The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1c to the financial statements, the Company has suffered recurring losses from operations, has a working capital deficiency, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1c. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
U.S. dollars in thousands, except share and per share data
|
|
|
|
|
September 30,
|
|
|
|
Note
|
|
|
2018
|
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
$
|
472
|
|
|
$
|
744
|
|
Restricted bank deposit
|
|
|
|
|
|
3
|
|
|
|
242
|
|
Other accounts receivable
|
|
|
3
|
|
|
|
1,217
|
|
|
|
363
|
|
Investment in Warrants
|
|
|
|
|
|
|
90
|
|
|
|
-
|
|
Inventory
|
|
|
|
|
|
|
122
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
|
|
|
|
1,904
|
|
|
|
1,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted bank deposit
|
|
|
|
|
|
|
56
|
|
|
|
-
|
|
Property and equipment, net
|
|
|
4
|
|
|
|
1,174
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
|
|
$
|
3,134
|
|
|
$
|
1,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loan
|
|
|
8
|
|
|
$
|
69
|
|
|
$
|
-
|
|
Trade payables
|
|
|
5
|
|
|
|
710
|
|
|
|
44
|
|
Convertible loans
|
|
|
9
|
|
|
|
1,057
|
|
|
|
-
|
|
Loan from related parties
|
|
|
|
|
|
|
350
|
|
|
|
-
|
|
Advances from customers
|
|
|
|
|
|
|
3,208
|
|
|
|
1,263
|
|
Other accounts payable
|
|
|
6
|
|
|
|
1,134
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
|
|
|
|
6,528
|
|
|
|
1,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDER'S DEFICIENCY
|
|
|
11
|
|
|
|
|
|
|
|
|
|
Ordinary Shares of $ 0.0001 par value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized: 500,000,000 shares at September 30, 2018 and 2017; Issued and Outstanding: 15,000,000 and 10,358,219 shares at September 30, 2018, and 2017, respectively
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Additional Paid in capital
|
|
|
|
|
|
|
3,419
|
|
|
|
1,297
|
|
Accumulated deficit
|
|
|
|
|
|
|
(6,814
|
)
|
|
|
(1,666
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders' deficiency
|
|
|
|
|
|
|
(3,394
|
)
|
|
|
(368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' deficiency
|
|
|
|
|
|
$
|
3,134
|
|
|
$
|
1,363
|
|
*) Represents an amount less than $1.
The accompanying notes are an integral part of the consolidated financial statements.
SEEDO CORP.
CONSOLIDATED STATEMENTS OF
OPERATIONS
U.S. dollars in thousands, except share and per share data
|
|
|
|
|
Year ended
September 30,
|
|
|
|
Note
|
|
|
2018
|
|
|
2017
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
|
$
|
2,007
|
|
|
$
|
532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
|
|
|
|
|
|
815
|
|
|
|
187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
|
|
|
2,127
|
|
|
|
330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
|
|
|
4,949
|
|
|
|
1,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
10
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses, net
|
|
|
13
|
|
|
|
209
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
$
|
5,148
|
|
|
$
|
1,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
|
|
|
|
$
|
(0.49
|
)
|
|
$
|
(0.11
|
)
|
Weighted average number of Ordinary shares used in computing basic and diluted loss per share
|
|
|
|
|
|
|
10,563,916
|
|
|
|
9,668,056
|
|
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
DEFICIENCY
U.S. dollars in thousands, except share and per share data
|
|
Ordinary Shares
|
|
|
Additional Paid
in capital
|
|
|
Accumulated
deficit
|
|
|
Total
Shareholders'
Deficiency
|
|
|
|
Number
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2016
|
|
|
9,298,222
|
|
|
|
1
|
|
|
|
335
|
|
|
|
(564
|
)
|
|
|
(228
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Ordinary shares
|
|
|
1,059,997
|
|
|
|
*
|
|
|
|
962
|
|
|
|
-
|
|
|
|
962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,102
|
)
|
|
|
(1,102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2017
|
|
|
10,358,219
|
|
|
|
1
|
|
|
|
1,297
|
|
|
|
(1,666
|
)
|
|
|
(368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Ordinary shares
|
|
|
213,859
|
|
|
|
*
|
|
|
|
237
|
|
|
|
-
|
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares with respect to the Reverse Merger
|
|
|
369,000
|
|
|
|
*
|
|
|
|
(349
|
)
|
|
|
-
|
|
|
|
(349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible loan
|
|
|
1,500,000
|
|
|
|
*
|
|
|
|
1,244
|
|
|
|
-
|
|
|
|
1,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Based Compensation to non-employees
|
|
|
2,558,922
|
|
|
|
*
|
|
|
|
948
|
|
|
|
-
|
|
|
|
948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
42
|
|
|
|
-
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,148
|
)
|
|
|
(5,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2018
|
|
|
15,000,000
|
|
|
|
1
|
|
|
|
3,419
|
|
|
|
(6,814
|
)
|
|
|
(3,394
|
)
|
*) Represents an amount less than $1.
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
U.S. dollars in thousands
|
|
Year ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(5,148
|
)
|
|
$
|
(1,102
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
23
|
|
|
|
1
|
|
Financial expenses related to convertible loans
|
|
|
179
|
|
|
|
-
|
|
Gain from changes in fair value of warrants
|
|
|
(10
|
)
|
|
|
-
|
|
Share based compensation expenses to non-employees
|
|
|
948
|
|
|
|
-
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase in other accounts receivable
|
|
|
(854
|
)
|
|
|
(60
|
)
|
Increase in inventory
|
|
|
(122
|
)
|
|
|
-
|
|
Increase in advances from customers
|
|
|
1,944
|
|
|
|
961
|
|
Increase in trade payables
|
|
|
389
|
|
|
|
26
|
|
Increase in other accounts Payable
|
|
|
696
|
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(1,955
|
)
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(906
|
)
|
|
|
(15
|
)
|
Increase (Decrease) in restricted bank deposit
|
|
|
183
|
|
|
|
(242
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(723
|
)
|
|
|
(257
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Issuance of Ordinary shares
|
|
|
737
|
|
|
|
963
|
|
Proceeds from convertible loans
|
|
|
1,600
|
|
|
|
-
|
|
Proceeds from short term loan
|
|
|
69
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
2,406
|
|
|
|
963
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in cash and cash equivalents
|
|
|
(272
|
)
|
|
|
733
|
|
Cash and cash equivalents at the beginning of the year
|
|
|
744
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the year
|
|
$
|
472
|
|
|
$
|
744
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment on credit
|
|
|
277
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
48
|
|
|
|
-
|
|
The accompanying notes are an integral part of the consolidated financial statements.
SEEDO CORP.
NOTES TO FINANCIAL STATEMENTS
U.S. dollars in thousands
|
a.
|
Seedo Corp. (the “Company”, “Our” or “We”), was incorporated on January 16, 2015 as GRCR Partners Inc. under the laws of Delaware. On September 17, 2018 the name of the company was changed to Seedo Corp. we were solely a provider of risk management and asset protection (“RAP”) services for businesses, individuals and families. Post-Acquisition and Exchange with Eroll Grow Tech, we have additionally acquired Eroll’s business as well ("acquisition Sunsidiary"). We produces the world’s first fully-automated 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.
|
Reverse merger
On September 14th, 2018, Eroll Grow Tech Ltd., an Israeli company and now the fully owned subsidiary of the Company, and the Company completed a merger of Acquisition. Eroll Grow Tech Ltd. survived the merger as a wholly-owned subsidiary of the Company.
Immediately following the transaction, Eroll Grow Tech Ltd. shareholders held approximately 87.4% of the outstanding Ordinary shares of the Company in exchange of 1,137 Ordinary shares of Eroll Grow Tech Ltd on a fully diluted basis while the pre-merger Company shareholders retained the remaining approximate 12.6%. The pre-merger Eroll Grow Tech Ltd. shareholders hold their existing shares of the company's Ordinary stock.
Pursuant to the terms and conditions of the Agreement, at the time of the Transaction, the Company issued 12,073,500 nonassessable shares of their Ordinary shares. Each of the holders of the pre-acquisition issued and outstanding Ordinary shares of Eroll Grow Tech Ltd. received their pro-rata allotment of these shares according to their then current shareholding in the Eroll Grow Tech Ltd. At the closing of this transaction, there were 15,000,000 Ordinary shares of the Company.
The Reverse Merger was accounted for as a reverse recapitalization which is outside the scope of ASC Topic 805, “Business Combinations” (“ASC 805”). Under reverse capitalization accounting, Eroll Grow Tech Ltd. is considered the acquirer for accounting and financial reporting purposes and acquired the assets and assumed the liabilities of the Company. The assets acquired and liabilities assumed are reported at their historical amounts. The annual consolidated financial statements of the Company reflect the operations of the acquirer for accounting purposes together with a deemed issuance of shares, equivalent to the shares held by the former stockholders of the legal acquirer and a recapitalization of the equity of the accounting acquirer. The annual consolidated financial statements include the accounts of the Company since the effective date of the reverse capitalization and the accounts of Eroll Grow Tech Ltd. since inception.
SEEDO CORP.
NOTES TO FINANCIAL STATEMENTS
U.S. dollars in thousands
Eroll Grow Tech Ltd. ("Eroll") was incorporated pursuant to the laws of the state of Israel on May 18, 2015.
Eroll has four wholly owned subsidiaries as followings:
Seedo Us Inc (Seedo Inc.) incorporated pursuant to the laws of the state of Colorado U.S in November 2016.
Seedo USA LLC (Seedo USA) incorporated pursuant to the laws of the state of Nevada U.S on March 2017. To this date the subsidiary has no activities.
Urban Auto Grow Inc (UAG) incorporated pursuant to the laws of the state of Nevada U.S on January 2017. To this date the subsidiary has no activities.
E.L Urban Auto Grow ltd (Urban) incorporated pursuant to the laws of the state of Cyprus on December 2017. To this date the subsidiary has no activities.
|
b.
|
The Company operates in the field of development, and distribution of home growing automated machines for variety of herbs and vegetables worldwide.
|
|
c.
|
The Company has not generated revenues since inception. The Company has an accumulated deficit and negative operating cash flow in the total amount of $ 6,814 and $ 1,955 as of September 30, 2018, respectively
,
and further losses are anticipated in the development of its business. Those factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due.
|
The Company intends to finance operating costs with existing cash, reducing operating spend and issuances of equity and debt securities, the Company will need to seek additional sources of financing.
The accompanying 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 year ended September 30, 2018, 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.
U.S. dollars in thousands
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
|
The consolidated financial statements have been prepared in accordance with U.S Generally Accepted Accounting Principles in the United States of America ("GAAP").
The preparation of the financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates
.
|
b.
|
Financial statements in U.S. dollars:
|
The costs of the Company are denominated in United States dollars (“dollars”). Some of the costs are incurred in New Israeli Shekels (NIS)
,
however the selling prices are linked to the Company’s price list which is determined in dollars, the budget is managed in dollars, financing activities including loans and cash investments, are made in U.S. dollars and the Company’s management believes that the dollar is the primary currency of the economic environment in which the Company and each of its subsidiaries operate. Thus, the dollar is the Company’s and its subsidiaries’ functional and reporting currency.
Accordingly, transactions denominated in currencies other than the functional currency are re-measured to the functional currency in accordance with Accounting Standards Codification (“ASC”) No. 830, “Foreign Currency Matters” at the exchange rate at the date of the transaction or the average exchange rate in the relevant reporting period. At the end of each reporting period, financial assets and liabilities are re-measured to the functional currency using exchange rates in effect at the balance sheet date. Non-financial assets and liabilities are re-measured at historical exchange rates. Gains and losses related to re-measurement are recorded as financial income (expense) in the consolidated statements of operations as appropriate.
|
c.
|
Principles of consolidation:
|
The consolidated financial statements include the financial statements of the
Company and its subsidiaries. Intercompany transactions and balances have been eliminated upon consolidation.
|
d.
|
Cash and cash equivalents:
|
Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less, at the date acquired.
|
e.
|
Restricted bank deposit:
|
Restricted bank deposit includes a deposit with maturities of more than three months and up to one year. The restricted bank deposit is presented at its cost, including accrued interest and is
composed of guarantees in respect of the Company's credit card and
manufacturing commitments
.
U.S. dollars in thousands
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
Inventories are stated at the lower of cost or net realizable value. The cost of inventories comprises costs of purchase and costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the Ordinary course of business less estimated costs of completion and estimated selling costs.
|
g.
|
Property and equipment:
|
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, at the following annual rates:
|
%
|
|
|
Computers, Software and peripheral equipment
|
33%
|
Mold & production Equipment
|
10%
|
Office furniture and equipment
|
10%
|
|
h.
|
Impairment of long-lived assets:
|
The Company’s long-lived assets are reviewed for impairment in accordance with ASC No. 360, “Property, Plant and Equipment” whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. Recoverability of assets (or asset group) 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 assets. 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 assets exceeds the fair value of the assets. During the years ended September 30, 2018, and 2017, no impairment losses have been recorded.
|
i.
|
Concentration of credit risks:
|
Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and restricted bank deposit. Cash and cash equivalents and restricted bank deposit are invested
in major banks in Israel and the United States
. Such funds in the Israel may be in excess of insured limits and are not insured in other jurisdictions.
Management believes that the financial institutions that hold the Company and its subsidiary' cash and cash equivalents have high credit ratings.
The Company, have no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
U.S. dollars in thousands
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
j.
|
Research and development expenses:
|
Research and development costs are charged to the consolidated statement of operations as incurred.
ASC 985-20, "Costs of Software to Be Sold, Leased, or Marketed", requires capitalization of certain software development costs subsequent to the establishment of technological feasibility.
Based on the Company's product development process, technological feasibility is established upon the completion of a working model. The Company does not incur material costs between the completion of a working model and the point at which the products are ready for general release. Therefore, research and development costs are charged to the consolidated statement of operations as incurred. The Company did not capitalized expenses as of September 30, 2018
.
Eroll's Grow Tech Ltd. liability for severance pay is pursuant to Section 14 of the Severance Compensation Act, 1963 ("Section 14"), pursuant to which all the Company’s employees are included under Section 14, and are entitled only to monthly deposits, at a rate of 8.33% of their monthly salary, made in the employee's name with insurance companies. Under Israeli employment law, payments in accordance with Section 14 release the Company from any future severance payments in respect of those employees. The fund is made available to the employee at the time the employer-employee relationship is terminated, regardless of cause of termination. The severance pay liabilities and deposits under Section 14 are not reflected in the consolidated balance sheets as the severance pay risks have been irrevocably transferred to the severance funds.
|
l.
|
Advances from customers
|
Advances from customers include primarily unearned amounts received in respect of sale and service contracts, but not yet recognized as revenues and therefore are classified as a liability.
|
m.
|
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.
U.S. dollars in thousands
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
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 (see note 9d and 9f). 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 measures Warrants related to the Convertible Loan Agreement (the “Agreement”) with Cannabics Pharmaceuticals (classified as asset) at fair value each reporting period until they will exercise or expire, with changes in the fair values being recognized in the Company’s consolidated statement of operations as other income (see Note 9). The fair value of the Warrants classified within Level 3.
The Company account for income taxes in accordance with ASC 740, "Income Taxes" which prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it not is more likely than not that a portion or all of the deferred tax assets will be realized. Based on ASC 740, a two-step approach is used to recognize and measure uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes.
U.S. dollars in thousands
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. As of September 30, 2018, and 2017, no liability for unrecognized tax positions has been recorded. Accordingly, no interest or penalties related to uncertain tax positions are recorded, either. It is the Company’s policy that any interest or penalties associated with unrecognized tax positions would be reflected in income tax expense.
|
o.
|
Basic and diluted net loss per share:
|
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of Ordinary shares outstanding during the period.
Diluted net loss per share is computed by giving effect to all potential shares of Ordinary shares, to the extent dilutive, all in accordance with ASC No. 260, “Earning Per Share”.
For the years ended September 30, 2018 and 2017, all outstanding shares warrants have been excluded from the calculation of the diluted net loss per share as all such securities are anti-dilutive for all years presented.
|
p.
|
Legal and other contingencies:
|
The Company accounts for its contingent liabilities in accordance with ASC 450 "Contingencies". A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. As of September 30, 2018 and 2017, the Company is not a party to any litigation that could have a material adverse effect on the Company's business, financial position, results of operations or cash flows (see Note 10). Legal costs incurred in connection with loss contingencies are expensed as incurred.
|
q.
|
Accounting for share-based payments:
|
S
hare compensation arrangements with non-employee service providers are accounted for in accordance ASC 505-50 Equity-Based Payments to Non-Employees, using a fair value approach. For the years ended September 30, 2018 and 2017 the Company recorded $948 and $0 in share-based compensation, respectively.
U.S. dollars in thousands
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
r.
|
Recent accounting pronouncements:
|
Revenue Recognition.
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, "Revenue from Contracts with customers"' new guidance that affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the FASB defines a five-step process which includes the following: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
ASU 2014-09, as amended, is effective for annual reporting periods beginning after December 15, 2017. Since the Company's inception until September 30, 2018 the Company did not recognize any revenues, the Company will evaluate the impact of this ASU on its consolidated financial statements and related disclosures
.
Leases. In February 2016, the FASB issued ASU 2016-02, “Leases”, on the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for in a manner similar to the accounting under existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASC 842 supersedes the previous leases standard, ASC 840, "Leases". This standard is effective for emerging growth companies for fiscal years beginning after December 15, 2019, and interim periods within fiscal years, beginning after December 15, 2020, and early adoption is permitted.
U.S. dollars in thousands
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
Recently Adopted Guidance
Business Combinations. In January 2017, the FASB issued ASU 2017-01 Business Combinations (Topic 805): “Clarifying the Definition of a Business”. ASU 2017-01 provides amendments to clarify the definition of a business and affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and should be applied prospectively as of the beginning of the period of adoption. Early adoption is permitted under certain circumstances. The Company adopted ASU 2017-01 on October 1, 2017 and it did not have an impact on its accounting and disclosures.
Certain financial statement data for prior years has been reclassified to conform to current year financial statement presentation.
NOTE 3:-
|
OTHER ACCOUNTS RECEIVABLE
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Government authorities
|
|
$
|
70
|
|
|
$
|
31
|
|
Prepaid expenses
|
|
|
22
|
|
|
|
8
|
|
Financial institutes
|
|
|
977
|
|
|
|
302
|
|
Advances to suppliers
|
|
|
148
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,217
|
|
|
$
|
363
|
|
U.S. dollars in thousands
NOTE 4
:-
PROPERTY AND EQUIPMENT, NET
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Cost:
|
|
|
|
|
|
|
Computers and peripheral equipment
|
|
$
|
40
|
|
|
$
|
13
|
|
Office furniture and equipment
|
|
|
11
|
|
|
|
2
|
|
Mold & production Equipment
|
|
|
955
|
|
|
|
-
|
|
Software
|
|
|
192
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,198
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation:
|
|
|
24
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
1,174
|
|
|
$
|
14
|
|
Depreciation expenses was $23 and $1 for the years ended September 30, 2018, and 2017, respectively.
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Open accounts
|
|
$
|
626
|
|
|
$
|
25
|
|
Notes payable
|
|
|
84
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
710
|
|
|
$
|
44
|
|
NOTE 6:-
OTHER ACCOUNTS PAYABLE
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Employees and payroll accruals
|
|
$
|
811
|
|
|
$
|
381
|
|
Government authorities
|
|
|
62
|
|
|
|
11
|
|
Professional service
|
|
|
140
|
|
|
|
18
|
|
Other payables
|
|
|
121
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,134
|
|
|
$
|
424
|
|
NOTE 7:- RELATED PARTIES
As of September 30, 2018 and September 30, 2017 the Company recorded a provision in the amount of $496 and $340 respectively, that classified in other accounts payable, and recorded expenses in the amount of $156 and $180 respectively, that classified in general and administrative expenses, to a related party for management services
.
U.S. dollars in thousands
NOTE 8:-
SHORT-TERM LOAN
|
|
|
|
|
September 30,
|
|
|
|
Interest %
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Short term loan
|
|
P+2.5%
|
|
|
$
|
69
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
69
|
|
|
$
|
-
|
|
NOTE 9:-
CONVERTIBLE LOANS
|
a.
|
On June 6, 2018 (the “Closing Date”), Eroll entered into a Loan Agreement (the “Agreement”) with a third party (the “Lender”), in a total amount of $500 (the “Loan”). The Loan bears interest at a monthly rate of 2%, for a year. Eroll shall pay the loan and interest within one year from the closing date. In future event when Eroll will merge with public company the lender has the right to convert the Loan and Interest to the public company shares, at a price per share equals to the lower of (1) a valuation of the Company of $15,000, or (2) the fair market value of the Company as shall be evaluated as of the Company's first raising via equity issuance. During the 12 months period ended September 30, 2018, the Company recorded an interest expenses in the total amount of $40. According ASC 470 the Company did not record a Beneficial Conversion Feature ("BCF") with respect to convertible loan since the contingent BCF shall not be recognized in earnings until the contingency is resolved.
|
|
b.
|
During July 2018, Eroll entered into a Convertible Loan Agreement (the “Agreement”) with a third party (the “Lender”), in a total amount of $250 (the “Convertible Loan”). The Convertible Loan bears interest at a monthly rate of 2%, for a year. Per the terms of the Agreement, if Eroll will merge with a public company the lender has the right to convert the Loan and Interest to the public company shares, at a price per share equals to the lower of (1) a valuation of the Company of $25,000, or (2) the fair market value of the Company as shall be evaluated as of the Company's first raising via equity issuance. If the future event will not occur Eroll shall pay the loan and interest within one year from the closing date.
|
During the 12 months period ended September 30, 2018, the Company recorded an interest expenses in the total amount of $12. According ASC 470 the Company did not record a BCF with respect to convertible loan since the contingent BCF shall not be recognized in earnings until the contingency is resolved.
|
c.
|
On August 2, 2018, Eroll received a loan in the amount of $100 with interest rate of 2% per month, the loan shall be paid on September 20, 2018, in case Eroll will merge into a traded company in the OTC the lender in eligible to receive 99,338 from the public company. As the exercise price of the nondetachable conversion feature was higher than the fair value of the share price at the commitment date, no BCF was recorded.
|
Since Eroll merged into an OTC traded entity no interest expenses were paid.
During October 2018, the Company converted the loan to 99,338 Ordinary shares.
|
d.
|
On August 10, 2018, Eroll Grow Tech (now the wholly owned subsidiary of the Company) entered into a Convertible Loan Agreement (the “Agreement”) with Cannabics Pharmaceuticals Inc., a US public company. Pursuant to the terms of the Agreement, Cannabics was obliged to invest up to $2,000 in Eroll Grow Tech. According to the agreement Cannabics Pharmaceuticals Inc. obligated itself to invest $500 upon execution of the Agreement, to be followed by second $500 tranche within 90 days and third tranche in the amount of $1,000 (the "Second loan"), 90 days following that. On August 13, 2018, Cannabics Pharmaceuticals Inc. invested the initial $500 pursuant to its obligations under the Agreement. According to the Agreement, the Company shall issue Cannabics Pharmaceuticals Inc. Ordinary shares of the Company representing 7.5% of the outstanding shares on a fully-diluted basis of the Company at the time of conversion. Following the Second Investment, Cannabics Pharmaceuticals Inc. shall hold 15% of the outstanding shares on a fully-diluted basis of the Company. In addition according to the agreement Cannabics Pharmaceuticals Inc. shall issue to the company 1,000,000 warrants with an exercise price of $ 2 per share, of the Cannabics Pharmaceuticals Inc. shares, for a period of 12 months. The warrants were issued On August 14, 2018. As of September 30, 2018, the warrants fair value amount was $90.
|
U.S. dollars in thousands
NOTE 9:-
COVERTIBLE LOANS (Cont.)
On September 12, 2018, Eroll and Cannabics Pharmaceuticals Inc. executed an Amendment to their Agreement noted supra solely amending the mechanics of the percentage of the Company shares Cannabics Pharmaceuticals Inc. may convert for its investment; though the finite amount remains unchanged. The Amendment were as follows: Cannabics Pharmaceuticals Inc. is to receive 10% of the ordinary shares, for the initial $1,000 financing (as opposed to 15%); and for the Second Loan the Cannabics Pharmaceuticals Inc. shall receive 5% of the Ordinary shares. On September 26, 2018, pursuant to the Agreement with Cannabics Pharmaceuticals Inc. noted supra, the Company received its 2nd installment of $500
.
According to the original agreement and the amendment stated above the Company issued Cannabics Pharmaceuticals Inc. 1,500,000 ordinary shares with 0.0001 par value, representing holding of 10% of the Ordinary shares.
At the conversion date the Company recorded the convertible loans at an aggregate fair value of $1,244, which is higher than the gross proceeds in the amount of $1,080, resulting a loss in the amount of $164
.
|
e.
|
During September 7, 2018, Eroll has entered into a Loan agreement with Cannabics Pharmaceuticals Inc. in the amount of $350 that shall have a one-year defined term and bears no interest. As part of the agreement Cannabics were also entitled to 3.6% of the Company's ordinary shares, in return to services provided as part the acquisition. As a result on September 27, 2018, the Company issued 540,000 Ordinary shares with 0.0001 par value with respect to share based compensation. Total share-based compensation expense in the consolidated statements of operations for the years ended September 30, 2018, and 2017, amounted to $ 448 and $ 0, respectively.
|
|
f.
|
During September 2018, Eroll received a loan from third party ("The Lender") in the amount of $250 that bears 2% monthly interest rate which will be paid if Eroll will not merge into an OTC traded entity, Eroll has two options for the repayment of the loan, 1) Eroll repays the loan alongside with the interest in one payment after 30 days, 2) Eroll can convert the loan and the interest to shares of any future traded entity that Eroll plans to merge into in the amount of 250,000 shares in exchange for 1 per share.
|
U.S. dollars in thousands
NOTE 9:-
COVERTIBLE LOANS (Cont.)
During October 2018, the loan was converted to 250,000 shares of the Company
.
Eroll also granted the Lender a warrant to purchase 100,000 Ordinary shares of the Company at an exercise price of $ 2 per share. The warrants were classified as shareholders' equity.
In accordance with ASC 470-20 as the liability is subject to subsequent fair value accounting and the freestanding warrants are classified in equity, the full fair value in amount of 208$ is allocated to the loan and the residual proceeds in an amount of 42$ allocated to the warrants.
Since Eroll merged into an OTC traded entity no interest expenses were paid.
The Company estimated the fair value of warrants using the Black-Scholes option pricing model using the following weighted average assumptions:
|
|
2018
|
|
|
|
|
|
Dividend yield
|
|
|
0
|
%
|
Risk-free interest rate
|
|
|
2.62
|
%
|
Expected term (in years)
|
|
|
2
|
|
Volatility
|
|
|
134.48
|
%
|
NOTE 10:-
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
On October 2017, Eroll entered into rental agreements for its office premises which will end on April 30, 2022. The agreement is secured by bank guarantees and monthly debentures equivalent with the lease payments.
The future minimum lease fees payable for the lease agreement as of September 30, 2018, are as following:
2019
|
|
$
|
124
|
|
2020
|
|
|
124
|
|
2021
|
|
|
124
|
|
2022
|
|
|
73
|
|
|
|
|
|
|
|
|
$
|
445
|
|
On September 2017 Eroll entered into a vehicle operating lease agreement for a period of 32 months. The future minimum lease fees payable for both above agreements as of September 30, 2018, are as following:
U.S. dollars in thousands
NOTE 11:-
|
SHAREHOLDERS' DEFICIENCY
|
|
a.
|
As of September 30, 2018, and 2017, the Company's share capital is composed as follows:
|
|
|
September 30, 2018
|
|
|
September 30, 2017
|
|
|
|
Authorized
|
|
|
Issued and outstanding
|
|
|
Authorized
|
|
|
Issued and outstanding
|
|
|
|
Number of shares
|
|
Ordinary shares of $0.0001 par value each
|
|
|
500,000,000
|
|
|
|
15,000,000
|
|
|
|
*500,000,000
|
|
|
|
*10,358,219
|
|
* Historically there were 1,114 private Eroll shares at a par Value of NIS 1 which were exchanged at a 1:9298 rate.
Each Ordinary share is entitled to receive dividend, participate in the distribution of the Company's net assets upon liquidation and to receive notices of participate and vote (at one vote per share) at the general meetings of the Company on any matter upon which the general meeting is authorized.
|
1.
|
During November 2017, Eroll Ltd issued a total of 23 Ordinary shares with NIS 1 par value, for a total proceeds of $237. As a result the total Eroll Ltd issued and outstanding shares were 1,137 Ordinary shares.
|
|
2.
|
On September 14, 2018, Eroll Ltd entered into a reversed merger agreement with Seedo Corp. (F/K/A GRCR Partners Inc.), as a result Erol's shares were exchanged with Seedo Corp. shares, 1,137 Eroll's Ordinary shares with 2,557,500 Seedo Corp. shares which represented 87.4% of Seedo Corp. shares at that time.
|
The Total number of Seedo Corp. shares at that time was 2,926,500 from which 2,557,500 were swapped With Eroll's shares and the remaining 369,000 were held by the Public.
|
3.
|
On the same day of the Merger the Company issued 8,014,578 shares to the current Shareholders that participated in the share swap on a pro-rata basis.
|
|
4.
|
On September 27, 2018, the Company issued 2,558,922 Ordinary shares with $0.0001 par value to the company consultants and to Cannabics (see also note 9e) as part of the services that were given in the merger. Fair value was estimated at $948.
|
|
5.
|
On September 27, 2018, the Company issued 1,500,000 Ordinary shares with $0.0001 par value, to Cannabics Pharmaceuticals Inc. as part of the conversion of the convertible loan. (see note 9d). Fair value was estimated at $1,244.
|
U.S. dollars in thousands
NOTE 12:-
|
TAXES ON INCOME
|
The Company’s subsidiaries are separately taxed under the domestic tax laws of the jurisdiction of incorporation of each entity.
|
a.
|
Corporate tax rates in U.S:
|
On December 22, 2017, the U.S. Tax Cuts and Jobs Act ("the TCJA") was signed into law, permanently lowering the corporate federal income tax rate from 35% to 21%, effective January 1, 2018. The company is subject to U.S. income tax laws. There are no significant provisions for U.S. federal, state or other taxes for any period.
|
b.
|
Corporate tax rates in Israel:
|
Presented hereunder are the tax rates relevant to Eroll in the years 2015-2018:
The Israeli statutory corporate tax rate and real capital gains were 23% in 2018, 24% in 2017, 25% in 2016 and 26.5% in 2015.
In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which reduces the corporate income tax rate to 24% effective from January 1, 2017 and to 23% effective from January 1, 2018.
|
c.
|
Deferred income taxes:
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows:
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Carry forward tax losses
|
|
$
|
1,056
|
|
|
$
|
145
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset before valuation allowance
|
|
|
1,056
|
|
|
|
145
|
|
Valuation allowance
|
|
|
(1,056
|
)
|
|
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuation allowance at September 30, 2018 and 2017.
|
d.
|
Net operating carry-forward losses for tax purposes:
|
As of September 30, 2018, the carry-forward losses amounting to approximately $4,590, which can be carried forward for an indefinite period.
U.S. dollars in thousands
NOTE 13:-
FINANCIAL EXPENSES, NET
|
|
Year ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Bank commissions
|
|
$
|
30
|
|
|
$
|
5
|
|
Financial expenses related to loans
|
|
|
227
|
|
|
|
-
|
|
Foreign currency transactions and other
|
|
|
(48
|
)
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
209
|
|
|
$
|
53
|
|
NOTE 14:- SUBSEQUENT EVENT
|
a.
|
During October 2018, the lender as mentioned in note 9f convert the convertible loan in the amount of $250 to 250,000 Ordinary shares $ 0.0001 par value.
|
|
b.
|
During October 2018, the lender as mentioned in note 9c decided to convert a convertible loan in the amount of $100 to 99,338 Ordinary shares $0.0001 par value.
|
|
c.
|
O
n November 5th, 2018, FINRA granted effectiveness for the Company’s name change to “Seedo Corp.” and new ticker Symbol “SEDO”.
|
|
d.
|
On November 6th, pursuant to the Convertible Loan Agreement with Cannabics Pharmaceuticals Inc. (See note 9d), the Company received $300 towards the second loan of $1,000 per the Agreement, and pursuant the Company issued 210,000 ordinary shares.
|
On December 10th, 2018, pursuant to the Convertible Loan Agreement with Cannabics Pharmaceuticals Inc. (See note 9d), the Company received the remaining $700, thus fulfilling Cannabics Pharmaceutical Inc.’s obligation of total investment of their $2,000 into our Company. And pursuant the Company issued 790,000 ordinary shares.
Following the agreement mentioned in note 9d, The Company shall pay the Cannabics Pharmaceuticals Inc. royalties in an amount equal to a percentage of the Company’s revenues starting of January 2019 sales as follows:
(a) Until the conversion or repayment of the third tranche ("Second Loan") in the amount of an additional $1,000, an amount equal to 2.5% of revenues
(b) Following the conversion or repayment of the Second Loan, an amount equal to 5% of revenues.
Notwithstanding the above, for the first year following the Second Loan closing date, The Company shall pay Cannabics minimum royalties of not less than $ 500.
U.S. dollars in thousands
NOTE 14:- SUBSEQUENT EVENT (Cont.)
In the event the Second Loan is converted into shares, the aggregate royalties to be paid hereunder will be capped at max $8,000.
|
e.
|
On November 29, 2018 the Company issued a total of 51,570 ordinary shares to a new investor for a price of $1.3 per share for a total consideration of $67.2.
|
|
f.
|
On December 4th, 2018, the Company executed a Convertible Debenture, Securities Purchase Agreement and ancillary agreements (collectively, the “Agreements”) with YAII PN, Ltd. Per the terms of the Agreements with YAII PN, the Company was tendered $550, which is open with right of redemption for two years. Prior to the maturity date of the Convertible Debenture, the Company, at its option, has the right to redeem in cash in part or in whole, the amounts outstanding provided that as of the date of the redemption notice (i) the VWAP of the Company’s Ordinary shares is less than $1.20 and (ii) there is no Equity Condition Failures as defined therein. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium equal to 20% of the outstanding amount being redeemed plus outstanding and accrued Interest.
|
|
|
Pursuant to the Agreements, we are utilizing the net proceeds for immediate cash infusion to expand our production facilities, as well as normative corporate working capital purposes.
|
There are no other restrictions on future financing transactions. The Agreement does not contain any right of first refusal, participation rights or penalties. YAII PN Ltd. has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our Ordinary shares during any time.
|
g.
|
On December 11th, 2018, the Company executed a Loan Agreement with 2622325 Ontario Limited, an Ontario corporation (the “Agreement”) under which the Company received $1,000. Per the terms of the Agreement, the loan is to be specifically utilized to increase production capacity of its automated grow units. The loan is to be repaid in full at the end of 180 days and bears 17.5% interest. Additionally, the Company has issued 33,333 Ordinary shares, and granted 333,333 Warrants with a strike price of $1.50 per Warrant, and 100,000 Warrants with a Strike Price of $ 2 per Warrant, all Warrants having a two-year life span,
|