Filing summary
Filing identity: The supplied filing is AgriFORCE Growing Systems Ltd.’s unaudited Form 10-Q for the quarter ended March 31, 2023—not a filing for AVAX ONE TECHNOLOGY LTD. The financial statements are in U.S. dollars.
Business context and reporting period
AgriFORCE is a development-stage agriculture technology and food-products company. Its Solutions division is developing controlled-environment growing systems; its Brands division is commercializing food products using acquired Manna intellectual property. The company reported no revenue since inception and is still developing its first facility and commercial operations.
Key financial metrics
| Metric | Q1 2023 / March 31, 2023 | Comparable / December 31, 2022 |
|---|---|---|
| Revenue | None | None since inception |
| Operating loss | $2.82 million | $2.76 million in Q1 2022 |
| Net loss | $1.72 million | $3.28 million in Q1 2022 |
| Operating cash flow | $(2.65) million | $(2.87) million in Q1 2022 |
| Cash and cash equivalents | $2.73 million | $2.27 million at December 31, 2022 |
| Working capital | Deficit of approximately $2.07 million | Not stated as a comparative figure |
| Total liabilities | $11.67 million | $11.30 million at December 31, 2022 |
| Current debentures, carrying value | $4.27 million | $3.94 million at December 31, 2022 |
| Derivative liabilities | $5.07 million | $4.65 million at December 31, 2022 |
Operating expenses rose 2% year over year to $2.82 million. Basic and diluted loss per share was $0.07, versus $0.22 in Q1 2022. The filing does not report revenue-based margins. Cash increased during the quarter primarily because of financing proceeds, not operating cash generation.
Changes and unusual items
- Net loss improved year over year, chiefly because the company recorded a $3.37 million gain from changes in the fair value of derivative liabilities, compared with a $457,042 loss in Q1 2022. This non-cash valuation change substantially affected reported earnings.
- Q1 2023 included $1.87 million of debenture interest accretion and a $419,703 loss on conversion of convertible debt. The company also recorded $168,760 of depreciation and amortization, including amortization of the Manna patent.
- In January, investors purchased a second debenture tranche with $5.08 million principal and $4.62 million gross proceeds. The tranche triggered a down-round adjustment, reducing the conversion and warrant exercise prices on the earlier tranche to $1.24.
- The company issued 2.52 million common shares during the quarter, including shares on debt conversion, compensation, consulting services, and exercise of Manna prefunded warrants. Shares outstanding were 18.31 million at quarter-end; the cover page reports 18.52 million as of May 9, 2023.
- The company terminated its Stronghold land purchase arrangement; associated prefunded warrants were rescinded, and the $2.09 million land deposit was reversed. It recorded a $12,000 write-off related to a prior land-purchase deposit.
Outlook, risks, and contingencies
Management says additional financing is likely needed to fund operations and develop and commercialize the company’s technology. The filing states that substantial doubt exists about the company’s ability to continue as a going concern for the twelve months following issuance. Management plans to seek debt or equity financing, but says there is no assurance it can obtain funding on acceptable terms; failure to do so could require operations to be scaled back or discontinued. Additional equity could dilute shareholders, while debt may impose restrictive covenants.
Management described Awakened Grains flour as commercially available through brokers and reported production trials, customer research and development work, and preparations for direct-to-consumer sales. A pilot plant was planned for the end of 2023. These are plans and progress statements, not reported revenue or confirmed commercial scale. The company also reported a nonbinding acquisition letter of intent for Berry People, with a proposed $28 million purchase price for 70% of the business, subject to due diligence and a definitive agreement. The proposed Delphy acquisition remained under discussion; the Deroose transaction remained at the letter-of-intent stage. No litigation contingencies were disclosed as of March 31, 2023.
Other key risks include continuing operating losses, limited cash relative to operating needs, scheduled debenture principal repayments, potential dilution from warrants and convertible debt, and execution and financing risks for facility development, product commercialization, and proposed acquisitions. The filing reports no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the issuer: this filing is for AgriFORCE Growing Systems Ltd., not AVAX ONE TECHNOLOGY LTD.
- Review the going-concern disclosure, cash runway, financing availability, and the timing and amount of debt repayments.
- Assess the debenture terms, down-round provisions, derivative-liability valuations, and potential dilution from outstanding warrants and convertible instruments.
- Verify whether planned facility, pilot-plant, product-launch, and acquisition milestones were subsequently completed, and whether they generated meaningful revenue.
- Check subsequent filings for developments concerning Berry People, Delphy, Deroose, and the terminated Stronghold land arrangement.