Business context and reporting period
This unaudited Form 10-Q covers the three months ended March 31, 2020. The filing identifies the registrant as Save Foods, Inc., a food-technology company developing produce sanitizing solutions; this differs from the request metadata naming Nexentis Technologies Inc. The company reported OTC Pink trading under SAFO.
Financial performance and position
- Revenue was $63,566, down 51% from $129,733 in Q1 2019. Gross profit was $42,791 versus $95,692; gross margin declined to approximately 67% from 74%.
- Operating loss was $361,861, compared with $345,844; net loss was $369,063, compared with $359,346. Company-attributable net loss was $365,647 in 2020 and $355,762 in 2019. Basic and diluted loss per share was $0.04 in both periods.
- Research and development expense rose 20% to $157,636; selling and marketing expense fell 80% to $28,937; general and administrative expense rose 34% to $218,079. Financing expense, net, was $7,202, versus $13,502.
- Operating cash outflow was $233,636, compared with $326,894. Investing cash flow was a $84 inflow, versus a $4,484 outflow; financing cash inflow was $122,740, versus $450,872. Cash and cash equivalents fell to $180,003 from $290,815; restricted cash was $37,027.
- Total assets were $475,344 and total liabilities $1,176,427, leaving a $701,083 stockholders’ deficit. Current liabilities of $618,342 exceeded current assets of $254,456; reported negative working capital was $363,886.
- Balance-sheet debt included $403,011 of convertible loans, a $7,049 short-term bank loan, and $12,717 of long-term bank debt. The filing also reports $135,000 of secured promissory-note proceeds in Q1 financing cash flow.
Material changes, outlook and risks
- Management attributed the revenue decline to a temporary sales freeze in Israel while seeking regulatory approval for new products, and lower U.S. sales. The filing says the company had no backlog or firm customer commitments.
- The company had not generated sufficient revenue to fund operations and depended on external financing. Management and the auditor noted substantial doubt about the company’s ability to continue as a going concern. No assurance of future financing was given.
- COVID-19 was identified as a risk to sales, financing, staffing, manufacturing and supply chains. Offices had been closed since mid-March and employees were working remotely; the eventual financial impact was not estimable.
- No quantified revenue or earnings guidance was provided. Management described work on regulatory approvals and potential applications in produce, greenhouses and other food markets; significant agreements had not been signed as of quarter-end.
- On May 9, 2020, the company disclosed a subsequent $100,000 securities sale to an existing shareholder: 91,743 units, each consisting of one common share and one three-year warrant exercisable at $1.20.
- Management concluded disclosure controls were not effective at a reasonable assurance level due to material weaknesses. No material change in internal control was reported during the quarter.
Most important facts to verify
- Confirm the registrant identity: the supplied filing is for Save Foods, Inc., not Nexentis Technologies Inc.
- Review the going-concern disclosure, cash runway, and availability and terms of additional financing.
- Verify progress and timing for regulatory approvals and the resulting effect on sales and customer commitments.
- Check the detailed debt and convertible-loan terms, including the warrants, conversion features and maturity schedule.
- Assess the material weaknesses in disclosure controls and any remediation plans.
- Reconcile the MD&A cost-of-revenues explanation: it describes an increase, but reported expense declined from $34,041 to $20,775.