Filing identity 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, 2023. This does not match the request metadata naming AVAX ONE TECHNOLOGY LTD.; the figures below are for AgriFORCE, as identified in the filing.
Business context
AgriFORCE is a development-stage agriculture technology and food-products company. Its Solutions division develops controlled-environment growing systems; its Brands division is commercializing plant-based food products using acquired Manna intellectual property. The company reported no revenue since inception.
Financial performance and position
| Metric | Q2 2023 / June 30, 2023 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None reported | None reported since inception |
| Operating loss | $2.91 million for Q2 | $4.22 million for Q2 2022 |
| Net loss | $2.53 million for Q2; $4.25 million for six months | $3.44 million for Q2 2022; $6.72 million for six months 2022 |
| Basic and diluted loss per share | $0.10 for Q2; $0.17 for six months | $0.21 for Q2 2022; $0.43 for six months 2022 |
| Cash and cash equivalents | $1.01 million | $2.27 million at December 31, 2022 |
| Operating cash flow | $(4.34) million for six months | $(5.06) million for six months 2022 |
| Current assets / current liabilities | $1.49 million / $7.01 million; working capital deficit of approximately $5.52 million | Working capital deficit cited by management: $5.5 million |
| Total liabilities / shareholders’ equity | $10.92 million / $7.31 million | $11.30 million / $10.54 million at December 31, 2022 |
For the six months, financing activities provided $3.10 million, including $4.62 million of net proceeds from debentures and $0.57 million from share issuance, partly offset by $1.74 million in debenture repayments and financing costs. Investing cash flow was nil. The filing reports $5.18 million of current debentures on the balance sheet; separate scheduled future principal payments total $12.96 million, including long-term debt. Lease liabilities were $1.47 million. No margin measure is meaningful given the absence of revenue.
Changes and unusual items
- Six-month operating expenses fell 18% year over year, mainly from lower consulting, R&D, wages, investor relations and professional fees; amortization rose after the Manna patent became available for use in January 2023.
- Net loss improved year over year, but results included a $5.83 million non-cash gain from changes in fair value of derivative liabilities, partly offset by $3.98 million of debenture accretion and $0.43 million loss on debt conversion.
- Share count increased from 15.80 million at year-end 2022 to 22.72 million at June 30, 2023, through debt and warrant conversions, ATM sales, private placement and other issuances. The filing reports 38.14 million common shares outstanding as of August 3, 2023.
- The Delphy acquisition agreement was terminated in May 2023. The Stronghold land transaction was terminated and related prefunded warrants rescinded. A proposed Berry People acquisition remained subject to due diligence and a definitive agreement; the filing gives a proposed $28 million purchase price for 70% of the business.
Outlook, risks and contingencies
Management states substantial doubt exists about the company’s ability to continue as a going concern for the twelve months following issuance. The company expects to seek additional debt, equity or other financing, with no assurance it can obtain funding on acceptable terms; absent financing, operations may be scaled back or discontinued. Further equity financing could dilute shareholders.
Management expected revenue from Radical Clean Solutions devices in the second half of 2023. The filing describes progress toward commercializing Awakened Grains products, including production testing and customer trials, but provides no revenue guidance or quantified near-term financial outlook. The company advanced $225,000 to RCS, with an option to convert the advance into a 14% ownership interest.
Debentures carry conversion and warrant terms subject to downward price adjustments. June 2023 ATM issuances reset relevant exercise/conversion prices to $0.30; subsequent July and August issuances further reduced them, to $0.12 by August 2. Debenture payments were settled partly in shares, creating dilution. Subsequent events also included CEO and board leadership changes announced July 18, 2023. The company disclosed no contingencies or litigation to report as of June 30.
Most important facts to verify
- Confirm the intended issuer: the supplied document is AgriFORCE Growing Systems Ltd., not AVAX ONE TECHNOLOGY LTD.
- Review financing availability, cash runway, working-capital deficit and the going-concern disclosure.
- Check the full debenture terms, principal repayment schedule, conversion-price resets and subsequent share issuances for dilution implications.
- Verify whether RCS device sales and Awakened Grains commercialization generated revenue after the reporting period; none was reported through June 30.
- Assess status and funding requirements of the proposed Berry People transaction and any other acquisition plans.
- Note that the controls discussion states management assessed internal controls as of June 30, 2022, despite this being the June 2023 quarterly filing; confirm the date and assessment are accurate.