Business context and reporting period
The supplied filing is N2OFF, Inc.’s Form 10-K for the fiscal year ended December 31, 2023—not a filing for “Nexentis Technologies Inc.” The company changed its name from Save Foods, Inc. to N2OFF, Inc. and its Nasdaq ticker from SVFD to NITO on March 19, 2024. Figures below are in U.S. dollars unless noted. The company develops post-harvest produce treatments through Save Foods Ltd. and is developing agricultural nitrous-oxide reduction technology through its 60%-owned subsidiary NTWO OFF Ltd. It also owns approximately 23% of Plantify Foods Inc.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $263,445 | $394,004 |
| Gross profit / gross margin | $208,267 / 79% | $235,691 / 60% |
| Operating loss | $(7,577,776) | $(5,819,642) |
| Net loss | $(7,259,918) | $(5,779,841) |
| Net loss attributable to company stockholders | $(6,522,408) | $(5,739,600) |
| Operating cash used | $(3,232,759) | $(5,097,126) |
| Investing cash used | $(1,519,560) | $(51,689) |
| Financing cash provided | $3,472,712 | $4,094,940 |
Revenue fell 33%, primarily due to lower sales in Mexico and Israel. Gross profit declined 12%, while gross margin increased as cost of sales fell faster than revenue. Operating expenses rose overall: research and development increased to $1.94 million, including a $1.66 million noncash in-process R&D charge related to NTWO OFF; selling and marketing fell 52% to $272,000; and general and administrative expense increased 18% to $5.58 million, including $2.56 million of share-based compensation.
At December 31, 2023, cash and cash equivalents were $4.45 million, restricted cash $31,000, working capital $4.69 million, total assets $7.24 million, and total liabilities $786,000. Current assets were $5.47 million against current liabilities of $778,000. Liabilities included operating lease obligations; the balance sheet reports no material conventional borrowings at year-end. The company reported an accumulated deficit of $29.36 million. Cash and cash equivalents declined by about $1.25 million year over year.
Material changes and unusual items
- Net loss increased 26% year over year despite lower operating cash use. Share-based compensation and noncash items materially affect the comparison.
- Other income of $985,000 included a reported $1.16 million gain associated with the first standby equity purchase agreement; the filing also reports a $714,000 loss from changes in the fair value of the Plantify investment and related interests.
- The company invested in Plantify through a share exchange, additional share purchases and a C$1.5 million debenture bearing 8% interest, due October 2024. The Plantify investment and debenture are reported as assets, with the investment carried at fair value.
- In August 2023, the company obtained a 60% interest in NTWO OFF in exchange for shares and committed up to $1.2 million in conditional commercialization support. It had paid the first $400,000 installment by year-end.
- The company completed a 1-for-7 reverse stock split in October 2023 and reincorporated in Nevada in November 2023. Share and per-share figures are generally adjusted for the reverse split.
Outlook, risks and contingencies
Management expects ongoing losses and negative operating cash flows. It believes available capital can support its operating plan through the end of the second quarter of 2025, but states that substantial doubt exists about the company’s ability to continue as a going concern and that additional financing may be needed. The auditor issued an unqualified opinion on the financial statements while also highlighting the going-concern uncertainty.
Management’s commercial focus is converting pilots into paying customers, targeting high-value crops and markets including Peru and Brazil. The filing describes sales cycles of at least two growing seasons and provides no firm customer commitments or quantified revenue guidance. NTWO OFF remains an early-stage research and development effort: greenhouse trials showed potential for bacterial strains to reduce nitrous oxide, but further testing and development are required to establish commercial viability.
Key risks include limited revenue, recurring losses and financing needs; lengthy customer pilots and uncertain market adoption; dilution under equity financing arrangements; regulatory approval requirements, including pending EPA work for sanitizer and pre-harvest applications; reliance on a limited number of manufacturers; and competition. The Israel-Hamas war has delayed pilots and packing-house activity and could disrupt employees, suppliers and logistics. The company says its commercial insurance does not cover war- or terrorism-related losses. A European patent registration is also subject to a claim scheduled for a court hearing in November 2024. No material legal proceedings against the company were otherwise reported.
The December 2023 standby equity agreement with YA II PN, Ltd. permits sales of up to $20 million of stock over 36 months at a price based on 94% of the lowest VWAP in a specified pricing period, subject to limits and conditions. It also permits conditional pre-advances of up to $3 million, documented as notes bearing 8% interest and requiring monthly repayment. The filing reports 28,333 shares sold under this agreement through March 29, 2024, at an average price of $1.50.
Important facts for investors to verify
- Confirm the filing identity: the document is for N2OFF, Inc., notwithstanding the request metadata naming Nexentis Technologies Inc.
- Reconcile per-share and weighted-average share data: MD&A lists 2022 loss per share of $(1.64) and weighted-average shares of 3,498,273, while the audited financial statements report $(10.85) and 528,776, respectively. The filing text does not provide a clear reconciliation.
- Assess liquidity and financing runway against the going-concern warning, potential cash needs, and repayment terms of any pre-advance notes.
- Review actual revenue, repeat orders and conversion rates from pilots, especially given the two-season sales cycle and customer concentration.
- Verify the terms, remaining capacity, issuance limits and potential dilution associated with the standby equity agreements and outstanding share-based awards.
- Track Plantify debenture repayment or conversion, valuation changes and the related-party and concentration risks.
- Monitor the impact of the Israel conflict on operations, pilot schedules, manufacturing and supply, as well as regulatory milestones and the pending patent matter.