| Significant Accounting Policies | NOTE 2–
SIGNIFICANT ACCOUNTING POLICIES The financial statements were prepared
in accordance with accounting principles generally accepted in the United States of America (US GAAP).
A. Use of estimates in the preparation of financial statements The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported
amounts of expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these financial
statements, the most significant estimates and assumptions relate to the going concern assumptions and convertible loans.
B. Functional currency A majority of the Group’s
revenues is generated in dollars. In addition, most of the Group’s costs are denominated and determined in dollars and in
new Israeli shekels. Management believes that the dollar is the currency in the primary economic environment in which the Group
operates. Thus, the functional and reporting currency of the Group is the dollar. Accordingly, monetary accounts maintained
in currencies other than the dollar are remeasured into dollars in accordance with Accounting Standards Codification (ASC) 830,
“Foreign Currency Matters”. All transaction gains and losses of the remeasured monetary balance sheet items are reflected
in the statements of operations as financial income or expenses, as appropriate.
C. Principles of consolidation The consolidated financial statements
include the accounts of the Company and its subsidiary, Save Foods Ltd. All significant intercompany balances and transactions
have been eliminated on consolidation.
D. Cash and cash equivalents, and Restricted cash Cash equivalents are short-term
highly liquid investments which include short term bank deposits (up to three months from date of deposit), that are not restricted
as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired. Restricted cash as of December 31,
2019 included a NIS 132,000 ($38,194) collateral account for the Company’s corporate credit cards, loan and a stand-by letter
of credit issued in favor of a landlord and is classified in current assets.
E. Accounts receivables Accounts receivables are stated
at their net realizable value. The allowance against gross accounts receivables reflects the best estimate of losses inherent in
the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and
other currently available information. As of December 31, 2019, and 2018, an allowance for doubtful debts in the amount of $24,702
and $24,623, respectively, is reflected in net accounts receivables. Accounts receivables are written off after all reasonable
means to collect the full amount have been exhausted.
F. Property, plant and equipment, net
1. Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. When an asset is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition is reflected in the Statements of Operations and Comprehensive Loss.
2. Rates of depreciation:
%
Furniture and office equipment 7-15
Machines 10-15
Computers 33.3
Vehicle 15
G. Impairment of long-lived assets The Group’s long-lived assets
are reviewed for impairment in accordance with Accounting Standards Codification (“ASC”) Topic 360, “Property,
Plant and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the
future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. During the year ended
December 31, 2018, the Company incurred impairment losses in the amount of $36,700 attributed to a machine that the Company discontinued
its use during the year. The impairment expenses was recorded in Research and Development expenses.
H. Deferred income taxes The Group accounts for income taxes
in accordance with ASC Topic 740, “Income Taxes”. Accordingly, deferred income taxes are determined utilizing the asset
and liability method based on the estimated future tax effects of differences between the financial accounting and the tax bases
of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the enacted tax rates expected
to be in effect when these differences reverse. Valuation allowances in respect of deferred tax assets are provided for, if necessary,
to reduce deferred tax assets to amounts more likely than not to be realized. The Group accounts for uncertain
tax positions in accordance with ASC Topic 740-10, which prescribes detailed guidance for the financial statement recognition,
measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements. According to ASC
Topic 740-10, tax positions must meet a more-likely-than-not recognition threshold. The Company’s accounting policy is to
classify interest and penalties relating to uncertain tax positions under income taxes, however the Company did not recognize such
items in its fiscal 2019 and 2018 financial statements and did not recognize any liability with respect to an unrecognized tax
position in its balance sheets.
I. Liability for employee rights upon retirement Save Foods Ltd’s liability
for employee rights upon retirement with respect to its Israeli employees is calculated, pursuant to Israeli severance pay law,
based on the most recent salary of each employee multiplied by the number of years of employment, as of the balance sheet date.
Employees are entitled to one month’s salary for each year of employment, or a portion thereof. Save Foods Ltd makes monthly
deposits to insurance policies and severance pay funds. The liability of the Company is fully provided for. The deposited funds include profits
accumulated up to the balance sheet date. The deposited funds may be withdrawn upon the fulfillment of the obligation pursuant
to Israeli severance pay laws or labor agreements. The value of the deposited funds is based on the cash surrender value of these
policies, and includes immaterial profits/losses. Severance expenses for the years
ended December 31, 2019 and 2018, amounted to $24,000 and $9,919, respectively.
J. Revenue recognition Revenues are recognized when delivery
has occurred and there is persuasive evidence of an agreement, the fee is fixed or determinable and collection of the related receivables
is reasonably assured and no further obligations exist. Revenues from sales of products
are recognized when title and risk and rewards for the products are transferred to the customer.
K. Research and development expenses Research and development expenses
are charged to operations as incurred.
L. Royalty-bearing grants Royalty-bearing grants from the
Israeli Innovation Authority (the “IIA”) for funding approved research and development projects are recognized at the
time Save Foods Ltd is entitled to such grants (i.e. at the time that there is reasonable assurance that the Company will comply
with the conditions attached to the grant and that there is reasonable assurance that the grant will be received), on the basis
of the costs incurred and reduce research and development costs. The cumulative research and development grants received by the
Company from inception through December 2019 amounted to $121,753. As of December 31, 2019, and 2018,
the Company did not accrue for or pay any royalties to the IIA since no revenues were recognized in respect of the funded projects.
M. Inventories Inventories are valued at the lower
of cost or net realizable value. Cost of raw and packaging materials, purchased products, manufactured finished products and products
in process are determined on the average costs basis. The Company regularly reviews its
inventories for impairment and reserves are established when necessary.
N. Basic and diluted loss per ordinary share Basic loss per ordinary share is
computed by dividing the loss for the period applicable to ordinary shareholders, by the weighted average number of shares of common
stock outstanding during the period. Securities that may participate in dividends with the shares of common stock (such as the
convertible preferred) are considered in the computation of basic loss per share under the two class method. However, in periods
of net loss, only the convertible preferred shares are considered, since such shares have a contractual obligation to share in
the losses of the Company. In computing diluted loss per share,
basic loss per share is adjusted to reflect the potential dilution that could occur upon the exercise of potential shares. Accordingly,
in periods of net loss, no potential shares are considered.
O. Stock-based compensation The Company measures and recognizes
the compensation expense for all equity-based payments to employees based on their estimated fair values in accordance with ASC
718, “Compensation-Stock Compensation”. Share-based payments including grants of stock options are recognized in the
statement of comprehensive loss as an operating expense based on the fair value of the award at the date of grant. The fair value
of stock options granted is estimated using the Black-Scholes option-pricing model. The Company has expensed compensation costs,
net of estimated forfeitures, applying the accelerated vesting method, over the requisite service period or over the implicit service
period when a performance condition affects the vesting, and it is considered probable that the performance condition will be achieved. Share-based payments awarded to
consultants (non-employees) are accounted for in accordance with ASC Topic 505-50, “Equity-Based Payments to Non-Employees”.
P. Fair Value Measurements The Company measures and discloses
fair value in accordance with the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification
820, Fair Value Measurements and Disclosures (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework
and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements.
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that
should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering
such assumptions there exists a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1 - unadjusted quoted prices
are available in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement
date Level 2 – pricing inputs are
other than quoted prices in active markets that are directly observable for the asset or liability or indirectly observable through
corroboration with observable market data. Level 3 – pricing inputs are
unobservable for the non-financial asset or liability and only used when there is little, if any, market activity for the non-financial
asset or liability at the measurement date. The inputs into the determination of fair value require significant management judgment
or estimation. Level 3 inputs are considered as the lowest priority within the fair value hierarchy. This hierarchy requires the Company
to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The fair value of cash and cash
equivalents is based on its demand value, which is equal to its carrying value. Additionally, the carrying value of all other short
term monetary assets and liabilities are estimated to be equal to their fair value due to the short-term nature of these instruments.
Q. Concentrations of credit risk Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents as well as certain other current
assets that do not amount to a significant amount. Cash and cash equivalents, which are primarily held in Dollars and New Israeli
Shekels, are deposited with major banks in Israel and United States. Management believes that such financial institutions are financially
sound and, accordingly, minimal credit risk exists with respect to these financial instruments. The Company does not have any significant
off-balance-sheet concentration of credit risk, such as foreign exchange contracts, option contracts or other foreign hedging arrangements. As of December 31, 2018, the Company
has an unutilized credit line of approximately $16,000 with an Israeli bank (zero for the year ended December 31, 2019).
R. Contingencies The Company records accruals for
loss contingencies arising from claims, litigation and other sources when it is probable that a liability has been incurred and
the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information
becomes available. Legal costs incurred in connection with loss contingencies are expensed as incurred.
S. New Accounting Pronouncements Adopted in Fiscal Year 2019 Recently
adopted accounting pronouncements Update
No. 2016-02 (Topic 842) “Leases”. Topic 842 supersedes the lease requirements in Accounting Standards Codification
(ASC) Topic 840, “Leases”. Under Topic 842, lessees are required to recognize assets and liabilities on the balance
sheet for most leases and provide enhanced disclosures. ASU No. 2016-02 is effective for interim and annual reporting periods beginning
after December 15, 2018. In July 2018, the FASB issued amendments in ASU 2018-11, which provide a transition election to not restate
comparative periods for the effects of applying the new standard. This transition election permits entities to change the date
of initial application to the beginning of the earliest comparative period presented, or retrospectively at the beginning of the
period of adoption through a cumulative-effect adjustment. The adoption of the new guidance did not have a material impact on the
consolidated statement of operations. In June
2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU
changes the model for the recognition of credit losses from an incurred loss model, which recognized credit losses only if it was
probable that a loss had been incurred, to an expected loss model, which requires the Company to estimate the total credit losses
expected on the portfolio of financial instruments. This standard is effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years. The adoption of the new guidance did not have a material impact on the consolidated
statement of operations. Recently
Issued Accounting Pronouncements In December
2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which
removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income
taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes
for tax goodwill and allocating taxes to members of a consolidated group. This standard is effective for interim and annual periods
in fiscal years beginning after December 15, 2020, and early adoption is permitted. We are currently assessing the timing and
impacts of adopting this standard and do not expect it to have a material impact on the Company. |
