Filing overview
Entity discrepancy: The request identifies AVAX ONE TECHNOLOGY LTD., but the supplied Form 10-Q is for AgriFORCE Growing Systems Ltd. This summary reflects the filing provided. It reports the quarter ended March 31, 2022; amounts are in U.S. dollars.
AgriFORCE is a development-stage agriculture technology company focused on controlled-environment growing systems and food-related intellectual property. It reported no revenue since inception.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 or prior year-end |
|---|---|---|
| Revenue | None | None since inception |
| Operating expenses | $2.760 million | $0.891 million |
| Operating loss | $2.760 million | $0.891 million |
| Net loss | $3.281 million | $0.885 million |
| Basic and diluted loss per share | $0.22 | $0.10 |
| Net cash used in operating activities | $2.871 million | $0.372 million |
| Cash and cash equivalents | $4.378 million | $7.775 million at Dec. 31, 2021 |
| Working capital | $3.1 million | Not stated for the comparison date |
| Total assets | $10.365 million | $11.765 million at Dec. 31, 2021 |
| Total liabilities | $5.315 million | $3.765 million at Dec. 31, 2021 |
There is no revenue base from which to assess gross margin or profitability margins. The company used $0.500 million in investing activities, primarily for an intangible asset, and had no financing cash flow in the quarter. Cash declined by $3.397 million. The balance sheet included $1.752 million of lease liabilities, a $1.903 million warrant liability, $0.765 million of contingent consideration payable, and a $48,015 long-term loan. The prior-year bridge debentures had been repaid in July 2021.
Material changes and notable items
- Operating expenses rose by $1.869 million, or 210%, year over year, as the company expanded staffing and operations. Major increases included wages and salaries, research and development, investor relations, and office and administrative costs.
- The net loss increased to $3.281 million from $0.885 million. In addition to higher operating costs, Q1 2022 included a $457,042 noncash warrant fair-value expense and $64,508 of foreign-exchange loss.
- Wages and salaries were $788,641; research and development was $396,527; consulting was $363,095; and investor and public relations was $345,489.
- Adoption of lease accounting guidance on January 1, 2022 resulted in recognition of operating lease right-of-use assets and liabilities of approximately $1.8 million each. The office lease had a remaining term of eight years, with total disclosed future payments of $2.356 million.
- The company paid $500,000 in February to satisfy secured debt of the seller of acquired intellectual property. It disclosed an amended Manna Nutritional Group asset purchase agreement with potential consideration of up to $14.475 million, including cash and share-linked prefunded warrants subject to conditions and shareholder approval.
Outlook, risks, and contingencies
Management stated that the company expects significant operating losses to continue and that additional financing is likely needed to fund operations and develop and commercialize its technology. The filing says these conditions raise substantial doubt about the company’s ability to continue as a going concern for the twelve months following issuance. Management intended to seek debt, equity, or other financing, but gave no assurance that funds could be obtained on acceptable terms; without financing, operations might need to be reduced or discontinued. No specific financial guidance was provided.
Business plans include financing and acquiring a 41.37-acre Coachella, California parcel, developing growing facilities and a genetics lab, and advancing food-product and intellectual-property initiatives. The filing notes that the prior land-purchase closing period had lapsed and that the company was renegotiating the agreement. The timing and funding of these plans are uncertain.
A British Columbia lawsuit by HydroHaus Horticulture and related parties seeks damages and other remedies concerning prior agreements and alleged intellectual property. The company denies the allegations and has filed a counterclaim; management, based on counsel’s opinion, did not believe potential monetary damages were material. No further activity was reported in the period. The filing also identifies possible COVID-19-related operational disruption. Management said disclosure controls and procedures were effective as of March 31, 2022 and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the issuer: the filing is for AgriFORCE Growing Systems Ltd., not the company named in the request.
- Assess cash runway, monthly cash burn, financing plans, and the going-concern warning; the filing provides no assured funding commitment.
- Verify milestones, conditions, dilution potential, and payment obligations under the amended Manna IP agreement, including required shareholder approval and patent-related conditions.
- Track progress and funding for the Coachella site and planned facilities, given the lapsed purchase closing period and ongoing renegotiation.
- Monitor warrant-liability valuation changes and the status and potential outcomes of the HydroHaus litigation.