Business context and reporting period
The supplied filing is Save Foods, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2022—not a filing identified as Nexentis Technologies Inc. Save Foods develops treatments intended to improve food safety and shelf life of fresh produce. Save Foods, Inc. reports as a holding company; its operating business is conducted primarily through its 98.48%-owned subsidiary, Save Foods Ltd. Figures below are in U.S. dollars.
Financial and operating performance
| Metric | Three months ended Sep. 30, 2022 | Three months ended Sep. 30, 2021 | Nine months ended Sep. 30, 2022 | Nine months ended Sep. 30, 2021 |
|---|---|---|---|---|
| Revenue | $51,233 | $71,363 | $169,943 | $248,840 |
| Gross profit | $26,831 | $17,719 | $90,694 | $180,909 |
| Gross margin | 52.4% | 24.8% | 53.4% | 72.7% |
| Operating loss | $1,767,841 | $1,292,507 | $4,390,447 | $3,131,966 |
| Comprehensive loss | $1,769,175 | $1,300,283 | $4,372,949 | $3,295,803 |
| Operating cash used | Not separately presented | Not separately presented | $4,126,702 | $3,189,906 |
For the nine-month period, R&D expense was $521,239, selling and marketing expense was $440,156, and general and administrative expense was $3,519,746. Basic and diluted loss per share was $1.39 for the nine months and $0.48 for the quarter. The filing reports cash and cash equivalents of $6,689,979 at September 30, 2022, plus restricted cash of $49,707. Working capital was $6,505,950. Total liabilities were $870,017, including $1,858 of short-term bank loans and $58,152 of operating lease liabilities. Cash, cash equivalents and restricted cash totaled $6,739,686 at period-end.
Material changes versus the prior comparable period
- Nine-month revenue declined 32%; management attributed the decrease mainly to adverse weather reducing citrus production. Third-quarter revenue declined 28% for the same stated reason.
- Nine-month gross profit fell 50%, and gross margin declined from 72.7% to 53.4%. In the quarter, gross profit rose 51% and gross margin improved, mainly because of lower salary costs included in cost of sales.
- Nine-month operating loss increased 40% and comprehensive loss increased 33%, reflecting lower revenue and higher operating expenses. Selling and marketing expense increased 330%, R&D increased 44%, and G&A increased 24%.
- Operating cash use increased about $937,000 year over year. The August 2022 public offering raised $4.8 million gross and $4.1 million net; cash and cash equivalents were nevertheless slightly below December 31, 2021 levels.
- Shares outstanding rose from 2,806,536 at year-end 2021 to 4,554,636 at September 30, 2022, including 1.6 million shares issued in the offering.
Outlook, risks and unusual items
Management stated that available cash was expected to fund operations for at least 12 months from the date of the interim financial statements. The company also said it may seek additional capital; inability to obtain adequate funds could require reduced development, a changed business strategy, or cessation of operations. No numerical revenue or earnings guidance was provided. Management expects R&D and selling and marketing expenses to increase as product development, field trials, pilots and commercial efforts continue.
The company reported no customer backlogs or firm purchase commitments. Revenue is concentrated: one customer accounted for $119,481, about 70% of nine-month sales and about 94% of third-quarter sales. The filing also identifies regulatory approvals, market acceptance, competition, limited suppliers, product liability, international expansion, COVID-19 and supply-chain uncertainty among relevant risks. Manufacturing continued without interruption as of the filing discussion. The company reported effective disclosure controls as of September 30, 2022 and no material changes in internal control over financial reporting.
Notable items include the public offering and related underwriter warrant for up to 80,000 shares at $3.75 per share; significant share-based and consultant compensation; and subsequent consultant share issuances approved or made after quarter-end. The filing’s MD&A gives third-quarter G&A expense as $1,495,395 in one discussion, while the interim income statement reports $1,479,064; the filing text does not reconcile this difference.
Important facts for investors to verify
- Confirm issuer identity: the supplied filing names Save Foods, Inc. (Nasdaq: SVFD), whereas the request metadata names Nexentis Technologies Inc.
- Review the revenue decline, weather-related explanation, customer concentration and lack of firm customer commitments.
- Assess cash runway against continuing operating cash use and the company’s stated need for potential additional capital.
- Consider dilution from the 2022 offering, service-related stock issuances, warrants and the 2022 share incentive plan authorizing up to 1,000,000 options.
- Reconcile the inconsistent third-quarter G&A figures and verify the reported loss and cash-flow measures against the filed financial statements.