fertilizer and phytosanitary products, direct labor, power, water, crop maintenance costs, depreciation of machinery cost, among others are included in the cost of sales based on the number of bales harvested and sold in that period calculated using a first in first out methodology.
Results of Operations
Our operating results for the years ended December 31, 2023 and 2022 are compared below:
For the Year Ended
December 31, Increase/
(Decrease)
Revenue $ 1,817,375 $ 679,196 1,138,179
Cost of goods sold 1,358,790 784,351 574,439
Gross profit (loss) 458,585 (105,155 ) 563,740
General and administrative expenses:
Employee compensation 34,062,086 5,933,664 28,128,422
Professional fees 5,496,465 18,059,427 (12,562,962 )
Equipment rental 22,074 89,875 (67,801 )
Operating lease expense 373,011 346,436 26,575
Insurance 445,538 - 445,538
Amortization 116,012 116,012 -
Depreciation 235,837 252,603 (16,766 )
Utilities and fuel 49,955 107,024 (57,069 )
Travel and entertainment 178,174 134,364 43,810
Program development and design - 101,893 (101,893 )
Other operating expenses 441,739 419,134 22,605
Total G&A expense 41,420,891 25,560,432 15,860,459
Loss from operations (40,962,306 ) (25,665,587 ) (15,296,719 )
Other expenses / (Income):
Foreign currency exchange (loss) / gain 66,478 (170,530 ) 237,008
Gain on sale of assets - (153,978 ) 153,978
Interest expense - related party 808,264 518,582 289,682
Interest expense - other 855,860 436,186 419,674
Debt amendment fee 386,274 - 386,274
Other income (17,943 ) (42,350 ) 24,407
Total other expense (income) 2,099,451 587,910 1,511,541
Loss before provision for income tax (43,061,757 ) (26,253,497 ) (16,808,260 )
Taxation - - -
Net loss attributable to controlling interests $ (43,061,757 ) $ (26,253,497 ) $ (16,808,260 )
Revenue and gross margin
We began harvesting our initial crop in the second quarter of 2022. The majority of the production was sold to local buyers but we also sent various samples and promotions to prospect regional and international customers. We experienced a gross loss on our revenue for 2022 due to various factors including: sales of the first cut, which is typically low quality alfalfa at highly discounted prices, lower selling prices initially as we introduced the local market to the product, which proved to be a successful strategy to engage the local market; sales at low prices of rain damaged product, as well as the cost of promotional, sample and community provided product all of which had no associated revenue.
Revenue momentum continued into 2023 with the majority of our product sold locally. We have been successful in attracting some regional buyers as well. Export sales will become feasible once we are able to expand the harvesting acreage and obtain scale sufficient to justify the shipping volumes and costs. The demand for product locally remains robust for the quantities that we produce with most of our harvested product being sold within days of being harvested.
Compared to the prior year, we were able to achieve gross margins of 25%.
General and administrative expenses
Total general and administrative expenses for the year ended December 31, 2023 increased by $15.9 million or 62.1%, over the year ended December 31, 2022. The primary reason for the increase was higher employee compensation expense which included share base compensation costs of approximately $33.2 million relating to the amortization of the RSU awards made by the Company in November 2022 and November 2023, as described in detail in Note 14 of the audited financial statements. Because these awards were all made during the pendency of working through the closing of the Business Combination the Company determined that the grant date fair value of these RSUs reflected the $10/share merger consideration. This was translated into significant income statement recognition notwithstanding the current share price. Offsetting this increase was a reduction in professional fees, which during the prior year reflected an expense of approximately $13.7 million with respect to an additional grant of shares to Global Commodities & Investments Ltd, the Company’s majority shareholder, which was made during the year as a reward for services provided to the Company since its formation. After taking consideration of the impact of this share grant in the prior year, other professional expenses increased by approximately $1.1 million compared to the prior year period, which was as a result of expanding commercial operations compared to the prior year and increased legal, insurance and audit expenses incurred preparing the Company to complete the Business Combination.
Other Income/Expense
Other expense increased by $1.5 million for the year ended December 31, 2023 compared to the prior year period due to higher interest accrued on the short term debt issued during 2022, the seller note payable and the related party note payables, and a debt amendment fee related to the delay in payment of the seller note payable offset by a small foreign exchange loss compared to the prior year gain. While the related party interest should have reduced as a result of the conversion of a related party loan to equity that took place in November 2022, the related party interest still increased over the prior year. In connection with an amendment to the related party note the Company entered into with Sponsor of the Business Combination entity, the Company agreed to reimburse the related party for the Extension Shares to be delivered to investors upon the closing of the Business Combination pursuant to the non-redemption agreements executed in connection with various extensions agreed to by such investors. Upon issuance of these Extension Shares the Company recognized a discount on the original debt issuance. This debt discount was amortized and included in related party interest prior to year-end in connection with the repayment of this related party note.
Net Loss
Net loss for the year ended December 31, 2023 increased by $16.8 million, or 64%, compared to the prior year period. The principal reasons, as described above, relate to higher employee costs and professional fees, largely due to share compensation expense, and higher other expense, largely due to higher interest and other note delated fees.
There was no income tax expense from continuing operations for the nine months ended September 30, 2023 or 2022.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity include funds generated by operations, the availability of credit facilities, levels of accounts receivable and accounts payable, and capital expenditures.
Since the acquisition by Agro Industries of LFT during the first quarter of 2018, we financed our operations primarily from loans from shareholders, sales of alfalfa production, and through the sale of non-usable equipment and inventory. During 2022 and 2023 the Company also raised capital from the issuance of short-term convertible debt and non-convertible debt.
During the second quarter of 2022 we began generating revenue from sales of alfalfa from our initial pilot program, which we commenced late in 2021.
During our first five years of operation we expect that our principal costs and expenses will include labor for agricultural processes, agricultural supplies (seeds, fertilizer and pesticides), farming and laboratory equipment, facilities construction, utilities and fuel costs, fees for technical consulting services and general administrative expenses, including rent, management salaries, implementation and maintenance of agricultural infrastructure and attestation, marketing and internal controls monitoring. In addition, we may incur rent, costs in connection with the acquisition of new leasehold interests in land. We expect that all net revenue generated from the sale of alfalfa will be reinvested into business for the foreseeable future.
We do not currently have sufficient funds to service our operations and our expenses and other liquidity needs and will require additional capital immediately. In addition, our management has expressed substantial doubt as to our ability to continue as a going concern absent raising additional capital, including after consummation of the Business Combination. At December 31, 2023 we had a working capital deficit of $24.6 million compared with a deficit of $4.2 million at December 31, 2022. Our working capital has decreased primarily due to an increase in payables, particularly absorbed in the Business Combination, and accrued expenses, offset by a small increase in other receivables. At December 31, 2023, we had $2.8 million in cash. The net cash losses and expenses of the business during the year ended December 31, 2023 have largely been funded by short term debt issued, short term payables and accruals and from related parties.
On or around December 6, 2023, the closing of Business Combination, we received (i) $5.75 million pursuant to that certain agreement for a Cash-Settled Equity Derivative Transaction (the “CSED”) entered into on December 6, 2023 with Vellar Opportunities Fund Master, Ltd; and (ii) approximately $2.9 million in proceeds from the Trust Account based on the number of shares of common stock that were not redeemed as of December 6, 2023.. Given the current share price, we believe the likelihood that warrant holders will exercise their warrants is low, and therefore the amount of cash proceeds that we will receive, is dependent upon the market price of our common stock. The value of our common stock will fluctuate and may not align with the exercise price of the warrants at any given time. We believe that if the warrants are “out of the money,” meaning the exercise price is higher than the market price of our common stock, there is a high likelihood that warrant holders may choose not to exercise their warrants.
We incurred substantial transaction expenses in connection with the Business Combination. Approximately $2.0 million in transaction expenses were settled upon the consummation of the Business Combination. However, we continue to have substantial transaction expenses accrued and unpaid subsequent to the Closing. As of December 31, 2023, we had approximately $31.8 million in current liabilities. Furthermore, the scale of our current operations are insufficient to cover the ongoing corporate expenses and additional expenses in connection with transitioning to, and operating as, a public company. We intend to seek delays on certain payments and explore other ways of potentially reducing immediate expenses with the goal of preserving cash until potential additional financing is secured, but these efforts may not be successful or sufficient in amount or on timely basis to meet our ongoing capital requirements. We are in discussions with certain financing sources to attempt to secure additional interim financing, which is needed to continue operations and fund other liquidity needs. In the absence of additional sources of liquidity, the management anticipates that existing cash resources will not be sufficient to meet ongoing operating and liquidity needs. However, there is no assurance that we will be able to timely secure such additional liquidity or be successful in raising additional funds or that such required funds, if available, will be available on acceptable terms or that they will not have a significant dilutive effect on our existing stockholders. In addition, we are unable to determine at this time whether any of these potential sources of liquidity will be adequate to support our operations or provide sufficient cash flows to us to meet our obligations as they become due and continue as a going concern. In the event we determine that additional sources of liquidity will not be available to us or will not allow us to meet our obligations as they become due, we may need to file a voluntary petition for relief under the United States Bankruptcy Code in order to implement a restructuring plan or liquidation. This could potentially cause us to cease operations and result in a complete or partial loss of investment in our common stock.
Because the proceeds from the Business Combination and the CSED are not adequate to cover our accrued and unpaid expenses and provide the cash and liquidity necessary to operate our business, we continue to seek equity and debt financings, or other capital sources, including with related parties. Sales of a substantial number of shares of our common stock in the public market could occur at any time. Such sales, or the perception in the market that such sales could occur, could result in a material decline in the public trading price of our common stock. Such a decline could adversely affect our ability to sell equity securities or the price at which we are able to sell equity securities and/or make it more difficult for us to raise additional capital through the sale of equity securities. In addition, to the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted. The terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. For more information, see “Risk Related to Our Securities”.
Notwithstanding the lack of liquidity, we continue to seek to raise the capital necessary to implement our expansion plans, over time, to as much of the full available capacity of LFT’s 25,000 hectares as is practical.
Over time, it is our intention to acquire control of additional farmland in Senegal and elsewhere in Africa, as well as implement two additional growth programs, aquaculture and creating carbon offset credits. We believe that we will require significant additional capital to achieve these short and medium-term objectives. Since the time we began commercial operations, we have made considerable progress in developing the local market for selling alfalfa, generating considerable interest in our product locally, regionally and in various international markets, and we have gained considerable knowledge and confidence with respect to the farming yields and potential for expansion by being able to replicate and expand our existing footprint. The speed and scale of our expansion will depend on the amount and pace of capital that we are able to raise.
Cash Flows
The following table presents summary cash flow information for the periods indicated.
For the Year Ended
December 31,
Net Cash Produced From/(Used)
Operating Activities $ (3,969,966 ) $ (2,700,347 )
Investing Activities (13,576 ) (163,912 )
Financing Activities 6,780,349 2,948,779
Effects of Exchange Rate Changes (18,956 ) (93,555 )
Net Increase/(Decrease) in Cash $ 2,777,851 $ (9,035 )
Cash Flows Used in Operating Activities
Cash flows used in operating activities for the year ended December 31, 2023, totaled approximately $4.0 million during which we incurred a net loss of $41.8 million. The net loss included the non-cash impacts of share-based compensation, depreciation, amortization, non-cash interest, and non-cash lease expenses. The cash flows for operating activities also reflected the decrease in working capital compared to the prior year period.
Cash Flows from Investing Activities
For the year ended December 31, 2023, total cash used in investing activities was $13,576 used for the acquisition of small equipment at the farm. For the year ended December 31, 2022, cash used in investing activities was $163,912 for equipment acquired for use in the pilot program.
Cash Flow from Financing Activities
For the year ended December 31, 2023, the cash from financing activities reflects the proceeds from the CSED transaction as well as the proceeds from investors that did not redeem prior to the Business Combination, net of transaction costs, as well as proceeds from short debt that the Company raised during the that period and principal loan amounts received from various related parties offset by debt that the Company repaid at the time of the Business Combination. Convertible notes with an aggregate principal amount and accrued but unpaid interest of approximately $1.92 million automatically converted into common stock upon the closing of the Business Combination. For the year ended December 31, 2022, the cash generated from financing activities reflected Convertible Promissory Notes issued during that period and loans from the majority shareholder, net of the payments on the seller notes payable.
Off Balance Sheet Arrangements
As of December 31, 2023 and December 31, 2022, we had no off-balance sheet financing arrangements.
Contractual Commitments
Our contractual obligations as of December 31, 2023, consist primarily of the seller note payable relating to the original LFT acquisition, the agreement with the Fass Ngom community in Senegal that provides for the right to use 5,000 hectares, and an obligation to begin supporting the local municipalities with whom we have partnered for significant land in Niger in accordance with agreements signed in December 2021, and the agreement signed between the Company, the community of Gie Dynn and the Government of Mauritania that provides for the right to develop 2,033 hectares of land in Mauritania together with the obligation to invest up to $30 million into this project over the next 20 years. These contractual obligations impact our short-term and long-term liquidity and capital needs.
The balance of the seller note payable was $2,042,527 as of December 31, 2023 and $1,976,050 as of December 31, 2022. In November 2022, Tampieri Financial Group agreed to a delayed payment of the amount due at that time. The resultant amendment fee was amortized monthly over the remaining period of the seller note payable. In May 2023, the Company and Tampieri Financial Group agreed to extend the payment date of the amounts that were due on March 31, 2023 until October 31, 2023. In consideration for this delay the Company agreed to pay interest of 6.3% per annum on the delayed payments. The final payments were not, however, made in October 2023. The parties are in discussions regarding a payment schedule, but should we not agree on this payment schedule there is a provision in the original agreement that states that if payment is not made by November 1, 2023 an additional $386,274 is payable to the Tampieri Financial Group and such increase defers the payment due until October 31, 2024. Other than the interest related to the delayed payments negotiated in May, 2023, the seller note payable does not bear an interest rate. As a result, the fair value of the seller note payable was less than face value when issued in the LFT asset acquisition. The seller note payable is presented net of unamortized discount and the unamortized amendment fee as reflected in the table below.
December 31, 2023 December 31,
Seller note payable, including 2022 amendment fee $ 2,042,528 $ 1,976,050
Less: unamortized discount - -
Less: unamortized 2022 amendment fee - 311,419
Add: interest on delayed instalment 119,403 -
Add: 2023 debt amendment fee 386,274 -
Add: 2023 fees 21,692 -
Total $ 2,569,897 $ 1,664,631
Land use agreement, Niger and Mauritania land use agreements
As of December 31, 2023, future minimum rental payments under the operating leases are approximately as follows:
$ 825,657
826,533
827,426
828,338
829,267
Thereafter 16,661,722
$ 20,798,943
The table above does not include any obligations related to the 20,000 hectares land use right obtained by way of a Senegal Presidential Decree. The Senegal Presidential Decree provides for the use by LFT of the land until 2062. There are no annual payments required in accordance with the Senegal Presidential Decree. This land use right was recognized as an intangible asset in connection with the asset purchase of LFT and is being amortized over the remaining term of the decree.
The table does however include obligations relating to the recent agreements signed with the mayor and local governments of Aderbissinat and Ingall, respectively, in Niger each under a 49-year term for the right to use and development 2.2 million hectares of their land. While there is no binding obligation under these agreements to plant a minimum number of hectares of trees, we agreed to pay approximately $86,000 per year under each agreement during the construction of the greenhouses and plantation. Once the sale of carbon credits commences the annual payment amount will increase to approximately $1.1 million. In addition, during the first year of the sale of carbon credits we are required to pay an additional $129,000 for each agreement for budgetary support to each region. As the timing of the sale of carbon credits is uncertain, we have reflected only the known and required, as of today, payments for the duration of these agreements.
The table also includes obligation reacting to the agreement signed between the Company, the community of Gie Dynn and the Government of Mauritania. This lease is for 20 years and covers 2,033 hectares of land. Of this land, 80%, or 1,626 hectares will be used by the Company for farming alfalfa with the balance being farmed, at the Company’s cost, at the direction of the community. The Company has agreed to invest up to $30 million into this project over the next 20 years. The annual cost of the 1,626 hectares will be $300 per hectare per annum, subject to an annual increase consistent with the household consumption index (a proxy for local inflation). In addition, the Company will pay 5% of annual net profits earned on the 1,626 hectares to the community subject to an annual minimum payment of approximately $122,000.
The Company maintains cash in banks in the United States as well as in Senegal. The aggregate cash balances shown on the consolidated balance sheets as of December 31, 2023 and December 31, 2022 were held at JPMorgan Chase Bank, N.A. as well as in various banks in Senegal and Niger. There is no insurance securing these deposits, other than FDIC insurance that governs all commercial banks in the United States. The Company has not experienced any losses in such deposits. There are no excess cash balances, beyond those required for short term operations, held in Senegal or Niger bank accounts.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable to a smaller reporting company.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Please see our Financial Statements beginning on page of this annual report.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K.
Based on this evaluation, our Chief Executive Officer and our Principal Financial Officer concluded that, as of December 31, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and our Principal Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S generally accepted accounting principles.
Under the supervision and with the participation of our Chief Executive Officer and our Principal Financial Officer and oversight of the board of directors, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023, based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2023.
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by M&K CPAS PLLC, an independent registered public accounting firm, as stated in their report which is included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended December 31, 2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and our Principal Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the organization have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2024 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023.
Codes of Business Conduct and Ethics
Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all officers, directors and employees, which is filed as an exhibit to this annual report on Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. Executive Compensation
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2024 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item, including Securities Authorized for Issuance Under Equity Plans, is incorporated by reference to our Proxy Statement relating to our 2024 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2024 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2024 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2023.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) Financial statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 2738)
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 726)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statement of Changes in Stockholders’ Deficit
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
(2). Financial Statement Schedules and Other Financial Information. No financial statement schedules are submitted because either they are not applicable or because the required information is included in the consolidated financial statements or notes thereto.
(3). Exhibits. Filed as part of this Annual Report on Form 10-K are the following exhibits:
Incorporated by Reference
Number
Description of Document
Schedule/Form
File Number
Exhibits
Filing Date
2.1†
Agreement and Plan of Merger, dated as of November 2, 2022, by and among 10X Capital Venture Acquisition Corp. II, 10X AA Merger Sub, Inc. and African Agriculture, Inc.
Form 8-K
File No.
001-40722
2.1
November 3,
2.2
First Amendment to Agreement and Plan of Merger, dated as of January 3, 2023, by and among 10X Capital Venture Acquisition Corp. II, 10X AA Merger Sub, Inc. and African Agriculture, Inc.
Form S-4/A
File No.
333-269342
2.2
October 27,
2.3
Second Amendment to Agreement and Plan of Merger, dated as of November 29, 2023, by and among 10X Capital Venture Acquisition Corp. II, 10X AA Merger Sub, Inc. and African Agriculture, Inc.
Form 8-K
File No.
001-40722
2.1
November 30,
3.1
Certificate of Incorporation of the Company
Form 8-K
File No.
001-40722
3.1
December 12,
3.2
Bylaws of the Company
Form 8-K
File No.
001-40722
3.2
December 12,
4.1
Specimen Common Stock Certificate
Form 8-K
File No.
001-40722
4.1
December 12,
4.2
Specimen Warrant Certificate
Form 8-K
File No.
001-40722
4.2
December 12,
4.3
Warrant Agreement between Continental Stock Transfer & Trust Company and Registrant, dated August 10, 2021.
Form 8-K
File No.
001-40722
4.1
August 13,
4.4
Description of Securities
10.1
Letter Agreement, dated August 10, 2021, by and among 10X Capital Venture Acquisition Corp. II, 10X Capital SPAC Sponsor II LLC, and the officers and directors of 10X Capital Venture Acquisition Corp. I.
Form 8-K
File No.
001-40722
10.1
August 13,
10.2
Amended and Restated Registration Rights Agreement, dated December 6, 2023, by and among 10X Capital Venture Acquisition Corp. II, 10X Capital SPAC Sponsor II LLC, and the other holders signatory thereto.
Form 8-K
File No.
001-40722
10.2
December 12,
10.3
Acquiror Support Agreement, dated November 2, 2022 by and among 10X Capital Venture Acquisition Corp. II, African Agriculture Inc., 10X Capital SPAC Sponsor II LLC and the directors and executive officers of 10X Capital Venture Acquisition Corp. II named therein.
Form 8-K
File No.
001-40722
10.1
November 3,
10.4
Form of Lock-Up Agreement, by and among certain stockholders of African Agriculture Holdings Inc. and 10X Capital SPAC Sponsor II LLC
Form 8-K
File No.
001-40722
10.4
December 12,
10.5
Form of Cash-Settled Equity Derivative Confirmation
Form 8-K
File No.
001-40722
10.1
November 30,
10.6
Standby Equity Purchase Agreement, dated November 2, 2022, by and between 10X Capital Venture Acquisition Corp. II and YA II PN, Ltd.
Form 8-K
File No.
001-40722
10.3
November 3,
10.7
Service Contract, dated July 14, 2021, by and between African Agriculture, Inc. and FGM International.
Form S-4/A
File No.
333-269342
10.10
October 27,
10.8
Agreement for Delivery of Pre-Construction Activities, dated December 22, 2021, by and between African Agriculture, Inc. and Willing Hands AS.
Form S-4/A
File No.
333-269342
10.11
October 27,
10.9
Engagement and Advisory Agreement, dated September 13, 2021, by and between African Agriculture, Inc. and Dr. Daniel H. Putnam.
Form S-4/A
File No.
333-269342
10.12
October 27,
10.10
Framework Agreement, dated July 8, 2021, by and between African Agriculture, Inc. and MPS Infrastructure Inc.
Form S-4/A
File No.
333-269342
10.13
October 27,
10.11
Amended and Restated Sales and Marketing Agreement, dated May 10, 2019, by and between Monitor Power Systems AS and African Discovery Group LLC.
Form S-4/A
File No.
333-269342
10.14
October 27,
10.12
Lease Agreement, dated August 13, 2021, by and between African Agriculture, Inc. and an Immobilier SARL.
Form S-4/A
File No.
333-269342
10.15
October 27,
10.13
Lease Agreement, dated December 5, 2021, by and among African Agriculture, Inc., Agro Industries Corp. and the municipality of Aderbissinat.
Form S-4/A
File No.
333-269342
10.16
October 27,
10.14
Lease Agreement, dated November 27, 2021, by and among African Agriculture, Inc., Agro Industries Corp. and the municipality of Ingall.
Form S-4/A
File No.
333-269342
10.17
October 27,
10.15
Partnership Agreement, dated January 2021, by and between the Farms of Teranga S.A. and the Municipality of Fass Ngom.
Form S-4/A
File No.
333-269342
10.18
October 27,
10.16
Contribution Agreement, dated June 24, 2021, by and between the shareholders of Agro Industries Corp listed as signatories thereto, Agro Industries Corp. and African Agriculture, Inc.
Form S-4/A
File No.
333-269342
10.19
October 27,
10.17
Amended and Restated Employment Agreement, dated May 21, 2022, by and between African Agriculture, Inc. and Harry Green.
Form S-4/A
File No.
333-269342
10.20
October 27,
10.18
Amended and Restated Advisor Agreement, dated May 21, 2022, by and between African Agriculture, Inc. and African Discovery Group, Inc.
Form S-4/A
File No.
333-269342
10.21
October 27,
10.19
African Agriculture, Inc. 2022 Incentive Plan and form Restricted Stock Unit Award Agreement.
Form S-4/A
File No.
333-269342
10.22
October 27,
10.20
Restricted Stock Unit Award Agreement, dated November 1, 2022, by and between African Agriculture, Inc. and African Discovery Group, Inc.
Form S-4/A
File No.
333-269342
10.23
October 27,
10.21
Transaction Bonus and Release, dated November 1, 2022, by and between African Agriculture, Inc. and Harry Green.
Form S-4/A
File No.
333-269342
10.24
October 27,
10.22
First Amendment to Transaction Bonus and Release, dated November 27, 2023 by and between African Agriculture Inc. and Harry Green.
Form 8-K
File No.
001-40722
10.3
November 30,
10.23
Transaction Bonus and Release, dated November 1, 2022, by and between African Agriculture, Inc. and African Discovery Group, Inc.
Form S-4/A
File No.
333-269342
10.25
October 27,
10.24
First Amendment to Transaction Bonus and Release, dated November 27, 2023 by and between African Agriculture Inc. and African Discovery Group Inc.
Form 8-K
File No.
001-40722
10.4
November 30,
10.25
African Agriculture Holdings Inc. 2023 Incentive Plan
Form S-4/A
File No.
333-269342
10.26
October 27,
10.26
Master Agreement, dated February 28, 2018, by and among Gora Seck, Agro Industries Corp, Tampieri Financial Group S.p.A., Tempieri S.p.A., Davide Tampieri and Senhuile S.A.
Form S-4/A
File No.
333-269342
10.27
October 27,
10.27
Intercompany Loan Agreement, dated May 10, 2021, by and among African Agriculture, Inc., Agro Industries Corp. and Global Commodities LTD.
Form S-4/A
File No.
333-269342
10.28
October 27,
10.28
Partnership Agreement, dated May 14, 2022, by and between African Agriculture, Inc. and The Directorate General of Water and Forests.
Form S-4/A
File No.
333-269342
10.29
October 27,
10.29
Joinder to the Letter Agreement, dated December 8, 2022, between the Company, the Sponsor and Mike Brown.
Form S-4/A
File No.
333-269342
10.30
October 27,
10.30
Second Amended and Restated Promissory Note, dated October 27, 2023, between African Agriculture, Inc. and 10X Capital SPAC Sponsor II LLC.
Form S-4/A
File No.
333-269342
10.31
October 27,
10.31
Partnership Contract for Project Development Commercial Agriculture, dated effective September 27, 2023, among African Agriculture, Inc., the Ministry of Agriculture and Deental Yakaare Ndema e Ngynaaka Economic Interest Grouping (GIE-DYNN).
Form S-4/A
File No.
333-269342
10.32
October 27,
10.32
Form of Indemnification Agreement by and between African Agriculture Holdings Inc. and its directors and executive officers.
Form 8-K
File No.
001-40722
10.32
December 12,
10.33*
Supply Contract by and between African Agriculture, Inc. and Dr. Khan, dated January 2, 2024.
14*
Code of Business Conduct and Ethics
21.1
List of Subsidiaries of African Agriculture Holdings Inc.
Form 8-K
File No.
001-40722
21.1
December 12,
31.1*
Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*+
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*+
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1
African Agriculture Holdings Inc. Compensation Clawback Policy
101.INS*
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*
Cover Page Interactive Data File (embedded within the Inline XBRL document)
† 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.
* Filed herewith.
+ The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.