Filing summary
Entity note: The supplied filing is AgriFORCE Growing Systems Ltd.’s Form 10-Q, not a filing for AVAX ONE TECHNOLOGY LTD. It covers the quarter and nine months ended September 30, 2023. Financial figures are in U.S. dollars unless stated otherwise.
Business context and reporting period
AgriFORCE describes itself as an agriculture-focused technology and food-products company, with Solutions (controlled-environment growing systems and related technology) and Brands (plant-based ingredients and products) divisions. The company reported no revenue since inception. Its interim financial statements are unaudited.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating loss | $1.63 million | $3.41 million | $7.37 million | $10.39 million |
| Net loss | $3.49 million | $3.40 million | $7.74 million | $10.12 million |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $(5.44) million | $(9.06) million |
- Gross profit and gross margin are not applicable to the reported periods because the company had no revenue.
- At September 30, 2023, cash was $586,565, down from $2.27 million at December 31, 2022. Current assets were $1.16 million and current liabilities were $6.86 million; management reported a $5.7 million working-capital deficit.
- Total liabilities were $9.99 million, including $4.67 million of current debentures, $1.40 million of lease liabilities, and $1.96 million of derivative liabilities. The separate future principal-payment schedule lists $10.67 million of debt payments; the filing’s debt carrying value is reduced by repayments, conversions, discounts and issuance costs.
- Total assets were $17.34 million and shareholders’ equity was $7.35 million. The balance sheet included $12.62 million of intangible assets.
Changes versus prior comparable periods
- Nine-month operating expenses fell 29% to $7.37 million, mainly as professional fees, consulting, research and development, and other costs declined. Management attributed the reductions chiefly to lower M&A spending, cost controls and reduced staffing. Amortization rose after the Manna patent became available for use.
- Nine-month net loss narrowed to $7.74 million from $10.12 million. This included a $6.16 million noncash gain from the change in fair value of derivative liabilities, partially offset by $6.05 million of debenture accretion interest.
- Q3 operating loss improved substantially year over year, but Q3 net loss increased slightly, to $3.49 million from $3.40 million, reflecting higher financing-related expenses, including debenture accretion.
- Nine-month operating cash use improved by $3.62 million year over year. The company had no investing cash outflow in the 2023 period, versus $623,259 in 2022.
- Financing provided $3.74 million of net cash in the first nine months of 2023, versus $9.99 million in 2022. 2023 financing included debenture proceeds and equity issuance, offset by debt repayments and financing costs.
Outlook, risks and unusual items
- Going concern: Management stated that substantial doubt exists about the company’s ability to continue as a going concern for the 12 months after issuance. It expects to seek additional debt or equity financing, but says funding may not be available on acceptable terms, or at all; without it, operations may need to be scaled back or discontinued.
- Debt and dilution: Debentures carry conversion features and warrants with down-round provisions. The August 2023 ATM issuance reset relevant exercise/conversion prices to $5.50. An October 18, 2023 additional $2.75 million debenture tranche reset them again to $2.62. The filing reports substantial debt conversions into shares, creating dilution risk.
- Business outlook: Management said it expected revenue from hydroxyl-generating devices in late 2023; the company had received initial purchase orders through a Mexico distribution agreement. Awakened Grains flour commercialization was underway, with customer trials, production preparation and sales-channel development described. The filing provides no quantified financial guidance.
- Transactions and strategy: The planned Delphy acquisition was terminated in May 2023. The Berry People acquisition remained a proposed transaction in the described materials, subject to due diligence and definitive terms. The Coachella land agreement was terminated, and the company disclosed subsequent litigation by Stronghold.
- Contingencies: Stronghold’s post-quarter complaint alleges contract-related claims; the company said it would defend itself and estimated exposure from $0 to $452,000. A former CEO also filed a wrongful-dismissal claim; the company denied liability and recorded no related liability.
- Other subsequent events: The company effected a 1-for-50 reverse stock split on October 11, 2023. It terminated its office lease and entered a short-term lease on November 1. Additional debt conversions and share issuances occurred after quarter-end. As of November 2, 2023, the filing reports 1,413,511 common shares outstanding.
- Management assessed disclosure controls and procedures as effective as of September 30, 2023 and reported no material quarter-period change in internal control over financial reporting.
Most important facts for investors to verify
- Confirm the issuer identity: this filing is for AgriFORCE Growing Systems Ltd., not AVAX ONE TECHNOLOGY LTD.
- Assess available liquidity, cash burn and the company’s ability to raise financing given the stated going-concern uncertainty.
- Review debenture terms, scheduled principal payments, post-quarter financing, conversion-price resets and potential dilution from shares, warrants and convertible securities.
- Verify whether the stated late-2023 device sales and flour commercialization produced revenue, and whether planned acquisitions or partnerships advanced.
- Monitor the Stronghold and former-CEO litigation, including potential exposure and any subsequent developments.