UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM20-F
¨ REGISTRATION STATEMENT PURSUANT TO SECTION12(b)OR (g)OF THE SECURITIES EXCHANGE ACT OF 1934
OR
¨ ANNUAL REPORT PURSUANT TO SECTION13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
OR
¨ TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
x SHELL COMPANY REPORT PURSUANT TO SECTION13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report June28, 2024
Commission File No.333-275005
Above Food Ingredients Inc.
( Exact name of registrant as specified in its charter )
Not applicable
( Translation of registrants name into English )
Canada
( Jurisdiction of incorporation or organization )
2305 Victoria Avenue #001
Regina, Saskatchewan, S4P 0S7
306-779-2268
( Address of principal executive offices )
Corporation Services Company
251 Little Falls Drive
Wilmington, DE 19808
( Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person )
Securities registered or to be registered pursuant to Section12(b)of the Act:
|
Title of each class: |
Trading Symbol(s) |
Name of each exchange on which registered: |
||||||||||||||||||
| Common Shares | ABVE | The Nasdaq Global Market LLC | ||||||||||||||||||
|
Warrants,
each exercisable for one common
share | ABVE.W | The Nasdaq Global Market LLC | ||||||||||||||||||
| Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Emerging growth company x |
If an emerging growth company that prepares its financial statements in accordance with U.S.GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a)of the Exchange Act. ¨
The term new or revised financial accounting standard refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section404(b)of the Sarbanes-Oxley Act (15U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨
If securities are registered pursuant to Section12(b)of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b). ¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.
| U.S.GAAP x |
International Financial Reporting
Standards as issued by the International
Accounting Standards Board ¨ | Other ¨ | ||||||||||||||||||
| Page |
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On June28, 2024 (the Closing Date ), Above Food Ingredients Inc., a corporation organized under the laws of Alberta, Canada ( New Above Food or TopCo ) closed the previously announced business combination (the Business Combination ) pursuant to that certain business combination agreement, dated as of April29, 2023, as amended by that certain Amendment No.1 to Business Combination Agreement dated March12, 2024 (as amended, the Business Combination Agreement ), by and among New Above Food, Bite Acquisition Corp., a Delaware corporation ( Bite ), Above Food Corp., a corporation existing under the laws of Alberta, Canada ( Above Food ) and Above Merger Sub,Inc., a Delaware corporation ( Merger Sub ).Capitalized terms used and not otherwise defined in this Shell Company Report on Form 20-F have the respective meanings given to those terms in the Proxy Statement/Prospectus (the Proxy Statement/Prospectus ), forming part of the Registration Statement on Form F-4 of New Above Food, as amended (Registration No. 333-275005), which was declared effective by the SEC on April 8, 2024 (the Registration Statement ).
Prior to the closing of the Business Combination (the Closing ), Above Food continued from the laws of Saskatchewan to a corporation under the laws of the Province of Alberta pursuant to the Business Corporations Act (Alberta) and the regulations made thereunder, as now in effect and as they may be promulgated or amended from time to time ( ABCA ). On the Closing Date, several transactions were completed pursuant to the Business Combination Agreement and the plan of arrangement under the laws of Alberta, Canada that was effected pursuant to the terms of the Business Combination Agreement, including:
| Above Foods shareholders effected a share exchange (the Share Exchange ), pursuant to which, among other things, Above Foods shareholders contributed to New Above Food all of the issued and outstanding equity of Above Food in exchange for newly issued common shares of New Above Food ( New Above Food Common Shares ), ClassA Earnout Shares of New Above Food as described in the articles of New Above Food ( New Above Food ClassA Earnout Shares ) and ClassB Earnout Shares of New Above Food as described in the articles of New Above Food ( New Above Food ClassB Earnout Shares ), and after giving effect to the Share Exchange, Above Food became a direct, wholly owned subsidiary of New Above Food; |
| on the Closing Date and following the completion of the Share Exchange, Merger Sub merged with and into Bite (the Merger ), with Bite surviving as a direct, wholly owned subsidiary of New Above Food; and |
| As a result of the Merger, (i)each issued and outstanding share of Bites common stock was automatically converted into and exchanged for one New Above Food Common Share and (ii)each issued and outstanding warrant to purchase shares of Bites common stock was, pursuant to the terms of the Warrant Agreement, dated February11, 2021, between Bite and Continental Stock Transfer Trust Company (the Bite Warrant Agreement ), automatically converted into one warrant to purchase New Above Food Common Shares (each, a New Above Food Warrant ), and all rights with respect to shares of Bites common stock underlying such warrants were automatically converted into rights with respect to New Above Food Common Shares (each converted Bite warrant, a New Above Food Listed Warrant) and (iii)each outstanding warrant issued by Above Food to purchase Above Food common shares (each, a Above Food Warrant ) automatically converted into one New Above Food Warrant, and in each case, New Above Food issued a number of New Above Food Common Shares and New Above Food Warrants in accordance with the Business Combination Agreement. |
Prior to the Business Combination, New Above Food did not conduct any material activities other than those incidental to its formation and the matters contemplated by the Business Combination Agreement, such as the making of certain required securities law filings and the establishment of certain subsidiaries. Upon the closing of the Business Combination, New Above Food became the direct parent of Above Food, an Alberta-based innovative food company leveraging its vertically integrated supply chain to deliver differentiated ingredients and consumer products.
New Above Food Common Shares and New Above Food Listed Warrants are currently listed on the Nasdaq Global Market ( Nasdaq ) under the symbols ABVE and ABVE.W, respectively.
Except as otherwise indicated or required by context, references in this Shell Company Report on Form20-F (the Report ) to we, us, our, TopCo, New Above Food or the Company refer to Above Food Ingredients Inc., a corporation organized under the laws of Alberta, Canada, and its consolidated subsidiaries.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this Report, including the description of the transactions, agreements and other information contained herein and the exhibits hereto, as well as information incorporated by reference herein are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as believe, may, will, estimate, continue, anticipate, intend, expect, should, could, would, plan, predict, potential, seem, seek, future, outlook, suggests, targets, projects, forecast and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding future events, the estimated or anticipated future results and benefits of New Above Food following the Business Combination, future opportunities for New Above Food, future planned products and services, business strategy and plans, objectives of management for future operations of New Above Food, market size and growth opportunities, competitive position, technological and market trends, and other statements that are not historical facts. These statements are based on the current expectations of New Above Foods management and are not predictions of actual performance.
These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on, by any investor as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. All forward-looking statements are based upon estimates and forecasts and reflect the views, assumptions, expectations, and opinions of New Above Food, which are all subject to change due to various factors. Any such estimates, assumptions, expectations, forecasts, views or opinions, whether or not identified in this Report, should be regarded as indicative, preliminary and for illustrative purposes only and should not be relied upon as being necessarily indicative of future results.
Many actual events and circumstances are beyond the control of New Above Food. These statements are subject to a number of risks and uncertainties regarding New Above Foods businesses and the Business Combination, and actual results may differ materially. These risks and uncertainties include, but are not limited to, general economic, political and business conditions; changes in domestic or foreign business, market, financial, political and legal conditions; failure to realize the anticipated benefits of the Business Combination, including difficulty in integrating the businesses of Bite and Above Food; the risk that the Business Combination disrupts current plans and operations or the ability of New Above Food to grow and manage growth profitably and retain its key employees including its executive team; costs related to the Business Combination; the overall level of demand for New Above Foods services; general economic conditions and other factors affecting New Above Foods business; New Above Foods ability to implement its business strategy; New Above Foods ability to manage expenses; changes in applicable laws and governmental regulation and the impact of such changes on New Above Foods business, New Above Foods exposure to litigation claims and other loss contingencies; the risks associated with negative press or reputational harm; New Above Foods ability to protect patents, trademarks and other intellectual property rights; any breaches of, or interruptions in, New Above Foods technology infrastructure; changes in tax laws and liabilities and other factors discussed under the sectiontitled Risk Factors in this Report.
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Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors discussed under the Risk Factors sectionin this Report. Accordingly, you should not rely on these forward-looking statements, which speak only as of the date of this Report. We undertake no obligation to publicly update or revise any forward-looking statement contained in this Report to reflect circumstances or events after the date of this Report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks described in the reports we will file from time to time with the SEC after the date of this Report.
Although we believe the expectations reflected in the forward-looking statements were reasonable at the time made, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assume responsibility for the accuracy or completeness of any of these forward-looking statements. You should carefully consider the cautionary statements contained or referred to in this sectionin connection with the forward looking statements contained in this Report and any subsequent written or oral forward-looking statements that may be issued by New Above Food or persons acting on its behalf.
iv
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A. Directors and Senior Management
Unless otherwise indicated, the address of each New Above Food director and executive officer is c/o Above Food Ingredients Inc., 2305 Victoria Avenue #001, Regina, Saskatchewan, S4P 0S7.
The board of directors of New Above Food ( New Above Food Board ) after the closing of the Business Combination consists of sevenmembers:
Chief Executive Officer and Executive Chairman
Lionel Kambeitz is a Founder, President, Chief Executive Officer and Executive Chairman of Above Food. He has served as Above Foods Chief Executive Officer and as a member of the Above Food board of directors ( Above Food Board ) since September2020. Mr.Kambeitz is also a Founder of KF Kambeitz Farms Inc. and served as the Executive Chairman of the board of directors from January2013 to January2023. Mr.Kambeitz has also been a director of HTC Purenergy Inc. since 1996. He is also a director on the board of Kingsland Energy Corp. and has served as a director on the board of directors since 1995. Mr.Kambeitz is also Chairman of the board of Carbon RX Inc. and a director on the board of directors of Delta CleanTech Inc. Mr.Kambeitz has over three-decades of experience in agriculture, manufacturing, energy and process design as well as extensive executive leadership experience in the agriculture industry. Age 71.
Executive Vice President, Chief Financial Officer and Director
Jason Zhao has served as Above Foods Chief Financial Officer since October2021. He founded Odyssey Advisory Services Ltd. in January2021. Mr.Zhao has also been the Chief Executive Officer of ISTDC Canada Inc. since 2008. From April2018 to January2021, Mr.Zhao served as Principal of Virtus Group, Chartered Professional Accountants Business Advisors LLP, the largest independent Chartered Professional Accountant and Business Advisory firm in Saskatchewan, Canada. He is a Chartered Professional Accountant and a Chartered Business Valuator. Mr.Zhao received a Bachelors degree in Business from the University of Alberta. Mr.Zhao has over 20 years of experience building and leading finance teams in accounting firms, private equity, and international companies with significant operating scale and complexity. Age 41.
Non-Executive Directors
Felipe Gomez Garcia has spent the last 27 years of his career with Grupo Industrial Vida S.A. de C.V. ( Grupo Vida ), where he has served as a Member of the board of directors and Chief Executive Officer since January2017. Grupo Vida, the largest oat milling company in Latin America, has its headquarters in Mxico and also has operations in Canada and Chile. He has been President of the Food Industry Chamber in the State of Jalisco, Mexico; VP of the Confederation of Industrial Chambers in Mexico; and Member of the board of directors of Food Bank in Guadalajara among other positions dedicated to support the most needed communities in Jalisco and Mexico. Mr.Gomez has extensive executive leadership experience and experience serving on various boards of directors for companies in the agriculture industry. Age 50.
Garth Fredrickson is Lead Independent Director of New Above Food. He was an industrial and commercial property developer and a recognized business builder. Mr.Fredrickson has worked at Bison Properties Limited since 1990 as a co-owner and its Vice President. He has also been the President and Owner of Friona Development Consulting Ltd since 1982. He serves on the board of directors for various private companies, including Atlantis Research Labs, where he has served since January2015, Pure Jet,Inc., where he has served since June2019, Bison Properties Limited, where he has served since 1997, and Friona Development Consulting Ltd, where he has served since 1982. He also served on the Board of Governors of the University of Regina from 1998 to 2004, and as the Chairman of the Board of Governors during that period. Mr.Fredrickson received a Bachelor of Arts degree from the University of Regina in 1979. Age 68.
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Alberto Ardura Gonzlez served as Bites Chief Executive Officer from Bites inception and served on the Bite board of directors ( Bite Board ), and has served as the Chairman of the Bite Board since December31, 2022, through the Closing of the Business Combination. He has more than 35 years of experience in the financial industry and has advised numerous companies on MA transactions and on structuring and underwriting public and private issuances of equity and debt. From 2002 to 2009, Mr.Ardura was the Chief Country Manager and Head of Fixed Income Currencies and Commodities at Merrill Lynch Mexico, S.A. de C.V., the leading investment bank in Mexico at the time. In 2009, Mr.Ardura joined Deutsche Bank, A.G. in New York City as Head of Latin America Capital Markets and Treasury Solutions, advising over 350 clients in raising several hundred billion dollars in debt and equity financing in the public and private markets, as well as advising several clients in restructurings transactions. During such time, Mr.Ardura was also responsible for Deutsche Banks local operations in Brazil, Mexico, Chile, Per and Argentina, and was a member of Deutsche Banks Global Emerging Markets Committee, Latin America Investment Committee, and Americas Investment Banking Executive Committee. He was later appointed as Vice Chairman of Corporate Finance for Latin America. From 2017 to 2019, he was a Managing Director leading the Latin America Investment Banking and Client Coverage division at Nomura Securities,Inc. In 2019, Mr.Ardura founded his own advisory firm, Pier A Capital Solutions,Inc., focusing on MA and private debt and equity financing transactions for clients across Latin America. Mr.Ardura has served on several boards of directors including Banca Promex, S.A. de C.V., Valores Finamex, S.A. de C.V. Merrill Lynch Mxico, and Casa de Bolsa, S.A. de C.V. He currently serves as an independent board member of HSBC Mxico, S.A., the banking subsidiary of Grupo HSBC, and also serves on the boards of its insurance, broker dealer and asset manager subsidiaries. Mr.Ardura is also an independent board member of Dimex Capital, SA deCV and FinMdica, S.A, and is also a board member of Eric Kayser Mxico, S.A.P.I. de C.V. Mr.Gonzlez has over three-decades of experience in the financial industry as well as his extensive executive leadership experience and board service positions. Age 61.
Chief Reginald Bellerose is a political leader and business leader. Mr.Bellerose has served as a director and a member of the Audit Finance Committees of Encanto Potash Corp. since 2020 and 2022, respectively. Mr.Bellerose is also a director at five private companies, including Carbon RX Inc., where he has served since November2022, Atamipek, where he has served since December2018, 102005647 Saskatchewan Ltd, where he has served since January2017, KDM Business Development Corp., where he has served since 2009, and Saskatchewan Indian Gaming Authority, where he has served as the Chairman of the board since February2008. Mr.Bellerose has served as the President of both Muskowekwan Resources Ltd. since 2010 and of KDM Business Development Corp. since 2009. He served for 17 consecutive years, until 2021, as Chief of Muskowekwan First Nation. Mr.Bellerose holds a Masters Certificate in Project Management from the University of Saskatchewan and a Bachelor of Arts in History and Political Science from Concordia University in Edmonton. Mr.Bellerose has served in various leadership positions in politics, business and has extensive board service positions. Age 56.
Agustin Tristan Aldave is a consultant for an array of companies in the financial industry and develops restaurants, franchises, ready-to-eat and ready-to-drink products, including developing a bottling company, as well as a food delivery platform to take healthy food and beverages to industrial areas. Mr.Tristan has served as a director and the CEO at the Agrinam Acquisition Corporation since August2021. Further, Mr.Tristan also serves as a director and the CEO of two private companies, including Lexington Capital, S.A.P.I. de C.V. ( Lexington ), where he has served since April2017, and Demeter Capital, S.A.P.I. de C.V., where he has served since August2016. Mr.Tristan received a Bachelor of Science in Industrial Engineering in 2008 from the University of Alabama and a Master of Business Administration from the same university in 2010. Mr.Tristan has extensive experience serving on various boards, working on food product development and consulting in the financial and manufacturing industries. Age 38.
The executive officers of New Above Food after the closing of the Business Combination consists of two additional individuals:
Vice President of Consumer Brands
Martin Williams is a Co-Founder of Above Food and the President and Chief Innovation Officer of AFBI, a wholly owned subsidiary of Above Food. He has served as the President and Chief Innovation Officer of AFBI since January2021. Mr.Williams has been a visiting professor at CEDIM Mxico since December2018, where he teaches a class on adaptive strategy as part of the Masters in Business Innovation program. Before founding Above Food, Mr.Williams held various leadership roles at global management consulting firms, such as Fahrenheit 212, which was acquired by Capgemini SE (PA: CAP), and Idea Couture Inc., which was acquired in 2016 by Cognizant Technology Solutions (NASDAQ: CTSH), until July2019, including Senior Vice President and Global Head of Strategy. Mr.Williams attended OCAD University in Toronto where he studied industrial design with a specialization in applied innovation.
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Vice President of Origination and Regenerative Agriculture
Tyler West is a Founder of Above Food and, since 2016, a Founder and President and Chief Executive Officer of Purely Canada Foods Corp. ( PCFC ), now a wholly owned subsidiary of Above Food. He has served as a member of the PCFC board of directors since October2016 and as a member of the Above Food Board since January2023 and as President and Chief Executive Officer of PCFC since October2017. Mr.West received a Bachelor of Science degree in Agricultural Business and Management at the University of Missouri-Columbia.
Corporate Governance
New Above Food Common Shares and New Above Food Listed Warrants are currently listed on Nasdaq under the symbols ABVE and ABVE.W, respectively. As of the Closing, New Above Food is subject to the Nasdaq corporate governance requirements (the Nasdaq Listing Rules ) on an ongoing basis.
The Canadian Securities Administrators (the CSA ) have issued corporate governance guidelines pursuant to National Policy 58-201Corporate Governance Guidelines (the Corporate Governance Guidelines ), together with certain related disclosure requirements pursuant to National Instrument 58-101Disclosure of Corporate Governance Practices ( NI 58-101 ). The Corporate Governance Guidelines are recommendations respecting reporting issuer corporate governance, including the CSAs recommendations on the composition of a companys board of directors (or similar body for a non-corporate entity), director independence, board mandates and position descriptions for the board chair, committee chairs, and the Chief Executive Officer, orientation and continuing education, written codes of conduct or ethics, nomination of directors, compensation and regulator board assessments.
New Above Food recognizes that good corporate governance plays an important role in its overall success and in enhancing shareholder value and, accordingly, has adopted, certain corporate governance policies and practices that reflect its consideration of the recommended Corporate Governance Guidelines.
The disclosure set out below includes disclosure required by NI 58-101 describing New Above Foods anticipated approach to corporate governance in relation to the Corporate Governance Guidelines and the Nasdaq Listing Rules.
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Election and Appointment of Directors
Under the New Above Food Articles, the New Above Food Board shall consist of a minimum of 1 and a maximum of 15 directors. Under the provisions of the ABCA if New Above Food is a reporting issuer in any jurisdiction of Canada the New Above Food Board shall not have less than 3 directors.
Unless otherwise required by the ABCA or the New Above Food Articles, at all meetings of shareholders, every question will be decided by a majority of the votes cast on the question. In case of an equality of votes on any question, the chair of the meeting will not be entitled to a second or casting vote.
A resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of directors or committee of directors is as valid as if it had been passed at a meeting of directors or committee of directors, as the case may be. A resolution in writing dealing with all matters required by the ABCA to be dealt with at a meeting of directors, and signed by all the directors entitled to vote at that meeting, satisfies all the requirements of the ABCA relating to meetings of directors.
Each director shall hold office until the next annual general meeting and until his or her successor is elected and duly qualified, subject to prior death, resignation, retirement, disqualification or removal from office.
Director Independence
The New Above Food Board has determined that each of Felipe Gomez Garcia, Garth Frederickson, Chief Reginald Bellerose, Alberto Ardura Gonzlez and Agustin Tristan Aldave qualify as independent directors, as defined under the rulesof Nasdaq and NI 58-101 and the New Above Food Board consists of a majority of independent directors, as defined under the rulesof the SEC and Nasdaq relating to director independence requirements. In addition, the New Above Food Board is subject to the rulesof the SEC and Nasdaq relating to the membership, qualifications, and operations of the audit committee, as discussed below.
Committees of the New Above Food Board of Directors
As of the Closing of the Business Combination, New Above Food Board established three standing committees: an audit and risk committee, nominating committee and a compensation committee. The written charter for each of the New Above Food Board committees is posted on our website at https://abovefood.com/investors/.
Audit and Risk Committee
We have established an audit and risk committee comprised of Garth Frederickson, Alberto Ardura Gonzlez and Agustin Tristan Aldave, with Alberto Ardura Gonzlez serving as chairperson, each of whom meet the independence requirements set forth in Rule10A-3 under the Exchange Act and applicable Nasdaq Listing Rules. Each member of the audit committee is financially literate, and the New Above Food Board has determined that Alberto Ardura Gonzlez qualifies as the audit committee financial expert, as such term is defined in Item 407 of Regulation S-K and qualifies as an audit committee financial expert, as such term is defined in the rulesof the SEC and applicable Nasdaq Listing Rules.
The audit and risk committee is, among other things, directly responsible for the appointment, compensation, retention and oversight of the work of New Above Foods independent auditor, including overseeing the qualifications and independence of our outside auditor, overseeing managements conduct of our financial reporting process (including the development and maintenance of systems of internal accounting and financial controls), overseeing the integrity of our financial statements, overseeing the performance of the internal audit functions, preparing certain reports required by the rulesand regulations of the SEC, reviewing the results and scope of the audit and other accounting related services, and overseeing New Above Foods compliance with legal and regulatory requirements.
Compensation Committee
We have established a compensation committee comprised of Garth Frederickson and Agustin Tristan Aldave, with Agustin Tristan Aldave serving as chairperson, each of whom meet the independence requirements set forth in Rule10C-1 under the Exchange Act and applicable Nasdaq Listing Rules.
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The compensation committee is, among other things, directly responsible for reviewing and approving, or recommending to the New Above Food Board for approval, compensation of the Chief Executive Officer and other executive officers, making recommendations to the New Above Food Board with respect to director compensation, overseeing the succession planning process, overseeing the administration of New Above Foods incentive compensation plans, and preparing any report on executive compensation required by the rulesand regulations of the SEC.
Nominating and Governance Committee
We have established a nominating and governance committee comprised of independent directors, Chief Reginald Bellerose and Felipe Gomez Garcia, with Chief Reginald Bellerose serving as chairperson.
The nominating and governance committee is, among other things, directly responsible for overseeing the selection of persons to be nominated to serve on the New Above Food Board, making recommendations to the New Above Food Board with respect to committee members and chairs, annually evaluating the committees, and overseeing and developing New Above Foods corporate governance practices.
Diversity
The New Above Food Board has not adopted any policies that address the identification and nomination of women or other diverse candidates to the New Above Food Board or to management of New Above Food. The New Above Food Board recognizes the importance and benefit of having a board of directors and senior management composed of highly talented and experienced individuals having regard to the need to foster and promote diversity among board members and senior management with respect to attributes such as gender, ethnicity and other factors. In support of this goal, the compensation committee intends to, when identifying candidates to nominate for election to the New Above Food Board or appoint as senior management or in its review of senior management succession planning and talent management:
consider individuals who are highly qualified, based on their talents, experience, functional expertise and personal skills, character and qualities having regard to New Above Foods current and future plans and objectives, as well as anticipated regulatory and market developments;
consider criteria that promote diversity, including with regard to gender, ethnicity, and other considerations;
consider the level of representation of women on its board of directors and in senior management positions, along with other markers of diversity, when making recommendations for nominees to the New Above Food Board or for appointment as senior management and in general with regard to succession planning for the New Above Food Board and senior management; and
as required, engage qualified independent external advisors to assist the New Above Food Board in conducting its search for candidates that meet the board of directors criteria regarding skills, experience and diversity.
At the present time, there are no women serving on the New Above Food Board.
B. Advisers
Latham Watkins LLP, 811 Main Street, Suite3700, Houston, TX 77002, has acted as U.S.securities counsel for New Above Food and Above Food and is continuing to act as U.S.securities counsel to New Above Food following the closing of the Business Combination.
Gowling WLG (Canada) LLP, 1600, 421 7th Avenue SW, Calgary, Alberta, T2P 4K9, Canada, has acted as counsel for New Above Food and Above Food with respect to Canadian law and is continuing to act as counsel for New Above Food with respect to Canadian law following the closing of the Business Combination.
C. Auditors
For the fiscal years ended January31, 2024 and 2023, Ernst Young LLP, Chartered Professional Accountants, 4093rd Ave S, Saskatoon, SK S7K 5R5, Canada, has acted and will act going forward as independent registered public accounting firm for Above Food and New Above Food, respectively.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
A. [Reserved]
B. Capitalization and Indebtedness
The following table sets forth the capitalization of New Above Food on an unaudited pro forma combined basis as of January31, 2024, after giving effect to the Business Combination.
|
As of
January31, 2024 | ||||||||||||||||||||
| (in CAD $ million) | ||||||||||||||||||||
| Cash and cash equivalents | 1.5 | |||||||||||||||||||
| Total liabilities | 334.7 | |||||||||||||||||||
| Equity | (186.4 | ) | ||||||||||||||||||
| Share Capital | (68.9 | ) | ||||||||||||||||||
| Retained earnings | (117.7 | ) | ||||||||||||||||||
| $ | Shares | % of Total | ||||||||||||||||||
| Bite public stockholders | $ | 504,380 | 50,438 | 0.2 | % | |||||||||||||||
| Bite initial stockholders (1) | $ | 57,900,000 | 5,790,000 | 20.8 | % | |||||||||||||||
| Lenders (2) | $ | 10,973,850 | 1,097,385 | 3.9 | % | |||||||||||||||
| Existing Above Food shareholders | $ | 166,099,810 | 16,609,981 | 59.7 | % | |||||||||||||||
| Brotalia shareholders (3) | $ | 18,000,000 | 1,800,000 | 6.5 | % | |||||||||||||||
| Veghouse shareholders (4) | $ | 8,525,500 | 852,550 | 3.1 | % | |||||||||||||||
| ANF shareholders (5) | $ | 16,042,529 | 1,604,253 | 5.8 | % | |||||||||||||||
| Total shares issued at close (6) | 278,046,069 | 27,804,607 | 100.0 | % | ||||||||||||||||
| Per Share Value: | ||||||||||||||||||||
| Shares outstanding, excluding additional dilution sources (7) | 10.00 | |||||||||||||||||||
| Shares outstanding, fully diluted (8) | 9.12 | |||||||||||||||||||
| Additional dilution sources | Shares | % of Total (19) |
Per share
value (20) | |||||||||||||||||
| Public warrants (9) | 10,000,000 | 19.3 | % | 10.40 | ||||||||||||||||
| Private placement warrants (10) | 275,000 | 0.5 | % | 10.01 | ||||||||||||||||
| Warrants underlying Sponsor Convertible Promissory Note (11) | 75,000 | 0.1 | % | 10.00 | ||||||||||||||||
| Above Food earn out shares (12) | 6,113,742 | 11.8 | % | 8.20 | ||||||||||||||||
| Above Food restricted share units (13) | 1,514,459 | 2.9 | % | 9.48 | ||||||||||||||||
| Above Food options - Tranche 1 (14) | 1,567,036 | 3.0 | % | 9.84 | ||||||||||||||||
| Above Food options - Tranche 2 (15) | 1,661,701 | 3.2 | % | 10.42 | ||||||||||||||||
| Above Food options - Tranche 3 (16) | 126,204 | 0.2 | % | 10.07 | ||||||||||||||||
| Above Food OTM warrants (17) | 2,375,455 | 4.6 | % | 10.26 | ||||||||||||||||
| ANF earn out shares (18) | 220,000 | 0.4 | % | 9.92 | ||||||||||||||||
| Total Additional Dilution Sources (19) | 23,928,597 | 46.0 | % | 9.12 | ||||||||||||||||
| Total shares assuming full dilution | 51,733,204 | |||||||||||||||||||
| (1) | Consists of 5,640,000 private shares currently outstanding, plus 150,000 shares underlying the Sponsor Convertible Promissory Note (as to which the Sponsor has agreed, pursuant to the Sponsor Support Agreement, to convert $1.5 million of the outstanding principal into Bite units immediately prior to the effective time of the Merger, which units will then, in accordance with the terms of the Business Combination Agreement, convert into one New Above Food Common Share and one half of a warrant to acquire a New Above Food Common Share, with a strike price of $11.50). |
| (2) | Represents the conversion of the lender financing entered into prior to the Business Combination, into New Above Food Common Shares at a deemed value of $10 per share. The interest amount was calculated as the amount accrued at the Closing Date. |
| (3) | In connection with the close of the transaction with Bite, Above Food issued Above Food common shares prior to the completion of the Business Combination to obtain financing of US $5.0 million from the shareholders of Brotalia and acquire the business of Brotalia. As the acquisition of Brotalia was not deemed to be significant within the meaning of Regulation S-X Rule 3-05, this acquisition is not reflected in the Pro forma financial information included elsewhere in this 20-F and accordingly the shares issued are also not included in such pro forma financial information. |
| (4) | In connection with the close of the transaction with Bite, Above Food issued 852,550 Above Food common shares prior to the completion of the Business Combination for cash proceeds of US $5.3 million from Veghouse and prepaid deposit of US $3.2 million. |
| (5) | In connection with the close of the transaction with Bite, Above Food acquired the remainder of the interest in ANF it did not own. The consideration paid was settled in Above Food common shares prior to the completion of the Business Combination. As the acquisition of the remaining interest in ANF was not deemed to be significant within the meaning of Regulation S-X Rule 3-05, this acquisition is not reflected in the Pro forma financial information included elsewhere in this 20-F and accordingly the shares issued are also not included in such pro forma financial information. |
| (6) | These equity values were calculated based on the number of shares outstanding at the closing of the Business Combination and the per share value of $10 per New Above Food Common Share. |
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| (7) | Calculation of value per share does not take into account the additional sources of dilution, as described in notes 9 through 18 below. |
| (8) | Calculation of value per share takes the issuance of the maximum amount of New Above Food Common Shares in connection with the additional dilution sources, as described in notes 9 through 18 below. In addition, calculation of value per share in the rows entitled Public Warrants and Private placement warrants and Warrants underlying Sponsor Convertible Promissory Note is based on the applicable Total Equity Value Post-Redemptions plus the full exercise of the applicable maximum number of Warrants at $11.50 per share for a total cash exercise price of approximately $115.0 million in the row entitled Public Warrants, approximately $3.2 million in the row entitled Private placement warrants and approximately $0.9 million in the row entitled Warrants underlying Sponsor Convertible Promissory Note. |
| (9) | This row assumes exercise of all Public Warrants outstanding as of January 31, 2024, to purchase 10,000,000 shares of Bite common stock. |
| (10) | This row assumes exercise of all private placement warrants outstanding as of January 31, 2024, to purchase 275,000 shares of Bite common stock. |
| (11) | This row assumes that the maximum amount permitted under the Sponsor Convertible Promissory Note to be converted into Bite units in the aggregate amount of $1,500,000 is converted into Bite units at a price of $10.00 per unit, as required by the terms of the Sponsor Support Agreement, and that the 75,000 warrants included in such units are all exercised. |
| (12) | This row assumes that all of the Above Food Earnout Shares are converted into New Above Food Common Shares. The Above Food Earnout Shares will only be converted into New Above Food Common Shares if certain conditions are satisfied within five years following the Closing Date, as described in this 20-F. |
| (13) | This row represents all of the 1,514,459 shares issuable to Above Foods employees pursuant to restricted share units that will begin vesting upon the consummation of the Business Combination and pursuant to employment agreements. |
| (14) | This row assumes that all of the first tranche of Above Foods options (Above Food Options T1) are converted into New Above Food Common Shares. |
| (15) | This row assumes that all of the second tranche of Above Foods options (Above Food OTM Options T2) are converted into New Above Food Common Shares. |
| (16) | This row assumes that all of the third tranche of Above Foods options (Above Food OTM Options T3) are converted into New Above Food Common Shares. |
| (17) | This row assumes that all of Above Foods out-of-the-money warrants (Above Food OTM Warrants) are converted into New Above Food Common Shares. |
| (18) | This row assumes the issuance of (i) 100,000 shares payable to ANF securityholders in the first year following the consummation of the ANF Acquisition (ANF Year One Earnout Shares) and (i)120,000 shares payable to ANF securityholders in the second year following the consummation of the ANF Acquisition (ANF Year Two Earnout Shares and, together with the ANF Year One Earnout Shares, the ANF Earnout Shares). These amounts represent the estimated maximum payout in shares under these earn out arrangements to illustrate the maximum amount of dilution possible to the Bite public stockholder who elect not to redeem their shares may experience in connection with the Business Combination; however, the 220,000 ANF Earnout Shares will be issued in a private placement pursuant to Section 4(a)(2) of the Securities Act after the total number of New Above Food Common Shares payable to the ANF securityholders following the consummation of the ANF Acquisition is determined. |
| (19) | This row assumes the issuance of all New Above Food Common Shares in connection with each of the additional dilution sources, which equals 23,928,597 New Above Food Common Shares. Percentages in this row represent (a) the foregoing share amount divided by (b) the sum of (i) the amounts included in the row titled Total Shares Outstanding plus (ii) the amounts included in the row titled Total Additional Dilution Sources. 23,928,597 New Above Food Common Shares in total represents the full amount of shares issuable with respect to the applicable additional dilution source in both the numerator and denominator. |
| (20) | These columns assume an equity value of New Above Food of $278.0 million. These equity values were calculated based on the number of shares at close and the assumed per share value of $10 per New Above Food Common Share. The per share values are calculated assuming the exercise price is paid for each dilutive instrument (where applicable) and such value is added to the total equity value of New Above Food. The denominator was calculated as the number of shares outstanding, adjusted to include the incremental share count underlying each dilutive instrument. |
As a result of the Business Combination, New Above Food became an SEC-registered and Nasdaq-listedcompany, and its operations represent a continuity of Above Foods operations. As a public company, New Above Food will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. We expect to incur additional annual expenses related to being a publicly listed company including, among other things, additional directors and officers liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses.
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Business Trends
Year Ended January31, 2024, January31, 2023, and January31, 2022
We generated a $7.8 million greater net loss in FY24 as compared to FY23, and a $47.5 million greater net loss in FY24 as compared to FY22. The biggest drivers of the increased loss as compared to FY23 were the following:
| Write-offs and write-downs of inventory of approximately $3 million, contributing to the increased gross loss, including: |
| o | A $2.7 million write-off of oat inventory due to the discontinuance of our oat grower program; and | |
| o | A $285,000 write-down of CPG inventory that had aged past acceptable dates for retailer. |
| Significant contract washout and cancellation costs, totaling approximately $650K, incurred to exit unfavorable contracts. These costs are incurred for various reasons, including crop damage/failure, transloader delays at ports, and our buyers no longer needing specific product due to mill backlogs or equipment breakdown. |
| Increased professional fees of $3.5 million, relating to increased consulting and accounting expenses assisting in the process of going public. |
| Increased rent of $1.4 million, largely due to the increased operating leases, as well as a full period of consolidating the operations of previous acquirees who rent premises and equipment. |
| Increased interest expense of $2.3 million, relating to the new subordinated convertible loans, the Bank of Nova Scotia loan used for the acquisition of Discovery Seed Labs, and overall increased interest rates on variable rate facilities. |
| An increase to the equity method investment loss of $3.0 million, largely relating to $3.3 million of impairment of the investment in ANF. |
Our decreased net loss in FY22 when compared to FY23 and FY24 is largely due to the Company having a stronger gross margin (fewer write-downs/write-offs and costs incurred to exit contracts), lesser selling, general, and administrative costs overall as we had not yet completed acquisitions, no equity method investment loss as compared to FY24 ($3.8 million) and FY23 ($0.8 million), and a lack of impairment of intangible assets as compared to FY24($1.8 million) and FY23 ($6.9 million).
Supply chains
We have historically experienced corresponding unfavorable effects of higher raw material costs, higher freight and logistics costs, and supply chain challenges, including supply chain disruptions resulting from labor shortages and disruptions in ingredients. These cost pressures and supply chain challenges have continued through the years ended January31, 2024 and 2023. We expect these challenges to continue in the 2025 fiscal year. We also continued to see manufacturer and logistics challenges, largely related to ingredient shortages that have contributed to lower sales of our products due to periodic out-of-stock situations. We could experience additional lost sale opportunities if our products are not available for purchase because of continued or expanded disruptions in our supply chain relating to an inability to obtain ingredients or packaging, labor challenges at our logistics providers or our contract manufacturers, or if our customers experience delays in stocking our products.
We have actively engaged with our customers, suppliers, and logistics and transportation providers, to meet demand for our products and to remain informed of any challenges within our business operations. We have also instituted price increases throughout the year ended January31, 2024. Management believes these price increases and additional cost savings initiatives will enable us to continue to invest in projects that drive growth.
Climate related trends
Our business, industry, customers and others in the agriculture value chain face long-term challenges from climate change, including increasing expectations for climate actions and reductions of GHG emissions. Physical risks from a changing climate can have an impact on our operations, our customers and our supply chain. These include more intense weather events, longer droughts, rising sea levels, and changes in average temperature and precipitation patterns. Global decarbonization ambitions and the resulting energy transition are driving carbon regulations and informing capital allocation priorities of investors. Above Food faces evolving risks related to potential regulatory changes, including carbon pricing. At the same time, a transition to a low-carbon economy could create significant opportunities for Above Food to help growers manage these impacts and improve their resilience by facilitating the adoption of climate-smart agriculture practices and developing products that can improve yields in more challenging conditions. To date, our operations have not been significantly affected by weather related risks, though prices for inputs such as pulses and grains have fluctuated as a result of weather impacts in the past. We mitigate the impact of these changes in pricing in part by using back-to-back forward contracts with price discovery mechanisms, and locking in margins in advance under a merchandising model. These derivative contracts have not been designated as accounting hedges, and thus changes in their fair value affect our earnings immediately.
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The impact of climate changes in the operations of our customers is uncertain and may be negative due to changes in rainfall patterns and intensity, shortage of water, changes in sea levels and changes in temperature, among others. These impacts may vary depending on the location and intensity of events, comprising acute risks, including increased severity of extreme climate events, and chronic risks, deriving from long-term changes in climate patterns. The risks of climate change also depend on political, regulatory, legal, technological and market responses. Further, climate change laws could also increase our costs and have an impact on our financial condition and results of operations. We cannot assure that the loss caused by these climate effects on the crops of our growers will be recovered, even in following seasons. As a result, we may be materially adversely affected, and our financial results may significantly vary in each year.
Climate change may also adversely affect our transportation infrastructure and that of logistics and transportation partners. Logistics bottlenecks resulting from poor highway conditions, which are aggravated during certain key planting periods, or resulting from adverse weather conditions or other causes, may delay or prevent the delivery of our products and may have an impact on our financial condition and results of operations.
Acquisitions
The Company has completed certain acquisitions (the Acquisitions ) in FY24, FY23, and FY22, as described below. The acquisitions were funded with a combination of cash and shares. The results of operations for these years might not be comparable as a result of these Acquisitions. Refer to Note 4 of the Financial Statements for details regarding these acquisitions.
Discovery Seed Labs
On March23, 2023, the Company entered into a contract to acquire 100% of the issued and outstanding common shares of Discovery Seed Labs Ltd. ( DSL ), a seed testing and genomics laboratory in Saskatoon, Saskatchewan, for $3,213,563 (the Purchase Price ). The acquisition of control was considered to be a business combination and accounted for using the acquisition method. The Company paid the Purchase Price by paying $2million cash and issuing 502,088 class A common shares valued at $1,213,563.
The aggregate consideration of this acquisition has been allocated to the fair values of the acquired assets and assumed liabilities as follows:
|
DSL |
||||
| Working capital | $ | 545,891 | ||
| Property, plant, and equipment | 93,852 | |||
| Intangible assets | 549,719 | |||
| Deferred tax liability | (247,073 | ) | ||
| Goodwill | 2,271,174 | |||
| Net assets acquired and aggregate consideration | $ | 3,213,563 |
The following table sets forth the fair values and the useful lives of the intangible assets acquired:
| Useful lives | DSL | |||||
| Customer relationships | 5 Years | $ | 315,407 | |||
| Favourable lease terms | 4 Years | 134,567 | ||||
| Non-compete agreements with DSL management | 3 Years | 43,293 | ||||
| Brand value | 10 Years | 56,452 | ||||
| Total intangible assets acquired | $ | 549,719 | ||||
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ANF
ANF produces a variety of branded foods under its various proprietary labels. On September7, 2021, Above Food entered into a Membership Interest Purchase and Option Agreement with ANFs majority owner, ANF Holdco LLC, to acquire all membership interests of ANF in four separate tranches.
As part of the first tranche, on September7, 2021, Above purchased 51.86 units of ANF representing 5.0% of the membership interests, for CAD $1,500,566 (US $1,185,000).
On December31, 2021, under the second tranche, Above increased its membership interests of ANF to 13.40% by purchasing 87.54 units representing 8.4% membership interests, for CAD $2,550,479 (US $2,000,000).
On January20, 2023, under the third tranche, Above acquired an additional 19.66% of ANFs membership interest for CAD $6,255,400 (USD $4,650,000), bringing Aboves total membership interest to 33.06%. The Company accounted for its investment in ANF using the equity method of accounting, until June 2024, when it acquired the remaining 66.94% interest in ANF for 1,604,253 New Above Food Common Shares.
FDO
On June3, 2022 the Company acquired 100% of the issued and outstanding common shares of Farmer Direct Organic Foods Ltd. ( FDO ), in exchange for 1,065,305 common shares of the Company. Of these shares, 432,780 were placed in escrow pending meeting certain milestones based on a combination of revenue and EBITDA as defined within the contract.
The aggregate consideration of this acquisition has been allocated to the fair values of the acquired assets and assumed liabilities as follows:
| FDO | ||||
| Working capital | $ | 1,251,916 | ||
| Property, plant, and equipment | 235,122 | |||
| Intangible assets | 2,782,000 | |||
| Long-term liabilities | (190,862 | ) | ||
| Goodwill | 1,526,171 | |||
| Net assets acquired and aggregate consideration | $ | 5,604,347 | ||
NorQuin
On May18, 2022 the Company entered into a contract to acquire 100% of the issued and outstanding common shares of NorQuin, North Americas largest supplier of quinoa, for $3,163,610 (the Purchase Price) plus or minus any working capital adjustments. The acquisition of control was considered to be a business combination and accounted for using the acquisition method. The Company paid the Purchase Price by issuing 1,565,595 class A common shares valued at $2,672,790 and 682,061 warrants with a total estimated fair value of $490,820.
The aggregate consideration of this acquisition has been allocated to the fair values of the acquired assets and assumed liabilities as follows:
| NorQuin | ||||
| Working capital | $ | 826,146 | ||
| Property, plant, and equipment | 5,927,331 | |||
| Intangible assets | 725,000 | |||
| Long-term liabilities | (3,768,857 | ) | ||
| Lease liability | (546,010 | ) | ||
| Net assets acquired and aggregate consideration | $ | 3,163,610 | ||
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The following table sets forth the fair values and the useful lives of the intangible assets acquired:
| Useful lives | NorQuin | |||||
| Brand and trademark | 10 Years | $ | 275,000 | |||
| Plant breeders rights | 5 Years | 450,000 | ||||
| Total intangible assets acquired | $ | 725,000 | ||||
Wood Water
On July13, 2021, the Company obtained control of Wood Water Foods Inc., doing business as Culcherd (Wood Water), a dairy alternative company. The consideration payable of $3,250,000 (which was reduced by a working capital adjustment of $16,590) was payable in shares of the Company, the number of which was based on the value of the Company at the time of issuance and subject to further adjustment if they were released as a result of a going public transaction. Taking into account the probability of a going public transaction, applicable share restrictions, and the working capital adjustment, the fair value of the consideration was determined to be $2,901,494 on acquisition and revalued to be $2,753,761 as at January31, 2022, with a resulting gain on revaluation of $147,733 recorded in our consolidated statements of operations for the year ended January31, 2022. On April13, 2022, the Company issued 1,616,705 voting common shares to settle the consideration liability.
The following table describes the fair value of the assets acquired and liabilities assumed in this acquisition.
| Wood Water | ||||
| Working capital | $ | 79,281 | ||
| Property, plant, and equipment | 10,053 | |||
| Intangible assets | 463,000 | |||
| Right of use assets | 45,731 | |||
| Long-term liabilities | (103,601 | ) | ||
| Lease liability | (45,731 | ) | ||
| Deferred tax liability | (85,524 | ) | ||
| Goodwill | 2,537,303 | |||
| Net assets acquired and aggregate consideration | 2,901,494 | |||
The following table sets forth the fair values and the useful lives of the intangible assets acquired:
| Useful lives | Wood Water | |||||||
| Customer relationships | 5 Years | $ | 72,000 | |||||
| Brand and trademark | 10 Years | 391,000 | ||||||
| Total intangible assets acquired | $ | 463,000 | ||||||
Comparability of Financial Information
Above Foodsresults of operations and financial position in the fiscal years ended January31, 2024, 2023, and 2022 may not be comparable as a result of the factors provided above under Business Trends, and the Acquisitions outlined above.
Key Financial Definitions/Components of Results
Revenue
Revenue consists primarily of commodity contracts related to forward sales of commodities such as grain and pulses, rudimentary ingredients, subleasing of farmlands, and sale of other products through consumer-packaged goods. Our main source of revenue is forward sales of commodity and ingredient contracts. As a result, our revenue levels tend to fluctuate alongside commodity prices, which are directly affected by numerous factors, including supply and demand, weather trends, geopolitical events, and government policies. These contracts generally require significant working capital, therefore limitations on working capital may also restrict revenue.
Cost of sales
Cost of goods sold consists primarily of the costs we pay to our contract growers and manufacturing partners to produce the products sold. These costs include the purchase of raw ingredients, packaging, shipping and handling, warehousing, and brokerages paid on contracts. In addition, any inventory write-down and/or spoilage are reflected as a component of cost of sales. For inventories of marketable agricultural commodities being stated at fair value, changes in the fair values of the inventory and gains/losses, both realized and unrealized, on related contracts are recognized as cost of sales. While forward commodity and foreign exchange contracts are entered into as a mechanism to hedge against fluctuations in commodity prices and foreign exchange, we are not perfectly hedged, and as such open the Company up to the possibility of significant gains or losses as a result. We anticipate our cost of goods sold to grow as a smaller proportion of our revenues as we achieve increased efficiencies and utilization within our Specialty Ingredient Centre and manage our exposures to commodity price and foreign exchange fluctuations.
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Selling, general and administrative (SGA) expenses
SGA expenses are primarily comprised of wages and salaries, professional fees, selling and marketing expenses, and other non-production operating expenses. As a publicly traded company, we expect to incur higher costs related to salaries and wages, advertising and marketing fees, as well as other legal, compliance, and administrative costs. We also expect to continue to increase our selling, marketing and advertising costs as we invest in growing our revenues and our market reach. We incurred significant expenses, consisting of professional fees, diligence fees and related costs, in connection with the Business Combination and capital raising efforts in the fiscal years ended January31, 2024 and 2023. We also incurred significant costs relating to our go-public process, an employee stock-based compensation plan, and increased rental costs associated with expansion. We anticipate significant expenditures relating to many of these costs going forward as we work to complete our transition to a public company. We have also identified and have begun to realize a number of synergies from the operations we acquired resulting from restructuring of the management teams, sharing resources, brand consolidation, and leveraging our robust supply chain in product formulations.
| Professional fees. Professional fees expense comprise costs paid in relation to accounting, consulting, legal, and sample testing services throughout the year, as well as special purpose professional fees relating to the Business Combination noted above. |
| Wages and salaries. Wages and salaries expenses comprise employee salaries and benefits, as well as expenses relating to stock-based compensation. |
| Advertising and promotion. Selling and marketing expenses comprise advertising costs and costs associated with consumer promotions incurred to acquire new customers, retain existing customers and build brand awareness. |
| Other non-production operating expenses. Other non-production operating expenses are primarily comprised of rent, insurance, and amortization of property, plant, and equipment and intangible assets not related to production and sales of products. |
Research and Development
Research Development ( RD ) costs consist of costs incurred to enhance our existing products and new product developments. RD costs are expensed as incurred. We expect to continue to be active in RD as we invest in growing our intellectual property, product offerings and expanding our market reach. However, in the near term, we expect to reduce our relative RD cost significantly as we work to commercialize existing intellectual property in which we have already invested. We recognize the value in continuing as the leader in regenerative agriculture, and we believe the refinement of our current operations and intellectual property is crucial to our long-term growth and strategy.
Financing Costs / Interest Expense
Financing costs consist of gains and losses on swap derivatives, as well as interest expense. Interest expense represents the actual cash interest costs incurred plus any accrued interest payable at a future date. There is no certainty that these rates or instruments will continue to be available to the Company.
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Results of Operations
Years Ended January31, 2024, January31, 2023, and January31, 2022
The following discussion presents an analysis of our consolidated results of operations for the year ended January31, 2024, 2023, and 2022.
| Year Ended January31 | YoY % |
Year Ended
January31 | YoY % | |||||||||||||||||
| 2024 | 2023 | Change | 2022 | Change | ||||||||||||||||
| Revenue | $ | 368,423,398 | $ | 396,464,504 | (7.1 | ) | $ | 198,857,713 | 99.4 | |||||||||||
| Cost of sales | (374,322,146 | ) | (397,744,144 | ) | (5.9 | ) | (190,945,089 | ) | 108.3 | |||||||||||
| Gross profit (loss) | (5,898,748 | ) | (1,279,640 | ) | (361.0 | ) | 7,912,624 | (116.2 | ) | |||||||||||
| Selling, general, and administrative expenses | (34,222,524 | ) | (31,107,404 | ) | 10.0 | (11,693,607 | ) | 166.0 | ||||||||||||
| Research and development expenses | (171,852 | ) | (430,666 | ) | (60.1 | ) | (235,095 | ) | 83.2 | |||||||||||
| Impairment of goodwill and other intangible assets | (1,806,337 | ) | (6,866,121 | ) | (73.7 | ) | 100.0 | |||||||||||||
| Loss from operations | (42,099,461 | ) | (39,683,831 | ) | 6.1 | (4,016,078 | ) | 888.1 | ||||||||||||
| Interest revenue | 245,262 | 296,479 | (17.3 | ) | 82,293 | 260.3 | ||||||||||||||
| Gain on revaluation of consideration payable | 147,733 | (100.0 | ) | |||||||||||||||||
| Interest expense | (7,670,156 | ) | (5,378,560 | ) | 42.6 | (2,086,274 | ) | 157.8 | ||||||||||||
| Loss before income taxes | (49,524,355 | ) | (44,765,912 | ) | 10.6 | (5,872,326 | ) | 662.3 | ||||||||||||
| Income tax recovery | 94,051 | 95,088 | (1.1 | ) | ||||||||||||||||
| Equity method investment loss | (3,787,927 | ) | (812,669 | ) | 366.1 | |||||||||||||||
| Loss for the year | (53,312,282 | ) | (45,484,530 | ) | 17.2 | (5,777,238 | ) | 687.3 | ||||||||||||
| Wages and salaries. Wage and salary expenses were $14.1 million for FY24, compared to $15.6million for FY23. The decrease in these expenses was primarily due to decreased stock option expenses of $3.8 million, offset by increases in employee wages as a result of added employees from acquisitions and to assist in the go public process. |
| Professional fees. Professional fees were $8.1 million for FY24, compared to $4.6 million for FY23. The increase in these expenses was primarily due to significant expenses incurred relating to the business combination with Bite and the go-public process as a whole. |
| Advertising and promotion. Advertising and promotion expenses were $0.7 million for FY24, compared to $1.5 million for FY23. The decrease in these expenses was primarily due to launching fewer new brands in 2023. |
| Rent. Rent expenses were $2.5 million for FY24, compared to $1.1 million for the same period in FY23. The increase in these expenses was primarily due to the acquisition of businesses and temporary storage facilities used in the process of storage improvement. |
SGA expenses increased $19.4 million, or 166.0%, for FY23 compared to FY22 due to the following:
| Advertising and promotions. Advertising and promotion expenses were $1.5 million for FY23, compared to $0.5 million for FY22. The increase in these expenseswas primarily due to launching of new brands in acquired businesses and the roadshows in connection with the Business Combination during FY23. |
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| Wages and salaries. Wage and salary expenses were $15.6 million for FY23, compared to $3.9 million for FY22. The increase in these expenses was primarily due to an increase in employee headcount and implementation of the employee stock options granted and expensed in FY23. |
| Insurance. Insurance expenses were $1.6 million for FY23, compared to $0.5 million for FY22. The increase in these expenses was primarily due to operating facilities newly added in FY23. |
| Rent. Rent expenses were $1.1 million for FY23, compared to $0.1 million for FY22. The increase in these expenses was primarily due to the acquisition of businesses and temporary storage facilities used in the process of storage improvement. |
Impairment of goodwill and other intangible assets. Impairment expense decreased from $6.9 million to $1.8 million for FY24 compared to FY23. The assets impaired in the comparative period include goodwill relating to the acquisitions of Culcherd and FDO, as well as assets relating to trademarks/patents and brand of FDO. After these businesses were acquired, the revenues and profitability for these subsidiaries were lower than the amounts forecasted at the time of the acquisition, and as a result it was determined that the carrying value of these assets may exceed their recoverable amount. The goodwill acquired in both acquisitions was fully impaired, while the intangible assets relating to the FDO brand and trademarks/patents were partially impaired based on a discounted cash flows analysis of the business. In the current period, assets impaired included the goodwill relating to the Discovery purchase and intangible assets relating to Culcherd. This impairment was recorded due to each of the respective entities falling short of projections used in the purchase price allocations of each.
Impairment expense in FY22 was nil as there were no indicators of impairment in any investments or intangibles as at or during the year ended January31, 2022.
Interest expense. Interest expenseincreased $2.3 million to $7.7 million forFY24 compared to FY23, primarily due to the new credit facilities obtained, as well as market interest rate increases on variable rate facilities. Similarly, interest expense increased from $3.3 million for FY23 compared to FY22, due to similar factors (i.e., new facilities and increased rates).
Equity method investment loss. The equity method investment loss increased $3.0 million to $3.8 million forFY24 compared to FY23. This increase is attributable to $3.3 million of impairment in the investment in ANF presented within this line item. This impairment was noted and recorded at the end of FY24, after ANFs revenue and EBITDA targets used in formulating the fair value at acquisition were not being met.
Analysis of Results of Operations
Year Ended January31, 2024, January31, 2023, and January31, 2022
Processed (sales) volumes by product for FY24, FY23, and FY22 are as follows (in 000s of metric tons):
| For the year ended January31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Durum | 188.5 | 148.7 | 54.3 | |||||||||
| Peas | 76.8 | 70.4 | 47.9 | |||||||||
| Lentils | 60.0 | 69.6 | 48.3 | |||||||||
| Wheat | 60.0 | 58.9 | 54.8 | |||||||||
| Canary Seed | 52.9 | 46.7 | 42.1 | |||||||||
| Canola | 26.4 | 43.5 | 25.1 | |||||||||
| Other (barley, beans, flax, oats, hemp) | 20.1 | 18.6 | 21.5 | |||||||||
| Total | 484.7 | 456.4 | 294.0 | |||||||||
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We actively manage our inventory related to demand in the market. The overall decrease in processed volumes was primarily related to working capital constraints, as the majority of our revenue is dependent on available working capital.
Segment Information
Above Food operates in two reportable segments: Disruptive Agriculture and Rudimentary Ingredients, and CPG. The Disruptive Agriculture and Rudimentary Ingredients segment concentrates on the provisioning of discrete genetics, origination, purchasing, grading, primary processing and sale of regeneratively grown grain, as well as the origination, purchase, and sale of bespoke ingredients products, processed primarily through the Company-owned ingredient facilities. The CPG segment formulates, manufactures, sells, distributes, and markets proprietary consumer product formulations in owned brands and focuses on manufacturing and distribution for private-labeled retail owned brands. The Company also has a corporate department that carries out the centralized functions of accounting, treasury, information technology, legal, and human resources. Given that this department does not undertake business activities and does not recognize revenue that are more than incidental to the Companys activities, it is not considered to be a separate operating segment.
Above Food determines the composition of the reportable segments based on factors including risks and returns, internal organization, and internal reports and allocates certain expenses across segments based on reasonable considerations such as production capacities.
We monitor our segment results primarily by reviewing net loss. Disruptive Agriculture and Rudimentary Ingredients net loss increased from $16.1 million in FY23 to $20.4 million in FY24. The increased loss is largely due to inventory write-offs and unfavorable contract positions. CPGs net loss decreased from $14.9 million in FY23 to $12.9 million in FY24, driven primarily by the significant impairment of intangible assets and goodwill in FY23, which was offset by increased operating expenses that were not present in FY23, incurred as a result of a full year ownership of FDO and NorQuin. Corporate and Others net loss increased from $14.5 million in FY23 to $20.0million in FY24. This increased loss is attributable to a smaller proportion of stock-based compensation expenses, offset by the increased headcount within the Corporate Group and increased professional fees, as discussed above, as well as $3.3 million of impairment relating to the investment in ANF that was incurred in FY24.
Disruptive Agriculture and Rudimentary Ingredients net loss increased from $1.7 million in FY22 to $16.1million in FY23, driven primarily by realized and unrealized losses on forward contracts and foreign exchange. The overly aggressive positions and timing differences discussed in the Results of Operations sectionabove are what caused this significant change. Realized losses totaling approximately $7.5 million were recorded by this segment. At year-end, mark-to-market adjustments of inventories and contracts held at fair value resulted in an additional $6.4 million of unrealized losses on these instruments that was included in the net loss of this segment.
CPGs net loss increased from $1.2 million in FY22 to $14.9 million in FY23, driven primarily by significant impairment losses on goodwill and intangible assets, as well as operating expenses that were not present in FY22, incurred as a result of the acquisitions of FDO and NorQuin, and a full year of ownership of Culcherd. The losses on goodwill and intangible assets in FY23 total $6.9 million in the CPG segment, made up of impairment of $1.8 million relating to an intangible asset acquired relating to an acquisition that ultimately did not occur, $2.5million relating to goodwill on the Culcherd acquisition and $2.6 million relating to goodwill, customer relationships, and the brand name acquired in the FDO acquisition. These impairments were recorded as the revenues and net profits of these entities did not align with projections that the valuations of each were based on.
Corporate and Others net loss increased from $2.8 million in FY22 to $14.5 million in FY23, driven primarily by the increased employee headcount in FY23 and increased professional fees as Above Food continues to grow. Salaries and wages increased $8.0 million from FY22 to FY23. Approximately $1.1 million of this increase is related to increased staff levels as the result of acquisitions in both FY22 and FY23, as well as additional employees necessary to supplement the growing business of Above Food. The remaining $6.9 million relates to the implementation of a stock-based compensation plan. Professional fees increased $1.6 million from FY22 to FY23, relating to due diligence and acquisitions, as well as the go-public transaction which remains ongoing.
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For Above Foods reportable operating segments during the years ended January31, 2024, 2023, and 2022, net losses are as follows:
|
Year ended
January31, 2024 |
Disruptive
Ag
Rudimentary Ingredients | CPG |
Corporate
and
Other |
Inter-segment
Eliminations | Consolidated | |||||||||||||||
| Net loss for the period | $ | (20,400,376 | ) | $ | (12,901,140 | ) | $ | (19,960,094 | ) | $ | (50,672 | ) | $ | (53,312,282 | ) | |||||
|
Year ended
January31, 2023 |
Disruptive
Ag
Rudimentary Ingredients | CPG |
Corporate
and
Other |
Inter-segment
Eliminations | Consolidated | |||||||||||||||
| Net loss for the period | $ | (16,051,802 | ) | $ | (14,924,353 | ) | $ | (14,508,375 | ) | $ | $ | (45,484,530 | ) | |||||||
|
Year ended
January31, 2022 |
Disruptive
Ag
Rudimentary Ingredients | CPG |
Corporate
and
Other |
Inter-segment
Eliminations | Consolidated | |||||||||||||||
| Net loss for the period | $ | (1,715,505 | ) | $ | (1,249,470 | ) | $ | (2,812,263 | ) | $ | $ | (5,777,238 | ) | |||||||
|
Disruptive
Ag
Rudimentary Ingredients - Commodities |
Disruptive
Ag
Rudimentary Ingredients - Ingredients |
Consumer
Package Goods |
Corporate
and
Other | Total | ||||||||||||||||
| Revenue | $ | 223,976,243 | $ | 132,871,708 | $ | 11,571,019 | $ | 4,428 | $ | 368,423,398 | ||||||||||
|
Disruptive
Ag
Rudimentary Ingredients - Commodities |
Disruptive
Ag
Rudimentary Ingredients - Ingredients |
Consumer
Package Goods |
Corporate
and
Other | Total | ||||||||||||||||
| Revenue | $ | 250,500,007 | $ | 136,530,965 | $ | 9,432,591 | $ | 941 | $ | 396,464,504 | ||||||||||
|
Disruptive
Ag
Rudimentary Ingredients - Commodities |
Disruptive
Ag
Rudimentary Ingredients - Ingredients |
Consumer
Package Goods |
Corporate
and
Other | Total | ||||||||||||||||
| Revenue | $ | 123,847,068 | $ | 74,807,683 | $ | 202,962 | $ | $ | 198,857,713 | |||||||||||
| For the years ended January31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Net cash (used in) provided by operating activities | $ | 7,148,748 | $ | (17,876,903 | ) | $ | (27,574,845 | ) | ||||
| Net cash (used in) provided by investing activities | $ | (4,517,944 | ) | $ | (6,662,720 | ) | $ | (30,589,836 | ) | |||
| Net cash provided by (used in) financing activities | $ | (4,006,321 | ) | $ | 24,810,398 | $ | 27,196,396 | |||||
Cash flows from operating activities
Net cash provided by operating activities includes net loss adjusted for non-cash expenses and movements in operating assets and liabilities. Our operating cashflows are primarily generated by revenues less cash paid for expenses, and cash used in or provided by working capital requirements.
22
The Company has incurred positive cash flows from operating activities of $7.1 million in the current year, compared to cash flows of $17.9 million used in FY24. The change compared to FY23 comes primarily from improved accounts receivable collections, significantly increased inventory turnover, and increased days in accounts payable as the Company works to manage liquidity. The comparative period saw decreased turnover in both accounts receivable and inventory, which largely contributed to the amount used in operating activities.
During FY23, operating activities used $17.9 million of cash. The decrease compared to FY22 comes primarily from improved accounts receivable collections and significantly increased inventory turnover. During FY22, operating activities used $27.6 million of cash, primarily consisting of changes in working capital, specifically a significant decrease in inventory turnover. Refer to the Liquidity and Capital Resources sectionof this Registration Statement/Proxy Statement for additional discussion on how the Company intends to meet cash requirements and maintain operations.
Cash flows from investing activities
During FY24, net cash used in investing activities was $4.5 million. These cash outflows consisted primarily of $3.6 million of acquisitions of property plant and equipment, largely relating to the cleaning facility and equipment being developed for the disruptive agriculture and rudimentary ingredients segment. Additionally, a net of $1.6 million of cash was used to acquire (i.e., $2.0 million paid less $0.4 million of cash in the company acquired).
During FY23, net cash used in investing activities was $6.7 million. This was largely the result of the purchase of property, plant, and equipment and intangible assets, as well as the investment in ANF as discussed above.
During FY22, net cash used in investing activities was $30.6 million. These cash outflows consisting primarily of $22.0 million of purchase in property, plant, and equipment, partially offset by $1.0 million received in proceeds from sale of existing assets. During the year, we also issued $5.4 million in loans primarily made to businesses we were planning to acquire, as well as purchased investments of $4.1 million related to the acquisition of our investment in ANF.
Cash flows from financing activities
During FY24, net cash used in financing activities was $4.0 million. During the year, we received loans totaling $6.5 million from Bank of Nova Scotia and a group of strategic investors. This was netted against the repayment of short-term debt and credit facilities ($4.9 million), the repayment of long-term debt ($2.2 million), and the repayment of amounts due to related parties ($2.2 million). There were also finance lease liability repayments of $1.2 million.
During FY23, net cash received from financing activities was $24.8 million. Cash inflows in this period primarily consist of $11 million received from the Bank of Nova Scotia, $8.1 million received from strategic investors, a net of $6.9 million in short-term debt and credit facilities received, and $1.1 million in net advances from related parties. These amounts were offset by $1.1 million in long-term debt repayment and $1.2 million in finance lease liability repayments.
During FY22, net cash received from financing activities was $27.2 million, primarily consisting of $30 million received from credit facilities, partially offset by $3.1 million in repayments on existing lease liabilities and amounts due to related parties.
Purchase of property, plant, and equipment
For the year ended January31, 2024, purchases of property, plant, and equipment increased to $3.6 million compared to $2.4 million in the year ended January31, 2023, an increase of $1.2 million. The increase was largely due to purchases of $2.5 million in the year ended January31, 2024 relating to the cleaning facility discussed above. In the year ended January31, 2023, the majority of purchases of property, plant, and equipment related to terminal equipment additions.
23
Contractual Obligations and Commitments
The following table summarizesourcontractual obligations and other commitments for cash expenditures as of January31, 2024, and the years in which these obligations are due (in 000s).
| Contractual Obligations | Total |
Lessthan
1year | 1-3years | 3-5years |
Morethan
5years | |||||||||||||||
| Accounts payable and accrued liabilities | $ | 53,102 | $ | 53,102 | ||||||||||||||||
| Short-term debt and credit facilities | $ | 36,000 | $ | 36,000 | ||||||||||||||||
| Bank indebtedness | $ | 12,304 | $ | 12,304 | ||||||||||||||||
| Lease liabilities | $ | 38,233 | $ | 2,370 | $ | 4,837 | $ | 3,827 | $ | 27,199 | ||||||||||
| Long-term debt | $ | 30,969 | $ | 30,783 | $ | 186 | ||||||||||||||
| Total contractual obligations as of January31, 2024 | $ | 170,608 | $ | 134,559 | $ | 5,023 | $ | 3,827 | $ | 27,199 | ||||||||||
| we are only required to include two years of audited consolidated financial statements in this prospectus, in addition to any required interim financial statements, and are only required to provide reduced disclosure in Managements Discussion and Analysis of Financial Condition and Results of Operations; |
| we are not required to engage an auditor to report on our internal controls over financial reporting pursuant to Section404(b)of the Sarbanes-Oxley Act; |
| we are not required to submit certain executive compensation matters to stockholder advisory votes, such as say-on-pay, say-on-frequency and say-on-golden parachutes; and |
| we are not required to disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officers compensation to our median employee compensation. |
We may take advantage of these provisions until the last day of the fiscal year following the fifth anniversary of the completion of this offering or such earlier time that we no longer qualify as an emerging growth company. We would cease to qualify as an emerging growth company upon the earliest of (a)the last day of the first fiscal year in which our annual gross revenue is $1.235 billion USD or more, (b)the date on which we have, during the previous rolling three-year period, issued more than $1.0 billion in non-convertible debt securities and (c)the last day of the fiscal year in which the market value of our common stock held by non-affiliates exceeded $700.0 million USD as of July31 of such fiscal year.
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Under the JOBS Act, emerging growth companies also can delay adopting new or revised accounting standards until such time as those standards would otherwise apply to private companies. We currently intend to take advantage of this exemption.
Foreign Private Issuer Status
Above Foodqualifies as a foreign private issuer as defined under SEC rules. Even afterAbove Foodno longer qualifies as an emerging growth company, as long asAbove Foodcontinues to qualify as a foreign private issuer under SEC rules,Above Foodis exempt from certain SEC rulesthat are applicable to U.S. domestic public companies, including:
| the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; |
| the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; |
| the rulesunder the Exchange Act requiring the filing with the SEC of quarterly reports onForm10-Qcontaining unaudited financial statements and other specified information, and current reports on Form8-Kupon the occurrence of specified significant events; and |
| the selective disclosure rulesby issuers of material nonpublic information under Regulation FD. |
Notwithstanding these exemptions,Above Foodintends to file with the SEC, within four months after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form20-Fcontaining financial statements audited by an independent registered public accounting firm.
Above Foodmay take advantage of these exemptions until such time asAbove Foodis no longer a foreign private issuer.Above Foodwould cease to be a foreign private issuer at such time as more than 50% of its outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i)the majority of its executive officers or directors are U.S. citizens or residents, (ii)more than 50% of its assets are located in the United States or (iii)its business is administered principally in the United States.
Both foreign private issuers and emerging growth companies also are exempt from certain more stringent executive compensation disclosure rules. Thus, even ifAbove Foodno longer qualifies as an emerging growth company, but remains a foreign private issuer,Above Foodwill continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private issuer.
In addition, becauseAbove Foodqualifies as a foreign private issuer under SEC rules,Above Foodis permitted to follow the corporate governance practices of Canada (the jurisdiction in whichAbove Foodis organized) in lieu of certain Nasdaq corporate governance requirements that would otherwise be applicable toAbove Food.
If at any timeAbove Foodceases to be a foreign private issuer,Above Food will take all action necessary to comply with the SEC and Nasdaq Listing Rules, including by appointing a majority of independent directors to the Above Food Board and having compensation and nominating committees that are comprised solely of independent directors, subject to a permittedphase-inperiod.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk, including the effects of adverse changes in commodity prices and exchange rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. All of our market risk sensitive instruments were entered into for purposes other than speculative trading.
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Foreign currency risk. The Company is exposed to currency risk as a certain portion of sales and expenses are incurred in U.S.Dollars resulting in US denominated accounts receivable, accounts payable, some commodity derivatives, and long-term debt. These balances are, therefore, subject to gains and losses due to fluctuations in that currency in relation to the Canadian Dollar.
The Company entered into foreign exchange derivative contracts to mitigate these risks. This strategy minimizes the impact of U.S.Dollar fluctuations on the operating results of the Company. The Companys derivative instruments have not been designated as hedging instruments and gain/losses are recorded within cost of sales in the consolidated statements of operations. The effect of a 5% increase in the exchange rate for the U.S.Dollar and the Canadian Dollar would have had an impact of a decrease of $0.1M on net loss for FY24, and an impact of a decrease of $2.2M on net loss for FY23, considering outstanding USD monetary asset and liability balances, as well as derivative and contracts as at the period and year ends, and assuming all other variables remain constant.
Credit risk. The risk of financial loss in the event of failure of a customer or counterparty to a financial instrument to meet its contractual obligation is defined as credit risk. The Companys principal exposure to credit risk is in respect to its accounts receivable. A substantial portion of the Companys accounts receivable is with customers in the agriculture industry and is subject to normal industry credit risks. A portion of the Companys sales and related accounts receivable are also generated from transactions with customers in overseas markets.
Accounts receivable are subject to credit risk exposure and the carrying values reflect managements assessment of the associated maximum exposure to such credit risk. The Company regularly monitors customers for changes in credit risk. The Companys credit exposure is mitigated through the use of credit practices that limit transactions according to the customers credit quality and due to the accounts receivable being spread over a large number of customers. Trade receivables from international customers are insured for events of non-payment through third-party export insurance to mitigate against credit risk. In cases where the credit quality of a customer does not meet the Companys requirements, a cash deposit or letter of credit is received before goods are shipped.
As of the year ended January31, 2024, 2023, and 2022, there were no customers that represented more than 10% of revenues. The Company does not believe that any single customer group represents a significant concentration of credit risk.
Commodity price risk. Commodity price risk is the risk that the value of inventory and related contracts will fluctuate due to changes in market prices. A change in price and quality will have a direct affect on the value of inventory. As a grain and pulse commodity trading company, the Company has significant exposure to changes in various agricultural commodity prices. Prices for these commodities are volatile and are influenced by numerous factors beyond the Companys control, such as supply and demand fundamentals, as well as the weather. A substantial change in prices may affect the Companys comprehensive income and operating cash flows, if not properly managed.
To mitigate the risks associated with the fluctuations in the market price for agricultural commodities, the Company has a policy that commodities be hedged, when possible, through the use of purchase and sales contracts. The Company may employ derivative commodity instruments (primarily futures and options) for the purpose of managing its exposure to commodity price risk, however, they are not used for speculative or trading purposes. The Companys actual exposure to these price risks is constantly changing as the Companys inventories and commodity contracts change. The effect of a 10% increase in the price of various commodities traded would have had an impact of a $1.2 million increase in net loss for FY24, and a $0.7 million increase in net loss for FY23, considering outstanding contracts as at the reporting dates and assuming all other variables remain constant.
Liquidity risk. Liquidity risk is the risk that the Company cannot meet its financial obligations associated with financial liabilities in full. The Companys main sources of liquidity are its operations its credit facility and other debt financing. The funds are primarily used to finance working capital and capital expenditure requirements and are adequate to meet the Companys financial obligations associated with financial liabilities. Risk associated with debt financing is mitigated by having negotiating terms over several years and renegotiating terms before they are due.
29
Interest rate risk. Interest rate risk is the risk that the Company will be unable to finance existing debt with similar terms, as well as potential changes in the future cash flows of financial instruments. The Companys principal exposure to interest rate risk is with respect to its short-term debt and credit facilities, long-term debt and lease liability, which bear interest at fixed and floating interest rates.
The effect of a 1% increase in interest rates relating to the bank indebtedness, long-term debt and lease liability of the Company would be an increase in interest expense for FY24 of approximately $1.0 million, and $1.7million for FY23. Exposure to interest rate risk is managed through normal operating and financing activities.
Other risks . Although we perform services for customers located in a number of jurisdictions, we have not experienced any material difficulties in receiving funds remitted from foreign countries. However, new or modified exchange control restrictions could have an adverse effect on our ability to repatriate cash to fund our operations and make principal and interest payments, when necessary.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
Information regarding the board practices of New Above Food is included in the Proxy Statement/Prospectus under the sectiontitled Management of New Above Food Following the Business Combination and is incorporated herein by reference.
B. Compensation
Compensation of New Above Foods Directors and Executive Officers
Information regarding the compensation of the directors and executive officers of New Above Food for the year ended January 31, 2024, which compensation was paid for services prior to the closing of the Business Combination is included in the Proxy Statement/Prospectus under the sectionstitled Executive and Director Compensation-Above Food-Historical Compensation of Above Foods Directors and Executive and Director Compensation-Above Food-Historical Compensation of Above Foods Executive Officers and is incorporated herein by reference.
Executive Officer Agreements
In connection with the closing of the Business Combination, Above Food assigned its existing employment and consulting agreements with the executive officers of New Above Food to New Above Food. Information regarding these agreements is included in the Proxy Statement/Prospectus under the sectionstitled Executive and Director Compensation-Above Food-Employment Agreements . New Above Food expects that it may enter into new employment or other agreements to supersede and replace such existing agreements, although the precise terms and conditions of such agreements have not yet been determined.
Equity Compensation
New Above Food adopted the Above Food Ingredients Inc. 2024 Incentive Award Plan (the 2024 Incentive Award Plan ) on June 28, 2024, which became immediately effective upon the consummation of the Business Combination. The 2024 Incentive Award Plan initially reserved up to 83,854,489 for issuance pursuant to awards that may be granted under the 2024 Incentive Award Plan, which amount is subject to adjustment and an annual increase as set forth under the terms of the 2024 Incentive Award Plan. No awards have yet been granted under the 2024 Incentive Award Plan. Further information regarding the 2024 Incentive Award Plan is included in the Proxy Statement/Prospectus under the section titled New Above Food Equity Incentive Plan and is incorporated herein by reference.
Prior to the Business Combination, Above Food made grants of share options and restricted share units to its executive officers, which awards have been assumed by New Above Food in connection with the Business Combination. Further information is included in the Proxy Statement/Prospectus under the section titled Executive and Director Compensation-Above Food-Equity Compensation and is incorporated herein by reference.
Indemnification
The Amended and Restated By-Law No. 1 of New Above Food provides for the indemnification of the executive officers and directors of New Above Food on the terms set forth therein and expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and its directors, executive officers, and other persons with respect to indemnification and advancement of expenses. New Above Food has entered into an indemnification agreements with all of its current directors and executive officers.
C. Board Practices
Information regarding the board practices of New Above Food is included in the Proxy Statement/Prospectus under the sectiontitled Management of New Above Food Following the Business Combination and is incorporated herein by reference.
D. Employees
Following and as a result of the Business Combination, the business of New Above Food is conducted through Above Food, its direct, wholly owned subsidiary, as well as the direct and indirect subsidiaries of Above Food.
Information regarding the employees of Above Food is included in the Proxy Statement/Prospectus under the sectiontitled Business of Above Food and Certain Information about Above FoodEmployees and is incorporated herein by reference.
E. Share Ownership
Ownership of the Companys shares by its directors and executive officers upon consummation of the Business Combination is set forth in Item 7.A of this Report.
F. Disclosure of a registrants action to recover erroneously awarded compensation
Not applicable.
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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table sets forth the beneficial ownership of New Above Food Common Shares following the Business Combination:
(a) each person, or group of affiliated persons, known by us to beneficially own more than 5% of outstanding New Above Food Common Shares immediately following the consummation of the Business Combination;
(b) each of New Above Foods named executive officers, or directors; and
(c) all executive officers and directors of New Above Food as a group.
Beneficial ownership is determined in accordance with the rulesand regulations of the SEC. Each person named in the table has sole voting and investment power with respect to all of the common shares shown as beneficially owned by such person, except as otherwise indicated in the table or footnotes below.
The beneficial ownership of New Above Food Common Shares post-Business Combination is based on 28,532,715 New Above Food Common Shares issued and outstanding as of July 5, 2024, on a non-fully diluted basis, immediately following the Business Combination.
Unless otherwise indicated, New Above Food believes that all persons named in the table below have sole voting and investment power with respect to all shares of capital stock beneficially owned by them. To New Above Foods knowledge, no New Above Food Common Shares beneficially owned by any executive officer or director have been pledged as security.
Unless otherwise indicated, the address of each New Above Food director and executive officer is c/o Above Food Ingredients Inc., 2305 Victoria Avenue #001, Regina, Saskatchewan, S4P 0S7.
| Name and Address of Beneficial Owners |
Numberof
New Above Food Common Shares |
%of
totalNew Above Food Common Shares | |||||||||||||
| Five Percent Holders | |||||||||||||||
| Kambeitz Agri Inc. (1) | 2,776,516 | 9.73 | 1% | ||||||||||||
| Grupo Empresarial Enhol S.L. | 2,105,000 | 7.38 | % | ||||||||||||
| ANF Holdco, LLC | 1,604,250 | 5.62 | % | ||||||||||||
| Smart Dine, LLC (8) | 2,524,616 | 8.78 | % | ||||||||||||
| Directors and Executive Officers of New Above Food | |||||||||||||||
| Lionel Kambeitz (2) | 2,600,541 | 9.08 | % | ||||||||||||
| Jason Zhao (3) | 354,074 | 1.23 | % | ||||||||||||
| Martin Williams (4) | 513,825 | 1.49 | % | ||||||||||||
| Tyler West (5) | 2,271,689 | 7.89 | % | ||||||||||||
| Garth Frederickson | 0 | * | % | ||||||||||||
| Felipe Gomez Garcia | 0 | * | % | ||||||||||||
| Chief Reginald Bellerose (6) | 26,292 | * | % | ||||||||||||
| Agustin Tristan (7) | 813,151 | 2.84 | % | ||||||||||||
| Alberto Ardura Gonzlez (8) | 2,524,616 | 8.78 | % | ||||||||||||
| All Directors and Executive Officers of New Above Food as a group (9 Individuals) | 8,769,188 | 30.73 | |||||||||||||
| (1) | Includes (i)2,723,931 New Above Food Common Shares held by Kambeitz Agri Inc. ( Agri ) and (ii)52,585 New Above Food Common Shares held by KF Kambeitz Farms Inc. ( KF Farms) . Agris voting shares are owned by Northrange Capital Corp., a Saskatchewan private business corporation, of which Jordan Kambeitz owns 76% of the equity securities and is the sole director and officer. Gailene Kambeitz owns the remaining 24% of the equity securities of Northrange Capital Corp. KF Farms is owned by Agri. and Jordan Kambeitz is the sole director and officer of Kambeitz Farms Inc. The registered address of Agri and KF Farms is 2-2305 Victoria Ave, Regina, Saskatchewan S4P 0S7, Canada. |
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| (2) | Includes (i)355,275 New Above Food Common Shares held by 10209422 Saskatchewan LTD, (ii)2,140,096 New Above Food Common Shares held by Lionel Kambeitz and (iii)105,170 New Above Food Common Shares subject to options exercisable within 60 days of July5, 2024. 10209422 Saskatchewan LTD is a Saskatchewan private business corporation, of which Mr.Kambeitz owns 100% of the voting shares. Consequently, he may be deemed the beneficial owner of the shares held by 10209422 Saskatchewan LTD and has voting and dispositive control over such securities. Mr. Kambeitz disclaims beneficial ownership of any shares other than to the extent he may have a pecuniary interest therein, directly or indirectly. |
| (3) | Includes 354,074 New Above Food Common Shares subject to options exercisable within 60 days of July5, 2024. |
| (4) | Includes (i)110,671 New Above Food Common Shares held by The Larder Inc. and (ii)403,154 New Above Food Common Shares subject to New Above Food options exercisable within 60 days of July5, 2024. The Larder Inc. is owned by the Bosnar-Williams Family Trust, of which Martin Williams is a trustee. Consequently, he may be deemed the beneficial owner of the shares held by The Larder Inc. and has voting and dispositive control over such securities. Mr. Williams disclaims beneficial ownership of any shares other than to the extent he may have a pecuniary interest therein, directly or indirectly. |
| (5) | Includes 262,927 New Above Food Common Shares subject to New Above Food options exercisable within 60 days of July5, 2024. |
| (6) | Includes 26,292 New Above Food Common Shares subject to New Above Food options exercisable within 60 days of July5, 2024. |
| (7) | Includes 709,151 New Above Food Common Shares held directly by Lexington Capital, SAPI DE CV and 104,000 New Above Food Common Shares issuable upon exercise of 104,000 Common Warrants held by Lexington Capital, SAPI DE CV. Agustin Tristan Aldave, a director on our Board, is a director and the Chief Executive Officer of Lexington Capital, SAPI DE CV. Consequently, he may be deemed the beneficial owner of the shares held by Lexington Capital, SAPI DE CV and has voting and dispositive control over such securities. Mr. Tristan Aldave disclaims beneficial ownership of any shares other than to the extent he may have a pecuniary interest therein, directly or indirectly. The address of Lexington Capital, SAPI DE CV is Insurgentes Sur 64 Piso 10 A1004, Col Juarezm, Del Cuauhtemoc, Ciudad De Mexico 06600, Mexico. |
| (8) | Includes 2,293,616 New Above Food Common Shares held by Smart Dine, LLC and 231,000 Common Shares issuable upon exercise of 231,000 Common Warrants held by Smart Dine, LLC. Smart Dine, LLC is the Sponsor. Alberto Ardura Gonzlez, a director on our Board, is a manager of the Sponsor. Consequently, he may be deemed the beneficial owner of the shares held by the Sponsor and has voting and disositive control over such securities. Mr. Ardura Gonzlez disclaims beneficial ownership of any shares other than to the extent he may have a pecuniary interest therein, directly or indirectly. The address of Smart Dine, LLC is 720 N. State Street, Chicago, IL 60654. |
Immediately following the consummation of the Business Combination, there were 87 record holders, of which 53 record holders holding approximately 58.9% of New Above Food Common Shares had registered addresses in Canada. These numbers are not representative of the number of beneficial holders of our Common Shares nor are they representative of where such beneficial holders reside, since many of these New Above Food Common Shares are held of record by brokers or other nominees (including one Canadian. nominee company, CDS Co., which held approximately 14.4% of our outstanding New Above Food Common Shares immediately following the consummation of the Business Combination).
B. Related Party Transactions
Information regarding certain related party transactions is included in the Proxy Statement/Prospectus under the sectiontitled Certain Relationships and Related Transactions and is incorporated herein by reference.
C. Interests of Experts and Counsel
Not Applicable.
ITEM 8. FINANCIAL INFORMATION.
A. Consolidated Statements and Other Financial Information.
See Item 18 of this Report for consolidated financial statements and other financial information.
Information regarding legal proceedings involving New Above Food and Above Food is included in the Proxy Statement/Prospectus under the section Business of Above Food and Certain Information About Above Food Legal Proceedings , and is incorporated herein by reference.
B. Significant Changes
A discussion of significant changes since January31, 2024, is provided under Item 4 and Item 5 of this Report and is incorporated herein by reference.
A. Offer and Listing Details
Nasdaq Listing of New Above Food Common Shares
New Above Food Common Shares and New Above Food Listed Warrants are currently listed on Nasdaq under the symbols ABVE and ABVE.W, respectively. Holders of New Above Common Shares and warrants should obtain current market quotations for their securities.
There can be no assurance that the New Above Food Common Shares will remain listed on Nasdaq. If New Above Food fails to comply with the Nasdaq listing requirements, the New Above Food Common Shares could be delisted from Nasdaq. A delisting of the New Above Food Common Shares will likely affect the liquidity of the New Above Food Common Shares and could inhibit or restrict the ability of New Above Food to raise additional financing.
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Lock-up Agreements
Information regarding the lock-up restrictions applicable to some of the New Above Food Common Shares is included in the Proxy Statement/Prospectus under the sectiontitled Certain Relationship and Related Person TransactionLock-Up Agreements and is incorporated herein by reference.
Above Food and Grupo Empresarial Enhol, S.L. (Enhol) entered into Common Share Subscription Agreement (Enhol Subscription Agreement), dated June 13, 2024, included in this Report as Exhibit 10.23, under which Enhol agreed to purchase 2,377,082 Above Food common shares at a price of $2.103419 per share ($10.00 per share of New Above Food Common Shares), which Above Food common shares converted into 500,000 New Above Food Common Shares at closing of the Business Combination, and 50% of Enhols shares (250,000 shares) are locked up for 60 days and the remaining 50% of Enhols shares (250,000 shares) are locked up for 180 days after the Closing Date, as further described in that certain Lock-Up Agreement, dated June 19, 2024, by and between Above Food and Enhol, included in this Report as Exhibit 10.26.
Above Food entered into subscription agreements with several investors (PIPE Subscription Agreements), under which the investors agreed to purchase 550,000 units of Above Food at a purchase price of $10.00 per unit for a total purchase price of $5,500,000, which units included one Above Food common share and one additional Above Food common share provided from the Sponsor or from treasury (the Advantage Shares), which Above Food common shares, besides the Advantage Shares, converted into 530,000 New Above Food Common Shares, and 25% are locked up for 90 days from July1, 2024. The form of PIPE Subscription Agreement is included in this Report as Exhibit10.24 .
Above Food, Enhol, and Gonzalo Agorreta Preciado entered into the Shares Sale and Purchase and Exchange Agreement (Enhol SPA), dated June 13, 2024, included in this Report as Exhibit 10.25, under which Above Food agreed that Enhol and Mr. Preciados shares under the Enhol Subscription Agreement would participate in the Share Exchange. The parties agreed that the shares issued pursuant to the Enhol SPA will be locked up for 12 months.
Other Transfer Restrictions
Pursuant to the terms of the plan of arrangement (the Plan of Arrangement ) approved by the Court of Kings Bench of Alberta in the Final Order dated June 18, 2024, all New Above Food Common Shares issued to former Above Food shareholders in exchange for their Above Food common shares held immediately prior to the effective time of the Plan of Arrangement are subject to certain restrictions on transfer and exceptions, whereby 90% of each such former Above Food shareholders New Above Food Common Shares issued under the Plan of Arrangement may not be transferred without the consent of New Above Food, except in certain circumstances, until the earlier of the date that is: (a) (i) the six month anniversary of the effective date of the Plan of Arrangement (the Effective Date ), or (ii) in the case of certain designated holders, the twelve month anniversary of the Effective Date; (b) such time, if ever, after 150 calendar days after the Effective Date that the volume-weighted average trading price of the New Above Food Common Shares on the national stock exchange on which such security is trading equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and similar corporate events) for any 20 trading days within any 30-trading day period commencing at least 150 calendar days after the Effective Date; and (c) such date on which New Above Food completes a liquidation, merger, stock exchange or other similar transaction which results in all of the shareholders of New Above Food having the right to exchange their New Above Food Common Shares for cash, securities or other property.
B. Plan of Distribution
Not applicable.
C. Markets
New Above Food Common Shares and New Above Food Listed Warrants are currently listed on the Nasdaq under the symbols ABVE and ABVE.W.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
As of the date of this Report, New Above Food has an issued share capital in the amount of 34,646,457 shares, consisting of 28,532,715 New Above Common Shares, 3,056,871 New Above Food ClassA Earnout Shares and 3,056,871 New Above Food ClassB Earnout Share.
New Above Food is authorized to issue (a)an unlimited number of New Above Food Common Shares without nominal or par value, and (b)an unlimited number of New Above Food ClassA Earnout Shares and New Above Food ClassB Earnout Shares, each without nominal or par value.
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B. New Above Food Articles
Information regarding certain material provisions of the articles of New Above Food is included in the Proxy Statement/Prospectus under the sectiontitled Description of New Above Food Securities and is incorporated herein by reference.
C. Material Contracts
Information regarding certain material contracts is included in the Proxy Statement/Prospectus under the sectionstitled Certain Relationships and Related Person Transactions , and Business of Above Food and Certain Information about Above Food , and are incorporated herein by reference.
On June 13, 2024, Above Food Cop, acquired all the shares of Brotalia, S.L. from Grupo Empresarial Enhol, S.L. and Mr. Gonzalo Agorreta Preciado. Brotalia, S.L. (Brotalia) is (A) a subsidiary of Enhol which is engaged in (a) the development, production and commercialization of (i) precooked processed animal protein products and (ii) products made with alternative protein, for human consumption, (b) the development and research of new products, technologies or processes for the manufacture of edible products for human consumption, and (c) food tech project acceleration consultancy, (the Business) and (B) the sole shareholder of Naturcook Innovaciones, S.L. (the Subsidiary and jointly with the Company, the Companies). The purchase price for the shares is USD $13,000,000, on the assumption that the net debt of the acquired business will be zero. The purchase price was paid by the delivery of 6,180,413 Above Food common shares at Closing pursuant to:
| (i) | the Common Share Subscription Agreement (Enhol Subscription Agreement), dated June 13, 2024, included in this Report as Exhibit 10.23, under which Enhol agreed to purchase 2,377,082 Above Food common shares at a price of $2.103419 per share, which Above Food common shares converted into 500,000 New Above Food Common Shares (the Enhol Shares) at the closing of the Business Combination and are subject to registration rights, 50% are locked up for 60 days and 50% are locked up for 180 days, as further described in that certain Lock-Up Agreement, dated June 19, 2024, by and between Above Food and Enhol, included in this Report as Exhibit 10.26; and |
| (ii) | a share purchase agreement (the Enhol SPA ), under which Above Food agreed that Enhol and Mr.Preciados shares under the Enhol Subscription Agreement would participate in the Share Exchange. The parties to the Enhol SPA agreed that no later than 10 business days following the Closing, Above Food would cause New Above Food to file a resale registration statement on FormF-1 to register the resale of Enhol and Mr.Preciados shares. The parties agreed that the shares issued pursuant to the Enhol SPA will be locked up for 12 months. |
New Above Food and Enhol entered into a Nomination Rights Agreement dated June19, 2024 ( Nomination Agreement ), included in this Report as Exhibit10.27 , under which New Above Food granted Enhol the right to designate one nominee to the New Above Food Board upon the closing of the Business Combination, so long as Enhol holds at least 50% of Enhols common shares.
Above Food entered into PIPE Subscription Agreements, under which the investors agreed to purchase 550,000 units of Above Food at a purchase price of $10.00 per unit for a total purchase price of $5,500,000, which units included one Above Food common share and one additional Above Food common share provided from the Sponsor or from treasury (the Advantage Shares), which Above Food common shares, besides the Advantage Shares, converted into 530,000 New Above Food Common Shares. In addition, at Closing, the investors received 530,000 New Above Food Common Shares in the form of Advantage Shares from the Sponsor. The form of PIPE Subscription Agreement is included in this Report as Exhibit10.24 .
Promissory Note, dated June27, 2024, issued by Bite in favor of the Sponsor (Bite Promissory Note), included in this Report as Exhibit10.28 , amended, replaced and superseded that certain promissory note, dated January22, 2024 between Bite and the Sponsor for $3,250,000 of cash owed to the Sponsor for working capital loans provided by the Sponsor to Bite for purposes of completing the Business Combination. Under the Bite Promissory Note, Bite promised to pay Sponsor an interest-free, principle amount of $3,500,000, but Sponsor could elect to convert the outstanding principle into Working Capital Units upon consummation of Bite's initial business combination. Sponsor converted $1,500,000 principal amount into Working Capital Units concurrently with the Closing of the Business Combination.
Arcadia Biosciences,Inc. ( Arcadia ), Arcadia Wellness, LLC, ( Sellers ), Above Food, and Above Food Ingredients Corp. ( Above Food Arcadia Sub ) entered into an Asset Purchase Agreement, dated May14, 2024, included in this Report as Exhibit10.29 , under which Above Food Arcadia Sub purchased assets, including, among others, inventory and intellectual property, in exchange for a $6,000,000 promissory note to Sellers. Sellers agreed to pay $2,000,000 USD.
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Under the Promissory Note, dated May14, 2024, by and among Arcadia Biosciences,Inc., Arcadia Wellness, LLC, Above Food and Above Food Arcadia Sub (Arcadia Promissory Note), included in this Report as Exhibit10.34 , Above Food Arcadia Sub promised to pay Arcadia $6,000,000 USD by the third anniversary of the effective date of the Acadia Promissory Note, payable in yearly installments of $2,000,000 USD with interest payable on each anniversary of the effective date of the Arcadia Promissory Note at the Prime Rate. Arcadia also has the right to obtain publicly traded New Above Food Common Shares in the amount of $2,000,000 USD until the second anniversary of the Promissory Note, instead of receiving one of the installment payments in cash, and New Above Food is required to file a resale registration statement on FormF-1 within 20 days of such share issuance.
Above Food, NRGene Technologies Ltd. and NRGene Canada Inc. ( NRGene Canada and together with NRG Technologies Ltd., the Sellers ), entered into an Amendment to Asset Purchase Agreement, dated June 26, 2024, included in this Report as Exhibit 10.31 , to amend that certain Asset Purchase Agreement, dated August 28, 2023, included in this Report as Exhibit 10.10 , pursuant to which Above Food agreed to participate in the private financial round of NRGene Canada and allocate up to CAD $1,000,000 of excess proceeds from any sale of New Above Food Common Shares to an investment under a SAFE investment agreement. Above Food agreed to provide the Sellers a non-recourse loan in the amount of CAD$ 2,362,500, for a period of six (6) months from the date of disbursement, bearing an interest rate of 3% per annum. Above Food also agreed to deliver to the Sellers 250,000 New Above Food Common Shares.
New Above Food and Sponsor entered into a Secured Convertible Promissory Note, dated June 27, 2024, included in this Report as Exhibit 10.32, under which New Above Food promised to pay Sponsor $2,000,000 in principle on the maturity date of June 27, 2026, with interest accruing on the unpaid principal amount at a rate equal to six percent (6%) per quarter, compounded quaterly. The entire principle amount is convertible into New Above Food Common Shares at Sponsors election.
Above Food, New Above Food, Sponsor, Enhol and Mr. Preciado entered into the Joinder to Registration Rights Agreement, dated June 19, 2024, included in this Report as Exhibit 10.33 , under which Enhol and Mr. Preciado agreed to be bound by and become parties to the Registration Rights Agreement, dated June 28, 2024, by and among Above Food, New Above Food, Sponsor, and certain other investors set forth therein.
Material Contracts Relating to the Business Combination
Business Combination Agreement
A description of the Business Combination Agreement is set forth in the Proxy Statement/Prospectus under the sections titled The Business Combination ProposalBusiness Combination Agreement and is incorporated herein by reference.
Related Agreements
A description of the material provisions of certain additional agreements entered into pursuant to the Business Combination Agreement is set forth in the Proxy Statement/Prospectus under the sections titled The Business Combination ProposalAncillary Agreements and Description of New Above Food SecuritiesNew Above Food Warrants, and is incorporated herein by reference.
D. Exchange Controls and Other Limitations Affecting Security Holders
Canada has no system of exchange controls. There are no Canadian governmental laws, decrees, or regulations relating to restrictions on the repatriation of capital or earnings of the Company to non-resident investors. There are no laws in Canada or exchange control restrictions affecting the remittance of dividends or other payments made by the Company in the ordinary course to non-resident holders of the New Above Food Common Shares by virtue of their ownership of such New Above Food Common Shares, except as discussed below in under Item 10.E. - Taxation.
There are no limitations under the laws of Canada or in the organizing documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Canada Act may require that a non-Canadian not acquire control of the Company without prior review and approval by the Minister of Innovation, Science and Economic Development, where applicable thresholds are exceeded. The acquisition of one-third or more of the voting shares of the Company would give rise a rebuttable presumption of an acquisition of control, and the acquisition of more than fifty percent of the voting shares of the Company would be deemed to be an acquisition of control. In addition, the Investment Canada Act provides the Canadian government with broad discretionary powers in relation to national security to review and potentially prohibit, condition or require the divestiture of, any investment in the Company by a non-Canadian, including non-control level investments. Non-Canadian generally means an individual who is neither a Canadian citizen nor a permanent resident of Canada within the meaning of the Immigration and Refugee Protection Act (Canada) who has been ordinarily resident in Canada for not more than one year after the time at which he or she first became eligible to apply for Canadian citizenship, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians.
Amendments to the Investment Canada Act have been passed by the Canadian government but have not yet come into force. Among other things, the amendments will broaden and strengthen the national security review provisions and require, under certain circumstances to be prescribed in regulations that have not yet been published, pre-closing notification of certain foreign investment transactions.
E. Taxation
Information regarding certain U.S. tax consequences of owning and disposing of New Above Food Common Shares and New Above Food Warrants is included in the Proxy Statement/Prospectus under the section titled Material U.S. Federal Income Tax Considerations of the Business Combination and is incorporated herein by reference.
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F. Dividends and Paying Agents
New Above Food has never declared or paid any cash dividends and has no plan to declare or pay any dividends on New Above Food Common Shares in the foreseeable future. New Above Food currently intends to retain any earnings for future operations and expansion.
Subject to the rights of any other shares of New Above Food which are expressed to rank prior to the New Above Food Common Shares, the holders of New Above Food Common Shares are entitled to receive dividends at such times and in such amounts as the New Above Food Board may determine from time to time. The holders of the New Above Food ClassA Earnout Shares and the New Above Food ClassB Earnout Shares shall not be entitled to any dividends or other distributions other than in the event of a distribution of assets of the Company among its shareholders arising on the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company among its shareholders for the purpose of winding up its affairs.
Under the ABCA, New Above Food may not pay a dividend in money or other property if there are reasonable grounds for believing that New Above Food is, or would after the payment be, unable to pay its liabilities as they become due, or the realizable value of New Above Foods assets would thereby be less than the aggregate of its liabilities and stated capital of all classes.
Since New Above Food is a holding company, its ability to pay dividends will be dependent upon the financial condition, liquidity and results of operations of, and the receipt of dividends, loans or other funds from, its subsidiaries. The subsidiaries are separate and distinct legal entities and have no obligation to make funds available to New Above Food. In addition, there are various statutory, regulatory and contractual limitations and business considerations on the extent, if any, to which the subsidiaries of New Above Food may pay dividends, make loans or otherwise provide funds to New Above Food.
G. Statement by Experts
The consolidated balance sheet of New Above Food as of January31, 2024, incorporated by reference in this Report has been audited by Ernst Young LLP, independent registered public accounting firm, as set forth in their report thereon, appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Above Food at January31, 2024 and 2023, and for each of the three years in the period ended January31, 2024, appearing in this Report have been audited by Ernst Young LLP, independent registered public accounting firm, as set forth in their report thereon (which contains an explanatory paragraph describing conditions that raise substantial doubt about Above Foods ability to continue as a going concern as described in Note 2 to the consolidated financial statements) appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
The financial statements of Bite as of and for the fiscal years ended December 31, 2023 and 2022, incorporated by reference in this report, have been audited by Marcum LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, which includes an explanatory paragraph as to Bites ability to continue as a going concern, and are included in reliance on such report given on the authority of such firm as an expert in accounting and auditing.
H. Documents on Display
We are subject to certain of the informational filing requirements of the Exchange Act. Because we are a foreign private issuer, we are exempt from the rulesand regulations under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section16 of the Exchange Act, with respect to their purchase and sale of our shares. In addition, we are not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we are required to file with the SEC an Annual Report on Form20-F containing financial statements audited by an independent accounting firm. We may, but are not required, to furnish to the SEC, on Form6-K, unaudited financial information after each of our first three fiscal quarters. The SEC also maintains a website at http://www.sec.gov that contains reports and other information that we file with or furnish electronically with the SEC. You may read and copy any report or document we file, including the exhibits, at the SECs public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.
I. Subsidiary Information.
Not applicable.
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regarding quantitative and qualitative disclosure about market risk is included in the audited consolidated financial statements of Above Food for the year ended January31, 2024, which form part of this Report.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Information regarding New Above Food Warrants is included in the Proxy Statement/Prospectus under the sectiontitled Description of New Above Food SecuritiesNew Above Food Warrants and is incorporated herein by reference.
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Item16A. Audit Committee Financial Expert
The New Above Food Board has determined that Alberto Ardura Gonzlez is an audit committee financial expert, within the meaning of the current rulesof the U.S. Securities and Exchange Commission. Alberto Ardura Gonzlez is independent as required by the Nasdaq Listing Rules.
Item16B. Code of Ethics
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Pursuant to our Code of Ethics, officers of New Above Food covered by New Above Foods Code of Ethics are required to promptly bring to the attention of the appropriate personnel, including officers, the General Counsel, outside counsel for the Company and the New Above Food Board or the relevant committee thereof, any information concerning any violations of the Code of Ethics.
Item16G. Corporate Governance
Our common shares and warrants are listed on Nasdaq and as a Nasdaq-listed company, we are required to comply with certain corporate governance standards under applicable Nasdaq Listing Rules. However, as a foreign private issuer, pursuant to Nasdaq Listing Rule5615(a)(3), we are permitted to follow home country practice in lieu of certain provisions of the Nasdaq Listing Rules.
Our corporate governance practices differ in certain significant respects from those that U.S. companies must adopt in order to maintain a Nasdaq listing and, in accordance with Nasdaq Listing Rule5615(a)(3), we provide a brief, general summary of such differences.
Pursuant to Nasdaq Listing Rule5615(a)(3), the Company has elected to follow certain Canadian practices consistent with the requirements of the ABCA in lieu of the requirements of (i)NASDAQ Listing Rule5620(c)(Quorum Rule) and (ii)Nasdaq Rule5635, which sets forth the circumstances under which shareholder approval is required prior to an issuance of securities in certain circumstances as set out therein.
Nasdaq Listing Rule5620(c)requires that the minimum quorum requirement for a shareholder meeting is one-third of the outstanding common shares. In addition, a company listed on Nasdaq is required to state its quorum requirement in its bylaws. New Above Foods quorum requirement is set forth in its organizational documents, which provides that if the Company has more than 15 shareholders, quorum for the transaction of business at a meeting of shareholders is shareholders holding not less than twenty five (25%) percent of the shares of the Company entitled to vote at that meeting being present in person or represented by proxy, where two or more joint holders are counted as one shareholder.
The shareholder approval requirements set forth in Nasdaq Listing Rule5635 are different than those required by the Canadian Rules. New Above Food intends to comply with such Canadian Rulesin lieu of the requirements set forth in Nasdaq Listing Rule5635.
Other than the home country practices described above, we are not aware of any significant ways in which our corporate governance practices differ from those followed by U.S. domestic companies under the Nasdaq listing rules.
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We have elected to provide financial statements and related information pursuant to Item 18 Financial Statements .
The audited consolidated financial statements of Bite for the fiscal year ended December31, 2023, are incorporated by reference to pagesF 3F 24 in Amendment No.4 to the Registration Statement on FormF-4, filed with the SEC on April2, 2024 ( Amendment No.4 ).
The audited consolidated financial statements of Above Food for the fiscal year ended January31, 2024, form part of this Report.
The audited consolidated financial statements of New Above Food for the fiscal year ended January31, 2024, are incorporated by reference to pagesF 116F 119 in Amendment No.4.
The unaudited pro forma condensed combined financial statements of New Above Food as of and for the year ended January31, 2024 are attached as Exhibit15.1 to this Report.
|
Exhibit
|
Description |
||||||||||||||
| 1.1* | Amended and Restated Articles of Above Food Ingredients Inc. | ||||||||||||||
| 1.2* | Amended and Restated By-law No.1 of Above Food Ingredients Inc., dated June28, 2024. | ||||||||||||||
| 2.1 | Business Combination Agreement, dated as of April29, 2023, by and among Bite Acquisition Corp., 2510169 Alberta Inc., Above Merger Sub,Inc. and Above Food Corp. (incorporated by reference as AnnexA-1 to the Registration Statement on FormF-4/A (Reg.No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 2.2 | Amendment No.1 to Business Combination Agreement, dated as of March12, 2024, by and among Bite Acquisition Corp., Above Food Ingredients Inc., Above Merger Sub,Inc. and Above Food Corp.(incorporated by reference as Annex A-2 to the Registration Statement on FormF-4/A (Reg.No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 2.3 | Plan of Arrangement (incorporated by reference included as ExhibitD to the Business Combination Agreement, which is included as Annex A-1 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 4.1* | Amended and Restated Warrant Agreement, by and between Above Food Ingredients Inc., Bite Acquisition Corp., Continental Stock Transfer Trust Company and Odyssey Transfer and Trust, dated June28, 2024. | ||||||||||||||
| 4.2* | Amended and Restated Warrant Indenture, by and between Above Food Ingredients Inc., Above Food Corp. and Odyssey Trust Company, dated June28, 2024. | ||||||||||||||
| 10.1* | Stock Escrow Assignment, Assumption and Amendment Agreement, dated June28, 2024, by and among Bite Acquisition Corp., Above Food Ingredients Inc., Smart Dine, LLC, Continental Stock Transfer Trust Company, and Odyssey Transfer and Trust Company. | ||||||||||||||
| 10.2* | Stock Escrow Agreement, dated February 11, 2021, among Bite Acquisition Corp., Continental Stock Transfer Trust Company and certain security holders. | ||||||||||||||
|
Exhibit
|
Description |
||||||||||||||
| 10.3* | Registration Rights Agreement, dated June28, 2024, by and among Above Food Corp., Above Food Ingredients Inc., Smart Dine, LLC and certain other investors set forth therein. | ||||||||||||||
| 10.4* | Formof Indemnification and Advancement Agreement. | ||||||||||||||
| 10.5 | Formof General Security Agreement (incorporated by reference as Exhibit10.6 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.6 | Formof Release to the General Security Agreement (incorporated by reference as Exhibit10.7 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.7 | Escrow Agreement, dated December29, 2022, between Above Food corp., Lexington Capital, S.A.P.I. de C.V. and McDougall Gauley LLP. (incorporated by reference as Exhibit10.13 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.8 | Pledge Agreement, dated December29, 2022, between Above Food USA Corp. and Lexington Capital, S.A.P.I. de C.V. (incorporated by reference as Exhibit10.14 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.9▲ | Supplier Agreement, between Farmer Direct Organic Foods Ltd. and United Natural Foods,Inc. (incorporated by reference as Exhibit10.15 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.10 | Asset Purchase Agreement, dated August28, 2023, between NRGene Technologies Ltd., NRGene Canada Inc., and Above Food Corp. (incorporated by reference as Exhibit10.16 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.11 | Amended and Restated Agreement for Lease, dated May5, 2023, by and among Purely Canada Terminals Corp., Purely Canada Foods Corp. and Kambeitz Agri Inc. (incorporated by reference as Exhibit10.17(a)to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.12 | Amended and Restated Agreement for Lease, dated June3, 2023, by and among Purely Canada Terminals Corp. and Purely Canada Foods Corp. (incorporated by reference as Exhibit10.17(b)to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.13 | Lease Agreement, dated June12, 2017, between Matrix Equities Inc., as Landlord, and Northern Quinoa Production Corporation, as Tenant (incorporated by reference as Exhibit10.18 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.14 | Amendment of Lease to the Lease Agreement, dated January13, 2021, between Matrix Equities Inc., as Landlord, and Northern Quinoa Production Corporation, as Tenant (incorporated by reference as Exhibit10.19 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.15 | Renewal of Lease to the Lease Agreement, dated October17, 2022, between Matrix Equities Inc., by its duly authorized agent, Triovest Realty Advisors Inc., as Landlord, and Northern Quinoa Production Corporation, as Tenant (incorporated by reference as Exhibit10.20 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.16 | Industrial Lease (Multi-Tenant), dated October17, 2019, between 1057041 Ontario Inc., as Landlord, and Wood Water Foods Inc., as Tenant (incorporated by reference as Exhibit10.21 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
|
Exhibit
|
Description |
||||||||||||||
| 10.17 | First Amending Lease Agreement to the Industrial Lease, dated September30, 2021, between 1057041 Ontario Inc., as Landlord, and Wood and Water Foods Inc., as Tenant (incorporated by reference as Exhibit10.22 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.18 | Second Amending Lease Agreement to the Industrial Lease, dated November30, 2022, between 1057041 Ontario Inc., as Landlord, and Wood and Water Foods Inc., as Tenant, dated November30, 2022 Tenant (incorporated by reference as Exhibit10.23 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.19▲ | Lease Agreement, dated December31, 2021, by and between Midatlantic Warehouse Storage, LLC, as landlord and Atlantic Natural Foods, LLC, as tenant (110 Industry Drive, Nash County, Nashville, North Carolina) (incorporated by reference as Exhibit10.24 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.20 | Above Food Corp. Stock Option Plan (incorporated by reference as Exhibit10.25 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.21 | Above Food Corp. Restricted Share Unit Plan (incorporated by reference as Exhibit10.26 to the Registration Statement on FormF 4/A (Reg. No.333-275005), filed with the SEC on April8, 2024). | ||||||||||||||
| 10.22* | Above Food Ingredients Inc. Equity Incentive Plan, dated June28, 2024. | ||||||||||||||
| 10.23*▲ | Common Share Subscription Agreement, dated June13, 2024, by and between Above Food Corp. and Grupo Empresarial Enhol, S.L. | ||||||||||||||
| 10.24*▲ | Formof Common Share Subscription Agreement, dated June21, 2024, by and between Above Food Corp. and various investors. | ||||||||||||||
| 10.25* | Shares Sale and Purchase and Exchange Agreement, dated June13, 2024, by and among Above Food Corp., Grupo Empresarial Enhol, S.L., and Gonzalo Agorreta Preciado. | ||||||||||||||
| 10.26* | Lock-Up Agreement, dated June19, 2024, by and between Above Food Corp. and Grupo Empresarial Enhol, S.L. | ||||||||||||||
| 10.27* | Nomination Rights Agreement, dated June19, 2024, by and between Above Food Ingredients Inc. and Grupo Empresarial Enhol, S.L. | ||||||||||||||
| 10.28* | Promissory Note, dated June27, 2024, issued by Bite Acquisition Corp. in favor of Smart Dine, LLC. | ||||||||||||||
| 10.29*▲ | Asset Purchase Agreement, dated May14, 2024, by and among Arcadia Biosciences,Inc., Arcadia Wellness, LLC , Above Food Corp., and Above Food Ingredients Corp. | ||||||||||||||
| 10.30* | Promissory Note, dated May14, 2024, by and among Arcadia Biosciences,Inc., Arcadia Wellness, LLC, Above Food Corp. and Above Food Ingredients Corp. | ||||||||||||||
| 10.31* | Amendment to Asset Purchase Agreement, dated June 26, 2024, by and among Above Food Corp., NRGene Technologies Ltd. and NRGene Canada Inc. | ||||||||||||||
| 10.32* | Secured Convertible Promissory Note, dated June 27, 2024, by and between Above Food Ingredients Inc. and Smart Dine, LLC. | ||||||||||||||
| 10.33* | Joinder to Registration Rights Agreement, dated June 19, 2024, by and among Above Food Corp., Above Food Ingredients Inc., Smart Dine, LLC, Grupo Empresarial Enhol, S.L., and Gonzalo Agorreta Preciado. | ||||||||||||||
| 15.1* | Unaudited pro forma condensed combined financial statements. | ||||||||||||||
| 23.1* | Consent of Ernst Young LLP, auditor to Above Food Corp. and Above Food Ingredients Inc. | ||||||||||||||
| 23.2* | Consent of Marcum, LLP, auditor to Bite Acquisition Corp. | ||||||||||||||
| Schedules to this exhibit have been omitted pursuant to Item 601(a)(5)of Regulation S-K. The Registrant hereby agrees to furnish a copy of any omitted schedules to the Commission upon request. |
| ▲ | Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv)of Regulation S-K. The Registrant hereby agrees to furnish a copy of any omitted portion to the Commission upon request. |
| Portions of this exhibit have been omitted pursuant to Item 601(a)(6)of Regulation S-K. The Registrant hereby agrees to furnish a copy of any omitted portion to the Commission upon request. |
| * | Filed herewith. |
41
SIGNATURES
The registrant certifies that it meets all of the requirements for filing on Form20-F and has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: July8, 2024 | Above Food Ingredients Inc. | ||
| By: | /s/ Lionel Kambeitz | ||
| Name: | Lionel Kambeitz | ||
| Title: | Chief Executive Officer | ||
42
Above Food Corp.
Consolidated Financial Statements
as of January31, 2024 and 2023 and for the years ended January31, 2024, 2023 and 2022
CONTENTS
F- 1
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Above Food Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Above Food Corp. (the Company), as of January 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, changes in equity and cash flows, for each of the years in the three year period ended January 31, 2024, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three year period ended January 31, 2024, in conformity with U.S. generally accepted accounting principles.
The Companys ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a working capital deficiency, has violated covenant requirements under its lending agreements as at January 31, 2024 and has stated that substantial doubt exists about the Companys ability to continue as a going concern. Management's evaluation of the events and conditions and managements plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst Young LLP
Charterred Professional Accountants
We have served as the Companys auditor since 2021.
Saskatoon, Canada
May 31, 2024, except for Note 26, as to which the date is July 8, 2024.
F- 2
(Expressed in Canadian dollars)
| As at | Note(s) | January31, 2024 | January31, 2023 | ||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash | $ | 952,280 | $ | 2,327,797 | |||||||
| Accounts receivable, net | 24,028,576 | 33,664,121 | |||||||||
| Loans receivable | 9 | 671,500 | 552,003 | ||||||||
| Inventory | 5 | 26,009,438 | 47,919,591 | ||||||||
| Commodity forward contracts | 14 | 15,187,459 | 14,030,350 | ||||||||
| Foreign exchange forward contracts | 14 | 359,973 | 542,862 | ||||||||
| Other assets | 7 | 1,227,012 | 3,458,705 | ||||||||
| 68,436,238 | 102,495,429 | ||||||||||
| Investment in affiliate | 6 | 5,873,574 | 9,541,713 | ||||||||
| Property, plant and equipment, net | 10 | 27,249,328 | 26,377,900 | ||||||||
| Intangible assets, net | 11 | 2,448,489 | 2,938,340 | ||||||||
| Operating lease right-of-use assets | 15 | 6,745,324 | 5,702,190 | ||||||||
| Finance lease right-of-use assets | 15 | 31,552,824 | 32,475,705 | ||||||||
| Goodwill | 4, 11 | 871,174 | |||||||||
| Due from related parties | 22 | 302,406 | |||||||||
| Other assets | 8 | 711,004 | 1,055,693 | ||||||||
| Total Assets | $ | 143,887,955 | $ | 180,889,376 | |||||||
|
LIABILITIES AND EQUITY |
|||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable and accrued liabilities | 14 | $ | 53,101,833 | $ | 47,396,393 | ||||||
| Customer deposit | 8,676,662 | 2,671,068 | |||||||||
| Short-term debt and credit facilities | 12 | 36,000,000 | 47,500,000 | ||||||||
| Bank indebtedness | 12,304,272 | 5,745,489 | |||||||||
| Long-term debt, current portion | 13 | 30,783,203 | 23,259,226 | ||||||||
| Due to related parties | 22 | 6,017,600 | 8,480,516 | ||||||||
| Operating lease liabilities, current portion | 15 | 1,179,839 | 796,801 | ||||||||
| Lease liabilities, current portion | 15 | 1,190,708 | 1,203,809 | ||||||||
| Commodity forward contracts | 14 | 3,250,260 | 977,331 | ||||||||
| Foreign exchange forward contracts | 14 | 1,346,133 | 3,124,828 | ||||||||
| 153,850,510 | 141,155,461 | ||||||||||
| Long-term debt | 13 | 186,104 | 577,517 | ||||||||
| Operating lease liabilities | 15 | 5,434,482 | 4,905,388 | ||||||||
| Finance lease liabilities | 15, 22 | 30,428,018 | 31,620,032 | ||||||||
| Deferred tax liabilities | 18 | 247,073 | - | ||||||||
| Commitments and contingencies | 24 | ||||||||||
| 190,146,187 | 178,258,398 | ||||||||||
| Shareholders equity: | |||||||||||
| Voting common shares, $0.00001 par value, unlimited shares authorized; 78,032,167 and 77,452,927 shares issued and outstanding as of January31, 2024 and 2023, respectively. In connection with the acquisition of FDO (Note 4) 432,780 shares are held in escrow and to be released contingently upon the satisfaction of certain conditions | 16 | 781 | 775 | ||||||||
| Additional paid-in capital | 16 | 45,777,474 | 41,474,196 | ||||||||
| Warrants | 16 | 11,676,046 | 11,676,046 | ||||||||
| Retained deficit | (103,880,258 | ) | (50,567,976 | ) | |||||||
| Accumulated other comprehensive income | 167,725 | 47,937 | |||||||||
| Total shareholders equity | (46,258,232 | ) | 2,630,978 | ||||||||
| Total liabilities and shareholders equity | $ | 143,887,955 | $ | 180,889,376 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
F- 3
Consolidated Statements of Operations and Comprehensive Loss
(Expressed in Canadian dollars)
| Year Ended January31 | |||||||||||||||
| Note(s) | 2024 | 2023 | 2022 | ||||||||||||
| Revenue | 20 | 368,423,398 | $ | 396,464,504 | $ | 198,857,713 | |||||||||
| Cost of sales | 14, 21 | 374,322,146 | 397,744,144 | 190,945,089 | |||||||||||
| Gross profit (loss) | (5,898,748 | ) | (1,279,640 | ) | 7,912,624 | ||||||||||
| Expenses | |||||||||||||||
| Selling, general and administrative | 23 | 34,222,524 | 31,107,404 | 11,693,607 | |||||||||||
| Research and development | 2 | 171,852 | 430,666 | 235,095 | |||||||||||
| Impairment of goodwill and other intangible assets | 11 | 1,806,337 | 6,866,121 | ||||||||||||
| 36,200,713 | 38,404,191 | 11,928,702 | |||||||||||||
| Loss from operations | (42,099,461 | ) | (39,683,831 | ) | (4,016,078 | ) | |||||||||
| Interest revenue | 245,262 | 296,479 | 82,293 | ||||||||||||
| Gain on revaluation of consideration payable | 4 | 147,733 | |||||||||||||
| Interest expense | 14 | (7,670,156 | ) | (5,378,560 | ) | (2,086,274 | ) | ||||||||
| Net loss before income taxes | (49,524,355 | ) | (44,765,912 | ) | (5,872,326 | ) | |||||||||
| Income tax recovery | |||||||||||||||
| Current | 18 | (15,370 | ) | ||||||||||||
| Deferred | 18 | (78,681 | ) | (95,088 | ) | ||||||||||
| Income tax recovery | (94,051 | ) | (95,088 | ) | |||||||||||
| Equity method investment loss and impairment | 6 | 3,787,927 | 812,669 | - | |||||||||||
| Net loss for the year | $ | (53,312,282 | ) | $ | (45,484,530 | ) | $ | (5,777,238 | ) | ||||||
| Net loss per share of common share | |||||||||||||||
| Basic and diluted | 25 | $ | (0.69 | ) | $ | (0.60 | ) | $ | (0.08 | ) | |||||
| Weighted-average common shares outstanding | |||||||||||||||
| Basic and diluted | 25 | 77,512,765 | 76,039,262 | 72,304,200 | |||||||||||
| Other comprehensive income | |||||||||||||||
| Cumulative translation adjustments | 152,131 | 65,667 | |||||||||||||
| Tax effect | (32,343 | ) | (17,730 | ) | |||||||||||
| Total other comprehensive income | $ | 119,788 | $ | 47,937 | $ | ||||||||||
| Comprehensive loss for the year | $ | (53,192,494 | ) | $ | (45,436,593 | ) | $ | (5,777,238 | ) | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F- 4
Consolidated Statements of Changes in Shareholders Equity
(Expressed in Canadian dollars)