Business context and reporting period
The supplied filing is Save Foods, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2022; it does not identify Nexentis Technologies Inc. as the registrant. Save Foods develops produce treatments intended to improve food safety and shelf life. Save Foods, Inc. reports with its 98.48%-owned subsidiary, Save Foods Ltd.; common stock trades on Nasdaq under SVFD.
Financial results and liquidity
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Revenue | $31,080, down 43% year over year | $118,710, down 33% |
| Gross profit / margin | $18,082 / 58.2% | $63,863 / 53.8% |
| Operating loss | $1,276,932 | $2,622,606 |
| Comprehensive loss | $1,264,004 | $2,603,774 |
| Net loss attributable to company stockholders | $1,256,670 | $2,586,420 |
| Basic and diluted loss per share | $0.44 | $0.91 |
For the six months, operating expenses were $2.69 million: research and development $322,738, selling and marketing $323,049, and general and administrative $2,040,682. Cash used in operations was $2,355,007, versus $1,717,629 in the prior-year period. Investing activities used $15,681; financing activities used $3,965. Cash, cash equivalents and restricted cash declined $2,378,892 during the period.
At June 30, 2022, cash and cash equivalents were $4,378,434, with a further $50,286 of restricted cash. Current assets were $5,002,860 and current liabilities $775,751, yielding reported working capital of $4,227,109. Total liabilities were $1,001,041, including $3,748 in short-term bank loans, $75,149 in operating lease liabilities, and $150,141 in employee retirement-rights liabilities. Total assets were $5,389,729 and stockholders’ equity was $4,388,688. No long-term bank loan balance is shown.
Material changes versus prior comparable periods
- Six-month revenue fell 33%, while cost of sales rose to $54,847 from $14,287; gross profit fell 61% to $63,863, and gross margin contracted to 53.8% from 91.9%.
- Six-month selling and marketing expense increased 867% to $323,049, and general and administrative expense rose 22% to $2,040,682. Management attributed the increases mainly to expanded sales and marketing activity, salaries, share-based compensation, and insurance.
- Six-month comprehensive loss widened 30% to $2,603,774. Cash used in operations increased by about $637,000 year over year. Cash and cash equivalents at period-end were $4.38 million, compared with $9.31 million at June 30, 2021.
- Second-quarter revenue declined 43%, attributed by management to weather conditions and reduced citrus production. Second-quarter selling and marketing expense rose sharply, while R&D and general and administrative expense declined year over year.
- Shares outstanding increased from 2,806,536 at December 31, 2021 to 2,876,136 at June 30, 2022, including shares issued for employee, consultant, and service-provider compensation.
Outlook, risks, contingencies and unusual items
- Management said available cash was expected to fund operations for at least 12 months from the financial-statement date. It also noted potential reliance on securities sales or other additional capital; inadequate funding could require reduced development, a changed strategy, or cessation of operations, and equity financing could dilute shareholders.
- No formal revenue or earnings guidance is provided. Management expects R&D and selling and marketing costs to increase as product development, field trials, commercial validation, and market expansion continue.
- The company reported no backlog or firm customer commitments. It identified commercial acceptance, regulatory approvals, additional product trials, competition, supplier concentration, Nasdaq listing compliance, international expansion, product liability, and COVID-related supply-chain uncertainty among its risks. Manufacturing was continuing without interruption at the time of the filing.
- Sales were concentrated: Mexico accounted for $71,549 and the United States for $35,948 of first-half 2022 revenue; Israel contributed $11,213. One customer represented $71,549 of first-half sales, and another $35,948.
- Consultant and investor-relations arrangements included cash fees, stock, and warrants. A July 28, 2022 amendment limited a consultant to 30,960 already-vested warrants and set minimum aggregate compensation of $30,600 over six months. These are subsequent events.
- Management concluded disclosure controls and procedures were effective as of June 30, 2022 and reported no material changes in internal control over financial reporting. The filing reports no defaults upon senior securities.
Important facts for investors to verify
- Confirm the intended issuer: the provided 10-Q is for Save Foods, Inc. (SVFD), not Nexentis Technologies Inc.
- Assess the cash runway against ongoing operating cash burn and the stated 12-month liquidity expectation; the filing does not provide a detailed runway forecast.
- Review the causes and sustainability of falling sales, lower gross margin, and higher sales, marketing, and administrative expenses.
- Evaluate customer concentration, lack of committed orders, and the effect of weather and citrus production on sales.
- Review dilution and potential obligations from consultant share and warrant arrangements, as well as the company’s future capital needs.
- Note a wording inconsistency in MD&A: its second-quarter gross-profit discussion calls the prior-year $43,049 figure a “gross loss,” although the financial statements report it as gross profit.