Business context and reporting period
Filing identity: The supplied filing is Save Foods, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2023, not a filing identified as Nexentis Technologies Inc. Save Foods develops treatments intended to improve fresh-produce safety and shelf life. Amounts below are in U.S. dollars.
Financial performance and position
- Revenue: Q3 2023 product sales were $0, versus $51,233 in Q3 2022. Nine-month sales were $157,618, down 7% from $169,943.
- Profitability: Nine-month gross profit was $87,389 (about 55% of sales), compared with $90,694. Operating loss was $5.441 million versus $4.390 million; consolidated net loss was $5.473 million versus $4.373 million. Net loss attributable to Save Foods stockholders was $4.789 million versus $4.346 million.
- Quarterly results: Q3 consolidated net loss was $3.036 million, versus $1.769 million. The financial statements show no Q3 sales or cost of sales; MD&A separately refers to a $476 gross loss, so the filing’s quarterly gross result is unclear.
- Cash flow: Nine-month operating cash use was $2.259 million, investing cash use was $1.520 million, and financing cash flow was zero. Cash, cash equivalents and restricted cash fell $3.770 million to $1.981 million.
- Liquidity and debt: September 30 cash and cash equivalents were $1.935 million; current assets were $2.845 million against current liabilities of $633,473, giving working capital of $2.212 million. Total liabilities were $633,473; no borrowings are reported on the balance sheet.
- Other metrics: Total assets were $5.251 million and total equity was $4.618 million. An investment in Plantify and related convertible loan totaled $2.281 million at fair value; the company recorded an $87,576 fair-value loss.
Material changes versus the prior comparable period
- Sales fell 100% in Q3 and 7% for the first nine months. The company attributed the nine-month decline mainly to lower sales in Mexico and Israel; Q3 decline was attributed mainly to Mexico.
- Nine-month R&D expense increased 251% to $1.829 million, principally reflecting costs associated with the Yaaran/Nitrousink transaction and acquired in-process R&D. Selling and marketing expense declined 50% to $218,000 following cost reductions. General and administrative expense was broadly unchanged at $3.481 million.
- Nine-month operating cash use decreased from $4.127 million to $2.259 million, while investing cash use rose from $35,430 to $1.520 million, primarily due to Plantify investments. Cash at September 30, 2023 was substantially below the $5.701 million reported at December 31, 2022.
- On October 5, 2023, the company effected a 1-for-7 reverse stock split. It reported regaining Nasdaq’s minimum bid-price compliance after the split.
Outlook, risks and unusual items
- Going concern: Management expects continued losses and negative operating cash flows and states there is substantial doubt about the company’s ability to continue as a going concern. Based on September 30 resources, management estimated funding through the middle of Q3 2024 and expects to seek additional equity, debt or strategic-partner funding. Failure to obtain funds could require reduced operations or cessation.
- Subsequent financing: On October 31, 2023, the company received $700,000 gross proceeds under a one-year promissory note with an 8% interest rate and 3% original issue discount. Monthly principal and interest payments begin December 31, 2023; share-sale proceeds under the associated purchase agreement generally first satisfy note payments. The company also has a standby equity purchase agreement for up to $3.5 million, at a price based on 94% of the applicable VWAP, subject to terms and limits. These arrangements create repayment and potential dilution considerations.
- Strategic transactions: Save Foods acquired a 60% interest in Nitrousink and committed up to $1.2 million in conditional commercialization support. It also held approximately 23% of Plantify after additional share purchases and extended Plantify a C$1.5 million convertible debenture bearing 8% interest and due October 2024.
- Geopolitical risk: The October 2023 war in Israel occurred after the reporting date. Management cited potential disruption to supply chains, production, transport and staffing, and said the effects on operations and asset values could not yet be assessed.
- Commercial and concentration risks: The company reported no customer backlog or firm purchase commitments, and says products may require lengthy pilots and regulatory approvals. Two customers accounted for most nine-month sales: $109,824 and $41,554.
- Controls and legal matters: Management concluded disclosure controls were effective as of September 30, 2023; no material change in internal control was reported during Q3. The filing reports no pending material legal proceedings.
Key facts investors should verify
- Confirm the filing entity: the document is for Save Foods, Inc. (ticker SVFD), despite the request metadata naming Nexentis Technologies Inc.
- Review the going-concern disclosure, projected cash runway and whether subsequent financing is sufficient to fund operations and debt repayments.
- Track actual draws, share issuances, pricing and dilution under the YA II PN purchase agreement and the $700,000 note.
- Assess whether the company can convert pilots into recurring paid sales, given zero Q3 revenue, no firm customer commitments and customer concentration.
- Reconcile the filing’s Q3 gross-result discrepancy and evaluate the valuation and performance of the Plantify investment and Nitrousink commercialization commitment.
- Monitor the operational and financial effects of the Israel conflict and continued Nasdaq listing compliance.