Business context and reporting period
The supplied filing is Save Foods, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2021; it does not identify Nexentis Technologies Inc. as the registrant. Save Foods develops food-treatment solutions intended to improve fresh-produce safety and shelf life. Save Foods, Inc. is the holding company and owns 98.48% of Save Foods Ltd.
Unless noted otherwise, amounts are U.S. dollars. Share and per-share figures reflect the company’s February 2021 1-for-7 reverse stock split.
Financial results and position
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 | Comparable 2020 period |
|---|---|---|---|
| Revenue | $54,403 | $177,477 | $0 for Q2; $63,566 for six months |
| Gross profit | $43,049 | $163,190 | Gross loss of $4,911 for Q2; gross profit of $37,880 for six months |
| Operating loss | $1,622,141 | $1,839,459 | $403,726 for Q2; $765,587 for six months |
| Net loss | $1,501,225 | $1,995,520 | $581,185 for Q2; $950,248 for six months |
| Basic and diluted loss per share | $0.69 | $1.05 | $0.40 for Q2; $0.65 for six months |
| Operating cash flow | Not separately provided | $(1,711,222) | $(468,999) for six months |
At June 30, 2021, cash and cash equivalents were $9.31 million, working capital was $8.90 million, total assets were $10.27 million, and total liabilities were $1.36 million. Current liabilities were $1.20 million. Convertible loans were fully converted during May; remaining bank loans totaled about $11,923, including current and long-term portions. The company reported no off-balance-sheet arrangements.
Gross margin was approximately 79% for Q2 and 92% for the first half, calculated from reported revenue and gross profit. No formal margin target was provided.
Material changes versus prior periods
- First-half revenue rose 179% year over year, attributed primarily to sales of products introduced in Q4 2020. Q2 revenue was $54,403 versus none in Q2 2020.
- First-half gross profit increased to $163,190 from $37,880, reflecting higher sales and lower product costs; management attributed lower costs partly to outsourcing production.
- First-half operating loss more than doubled, with general and administrative expense rising 226% to $1.67 million. Management cited increased professional services and director compensation following the Nasdaq listing.
- First-half net loss increased 109% to $2.00 million, while operating cash use rose to $1.71 million from $469,000.
- Cash increased from $242,900 at year-end 2020, principally following the May public offering. The offering sold 1,090,909 shares at $11 each for $12 million gross proceeds; reported net proceeds were $10.46 million.
Outlook, risks, and unusual items
- Management expected cash balances to fund operations for at least 12 months from issuance of the interim financial statements. It cautioned that further capital may be needed; inadequate financing could require reduced development, a changed strategy, or cessation of operations.
- Management expects research and development and selling and marketing expenses to increase as product development, field trials, commercial pilots, and sales efforts expand. No numerical revenue or earnings guidance was provided.
- The company had no backlog or firm customer commitments and warned that sales could deteriorate if products fail to achieve commercial success or obtain required regulatory approvals.
- COVID-19 had delayed some development and field tests; certain employees, including the Chief Technology Officer, were furloughed. Management reported no material financial impact to date but said the future effects remained uncertain.
- Disclosure controls and procedures were concluded to be ineffective at June 30, 2021 because of material weaknesses. The filing excerpt does not specify the weaknesses or a remediation timetable.
- New consulting arrangements included signing bonuses of $150,000 and $250,000, monthly fees and possible transaction-related bonuses. A subsequent August 2021 agreement provided for a $301,000 fee plus 12,000 shares. Executive and board option awards approved in June had terms not yet determined.
- The underwriter received warrants for 54,545 shares exercisable at $13.75 per share. The 45-day over-allotment option was not exercised.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is for Save Foods, Inc. (Nasdaq: SVFD), not Nexentis Technologies Inc.
- Assess the quality and repeatability of the small revenue base, customer commitments, commercial adoption, and regulatory approvals.
- Evaluate cash burn against the stated 12-month runway, including planned operating-cost increases and subsequent consulting and equity commitments.
- Review the identified material weaknesses, their causes, and management’s remediation progress.
- Reconcile offering proceeds: the filing reports $10.46 million net proceeds in one section and $10.50 million of cash proceeds net of issuance costs in the cash-flow statement, with $40,000 of deferred issuance expenses also disclosed.
- Note that outstanding shares were 2,776,551 at June 30 and 2,790,836 at August 11, 2021; consider dilution from warrants, options, and share-based compensation.