Save Foods, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited consolidated results. The supplied metadata names Nexentis Technologies Inc., but the filing identifies Save Foods, Inc. (Nasdaq: SVFD) as the registrant. Save Foods develops treatments intended to improve food safety and shelf life for fresh produce.
Key financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Product revenue | $121,010 | $87,630 |
| Gross profit / gross margin | $78,264 / 64.7% | $45,781 / 52.2% |
| Operating loss | $(1,743,653) | $(1,345,674) |
| Net loss | $(1,721,549) | $(1,339,770) |
| Net loss attributable to company stockholders | $(1,713,678) | $(1,329,750) |
| Basic and diluted loss per share | $(0.37) | $(0.47) |
| Cash used in operating activities | $(1,105,789) | $(1,085,941) |
Revenue increased 38%, mainly from higher sales in Mexico. Gross profit increased 71%, and gross margin improved. Operating loss widened 30%, principally because general and administrative expense rose 63% to $1.63 million, including substantially higher share-based compensation. Research and development expense fell 43% and selling and marketing expense fell 61%, reflecting cost reductions.
Financial position and liquidity
- At March 31, 2023, cash and cash equivalents were $4.60 million; restricted cash was $48,762. Cash, cash equivalents and restricted cash totaled $4.64 million, down $1.11 million from year-end 2022.
- Working capital was $4.61 million. Current assets were $5.28 million and current liabilities were $672,087.
- Total liabilities were $696,922, including $24,835 of operating lease liabilities. The balance sheet reports no outstanding bank or other borrowing at quarter-end.
- Accumulated deficit was approximately $25 million. Management expects continued losses and negative operating cash flows and states that substantial doubt exists about the company’s ability to continue as a going concern.
- The filing gives differing cash-runway estimates: the financial-statement note says existing cash is expected to fund operations until the middle of Q3 2024; MD&A says through June 30, 2024. Management expects it may need additional capital, but says financing may not be available on acceptable terms or at all.
Developments, outlook and risks
- Management cut R&D and selling and marketing spending, shifting emphasis toward commercialization and converting completed pilots into paying customers. The filing provides no quantified revenue or earnings guidance.
- The company says product sales involve lengthy pilot periods, with no assurance of sales; it reports no backlog or firm customer commitments. Commercialization also depends on market acceptance and regulatory approvals.
- Management cites dependence on external financing, a limited operating history, competition, supplier concentration, distribution and partnership execution, regulatory approval, Nasdaq listing compliance, and potential product, intellectual property and operational risks.
- On April 5, 2023, after quarter-end, Save Foods exchanged shares with Plantify Foods: Save Foods issued 1,164,374 shares and received 30,004,349 Plantify shares. Save Foods also agreed to lend Plantify C$1.5 million (approximately $1.124 million) at 8% annual interest, due by October 4, 2024, with conversion rights and security arrangements described in the filing.
- A board-approved grant of 1,000,000 Save Foods shares was issued April 3, 2023; its estimated value of $678,000 was recorded in equity for the quarter ended March 31. The filing also reports other service-related share issuances and a $691,220 share-based compensation expense for Q1 2023.
- Effective April 1, 2023, CEO David Palach was appointed interim CFO. Management concluded disclosure controls were effective as of March 31, 2023. The filing states no material changes to previously disclosed risk factors.
Investor facts to verify
- Reconcile the conflicting cash-runway estimates: middle of Q3 2024 versus June 30, 2024.
- Confirm the outstanding share count: the cover reports 7,004,159 shares as of March 31, while the balance sheet reports 4,658,726 issued and outstanding shares at that date.
- Assess the Plantify investment and C$1.5 million loan, including funding source, collectability, collateral, conversion terms and impact on Save Foods’ liquidity.
- Track whether pilots convert into recurring sales, particularly given the limited revenue base and lack of firm customer commitments.
- Monitor cash burn, additional financing needs, potential dilution and the company’s ability to remain a going concern.