Save Foods, Inc. — Form 10-Q Summary
Registrant identification: The supplied filing is for Save Foods, Inc., not Nexentis Technologies Inc. The unaudited reporting period ended September 30, 2020; comparisons are with the three and nine months ended September 30, 2019, and balance-sheet figures are compared with December 31, 2019. Amounts are U.S. dollars.
Business context
Save Foods develops food-acid-based, “green” treatments intended to improve food safety and extend fresh-produce shelf life. The company describes its business as a startup still developing and commercializing products, with no recurring revenue source. It reported no product sales in the third quarter.
Financial performance and position
| Metric | Three months ended September 30, 2020 | Nine months ended September 30, 2020 |
|---|---|---|
| Revenue | $0 | $63,566 |
| Gross profit | $0 | $37,880 |
| Operating loss | $(432,085) | $(1,197,672) |
| Net loss | $(437,682) | $(1,387,930) |
| Net loss attributable to Save Foods | $(433,900) | $(1,376,592) |
| Basic and diluted loss per share | $(0.04) | $(0.13) |
- Nine-month revenue fell 51% from $129,733 in 2019; management attributed the decline to a sales freeze in Israel, reduced U.S. sales, and a focus on regulatory approval for new products. There were no firm customer commitments or sales backlog.
- Nine-month operating loss narrowed from $1,378,948 in 2019. Research and development expense was $340,808 (down 8%), selling and marketing was $43,482 (down 88%), and general and administrative expense was $851,262 (up 29%). Management cited lower travel and field-trial activity amid COVID-19 and higher share-based compensation and director/service-provider costs.
- Nine-month financing expense was $206,829 versus $31,123 in 2019, primarily reflecting convertible-loan exchange compensation expense and accrued interest and amortization. The company also recorded a $15,690 gain on disposal of its Savecann investment.
- Cash and cash equivalents were $310,571 at September 30, 2020, plus $38,361 of restricted cash. Current assets were $394,297 and current liabilities $704,228; working capital was negative $309,931, compared with negative $199,212 at year-end 2019. Total liabilities were $954,289 and total stockholders’ deficit was $370,930.
- Nine-month operating cash use was $619,397, investing cash provided was $1,809, and financing cash provided was $637,344. Cash increased by $19,756 from year-end. Financing included $350,000 from share issuance, $60,000 from warrant exercises, $125,000 of convertible loans and $135,000 of secured promissory notes.
- Convertible loans included $125,000 issued in September at 5% interest, generally convertible at $1.09 per share and due under stated installment and maturity terms. The balance sheet reported $31,250 of current convertible-loan maturities, $75,250 of convertible loans, and an $18,692 fair-value convertible component.
Changes, outlook, and risks
- In June, lenders exchanged prior convertible-loan arrangements for units comprising shares and warrants; the company recorded $57,793 of compensation expense related to the exchange. It also raised equity from existing shareholders and Medigus. Medigus’s contemplated additional investment of up to $25,000 is conditional on starting a proof-of-concept procedure.
- Management stated that COVID-19 postponed field tests and international travel; some employees were furloughed, and offices remained closed with employees working remotely. The company said the pandemic’s impact could be material but could not be estimated.
- The filing and management identify substantial doubt about the company’s ability to continue as a going concern. The company depends on external financing, and the filing provides no assurance that further capital will be available on acceptable terms. The financial statements include no adjustments for the outcome of this uncertainty.
- No quantitative revenue or earnings guidance is provided. Management notes commercialization, regulatory approval, financing, customer adoption, and COVID-19 disruption as important uncertainties.
- Disclosure controls and procedures were assessed as ineffective at a reasonable-assurance level as of September 30, 2020 because of material weaknesses identified by management. The filing says there were no material changes in internal control over financial reporting during the quarter.
- Subsequent events included $75,000 of additional convertible loans in October, stockholder approval of a proposed 5-for-1 to 7-for-1 reverse split and a staggered-board amendment (both pending required steps), and appointment of a co-CEO in November with an $8,000 monthly retainer and a future option grant to be determined.
Key facts for investors to verify
- Confirm the issuer identity: the filing is for Save Foods, Inc., despite the request metadata naming Nexentis Technologies Inc.
- Review the going-concern disclosure, negative working capital, cash runway, and the company’s ability to obtain additional financing.
- Check progress on regulatory approvals, product commercialization, customer orders, and the conditional Medigus proof-of-concept investment.
- Assess the effects of convertible-loan terms, fair-value accounting, warrants, stock compensation, and potential share dilution.
- Review the material weaknesses underlying ineffective disclosure controls and any subsequent remediation disclosures.
- Confirm whether the proposed reverse split and staggered-board amendment became effective after the reporting date.