Business context and reporting period
The supplied filing is AgriFORCE Growing Systems Ltd.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2022. This does not match the request metadata, which identifies AVAX ONE TECHNOLOGY LTD.; confirm the issuer before relying on this summary. AgriFORCE described two businesses: AgriFORCE Solutions, focused on agricultural technology and facilities, and AgriFORCE Brands, focused on plant-based products and ingredients.
Financial results and position
| Metric (US dollars) | Three months ended June 30, 2022 | Six months ended June 30, 2022 | Comparable 2021 period |
|---|---|---|---|
| Revenue | None | None | None |
| Operating loss | $4.22 million | $6.98 million | $0.71 million and $1.61 million |
| Net loss | $3.44 million | $6.72 million | $1.21 million and $2.09 million |
| Basic and diluted loss per share | $0.21 | $0.43 | $0.20 and $0.30 |
- Operating expenses rose 491% year over year in Q2 and 335% for the first six months. Management attributed increases primarily to hiring and higher consulting, professional, R&D, investor-relations, and administrative costs following the IPO.
- No operating margin is meaningful because the company reported no revenue. The filing provides no gross profit or gross margin.
- Cash and cash equivalents were $2.00 million at June 30, down from $7.78 million at December 31, 2021. Six-month operating cash use was $5.06 million, investing cash use $0.64 million, and financing cash use $0.04 million. Ending working capital was reported as $7.1 million.
- Total assets were $27.18 million, total liabilities $17.04 million, and shareholders’ equity $10.14 million. Current liabilities included $3.70 million of debentures (net of discounts and issuance costs); lease liabilities totaled $1.66 million. The filing lists $14.03 million gross debenture principal, with scheduled principal repayments beginning in 2022.
Material changes and unusual items
- On June 30, the company entered into agreements for $14.03 million principal of convertible debentures, with $12.75 million gross proceeds. The proceeds were still receivable at quarter-end and were received July 7, 2022. Interest is 5% for the first year, 6% for the second, and 8% thereafter; principal is payable in 25 installments starting September 1, 2022. Investors may purchase additional tranches, subject to stated limits. The debentures and warrants have down-round provisions.
- The financing included 4.11 million warrants and conversion features recorded as derivative liabilities. Derivative liabilities totaled $8.59 million at quarter-end. Fair-value changes affected reported results; the income statement reports a $675,504 warrant fair-value benefit in Q2 and a $218,462 benefit for the six-month period.
- Intangible assets rose to $9.19 million, primarily reflecting the Manna Nutritional Group intellectual-property acquisition. The agreement includes prefunded warrants and additional contingent consideration tied to patent-related events; $741,561 was recorded as contingent consideration at June 30.
- Adoption of lease accounting guidance resulted in recognition of a $1.71 million right-of-use asset and $1.66 million lease liability at quarter-end.
Outlook, risks, and contingencies
- Management stated that the company has incurred substantial losses, expects significant future losses, and will likely need additional financing. The filing says these conditions raise substantial doubt about the company’s ability to continue as a going concern for twelve months from issuance. Failure to raise capital could require operations to be scaled back or discontinued; equity financing could dilute shareholders.
- Management’s plans include developing facilities and a genetics laboratory, commercializing Manna-related products, and pursuing acquisitions. These are plans, not quantified financial guidance; the filing gives no revenue or earnings forecast.
- A British Columbia lawsuit relating to an earlier technology transaction remained pending, with no further activity reported during the period. Management, citing counsel, did not believe potential monetary damages were material; plaintiffs seek damages and other relief.
- The company reported no new contingencies during the period. Management assessed disclosure controls and procedures as effective and reported no material changes 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 AVAX ONE TECHNOLOGY LTD.
- Confirm receipt and use of the debenture proceeds, repayment schedule, conversion terms, warrants, and potential additional financing tranches.
- Assess the company’s cash runway and financing needs in light of continuing losses, cash burn, and the stated going-concern uncertainty.
- Review the Manna IP acquisition’s patent milestones, contingent consideration, warrant issuance and vesting, and commercialization progress.
- Check subsequent developments in the pending litigation and in facility development and product launches.