UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedfrom January 1, 2022 to September 30, 20212022.
Commission file number: 333-208814
SEEDOSATIVUS TECH CORP.
(Exact name of registrant as specified in its charter)
| Delaware | 47-2847446 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
#3 Bethesda Metro Center, #700 Bethesda, Md 20814 | ||
| (Address of principal executive offices) | (Zip Code) |
800 608-6432
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day. Yes ☒ YesNo ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒
(Does not currently apply to the Registrant)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 if the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 15, 2021,14, 2022, the registrant had 41,783,8194,194,385 shares of its Common Stock, $0.0001$0.001 par value, outstanding.
When used in this quarterly report, the terms “Seedo“Sativus Tech Corp.” “the Company,” “we,” “our,” and “us” refer to SeedoSativus Tech Corp.
TABLE OF CONTENTS
i
PART I. Financial Information
SATIVUS TECH CORP.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2022
1
SEEDO CORP.
SATIVUS TECH CORP.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2021
SEEDO CORP.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 20212022
IN THOUSANDS OF U.S. DOLLARS
INDEX
- - - - - - - - - - - -
F-1
SEEDOSATIVUS TECH CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
| September 30 | December 31 | |||||||||||||||
| 2021 | 2020 | September 30, | December 31, | |||||||||||||
| (Unaudited) | 2022 | 2021 | ||||||||||||||
| ASSETS | (Unaudited) | |||||||||||||||
| CURRENT ASSETS: | ||||||||||||||||
| Cash and cash equivalents | $ | 916 | $ | 411 | $ | 191 | $ | 866 | ||||||||
| Restricted cash | 19 | - | 11 | 20 | ||||||||||||
| Prepaid expenses and other receivables | 171 | 7 | ||||||||||||||
| Other current assets | 40 | 77 | ||||||||||||||
| Total current assets | 1,106 | 418 | 242 | 963 | ||||||||||||
| NON-CURRENT ASSETS | ||||||||||||||||
| Right-of-use asset | 34 | 46 | ||||||||||||||
| Property and equipment, net | 11 | - | 209 | 6 | ||||||||||||
| Total non-current assets | 243 | 52 | ||||||||||||||
| Total assets | $ | 1,117 | $ | 418 | $ | 485 | $ | 1,015 | ||||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||||
| Accounts payables | 33 | 51 | 33 | 12 | ||||||||||||
| Convertible loans (Note 3) | 1,886 | 1,128 | ||||||||||||||
| Fair value of convertible component in convertible loans (Note 3) | 896 | 610 | ||||||||||||||
| Other accounts liabilities | 5 | 100 | ||||||||||||||
| Other current liabilities | 111 | 110 | ||||||||||||||
| Convertible loans | 2,176 | 2,994 | ||||||||||||||
| Fair value of convertible component in convertible loans | 1,302 | 222 | ||||||||||||||
| Short term lease liability | 15 | 20 | ||||||||||||||
| Total current liabilities | 2,820 | 1,889 | 3,637 | 3,358 | ||||||||||||
| LONG-TERM LIABILITIES | ||||||||||||||||
| Fair value of convertible component in convertible loans (Note 3) | - | 502 | ||||||||||||||
| Convertible loan (Note 3) | - | 73 | ||||||||||||||
| Total long term liabilities | 575 | |||||||||||||||
| SHAREHOLDER’S DEFICIT (Note 5) | ||||||||||||||||
| Long term lease liability | 20 | 29 | ||||||||||||||
| Total Liabilities | 3,657 | 3,387 | ||||||||||||||
| SHAREHOLDER’S DEFICIT | ||||||||||||||||
| Ordinary shares of $0.0001 par value | ||||||||||||||||
| Authorized: 500,000,000 shares at September 30, 2021 and December 31, 2020; Issued and Outstanding: 41,017,152 and 31,665,566 shares at September 30, 2021 and December 31, 2020, respectively | 4 | 3 | ||||||||||||||
| Authorized: 500,000,000 shares at September 30, 2022, and December 31, 2021; Issued and Outstanding: 4,194,385 and 4,194,385 shares at September 30, 2022, and December 31, 2021, respectively | 4 | 4 | ||||||||||||||
| Additional Paid in capital | 18,401 | 15,409 | 18,850 | 18,595 | ||||||||||||
| Accumulated deficit | (20,247 | ) | (17,458 | ) | (21,973 | ) | (21,077 | ) | ||||||||
| (1,842 | ) | (2,046 | ) | (3,119 | ) | (2,478 | ) | |||||||||
| Non-controlling interests | 139 | - | (53 | ) | 106 | |||||||||||
| Total shareholders’ deficit | (1,703 | ) | (2,046 | ) | (3,172 | ) | (2,372 | ) | ||||||||
| Total liabilities and shareholders’ deficit | $ | 1,117 | $ | 418 | $ | 485 | $ | 1,015 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-2
SEEDOSATIVUS TECH CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)LOSS (Unaudited)
U.S. dollars in thousands, except share and per share data
| Three months ended | Nine months ended | Three months ended | Nine months ended | |||||||||||||||||||||||||||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||
| Research and development | $ | (125 | ) | $ | (2 | ) | $ | (443 | ) | $ | (2 | ) | $ | (218 | ) | $ | (125 | ) | $ | (494 | ) | $ | (443 | ) | ||||||||
| Selling and marketing | (50 | ) | - | (131 | ) | - | - | (50 | ) | - | (131 | ) | ||||||||||||||||||||
| General and administrative | (315 | ) | (123 | ) | (1,020 | ) | (123 | ) | (189 | ) | (315 | ) | (490 | ) | (1,020 | ) | ||||||||||||||||
| Operating loss | (490 | ) | (125 | ) | (1,594 | ) | (125 | ) | (407 | ) | (490 | ) | (984 | ) | (1,594 | ) | ||||||||||||||||
| Gain on liquidation of subsidiary | - | - | - | 9,593 | ||||||||||||||||||||||||||||
| Financial expenses, net | (98 | ) | (290 | ) | (1,340 | ) | (898 | ) | (435 | ) | (98 | ) | (117 | ) | (1,340 | ) | ||||||||||||||||
| Net income (loss) | (588 | ) | (415 | ) | $ | (2,934 | ) | $ | 8,570 | |||||||||||||||||||||||
| Net loss | $ | (842 | ) | (588 | ) | $ | (1,101 | ) | $ | (2,934 | ) | |||||||||||||||||||||
| Non-controlling interests | (58 | ) | - | (145 | ) | - | 110 | 58 | 205 | 145 | ||||||||||||||||||||||
| Net Income (loss) attributable to equity holders of the Company | (530 | ) | (419 | ) | (2,789 | ) | 8,570 | |||||||||||||||||||||||||
| Net loss attributable to equity holders of the Company | (732 | ) | (530 | ) | (896 | ) | (2,789 | ) | ||||||||||||||||||||||||
| Basic and diluted net income (loss) per share | $ | (0.01 | ) | (0.02 | ) | $ | (0.08 | ) | $ | 0.29 | ||||||||||||||||||||||
| Basic and diluted net loss per share | $ | (0.17 | ) | (0.01 | ) | $ | (0.21 | ) | $ | (0.08 | ) | |||||||||||||||||||||
| Weighted average number of Ordinary shares used in computing basic and diluted loss per share | 38,015,346 | 26,632,090 | 34,154,570 | 29,502,030 | 4,194,385 | 3,801,535 | 4,194,385 | 3,415,457 | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3
SEEDO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
U.S. dollars in thousands, except share and per share data
| Ordinary shares | Additional Paid in | Accumulated | Total Shareholders’ | Non- controlling | ||||||||||||||||||||||||
| Number | Amount | capital | Deficit | Deficiency | interests | Total | ||||||||||||||||||||||
| Balance at January 1, 2020 | 20,535,354 | $ | 2 | $ | 14,443 | $ | (25,100 | ) | $ | (10,655 | ) | - | (10,655 | ) | ||||||||||||||
| Conversion of convertible loans | 3,009,460 | 1 | 146 | - | 146 | - | 146 | |||||||||||||||||||||
| Net income | - | - | - | 8,566 | 8,566 | - | 8,566 | |||||||||||||||||||||
| Balance at March 31, 2020 (Unaudited) | 23,544,814 | $ | 3 | $ | 14,589 | $ | (16,534 | ) | $ | (1,943 | ) | - | (1,943 | ) | ||||||||||||||
| Conversion of convertible loans | 5,957,216 | - | 77 | - | 77 | - | 77 | |||||||||||||||||||||
| Net income | - | - | - | 419 | 419 | - | 419 | |||||||||||||||||||||
| Balance at June 30, 2020 (Unaudited) | 29,502,030 | 3 | 14,666 | (16,115 | ) | (1,446 | ) | - | (1,446 | ) | ||||||||||||||||||
| Issuance of warrants | - | - | 53 | - | 53 | - | 53 | |||||||||||||||||||||
| Net loss | - | - | - | (415 | ) | (415 | ) | - | (415 | ) | ||||||||||||||||||
| Balance at September 30, 2020 (Unaudited) | 29,502,030 | $ | 3 | $ | 14,719 | (16,530 | ) | (1,808 | ) | - | (1,808 | ) | ||||||||||||||||
SEEDOSATIVUS TECH CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
U.S. dollars in thousands, except share and per share data
| Additional | Total | Non- | ||||||||||||||||||||||||||
| Ordinary shares | Paid in | Accumulated | Shareholders’ | controlling | ||||||||||||||||||||||||
| Number | Amount | capital | Deficit | Deficiency | interests | Total | ||||||||||||||||||||||
| Balance at January 1, 2021 | 31,665,566 | $ | 3 | $ | 15,409 | $ | (17,458 | ) | $ | (2,046 | ) | - | (2,046 | ) | ||||||||||||||
| Transactions with non-controlling interests | - | - | 1,122 | - | 1,122 | 284 | 1,406 | |||||||||||||||||||||
| Share Based Compensation to employees and non-employees | - | - | 27 | - | 27 | - | 27 | |||||||||||||||||||||
| Beneficial conversion feature related to convertible loans | - | - | 530 | - | 530 | - | 530 | |||||||||||||||||||||
| Exercise of warrants | - | - | 39 | - | 39 | - | 39 | |||||||||||||||||||||
| Issuance of shares in respect of RSU’s | 630,250 | - | 334 | - | 334 | - | 334 | |||||||||||||||||||||
| Net loss | - | - | - | (2,197 | ) | (2,197 | ) | (34 | ) | (2,231 | ) | |||||||||||||||||
| Balance at March 31, 2021 (Unaudited) | 32,295,816 | $ | 3 | $ | 17,461 | 19,655 | (2,191 | ) | 250 | (1,941 | ) | |||||||||||||||||
| Share Based Compensation to employees and non-employees | - | - | 16 | - | 16 | - | 16 | |||||||||||||||||||||
| Conversion of convertible loans | 2,600,000 | 1 | 260 | - | 261 | - | 261 | |||||||||||||||||||||
| Issuance of shares in respect of RSU’s | 100,000 | - | - | - | - | - | - | |||||||||||||||||||||
| Net loss | - | - | - | (62 | ) | (62 | ) | (53 | ) | (115 | ) | |||||||||||||||||
| Balance at June 30, 2021 (Unaudited) | 34,995,816 | 4 | 17,737 | (19,717 | ) | (1,976 | ) | 197 | (1,779 | ) | ||||||||||||||||||
| Share Based Compensation to employees and non-employees | 471,336 | - | 119 | - | 119 | - | 119 | |||||||||||||||||||||
| Conversion of convertible loans | 5,550,000 | - | 545 | - | 545 | - | 545 | |||||||||||||||||||||
| Net loss | - | - | - | (530 | ) | (530 | ) | (58 | ) | (588 | ) | |||||||||||||||||
| Balance at September 30, 2021 (Unaudited) | 41,017,152 | $ | 4 | $ | 18,401 | (20,247 | ) | (1,842 | ) | 139 | (1,703 | ) | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
SEEDO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
U.S. dollars in thousands
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | (2,934 | ) | $ | 8,570 | |||
| Adjustments to reconcile loss to net cash used in operating activities: | ||||||||
| Depreciation | 1 | - | ||||||
| Share based compensation expenses to employees and non-employees | 496 | - | ||||||
| Financial expenses related to convertible loans and warrants | 166 | 596 | ||||||
| Change in fair value of convertible component in convertible loans | 1,222 | 301 | ||||||
| Gain on liquidation of subsidiary | - | (9,593 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Increase in other accounts receivables | (164 | ) | (1 | ) | ||||
| Increase (decrease) in accounts payables | (18 | ) | 5 | |||||
| Increase (decrease) in other accounts payables | (95 | ) | 59 | |||||
| Net cash used in operating activities | (1,326 | ) | (63 | ) | ||||
| Cash flows from investing activities | ||||||||
| Increase in restricted cash | (19 | ) | - | |||||
| Purchase of property and equipment | (12 | ) | - | |||||
| Net cash used in investing activities | (31 | ) | - | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from convertible loans | 530 | 300 | ||||||
| Proceeds from issuance of shares to minority interests in subsidiary | 1,406 | - | ||||||
| Repayment of convertible loans | (74 | ) | - | |||||
| Net cash provided by financing activities | 1,862 | 300 | ||||||
| Increase in cash and cash equivalents | 505 | 237 | ||||||
| Cash and cash equivalents and restricted cash at the beginning of the year | 411 | 2 | ||||||
| Cash and cash equivalents at the end of the period | $ | 916 | $ | 239 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Supplemental disclosures of non- cash flow information: | ||||||||
| Conversion of convertible loans | $ | 8,050 | $ | 223 | ||||
| Ordinary shares | Additional Paid in | Accumulated | Total Shareholders’ | Non- controlling | ||||||||||||||||||||||||
| Number | Amount | capital | Deficit | Deficiency | interests | Total | ||||||||||||||||||||||
| Balance as of January 1, 2021 | 3,167,560 | $ | 3 | $ | 15,409 | $ | (17,458 | ) | $ | (2,046 | ) | $ | - | $ | (2,046 | ) | ||||||||||||
| Transactions with non-controlling interests | - | - | 1,122 | - | 1,122 | 284 | 1,406 | |||||||||||||||||||||
| Share Based Compensation to employees and non-employees | - | - | 27 | - | 27 | - | 27 | |||||||||||||||||||||
| Beneficial conversion feature related to convertible loans | - | - | 530 | - | 530 | - | 530 | |||||||||||||||||||||
| Exercise of warrants | - | - | 39 | - | 39 | - | 39 | |||||||||||||||||||||
| Issuance of shares in respect of RSU’s | 63,025 | - | 334 | - | 334 | - | 334 | |||||||||||||||||||||
| Net loss | - | - | - | (2,197 | ) | (2,197 | ) | (34 | ) | (2,231 | ) | |||||||||||||||||
| Balance as of March 31, 2021 (Unaudited) | 3,230,585 | $ | 3 | $ | 17,461 | $ | (19,655 | ) | $ | (2,191 | ) | $ | 250 | $ | (1,941 | ) | ||||||||||||
| Share Based Compensation to employees and non-employees | - | - | 17 | - | 17 | - | 17 | |||||||||||||||||||||
| Conversion of convertible loans | 260,000 | 1 | 259 | - | 260 | - | 260 | |||||||||||||||||||||
| Issuance of shares in respect of RSU’s | 10,000 | - | - | - | - | - | - | |||||||||||||||||||||
| Net loss | - | - | - | (62 | ) | (62 | ) | (53 | ) | (115 | ) | |||||||||||||||||
| Balance as of June 30, 2021 (Unaudited) | 3,500,585 | $ | 4 | $ | 17,737 | $ | (19,717 | ) | $ | (1,976 | ) | $ | 197 | $ | (1,779 | ) | ||||||||||||
| Share Based Compensation to employees and non-employees | 47,134 | - | 119 | - | 119 | - | 119 | |||||||||||||||||||||
| Conversion of convertible loans | 555,000 | - | 545 | - | 545 | - | 545 | |||||||||||||||||||||
| Net loss | - | - | - | (530 | ) | (530 | ) | (58 | ) | (588 | ) | |||||||||||||||||
| Balance as of September 30, 2021 (Unaudited) | 4,102,719 | 4 | 18,401 | (20,247 | ) | (1,842 | ) | 139 | (1,703 | ) | ||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4
SATIVUS TECH CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
U.S. dollars in thousands, except share and per share data
| Ordinary shares | Additional Paid in | Accumulated | Total Shareholders’ | Non- controlling | ||||||||||||||||||||||||
| Number | Amount | capital | Deficit | Deficiency | interests | Total | ||||||||||||||||||||||
| Balance as of January 1, 2022 | 4,194,385 | $ | 4 | $ | 18,595 | $ | (21,077 | ) | $ | (2,478 | ) | $ | 106 | $ | (2,372 | ) | ||||||||||||
| Share based compensation to non-controlling parties | - | - | 117 | - | 117 | 30 | 147 | |||||||||||||||||||||
| Share Based Compensation to employees and non-employees | - | - | 40 | - | 40 | - | 40 | |||||||||||||||||||||
| Cancellation of share options in subsidiary | - | - | (168 | ) | - | (168 | ) | (43 | ) | (211 | ) | |||||||||||||||||
| Net income | - | - | - | 448 | 448 | (27 | ) | 421 | ||||||||||||||||||||
| Balance as of March 31, 2022 (Unaudited) | 4,194,385 | $ | 4 | $ | 18,584 | $ | (20,629 | ) | $ | (2,041 | ) | $ | 66 | $ | (1,975 | ) | ||||||||||||
| Share based compensation to non-controlling parties | - | - | 101 | - | 101 | 26 | 127 | |||||||||||||||||||||
| Share Based Compensation to employees and non-employees | - | - | 35 | - | 35 | - | 35 | |||||||||||||||||||||
| Net income | - | - | - | (612 | ) | (612 | ) | (68 | ) | (680 | ) | |||||||||||||||||
| Balance as of June 30, 2022 (Unaudited) | 4,194,385 | $ | 4 | $ | 18,720 | $ | (21,241 | ) | $ | (2,517 | ) | $ | 24 | $ | (2,493 | ) | ||||||||||||
| Transactions with non-controlling interests | - | - | 78 | - | 78 | 22 | 100 | |||||||||||||||||||||
| Share based compensation to non-controlling parties | - | - | 39 | - | 39 | 11 | 50 | |||||||||||||||||||||
| Share Based Compensation to employees and non-employees | - | - | 13 | - | 13 | - | 13 | |||||||||||||||||||||
| Net income | - | - | - | (732 | ) | (732 | ) | (110 | ) | (842 | ) | |||||||||||||||||
| Balance as of September 30, 2022 (Unaudited) | 4,194,385 | 4 | 18,850 | (21,973 | ) | (3,119 | ) | (53 | ) | (3,172 | ) | |||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-5
SATIVUS TECH CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
U.S. dollars in thousands
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (1,101 | ) | $ | (2,934 | ) | ||
| Adjustments to reconcile loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 36 | 1 | ||||||
| Share based compensation expenses to employees and non-employees | 172 | 496 | ||||||
| Financial expenses related to convertible loans and warrants | (980 | ) | 166 | |||||
| Change in fair value of convertible component in convertible loans | 1,081 | 1,222 | ||||||
| Changes in assets and liabilities: | ||||||||
| Increase (decrease) in other accounts receivable | 37 | (164 | ) | |||||
| Increase (decrease) in trade payables | 21 | (18 | ) | |||||
| Increase (decrease) in other current liabilities | 1 | (95 | ) | |||||
| Net cash used in operating activities | (733 | ) | (1326 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Decrease (Increase) in restricted cash | 9 | (19 | ) | |||||
| Purchase of property and equipment | (199 | ) | (12 | ) | ||||
| Net cash used in investing activities | (190 | ) | (31 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from convertible loans | 239 | 530 | ||||||
| Lease payments | (16 | ) | - | |||||
| Repayment of convertible loans | (75 | ) | (74 | ) | ||||
| Proceeds from issuance of shares to minority interests in subsidiary | 100 | 1,406 | ||||||
| Net cash provided by financing activities | 248 | 1,862 | ||||||
| Increase (decrease) in cash and cash equivalents and restricted cash | (675 | ) | 505 | |||||
| Cash and cash equivalents and restricted cash at the beginning of the year | 866 | 411 | ||||||
| Cash and cash equivalents at the end of the period | $ | 191 | $ | 916 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 75 | $ | - | ||||
| Conversion of convertible loans | $ | - | $ | 8,050 | ||||
| Purchase of fixed assets by issuance of share capital | $ | 28 | $ | - | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-6
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 1:- | GENERAL |
| a. |
During the third quarter of 2019, Eroll was experiencing financial and operational difficulties and during 2020, entered liquidation proceedings through the Nazareth District Court of the State of Israel (the “Court”). On March 25, 2020, the Court approved the purchase of all of Eroll’s assets by a non-related third-party and therefore, the Company no longer has any legal ties nor privity with Eroll.
On July 19, 2020, the Company formed a new wholly-owned subsidiary in Israel, Hachevra Legiduley Pkaot Beisrael Ltd. (the “New Subsidiary”), to develop a fully automated and remotely managed system for growing saffron and other vegetables. On November 5, 2020, the New Subsidiary changed its name to Saffron-Tech Ltd. (“Saffron Tech”).
The Company, through Saffron Tech, is focusing on its in-house research and development of agriculture technology products, among others, in the fields of exotic plants and mushrooms. Saffron Tech plans to roll out its proof of concept in the coming months. This technology is designed towill provide turnkey automated growing containers for high-quality, high-yield saffron all year round. The Company is in advanced stages of developing and testing a fully automated and remotely managed system for growing high-quality, high-yield saffron anywhere and anytime.
Saffron is used in many industries, such as the food industry, particularly by famous chefs and Michelin starred restaurants, the natural cosmetics industry and the natural medicine industry and as a dye in the textile industry. Medicinal claims as an anti-depressant, antioxidant, and antiseptic are constantly increasing.
During July 2022, Saffron Tech received a total of $100 in respect of the issuance of 76,890 shares to third party investors at a price of NIS 4.5 per share (approximate $1.36 per share). The investors also received an option to convert the shares of Saffron Tech into shares of the Company. The option expires on January 1, 2023.
Saffron Tech is currently in the process of raising equity by crowd funding through the Israeli crowd funding platform – Pipelbiz. Assuming the maximum amount (NIS 5 million) is raised, the Company will own approximately 61% of Saffron Tech. As of the day of this report the Saffron Tech has raised NIS 2 million.
As of September 30, 2022, the Company owns 75% of the common shares of Saffron Tech.
On August 10,December 9, 2021, the Company announced that its subsidiary, Saffron Tech, has been awardedimplemented a $446 thousand grant from the Israeli Innovation Authority. The new grant will allow Saffron Tech to accelerate its R&D program building on its groundbreaking development1-for-10 consolidation, or reverse split, of the protocols for growing saffron using vertical farming technology. The funds will be allocatedCompany’s issued and outstanding common shares. Except where otherwise indicated, all share and per share data in these financial statements have been retroactively restated to enablereflect the company expand its facilities, allowing it to grow more saffron for commercial use.reverse stock split.
The Company’s proof of concept utilizes the “Grow Next to Consumer” policy and is therefore sustainable and fit the COVID-19 restrictions on transport. It is also environmentally friendly, using economic levels of water, space, fertilizer, and energy. Accounting to the Company’s calculations, we believe that the controlled indoor growing area will produce ten times more yield compared to the same land area using traditional methods. The sealed environment eliminates the need for harmful pesticides and herbicides, producing a clean and safe product that is easy to control from anywhere. The Company’s solution is easily scalable and pre-designed to quickly grow operations
| b. | The Company has an accumulated deficit in the total amount of |
The Company intends to finance operating costs over the next twelve months with existing cash on hand, reducing operating spend, and future issuances of equity and debt securities, or through a combination of the foregoing. However, the Company will need to seek additional sources of financing if the Company requires more funds than anticipated during the next 12 months or in later periods.
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business.
The consolidated financial statements for the nine and three months ended September 30, 2021,2022, do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.
F-7
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 1:- | GENERAL (cont.) |
| c. | The COVID-19 pandemic, which originated in China in late 2019, has since spread across the globe and affected the economic condition of most, if not all, countries, including the United States, Israel and many countries in Europe. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. While COVID-19 is still spreading and the final implications of the pandemic are difficult to estimate at this stage, it is clear that it has affected the lives of a large portion of the global population. As of |
| NOTE 2:- | UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
Basis of Presentation and Principles of Consolidation:
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary and were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
All intercompany accounts and transactions have been eliminated in consolidation.
Unaudited Interim Financial Information
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 20202021, and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20202021, filed with the SEC on March 17, 202131, 2022 (the “2020“2021 Annual Report”). The results for any interim period are not necessarily indicative of results for any future period.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position and results of operations for the interim periods presented .Thepresented. The results for the nine and three months ended September 30, 20212022, are not necessarily indicative of the results for the year ending December 31, 2021,2022, or for any future period.
As of September 30, 2021,2022, there have been no material changes in the Company’s significant accounting policies from those that were disclosed in the 20202021 Annual Report.
F-8
| SATIVUS TECH CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 2:- | UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.) |
Fair value of financial instruments
ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:
| Level 1 — | Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. |
| Level 2 — | Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. |
| Level 3 — | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The carrying amounts of cash and cash equivalents, short term deposits, trade receivables, trade payables and short-term loan approximate their fair value due to the short-term maturity of such instruments.
The Company elected to measure some of the convertible loans under the fair value option. Under the fair value option the convertible loans will be measured at fair value in each reporting period until they will be converted, with changes in the fair values being recognized in the Company’s consolidated statement of operations as financial income or expense. The proceeds received for the issuance of the convertible loans were allocated at fair value conducted on an arm’s-length basis.
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:
| Balance as of September 30, 2021 | Balance as of September 30, 2022 | |||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Fair Value of convertible component in convertible loan, net of discounts and debt issue costs | $ | - | $ | - | $ | 896 | $ | 896 | $ | - | $ | - | $ | 1,302 | $ | 1,302 | ||||||||||||||||
| Total liabilities | $ | - | $ | - | $ | 896 | $ | 896 | $ | - | $ | - | $ | 1,302 | $ | 1,302 | ||||||||||||||||
| Balance as of December 31, 2020 | Balance as of December 31, 2021 | |||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Fair Value of convertible component in convertible loan, net of discounts and debt issue costs | $ | - | $ | - | $ | 1,112 | $ | 1,112 | $ | - | $ | - | $ | 222 | $ | 222 | ||||||||||||||||
| Total liabilities | $ | - | $ | - | $ | 1,112 | $ | 1,112 | $ | - | $ | - | $ | 222 | $ | 222 | ||||||||||||||||
F-9
| SATIVUS TECH CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 3:- | CONVERTIBLE LOANS |
| a. | On February 21, 2019, the Company received a convertible loan from |
On February 20, 2021, the Company and the third party extended the February 2019 loan to November 10, 2021.
The Company at its option shall have the right to redeem, in part or in whole, outstanding principal amount and interest under this loan agreement prior to the maturity date. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium equal to 20% of the outstanding principal amount being redeemed plus outstanding and accrued interest.
The February 2019 Lender isshall be entitled to convert at its option any portion of the outstanding and unpaid principal or accrued interest into fully paid and nonassessable of shares of common stock, at the lower of the fixed conversion price then in effect or the market conversion price. The number of shares of common stock issuable upon conversion of any conversion amount shall be determined by dividing (x) such conversion amount by (y) the fixed conversion price of $2$20.00 or (z) 80% of the lowest the volume-weighted average price of the Company’s shares of common stock during the 10 trading days immediately preceding the conversion date.
TheAs of December 31, 2021, the Company accountedhas defaulted on the February 2019 Loan and the February 2019 Loan was presented in fair value in the financial statements for the year ended December 31, 2021.
On January 18, 2022, the Company paid accrued interest of the February 2019 Loan in accordancethe amount of $20. In concurrence with ASC 470-20, Debt with conversion and other Options. Inthe payment of accrued interest, the February 2019 Loan was extended to August 31, 2022. On August 11, 2022, the intrinsic value of the BCFFebruary 2019 Loan was calculated and the Company allocated $550further extended to the BCF as additional paid in capital.December 31, 2022. See also note 3f.
On May 12, 2021,Conversion feature
In accordance with ASC 815-15-25 the Company repaid a portionconversion feature was considered an embedded derivative instrument, and is to be recorded at its fair value separately from the convertible notes, within current liabilities in the Company’s balance sheet. The conversion component is then marked to market at each reporting period with the resulting gains or losses shown in the statements of operations.
The fair value of the February 2019 loan and the accrued interestconversion feature (hereafter “Convertible Component”) in the amount of $74.$310 ($264 at March 31, 2022) was estimated using the Monte Carlo Simulation Model to compute the Convertible Component’s fair value. The assumptions used to perform the Monte-Carlo simulation model below:
| March 31, 2022 | September 30, 2022 | |||||||
| Share price | $ | 0.80 | $ | 0.60 | ||||
| Dividend yield | 0 | 0 | % | |||||
| Risk-free interest rate | 1.35 | % | 3.33 | % | ||||
| Expected term (in years) | 0.75 | 0.25 | ||||||
| Volatility | 164.65 | % | 200.16 | % | ||||
The February 2019 Loan is included in the convertible loans in current liabilities as of September 30, 20212022, in the amount of $312,$258, and $350$506 as of December 31, 2020.2021.
During the nine months ended September 30, 2021 and 2020,2022, the Company recorded interest and financial expensesincome related to February 2019 Loan in the amount of $228, and interest and financial expenses in the amount of $46 and $298, respectively.in the nine months ended September 30, 2021.
| b. | On October 15, 2019, the Company received a convertible loan from a third party (“October 2019 Lender”) in the principal amount of $1,100 that bears an annual 10% interest rate (“October 2019 Loan”). The October 2019 Loan has a |
The October 2019 Lender isshall be entitled to convert the principal loan and the outstanding interest (the “Conversion Amount”) into such number of ordinary shares determined by dividing (x) such Conversion Amount by (y) the fixed conversion price of $1.25$12.50 or (z) 80% of the lowest the volume-weighted average price of the Company’s ordinary shares during the 10 trading days immediately preceding the conversion date.
As of September 30, 2021 and December 31, 2020, the BCF was revalued at $500 and $610, respectively.
F-10
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 3:- | CONVERTIBLE LOANS |
As of December 31, 2021, the Company has defaulted on the October 2019 Loan and the October 2019 Loan is presented in fair value in the financial statements for the year ended December 31, 2021. On January 18, 2022, the Company paid accrued interest of the October 2019 Loan in the amount of $55. On August 11, 2022, the October 2019 Loan was extended to December 31, 2022. See also note 3f.
Conversion feature
In accordance with ASC 815-15-25 the conversion feature was considered an embedded derivative instrument, and is to be recorded at its fair value separately from the convertible notes, within current liabilities in the Company’s balance sheet. The conversion component is then marked to market at each reporting period with the resulting gains or losses shown in the statements of operations.
The fair value of the conversion feature (hereafter “Convertible Component”) in the amount of $756 ($725 at March 31, 2022( was estimated using the Monte Carlo Simulation Model to compute the Convertible Component’s fair value. The assumptions used to perform the Monte-Carlo simulation model below:
The Company estimated the fair value of BCF using the Monte Carlo option pricing model using the following weighted average assumptions:
| December 31, 2020 | September 30, 2021 | March 31, 2022 | September 30, 2022 | |||||||||||||
| Share price | $ | 0.15 | $ | 0.16 | $ | 0.80 | $ | 0.60 | ||||||||
| Dividend yield | 0 | % | 0 | % | 0 | 0 | % | |||||||||
| Risk-free interest rate | 0.10 | % | 0.07 | % | 1.35 | % | 3.33 | % | ||||||||
| Expected term (in years) | 0.79 | 0.04 | 0.75 | 0.25 | ||||||||||||
| Volatility | 133.48 | % | 88.67 | % | 164.65 | % | 200.16 | % | ||||||||
The October 2019 Loan is included in the convertible loans in current liabilities as of September 30, 20212022, in the amount of $1,290,$1,195, and $754$2,142 as of December 31, 2020.2021.
During the nine months ended September 30, 2021 and 2020,2022, the Company recorded interest and financial expensesincome related to the October 2019 Loan in the amount of $892, and interest and financial expenses in the amount of $385 and $522, respectively.in the nine months ended September 30, 2021.
| On August 7, 2020, |
The August 2020 Loans areLoan is convertible by the August 2020 LendersLender into Shares, at their discretion, at the lower of a fixed price of $0.102$1.02 (the “Fixed Conversion Price”) or 80% of the lowest volume weighted average price (“VWAP”) of the Company’s common stock during the 10 trading days immediately preceding the conversion date (the “Market Conversion Price”).
The Company also granted the August 2020 Investor warrants to purchase 50,000 shares of common stock of the Company at an exercise price of $2.00 per share, such exercise price is subject to any future price-based anti-dilution adjustments. Accordance with ASU 2017-11 the warrants were classified in shareholders equity. The fair value of the warrants granted was $35 using the Black-Scholes-Merton option pricing model.
The fair value of the conversion feature (hereafter “Convertible Component”) in the amount of $157 was estimated using the Monte Carlo Simulation Model to compute the Convertible Component’s fair value. The assumptions used to perform the Monte-Carlo simulation model below:
| December 31, 2021 | September 30, 2022 | |||||||
| Share price | $ | 0.65 | $ | 0.60 | ||||
| Dividend yield | 0 | 0 | % | |||||
| Risk-free interest rate | 0.23 | % | 3.33 | % | ||||
| Expected term (in years) | 0.58 | 0.25 | ||||||
| Volatility | 145.70 | % | 200.16 | % | ||||
F-11
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 3:- | CONVERTIBLE LOANS |
The Company accounted for the August 2020 Loan in accordance with ASC 470-20, Debt with conversion and other Options. As of September 30, 2021 and December 31, 2020, the BCF was revalued at $397 and $502, respectively.
The Company estimated the fair value of BCF using the Monte Carlo option pricing model using the following weighted average assumptions:
| December 31, 2020 | September 30, 2021 | |||||||
| Share price | $ | 0.15 | $ | 0.16 | ||||
| Dividend yield | 0 | 0 | ||||||
| Risk-free interest rate | 0.12 | % | 0.07 | % | ||||
| Expected term (in years) | 1.58 | 0.86 | ||||||
| Volatility | 142.65 | % | 121.64 | % | ||||
The August 2020 Loan is included in the convertible loans in longshort term liabilities as of September 30, 20212022, in the amount of $208,$244, and $73$168 as of December 31, 2020.2021.
During the nine months ended September 30, 2021 and 2020,2022, the Company recorded interest and financial expenses related to the August 2020 Loan in the amount of $76, and interest and financial expenses in the amount of $30 in the nine months ended September 30, 2021
| d. | On July 31, 2020, the Company received a convertible loan from Mr. Shmuel Yannay (a third party at that time, and a director of the Company as of October 28, 2021) in the amount of $100 (“Director Loan”). The loan has a maturity date of July 31, 2022 (“Maturity Date”) and accrues annual interest at a rate of 10%. On August 17, 2022, the Director Loan was extended to December 31, 2022. |
The Director Loan is convertible into Shares, at his discretion, at the lower of a fixed price of $1.02 (the “Fixed Conversion Price”) or 80% of the lowest volume weighted average price (“VWAP”) of the Company’s common stock during the 10 trading days immediately preceding the conversion date (the “Market Conversion Price”).
The Company also granted the Mr. Yannay warrants to purchase 25,000 shares of common stock of the Company at an exercise price of $2.00 per share, such exercise price is subject to any future price-based anti-dilution adjustments. Accordance with ASU 2017-11 the warrants were classified in shareholders equity. The fair value of the warrants granted was $18 using the Black-Scholes-Merton option pricing model.
The fair value of the conversion feature (hereafter “Convertible Component”) an amount of $79 was estimated using the Monte Carlo Simulation Model to compute the Convertible Component’s fair value. The assumptions used to perform the Monte-Carlo simulation model below:
| December 31, 2021 | September 30, 2022 | |||||||
| Share price | $ | 0.65 | $ | 0.60 | ||||
| Dividend yield | 0 | 0 | % | |||||
| Risk-free interest rate | 0.23 | % | 3.33 | % | ||||
| Expected term (in years) | 0.58 | 0.25 | ||||||
| Volatility | 145.70 | % | 200.16 | % | ||||
The Director Loan is included in the convertible loans in short term liabilities as of September 30, 2022, in the amount of $122, and $55, respectively.$85 as of December 31, 2021.
During the nine months ended September 30, 2022, the Company recorded interest and financial expenses related to the Director Loan in the amount of $36, and interest and financial expenses in the amount of $15 in the nine months ended September 30, 2021
| e. | From June 2022 through to The 2022 SAFES shall be converted into shares of Saffron Tech, following a financing event of at least $2,000 (“Equity Event”). The The SAFE Price is the Valuation Cap ($5,000) divided by the Company Capitalization, being the total all the share In the event of a liquidity event, the Company will issue Shares equal to the 2022 SAFES Investment Amount divided by the liquidity price, as defined in the 2022 SAFES Agreement. If there is a dissolution event, the Company will pay the investor an amount equal to the purchase | |
| f. | On August 11, 2022, the Company and the February 2019 Lender, October 2019 Lender and the August 2020 Lender (all the same entity) entered in an agreement (“Payoff Agreement”) pursuant to which, should the Company raise at |
From January 2021 through to February 16, 2021, the Company received an additional $530 from third party investors from the issuance of Promissory Notes (“2021 Promissory Notes). One of the investors received 330,000 warrants (“2021 Promissory Warrants”). The 2021 Promissory Warrants have the same terms as the 2020 Promissory Notes and expire on January 3, 2022.
The Company estimated the fair value of warrants using the Black-Scholes-Merton option pricing model using the following weighted average assumptions:
| December 31, 2020 | January to February 2021 | |||||||
| Promissory Notes | Promissory Notes | |||||||
| Share price | $ | 0.19 | 0.15-0.55 | |||||
| Dividend yield | 0 | % | 0 | % | ||||
| Risk-free interest rate | 0.1 | % | 0.1 | % | ||||
| Expected term (in years) | 2 | 1-2 | ||||||
| Volatility | 176 | % | 176 | % | ||||
F-12
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE |
The fair value of the 2020 Promissory Warrants was $41 and is included in additional paid in capital for the year ended December 31, 2020.
The fair value of the 2021 Promissory Warrants was $39 and is included in additional paid in capital for the nine months ended September 30, 2021.
The Company accounted for the 2020 and 2021 Promissory Notes in accordance with ASC 470-20, Debt with conversion and other Options. The intrinsic value of the BCF for the 2020 Promissory Notes was calculated and the Company allocated $425 to the BCF as additional paid in capital in 2020. The intrinsic value of the BCF for the 2021 Promissory Notes was calculated and the Company allocated $530 to the BCF as additional paid in capital in 2021.
From June 2021 through to August 2021, Promissory Notes in the amount of $805 were converted into 8,050,000 shares of the Company.
The 2020 and 2021 Promissory Notes are included in convertible loans in current liabilities as of September 30, 2021 in the amount of $76, and $24 as of December 31, 2020.
During the nine months period ended September 30, 2021 and 2020, the Company recorded interest and financial expenses related to 2021 and 2021 Promissory Notes in the amount of $569 and nil, respectively.
| RELATED PARTIES |
| a. |
| |
| During the nine months ended September 30, |
| b. | Amounts owing to related parties (CEO, CFO and directors) as of September 30, 2022, and December 31, 2021, were $37 and $22, respectively. | |
| c. |
|
| d. |
|
| NOTE 5:- | SHAREHOLDERS’ DEFICIENCY |
| a. |
| ||
nine months ended September 30, 2022. |
| b. | Warrants |
A summary of warrant activity during the nine months period ended September 30, 20212022, and year ended December 31, 20202021, is as follows:
| Number | Average exercise price | Number | Average exercise price | |||||||||||||
| Warrants outstanding at January 1, 2020 | 1,150,833 | $ | 1.69 | |||||||||||||
| Warrants outstanding at January 1, 2021 | 213,083 | $ | 0.81 | |||||||||||||
| Granted | 1,080,000 | 0.18 | 99,000 | 0.15 | ||||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Forfeited/Cancelled | (66,000 | ) | 0.15 | |||||||||||||
| Forfeited/Cancelled | (47,333 | ) | 1.94 | |||||||||||||
| Warrants outstanding at December 31, 2021 | 198,750 | $ | 0.54 | |||||||||||||
| Expired | (100,000 | ) | 2 | (13,750 | ) | 2.00 | ||||||||||
| Warrants outstanding at December 31, 2020 | 2,130,833 | $ | 0.81 | |||||||||||||
| Granted | 330,000 | 0.15 | ||||||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Expired | (473,333 | ) | 1.94 | |||||||||||||
| Warrants outstanding at September 30, 2021 | 1,987,500 | 0.54 | ||||||||||||||
| Forfeited/Cancelled | - | - | ||||||||||||||
| Warrants outstanding at September 30, 2022 | 185,000 | $ | 0.43 | |||||||||||||
The following warrants and are outstanding as of December 31, 2021:
| Issuance date | Warrants outstanding | Exercise price per warrant | Warrants outstanding and exercisable | Expiry date | ||||||||||
| February 21, 2019 | 13,750 | $ | 20.00 | 13,750 | February 21, 2022 | |||||||||
| October 15, 2019 | 44,000 | $ | 12.50 | 44,000 | October 15, 2024 | |||||||||
| August 7, 2020 | 50,000 | $ | 2.00 | 50,000 | August 7, 2025 | |||||||||
| August 11, 2020 | 25,000 | $ | 2.00 | 25,000 | August 11, 2025 | |||||||||
| December 31, 2021 | 66,000 | $ | 1.50 | 66,000 | December 31, 2022 | |||||||||
| 198,750 | 198,750 | |||||||||||||
F-13
| SATIVUS TECH CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 5:- | SHAREHOLDERS’ DEFICIENCY (cont.) |
The following warrants and exercisableare outstanding as of September 30, 2021:2022:
| Issuance date | Warrants outstanding | Exercise price per warrant | Warrants outstanding and exercisable | Expiry date | Warrants outstanding | Exercise price per warrant | Warrants outstanding and exercisable | Expiry date | ||||||||||||||||||||
| February 21, 2019 | 137,500 | $ | 2.00 | 137,500 | February 21, 2022 | |||||||||||||||||||||||
| October 15, 2019 | 440,000 | $ | 1.25 | 440,000 | October 15, 2024 | 44,000 | $ | 12.50 | 44,000 | October 15, 2024 | ||||||||||||||||||
| August 7, 2020 | 500,000 | $ | 0.20 | 500,000 | August 7, 2025 | 50,000 | $ | 2.00 | 50,000 | August 7, 2025 | ||||||||||||||||||
| August 11, 2020 | 250,000 | $ | 0.20 | 250,000 | August 11, 2025 | 25,000 | $ | 2.00 | 25,000 | August 11, 2025 | ||||||||||||||||||
| December 17, 2020 | 330,000 | $ | 0.15 | 330,000 | December 17, 2021 | |||||||||||||||||||||||
| January 3, 2021 | 330,000 | $ | 0.15 | 330,000 | January 3, 2022 | |||||||||||||||||||||||
| December 31, 2021 | 66,000 | $ | 1.50 | 66,000 | December 31, 2022 | |||||||||||||||||||||||
| 1,987,500 | 1,987,500 | 185,000 | 185,000 | |||||||||||||||||||||||||
| c. | Share option plans: |
On April 1, 2019, the Company’s board of directors adopted the SeedoSativus Tech Corp. 2018 Share Options Plan (the “2018 Plan”).
Awards granted under the 2018 Plan are subject to vesting schedules and unless determined otherwise by the administrator of the 2018 Plan, generally vest following a period of four years from the applicable vesting commencement date, such that the awards vest in four annual equal installments and/or generally vest following a period of one year from the applicable vesting commencement date, such that the awards vest in four quarterly equal installments.
Subject to the discretion of the 2018 Plan administrator, if an award has not been exercised within seven years after the date of the grant, the award expires.
(i) A summary of employee share options activity during the nine-month periodnine months ended September 30, 20212022, and for the year ended December 31, 20202021, is as follows:
| Number | Average weighted exercise price | Number | Average weighted exercise price | |||||||||||||
| Options outstanding at January 1, 2020 | 1,605,880 | $ | 1.00 | |||||||||||||
| Options outstanding at January 1, 2021 | 166,000 | $ | 1.10 | |||||||||||||
| Granted | 1,660,000 | $ | 0.11 | 120,000 | 0.01 | |||||||||||
| Exercised | - | - | (90,000 | ) | 1.10 | |||||||||||
| Forfeited | (1,605,882 | ) | - | (1,000 | ) | 3.00 | ||||||||||
| Options outstanding at December 31, 2020 | 1,660,000 | - | ||||||||||||||
| Options outstanding at December 31, 2021 | 195,000 | $ | 0.63 | |||||||||||||
| Granted | - | - | - | - | ||||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Forfeited | - | - | - | - | ||||||||||||
| Options outstanding at September 30, 2022 | 195,000 | $ | 0.63 | |||||||||||||
| Options outstanding at September 30, 2021 | 1,660,000 | $ | 0.11 | |||||||||||||
| Options exercisable at September 30, 2021 | 935,000 | $ | 0.11 | |||||||||||||
| Options exercisable at September 30, 2022 | 171,250 | $ | 0.70 | |||||||||||||
F-14
| SATIVUS TECH CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 5:- | SHAREHOLDERS’ DEFICIENCY (cont.) |
The following options are outstanding as of September 30, 2022:
| Issuance date | Options outstanding | Exercise price per option | Options outstanding and exercisable | Expiry date | ||||||||||
| September 1, 2020 | 15,000 | $ | 0.70 | 8,750 | September 1, 2025 | |||||||||
| October 13, 2020 | 50,000 | $ | 1.00 | 50,000 | October 12, 2023 | |||||||||
| November 3, 2020 | 25,000 | $ | 1.00 | 25,000 | October 25, 2025 | |||||||||
| November 3, 2020 | 25,000 | $ | 1.50 | 25,000 | October 25, 2025 | |||||||||
| December 14, 2021 | 80,000 | $ | 0.01 | 57,500 | December 14, 2026 | |||||||||
| 195,000 | 166,250 | |||||||||||||
| d. | Restricted Share Units: |
RSUs under the 2018 Plan may be granted upon such terms and conditions, no monetary payment (other than payments made for applicable taxes) shall be required as a condition of receiving the Company’s shares pursuant to a grant of RSUs, and unless determined otherwise by the Company, the aggregate nominal value of such RSUs shall not be paid and the Company shall capitalize applicable profits or take any other action to ensure that it meets any requirement of applicable laws regarding issuance of shares for consideration that is lower than the nominal value of such shares. If, however, the Company’s board of directors determines that the nominal value of the shares shall not be waived and shall be paid by the grantees, then it shall determine procedures for payment of such nominal value by the grantees or for collection of such amount from the grantees by the Company.
Shares issued pursuant to any RSUs units may (but need not) be made subject to exercise conditions, as shall be established by the Company and set forth in the applicable notice of grant evidencing such award. During any restriction period in which shares acquired pursuant to an award of RSUs remain subject to exercise conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of unless otherwise provided in the 2018 Plan. Upon request by the Company, each grantee shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares hereunder and the Company may place appropriate legends evidencing any such transfer restrictions on the relevant share certificates.
A summary of RSU activity during the nine months ended September 30, 2021 years2022, and the year ended December 31, 20202021, is as follows:
| Number | ||||
| RSU outstanding at January 1, | ||||
| Granted | ||||
| Exercised | ( | ) | ||
| Forfeited | - | |||
| RSU outstanding at December 31, | ||||
| Granted | ||||
| - | ||||
| Exercised | - | |||
| Forfeited | (30,000 | ) | ||
| RSU’s outstanding at September 30, | ||||
F-15
| SATIVUS TECH CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 6:- | FINANCIAL EXPENSES |
| Three months ended | Nine months ended | Three months ended | Nine months ended | |||||||||||||||||||||||||||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||
| Financial expenses related to interest and revaluation of convertible component in convertible loans | $ | 108 | $ | 289 | $ | 1,318 | $ | 897 | $ | 446 | $ | 108 | $ | 100 | $ | 1,318 | ||||||||||||||||
| Financial expenses related to warrants | - | - | 39 | - | - | - | 39 | |||||||||||||||||||||||||
| Foreign currency transactions and other | (10 | ) | 1 | (17 | ) | 1 | (9 | ) | (10 | ) | 17 | (17 | ) | |||||||||||||||||||
| 98 | 290 | 1,340 | 898 | 435 | 98 | 117 | 1,340 | |||||||||||||||||||||||||
| NOTE 7:- | LIENS, COMMITMENTS |
Saffron leases its facility on a lease that expires on September 11, 2024. Lease payments are approximately $2 per month ($23 annually).
Saffron Tech is committed to pay royalties to the IIA on the proceeds from sales of products resulting from research and development projects in which the IIA participates by way of grants. In the first 3 years of sales the Company shall pay 3% of the sales of the product which was developed under IIA research and development projects. In the fourth, fifth and sixth years of sales, the Company shall pay 4% of such sales and from the seventh year onwards the Company shall pay 5% of up to 100% of the amount of grants received plus interest at LIBOR. Saffron Tech was entitled to the grants only upon incurring research and development expenditures. There were no future performance obligations related to the grants received from the IIA. As of September 30, 2022, the contingent liabilities with respect to grants received from the IIA, subject to repayment under these royalty agreements on future sales is $Nil. As of September 30, 2022, Saffron Tech received a total of $353 from the IIA
| NOTE 8:- | SUBSEQUENT EVENTS |
F-16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR AUDITED FINANCIAL STATEMENTS AND THE RELATED NOTES THAT APPEAR ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q AND THE FINANCIAL STATEMENTS AND RELATED NOTES THERETO FOR THE FISCAL YEAR ENDED DECEMBER 31, 20202021 AND THE RELATED MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, BOTH OF WHICH ARE CONTAINED IN OUR ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), ON MARCH 17, 2021.31, 2022. PAST OPERATING RESULTS ARE NOT NECESSARILY INDICATIVE OF RESULTS THAT MAY OCCUR IN FUTURE PERIODS. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT REFLECT OUR PLANS, ESTIMATES AND BELIEFS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS QUARTERLY REPORT.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws, and is subject to the safe-harbor created by such Act and laws. Forward-looking statements may include statements regarding our goals, beliefs, strategies, objectives, plans, including product and technology developments, future financial conditions, results or projections or current expectations These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties. Although we believe that the expectations reflected-in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our actual results may differ materially from those anticipated in these forward-looking statements. These forward-looking statements are made as of the date of this report, and we assume no obligation to update these forward-looking statements whether as a result of new information, future events, or otherwise, other than as required by law. In light of these assumptions, risks, and uncertainties, the forward-looking events discussed in this report might not occur and actual results and events may vary significantly from those discussed in the forward-looking statements. Further information on potential factors that could affect our business is described under the heading “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2022. Readers are also urged to carefully review and consider the various disclosures we have made in that report.
When used in this quarterly report, the terms “Seedo,“Sativus,” “the Company,” “we,” “our,” and “us” refer to SEEDOSATIVUS TECH CORP., a Delaware corporation, unless otherwise indicated or as otherwise required by the context.
Company Overview
Our Business
SEEDO CORP. (f/k/a GRCR Partners Inc.)Sativus Tech Corp. (the “Company”, “Our” or “We”) was formed on January 16, 2015, under the laws of the State of Delaware. Prior to September 14,14th, 2018, we werethe Company was solely a provider of risk management and asset protection (“RAP”) services for businesses, individuals and families. On September 14,14th, 2018, (“the Company”) executed an Acquisition and Share Exchange Agreement with Eroll Grow Tech Ltd. (“Eroll”), an Israeli Corporation that was formed on May 18,18th, 2015, under the laws of the state of Israel. On September 17, 2018, the Board of Directors adopted an Amendment to its Articles, changing the name of the Corporation to SEEDO CORP. The StateSince the Acquisition of Delaware effectuated said change on September 21, 2018;Eroll and on November 5, 2018, FINRA granted effectiveness for said changethrough to December 31, 2019, Eroll produced a plant growing device managed and controlled by an artificial intelligent algorithm, allowing consumers to grow their own herbs and vegetables effortlessly from seed to plant, while providing optimal conditions to assure premium quality produce year-round. On December 13, 2021, the new ticker Symbol “SEDO”. Post-Acquisition, SEEDO CORPCompany changed its main business focusname from Seedo Corp to Eroll’s business activities while continuing with some RAP activities.Sativus Tech Corp.
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On July 19, 2020, the Company formed a new wholly-owned subsidiary in Israel, Hachevra Legiduley Pkaot Beisrael Ltd. (the “New Subsidiary”), to develop a fully automated and remotely managed system for growing saffron and other vegetables. On November 5, 2020, the New Subsidiary changed its name to Saffron-Tech Ltd. (or “Saffron”(“Saffron Tech”).
The Company, through Saffron Tech, is focusing on its in-house research and development of agriculture technology products, among others, in the fields of exotic plants and mushrooms. Saffron Tech plans to roll out its proof of concept in the coming months. This technology will provide turnkey automated growing containers for high-quality, high-yield saffron all year round. The Company is in advanced stages of developing and testing a fully automated and remotely managed system for growing high-quality, high-yield saffron anywhere and anytime.
The Company’s technology offers a controlled environment based on the Company’s deep knowledge in plant biology. The technology provides optimal conditions for each stage of the plant’s development to reach optimal product quality.
The Company’s proof of concept utilizes the “Grow Next to Consumer” policy and is therefore sustainable and fit the COVID-19 restrictions on transport. It is also environmentally friendly, using economic levels of water, space, fertilizer, and energy. Accounting to the Company’s calculations, we believe that the controlled indoor growing area will produce ten times more yield compared to the same land area using traditional methods. The sealed environment eliminates the need for harmful pesticides and herbicides, producing a clean and safe product that is easy to control from anywhere. The Company’s solution is easily scalable and pre-designed to quickly grow operations.
Saffron is used in many industries, such as the food industry, particularly by famous chefs and Michelin starred restaurants, the natural cosmetics industry, and the natural medicine industry and as a dye in the textile industry. Medicinal claims as an anti-depressant, antioxidant, and antiseptic are constantly increasing.
The global saffron market size was valued at $1 Billion in 2019 and is anticipated to attain a revenue based CAGR of 7.3% from 2020 to 2027. The market is expected to grow over the next few years on account of demand from the pharmaceutical sector, particularly in countries with rapid population expansion.
Since the incorporation ofOn December 8, 2021, Saffron Tech announced it has hired employees and several consultants to commencebegun construction of a new state-of-the-art indoor farm that will help increase its production of the roll out of our proof of concept.saffron spice. Saffron Tech has signed several agreementsalready successfully completed two harvests of saffron using vertical farming technology at its initial location in Ganot, Israel. The Company’s mission with Israeli companies, including Growin Ltd (“Growin”) andthis new facility, located at Mavki’im, Israel, is to complete a third cycle to triple the Israeli Ministryamount of Agricultures research organization – The Volcani Center (“Volcani”). Growin is an ownersaffron produced annually. Traditional agriculture only produces one harvest of proprietary systems for indoor agriculture and Saffron Tech has acquired the exclusive right to market, sell and commercialize our product based on the Growin’s hydroponic machines. Volcani will assist Saffron Tech in writing the protocols required to grow saffron inper year through a controlled and automated way, including the use of robotics and AI.labor-intensive process.
On May 4,December 9, 2021, FINRA gave final approval for the Company announced that it had entered a research agreement with The Polytechnic UniversityCompany’s 1-for-10 consolidation, or reverse split, of Valencia, Spain,our issued and outstanding common shares, as noted in our 8K of December 13, 2021. Except where otherwise indicated, all share and per share data in these financial statements have been retroactively restated to develop vertical farming protocols for saffron with Professor Rosa V. Molina . Professor Molina has extensive knowledge in the cultivation of saffron from her university research programs in Spain and will join the scientific committee of the project.reflect said consolidation.
On August 10, 2021,January 6, 2022, the Company announced that its subsidiary, Saffron Tech, has been awarded a $1 million grant fromplanted approximately 25,000 Saffron bulbs in fields in the Israeli Innovation Authority.Golan Heights, in Norther Israel. The new grant will allow Saffron Tech to accelerate its R&D program building on its groundbreaking developmentplanation is being managed in conjunction with the Shamir Research Institute, which operates under the auspices of the protocols for growing saffron using vertical farming technology. The funds will be allocated to enable the company expand its facilities, allowing it to grow more saffron for commercial use.Haifa University, Israel.
ChangesOn April 4, 2022, the Company appointed Mrs. Tal Wilk-Glazer as Director and CEO of the Company. Gadi Levin stepped down as CEO and remains the Company’s CFO. On the same day, Mr. Moshe Bar Siman Tov and Mrs. Iris Ginsburg resigned from their positions as Directors. Their resignation was not the result of any disputes with the Company.
From June 2022 through to August 2022, Saffron Tech entered into a number of Simple Agreement for Future Equity (“2022 SAFES”) agreements with third parties for gross proceeds of approximately $239.
During July 2022, Saffron Tech received a total of $100 in respect of the Boardissuance of Directors76,890 shares to third party investors at price of NIS 4.5 per share (approximate $1.36 per share). The investors also received an option to convert the shares of Saffron Tech into shares of the Company. The option expires on January 1, 2023.
On August 24, 2021, the Company announced the appointment of Avi Stern to its board of directors as an independent director. Stern currently serves as the Vice President of Finance at Wix.com, a leading cloud-based website development platform with millions of users worldwide.
On November 1, 2021,30, 2022, the Company announced that Saffron Tech has announced its intention to raise up to 5 million New Israeli Shekels (“NIS”) (approximately $1.5 million) at a majoritypre-money valuation of NIS 32.5 million (approximately $10 million) through the Israeli crowd funding platform – Pipelbiz. Assuming the maximum amount is raised, the Company will own approximately 61% of the Company’s shareholders brought forth a Shareholder’s Action by Written Consent to remove David Freidenberg and Gil Feiler from the Board of DirectorsSaffron Tech. As of the Company, and immediately appoint Shmuel Yannay, Moshe Bar Siman Tov and Iris Tova Ginsburg to its Boardday of Directors. The three new directors will join Avi Stern, an incumbent Independent Director, in comprisingthis report the Board of Directors of Seedo.
Financings
During January 2021 through to February 16, 2021, the Company rasied $530 thousand from third party investors in respect of the issuance of convertible promissory notes (“2021 Promissory Notes”). The Promissory Notes bear no interest, are convertible into Shares based on a fixed conversion price of $0.10 per share and mature between six and 24 months from the issuance date. Pursuant to 2021 Promissory Notes one of the investors received warrants to purchase 330,000 Shares with a per share exercise price of $0.15 which warrants are exercisable through January 3, 2021.Saffron Tech has raised $ 0.6 million.
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Conversion of Notes
From June 2021 through to August 2021, certain Promissory Notes holders converted their notes in the amount of $805 into 8,050,000 shares.
Issuance of Restricted Share Units (“RSU’s”)
During the nine month period ended September 30, 2021, the Company issued 600,000 RSU’s, which were exercised into 600,000 shares of the Company. A further 130,250 shares were also issued during the same period, in respect of exercised RSU’s that had been granted during 2020.
Grants of shares
From July 2021 through to August 2021, the Company granted three directors 471,336 shares.
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited condensed financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.
These unaudited condensed financial statements should be read in conjunction with our December 31, 20202021, annual financial statements included in our Form 10-K, filed with the SEC on March 17, 2021.31, 2022.
Going Concern
Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the auditedcondensed consolidated financial statements for the yearnine months ended December 31, 2020September 30, 2022, regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Our unaudited condensed financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited condensed financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. There is no assurance that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.
Financing
We will require additional financing to implement our business plan, which may include joint venture projects and debt or equity financings. The nature of this enterprise and constraint of positive cash flow places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until such time as an economically viable profits and losses can be demonstrated. Therefore, any debt financing of our activities may be costly and result in substantial dilution to our stockholders.
Future financing through equity investments is likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other derivative securities, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and financing, including investment banking fees, legal fees, accounting fees, and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition.
Our ability to obtain needed financing may be impaired by such factors as the capital markets, both generally and specifically in the Agro-tech industry, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenue from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.
There is no assurance that we will be able to obtain financing on terms satisfactory to us, or at all. We do not have any arrangements in place for any future financing. If we are unable to secure additional funding, we may cease or suspend operations. We have no plans, arrangements, or contingencies in place in the event that we cease operations.
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Results of Operations
Nine months ended September 30, 20212022, compared to the Ninenine months ended September 30, 20202021
Operating Expenses
Research and development expenses for the nine months ended September 30, 2021,2022, were $443$494 thousand compared to $2$443 thousand for the same period in 2020. This increase was primarily due to cost incurred2021. Gross research and development expenses were $704 thousand, offset by the cancellation of share-based expenses from previous years in the amount of $105 thousand and amounts received in respect of participation in expenses by the Israeli Innovation Authority in the amount of $105 thousand (previous period – nil) which reduced total research and development of our prototype technology.expenses for the nine months ended September 30, 2022, to $494 thousand.
Total marketing expenses for the nine months ended September 30, 2021,2022, were $131 thousand$nil compared to $nil$131 thousand for the same period in 2020.2021.
TotalGeneral and administrative (“G&A”) expenses for the nine months ended September 30, 2022, were $490 thousand compared to $1,020 thousand for the same period in 2021. Gross general and administrative expenses were $596 thousand, offset by the cancellation of share-based expenses from previous year in the amount of $106 thousand which reduced total general and administrative expenses for the nine months ended September 30, 2021, were $1,020 thousand compared2022, to $123, for the same period in 2020. This was primarily due to an increase in stock-based compensation and professional expenses.$490 thousand.
Total financial expenses for the nine months ended September 30, 2021, were $1,3402022, was $117 compared to $898$1,340 thousand expenses for the same period in 2020.2021. The increase of $442 thousand was primarilyreason for the change is due to an increase in chargesfinancial losses related to interest and to the revaluationrevaluations of the convertible component of thein convertible loans.
Three months ended September 30, 20212022, compared to the three months ended September 30, 20202021
Operating Expenses
Research and development expenses for the three months ended September 30, 2021,2022, were $125$218 thousand compared to $2$125 thousand for the same period in 2020. This increase was primarily due to cost incurred in the development of our prototype technology.2021.
Total marketing expenses for the three months ended September 30, 2021,2022, were $50 thousand$nil compared to $nil$50 thousand for the same period in 2020.2021.
Total generalGeneral and administrative (“G&A”) expenses for the three months ended September 30, 2021,2022, were $315$189 thousand compared to $123,$315 thousand for the same period in 2020.2021.
Total financial expenses for the three months ended September 30, 2021, were $98 thousand2022, was $435 compared to $290$98 thousand for the same period in 2020.2021. The difference of $192 thousand was primarilyreason for the change is due to a decrease in the fair valuefinancial losses related to revaluations of a convertible component of thein convertible loans.
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Liquidity and Capital Resources
Overview
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. Since inception on January 16, 2015, the Company hadhas a cumulative deficit of $20,247$21,973 thousand and a working capital deficit of $1,714$3,395 thousand as of September 30, 2021.2022. Our future growth is dependent upon achieving further purchase orders and execution, management of operating expenses and ability of the Company to obtain the necessary financing to fund future obligations, and upon profitable operations.
Historically, we have financed our cash flow and operations from the initial contribution of our majority shareholder and by raising equity and convertible loans.
As of September 30, 2021,2022, we had current assets of $1,106$242 thousand consisting of $916$191 thousand in cash and cash equivalents, $19$11 thousand in restricted depositscash and $171$40 thousand in other current assets.
We had $2,820$3,637 thousand in current liabilities consisting of $38$111 thousand in accounts payable and other accountscurrent liabilities, $1,886$2,176 thousand in Convertible loans, $1,302 thousand in convertible component, $15 thousand in short-term lease liability and $896 BCF liability.$33 thousand accounts payables.
As of December 31, 2020,2021, we had current assets of $418$963 thousand consisting of $411$866 thousand in cash and cash equivalents, and $7$20 thousand in restricted cash and $77 thousand in prepaid expenses and other currents assets.receivables. We had $1,889$3,358 thousand in current liabilities, which consisted of $100 thousand in other accounts liabilities, $51$12 thousand in accounts payable, $1,128$110 thousand in convertibleother accounts payable, $2,994 thousand Convertible loans, and $610$222 thousand in BCF liability.liability, and $20 thousand in short term lease liability
We had a negative working capital of $1,714$3,395 thousand and $1,471$2,395 thousand as of September 30, 20212022, and December 31, 2020,2021, respectively.
Our currentCurrent liabilities as of September 30, 20212022, were $2,820$3,637 thousand compared to $1,889$3,358 thousand as of December 31, 2020.2021.
During the nine months ended September 30, 2021,2022, we had negative cash flowsflow from operations of $1,326$732 thousand which was mainly the result of a net loss of $2,929$1,101 thousand, share-based expenses of $172 thousand and offset in part by changes in the fair valuefinancial gains from revaluations of convertible loans of $166 thousand, changes in the fair value of a convertible component in convertible loans in the amount of $1,222 thousand and share based compensation of $496.
During the nine months ended September 30, 2020, we had negative cash flows from operations of $63 which was mainly the result of a net income of $8,570 thousand, offset mainly by a gain from the sale of a subsidiary of $9,593 thousand and financial expenses related to convertible loans and warrant of $897$100 thousand.
During the nine months ended September 30, 2021,2022, we had negative cash flowsflow from investing activities of $190 thousand compared to a negative cash flow from investing activities of $31 thousand compared to a non cash flow effect from investing activities during the nine months ended September 30, 2020.2021. The increase is due to investment in leasehold improvements.
During the nine months ended September 30, 2021,2022, we had positive cash flowsflow from financing activities of $1,862$248 thousand compared to $300a positive cash flow from financing activities of $1,862 during the nine months ended September 30, 2020.2021. Cash flowsflow from financing activities in the nine months ended September 30, 2022, was mainly a result of proceeds of convertible loans in the amount of $239 thousand, and proceeds from issuance of shares to minority interests in a subsidiary in the amount of $100 thousand. Cash flow from financing activities in the nine months ended September 30, 2021, was mainly a result of proceeds of convertible loans in the amount of $530 thousand, and proceeds from the issuance of shares to minority interests in a subsidiary in the amount of $1,406 thousand, offset by the repayment of a loan of $74 thousand.
We expect that our existing cash and cash equivalents as well as expected revenues will enable us to fund our operations and capital expenditure requirements through to September 2022. Our requirements for additional capital during this period will depend on many factors.
We may seek to raise any necessary additional capital through a combination of private or public equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights, future revenue streams, or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through private or public equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. We have a stockholders’ deficit of $1,7 million and a working capital deficiency of $1,714 thousand at September 30, 2021 as well as negative operating cash flows. These conditions raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of our Quarterly Report on Form 10-Q, an evaluation was carried out by management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of September 30, 2021.2022. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
During evaluation of disclosure controls and procedures as of September 30, 20212022, conducted as part of our preparation of the quarterly unaudited condensed financial statements, management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures and concluded that our disclosure controls and procedures were not effective. The basis for these conclusions are discussed in our annual report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 17, 2021.
Changes in Internal Control Over Financial Reporting
As of the end of the period covered by this report, there have been no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II- Other Information
Item 6. Exhibits
| Exhibit Number | Description | |
| 10.1 | Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 2, 2019). | |
| 31.1* | Rule 13a-14(a) Certification of the Chief Executive Officer | |
| 31.2* | Rule 13a-14(a) Certification of the Chief Financial Officer | |
| 32.1** | Section 1350 Certification of Chief Executive Officer | |
| 32.2** | Section 1350 Certification of Chief Financial Officer | |
| Inline XBRL Instance Document. | ||
| Inline XBRL Taxonomy Extension Schema Document. | ||
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||
| Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||
| Inline XBRL Taxonomy Extension Label Linkbase Document. | ||
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith. |
| * | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.
| Dated: November | By: | /s/ |
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