Business context and reporting period
Entity discrepancy: The request identifies AVAX ONE TECHNOLOGY LTD., but the supplied Form 10-Q is for AgriFORCE Growing Systems Ltd. This summary covers AgriFORCE’s quarter ended September 30, 2022, and nine months then ended. The company develops agricultural technology and plant-based food products through AgriFORCE Solutions and AgriFORCE Brands. It reported no revenue since inception.
Financial performance and position
All amounts are in U.S. dollars. The interim statements are unaudited.
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | None since inception | None since inception |
| Operating loss, 2022 | $3.41 million | $10.39 million |
| Operating loss, 2021 | $2.38 million | $3.99 million |
| Net loss, 2022 | $3.40 million | $10.12 million |
| Net loss, 2021 | $1.82 million | $3.92 million |
| Basic and diluted loss per share, 2022 | $0.17 | $0.58 |
For the nine months, net cash used in operating activities was reported as $8.89 million in the cash-flow statement; MD&A gives a different figure of $8.86 million. Investing activities used $0.62 million, while financing activities provided $9.82 million. Cash was $7.87 million at September 30, 2022, versus $7.78 million at December 31, 2021.
At September 30, total assets were $23.90 million, total liabilities $13.99 million, and shareholders’ equity $9.92 million. Working capital was approximately $2.2 million. Current debentures were carried at $4.08 million, while the filing reports $12.75 million of outstanding principal after repayments and conversions; future principal payments were scheduled at $1.68 million in 2022, $6.73 million in 2023, and $4.34 million in 2024. Derivative liabilities totaled $6.59 million. Operating lease liabilities totaled $1.52 million.
Material changes versus the prior comparable period
Nine-month operating expenses rose 161% to $10.39 million. The company attributed the increase primarily to higher staffing, professional and consulting fees, office and administrative costs, R&D, sales and marketing, travel, and lease expense. Third-quarter operating expenses rose 43% year over year; professional fees and consulting were notable increases, partly offset by lower share-based compensation and investor-relations costs.
Nine-month net loss increased to $10.12 million from $3.92 million, and operating cash use increased from $3.02 million to approximately $8.9 million. The company received $12.75 million of gross proceeds, net of original issue discount, from a new debenture financing in July 2022. Cash nevertheless increased only modestly, reflecting operating and investing outflows, financing costs, and foreign-exchange effects. Common shares outstanding at September 30 were 15,688,596, compared with 15,176,698 at year-end 2021; the cover reports 15,713,596 outstanding as of November 10, 2022.
Outlook, risks, contingencies, and unusual items
Management described the company as being in development, with its first facility and intellectual property not yet commercialized. It expects continued significant operating losses and says additional financing is likely needed. Management concluded that substantial doubt exists about the company’s ability to continue as a going concern for twelve months from issuance. It plans to seek debt, equity, or other financing, but cautions that financing may not be available on acceptable terms; failure to obtain funding could require operations to be scaled back or discontinued. Additional equity may dilute shareholders, and debt may impose restrictive covenants. No formal financial guidance was provided.
The June 2022 debentures carry a 5% rate for the first year, 6% for the second, and 8% thereafter, are convertible at $2.22 per share, and include warrants and down-round provisions. Their conversion feature and warrants are recorded as derivative liabilities and are subject to fair-value changes. The nine-month results include a $1.68 million debenture-interest accretion expense and a $1.68 million gain from changes in derivative fair value, among other financing-related items.
The company issued approximately $2.09 million in prefunded warrants as a deposit under a $4.3 million agreement to acquire Coachella-area land and related site work; the warrants may be void if closing does not occur by March 31, 2023. Its Manna intellectual-property acquisition includes further cash and warrant consideration tied to specified conditions, including patent-related milestones. The filing states there were no contingencies to disclose as of September 30 and no off-balance-sheet arrangements.
Plans described include facility development and commercialization of food products, but the timelines are prospective plans, not assured outcomes. Management cited funding needs, construction and commercialization costs, R&D, regulatory activities, working-capital needs, and planned acquisitions as factors affecting capital requirements. The filing also warns that actual results may differ materially from forward-looking statements.
Most important facts for investors to verify
- Confirm the issuer: the supplied filing is AgriFORCE Growing Systems Ltd., not AVAX ONE TECHNOLOGY LTD.
- Reconcile operating cash use: the cash-flow statement reports $8.89 million, while MD&A reports $8.86 million.
- Review the debenture terms, amortized carrying value versus principal outstanding, repayment schedule, conversion and down-round provisions, and potential dilution.
- Track financing runway and the company’s going-concern warning, including whether additional capital is obtained and on what terms.
- Check the status and conditions of the land purchase and Manna IP consideration, including warrant vesting, patent milestones, and required cash payments.
- Assess the large potential share overhang: the filing lists 16.26 million anti-dilutive common-equivalent securities at September 30, 2022.