Business context and reporting period
This is Save Foods, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2021. The filing describes a company developing and selling food-safety and shelf-life solutions for fresh produce. The request identifies Nexentis Technologies Inc., but the supplied filing is for Save Foods, Inc. (Nasdaq: SVFD).
Financial performance and position
| Metric | Q1 2021 | Q1 2020 or prior balance-sheet date |
|---|---|---|
| Revenue | $123,074 | $63,566 |
| Gross profit (margin) | $120,141 (about 97.6%) | $42,791 (about 67.3%) |
| Operating loss | $(246,879) | $(361,861) |
| Net loss | $(494,295) | $(369,063) |
| Net loss attributable to Save Foods | $(492,402) | $(365,647) |
| Basic and diluted loss per share | $(0.31) | $(0.25) |
| Operating cash flow | $(81,368) | $(233,636) |
| Cash and cash equivalents at quarter-end | $370,072 | $242,900 at Dec. 31, 2020 |
| Working capital | $(202,401) | $(290,062) at Dec. 31, 2020 |
At March 31, total assets were $880,788 and total liabilities were $1,756,036, leaving a stockholders’ deficit of $875,248. Current liabilities were $903,976. The balance sheet reports short-term bank debt of $7,708, current convertible-loan maturities of $89,586, long-term convertible loans of $188,185, and a $505,774 fair-value liability for the convertible component. Financing expenses were $247,416, versus $7,202 in Q1 2020; the filing attributes the increase mainly to accrued interest and amortization related to convertible loans.
Changes, outlook and risks
- Revenue rose 94%, which management attributed mainly to sales of new products introduced in Q4 2020. Cost of sales fell 86%, supporting a substantially higher gross margin.
- Research and development expense declined 56% to $69,791, in part because international travel and field trials were postponed during COVID-19. Selling and marketing expense increased 53% to $44,258; general and administrative expense increased 16% to $252,971.
- Despite lower operating loss, net loss increased 34%, principally reflecting higher financing expenses, including convertible-loan-related costs.
- Management expects research and development and selling and marketing expenses to increase as product development, field trials, and commercial validation and sales efforts expand. The company reported no firm customer commitments or product backlog and cautioned that sales could deteriorate if products do not achieve commercial success or required regulatory approval.
- COVID-19 had led to employee furloughs, including the Chief Technology Officer, and postponed some planned field tests. Management said it had not experienced a material financial impact to date, but could not estimate the pandemic’s full effect.
- Subsequent events: the company reported Nasdaq trading beginning May 14, 2021; conversion of $499,000 of convertible-note principal plus $11,211 accrued interest into 66,877 shares on May 11–12; and an approximately $12 million gross public offering. The filing’s descriptions conflict on the offering date: one passage says it closed March 18, while another says it closed May 18. Net proceeds are not stated clearly here.
- Management concluded disclosure controls were not effective as of March 31, 2021 because of material weaknesses. The interim financial statements are unaudited.
Important facts for investors to verify
- Confirm the correct issuer: the supplied filing is for Save Foods, Inc., not Nexentis Technologies Inc.
- Reconcile the public-offering date and proceeds, and verify net proceeds after underwriting discounts and expenses.
- Review the material weaknesses in disclosure controls and any remediation plans.
- Assess liquidity and financing needs given negative working capital, continuing losses, and reliance on external financing; verify the impact of the subsequent offering and note conversions.
- Evaluate whether new-product sales can grow, and whether regulatory approvals, field trials, and commercial validation support management’s plans.