CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
U.S.
dollars in thousands, except share and per share data
|
|
|
|
September 30
|
|
|
December 31
|
|
|
|
Note
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
94
|
|
|
$
|
921
|
|
Restricted bank deposit
|
|
|
|
|
151
|
|
|
|
87
|
|
Financial institute
|
|
|
|
|
328
|
|
|
|
830
|
|
Other accounts receivable
|
|
|
|
|
220
|
|
|
|
81
|
|
Advances to suppliers
|
|
|
|
|
1,350
|
|
|
|
328
|
|
Inventory
|
|
|
|
|
543
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
2,686
|
|
|
|
2,404
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
1,165
|
|
|
|
1,234
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
$
|
3,851
|
|
|
$
|
3,638
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Short-term loan
|
|
5
|
|
$
|
463
|
|
|
$
|
411
|
|
Trade payables
|
|
|
|
|
1,766
|
|
|
|
521
|
|
Convertible loans
|
|
7
|
|
|
-
|
|
|
|
771
|
|
Loan from related party
|
|
6
|
|
|
850
|
|
|
|
908
|
|
Advances from customers
|
|
|
|
|
2,442
|
|
|
|
3,016
|
|
Other accounts payable
|
|
|
|
|
1,466
|
|
|
|
1,121
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
6,987
|
|
|
|
6,748
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Convertible loan
|
|
7
|
|
|
234
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDER’S DEFICIENCY
|
|
8
|
|
|
|
|
|
|
|
|
Shares of common stock $0.0001 par value each
|
|
|
|
|
|
|
|
|
|
|
Authorized: 500,000,000 shares at September 30, 2019 and December 31, 2018; Issued and Outstanding: 20,440,477 and 16,198,578 shares at September 30, 2019 and December 31, 2018, respectively
|
|
|
|
|
2
|
|
|
|
2
|
|
Additional Paid in capital
|
|
|
|
|
15,465
|
|
|
|
5,410
|
|
Accumulated deficit
|
|
|
|
|
(18,837
|
)
|
|
|
(8,522
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ deficiency
|
|
|
|
|
(3,370
|
)
|
|
|
(3,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ deficiency
|
|
|
|
$
|
3,851
|
|
|
$
|
3,638
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
SEEDO
CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
U.S.
dollars in thousands, except share and per share data
|
|
|
|
Three months ended
September 30
|
|
|
Nine months ended
September 30
|
|
|
|
Note
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
$
|
310
|
|
|
$
|
-
|
|
|
$
|
703
|
|
|
$
|
-
|
|
Cost of revenues
|
|
|
|
|
562
|
|
|
|
-
|
|
|
|
1,142
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Loss
|
|
|
|
|
252
|
|
|
|
-
|
|
|
|
439
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
$
|
1,221
|
|
|
$
|
489
|
|
|
$
|
3,160
|
|
|
$
|
1,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
|
|
|
|
|
253
|
|
|
|
264
|
|
|
|
715
|
|
|
|
704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
|
|
1,299
|
|
|
|
1,286
|
|
|
|
3,422
|
|
|
|
1,841
|
|
Operating loss
|
|
|
|
|
3,025
|
|
|
|
2,039
|
|
|
|
7,736
|
|
|
|
4,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses
|
|
9
|
|
|
100
|
|
|
|
235
|
|
|
|
2,579
|
|
|
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
$
|
3,125
|
|
|
$
|
2,274
|
|
|
$
|
10,315
|
|
|
$
|
4,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
|
|
$
|
(0.16
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.54
|
)
|
|
$
|
(0.42
|
)
|
Weighted average number of shares of common stock used in computing basic and diluted loss per share
|
|
|
|
|
20,001,386
|
|
|
|
10,572,078
|
|
|
|
19,019,390
|
|
|
|
10,572,078
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
SEEDO
CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY
U.S.
dollars in thousands, except share and per share data
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
shares
of common stock
|
|
|
Paid
in
|
|
|
Accumulated
|
|
|
Shareholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of July 1, 2018 (Unaudited)
|
|
|
10,525,587
|
|
|
$
|
1
|
|
|
$
|
1,534
|
|
|
$
|
(4,540
|
)
|
|
$
|
(3,005
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares with respect to the Reverse Merger
|
|
|
369,000
|
|
|
|
-
|
|
|
|
(349
|
)
|
|
|
-
|
|
|
|
(349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of convertible loans
|
|
|
1,546,491
|
|
|
|
-
|
|
|
|
1,244
|
|
|
|
-
|
|
|
|
1,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Based Compensation to non-employees
|
|
|
2,558,922
|
|
|
|
-
|
|
|
|
948
|
|
|
|
-
|
|
|
|
948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of warrants
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,274
|
)
|
|
|
(2,274
|
)
|
Balance
as of September 30, 2018 (Audited)
|
|
|
15,000,000
|
|
|
$
|
1
|
|
|
$
|
3,419
|
|
|
$
|
(6,814
|
)
|
|
$
|
(3,394
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of July 1, 2019 (Unaudited)
|
|
|
20,007,144
|
|
|
$
|
2
|
|
|
$
|
14,555
|
|
|
$
|
(15,712
|
)
|
|
$
|
(1,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Based Compensation to employees and non-employees
|
|
|
-
|
|
|
|
-
|
|
|
|
910
|
|
|
|
-
|
|
|
|
910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of warrants
|
|
|
433,333
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,125
|
)
|
|
|
(3,125
|
)
|
Balance
as of September 30, 2019 (Unaudited)
|
|
|
20,440,477
|
|
|
$
|
2
|
|
|
$
|
15,465
|
|
|
$
|
(18,837
|
)
|
|
$
|
(3,370
|
)
|
SEEDO
CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY
U.S.
dollars in thousands, except share and per share data
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
shares of common stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
Shareholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2018 (Unaudited)
|
|
|
10,525,587
|
|
|
$
|
1
|
|
|
$
|
1,534
|
|
|
$
|
(2,385
|
)
|
|
$
|
(850
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares with respect to the Reverse Merger
|
|
|
369,000
|
|
|
|
-
|
|
|
|
(349
|
)
|
|
|
-
|
|
|
|
(349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible loans
|
|
|
1,546,491
|
|
|
|
-
|
|
|
|
1,244
|
|
|
|
-
|
|
|
|
1,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Based Compensation to non-employees
|
|
|
2,558,922
|
|
|
|
-
|
|
|
|
948
|
|
|
|
-
|
|
|
|
948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,429
|
)
|
|
|
(4,429
|
)
|
Balance as of September 30, 2018 (Audited)
|
|
|
15,000,000
|
|
|
$
|
1
|
|
|
$
|
3,419
|
|
|
$
|
(6,814
|
)
|
|
$
|
(3,394
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2019 (Unaudited)
|
|
|
16,198,578
|
|
|
$
|
2
|
|
|
$
|
5,410
|
|
|
$
|
(8,522
|
)
|
|
$
|
(3,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of common stock
|
|
|
1,820,575
|
|
|
|
*
|
|
|
|
4,404
|
|
|
|
-
|
|
|
|
4,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible loans
|
|
|
1,893,422
|
|
|
|
*
|
|
|
|
2,318
|
|
|
|
-
|
|
|
|
2,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Based Compensation to employees and non-employees
|
|
|
-
|
|
|
|
-
|
|
|
|
1,889
|
|
|
|
-
|
|
|
|
1,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Based Compensation to non-employees
|
|
|
94,569
|
|
|
|
*
|
|
|
|
134
|
|
|
|
-
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature related to convertible loan
|
|
|
-
|
|
|
|
-
|
|
|
|
96
|
|
|
|
-
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
514
|
|
|
|
|
|
|
|
514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants
|
|
|
433,333
|
|
|
|
-
|
|
|
|
700
|
|
|
|
-
|
|
|
|
700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,315
|
)
|
|
|
(10,315
|
)
|
Balance as of September 30, 2019 (Unaudited)
|
|
|
20,440,477
|
|
|
$
|
2
|
|
|
$
|
15,465
|
|
|
$
|
(18,837
|
)
|
|
$
|
(3,370
|
)
|
|
*)
|
Represents
an amount less than $1.
|
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,
|
|
|
|
2019
|
|
|
2018
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(10,315
|
)
|
|
$
|
(4,429
|
)
|
Adjustments to reconcile loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
131
|
|
|
|
19
|
|
Financial expenses related to convertible loans
|
|
|
640
|
|
|
|
178
|
|
Financial expenses related to short-term loans
|
|
|
657
|
|
|
|
-
|
|
Financial expenses related to loans from related party
|
|
|
942
|
|
|
|
-
|
|
Share based compensation expenses to employees and non-employees
|
|
|
1,921
|
|
|
|
948
|
|
Other
|
|
|
1
|
|
|
|
(10
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase in other accounts receivable
|
|
|
(660
|
)
|
|
|
(688
|
)
|
Increase in inventory
|
|
|
(386
|
)
|
|
|
(122
|
)
|
Increase (Decrease) in advances from customers
|
|
|
(574
|
)
|
|
|
1,684
|
|
Increase in trade payables
|
|
|
1,245
|
|
|
|
406
|
|
Increase in other accounts payable
|
|
|
358
|
|
|
|
223
|
|
Net cash used in operating activities
|
|
|
(6,040
|
)
|
|
|
(1,791
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(62
|
)
|
|
|
(454
|
)
|
Net cash used in investing activities
|
|
|
(62
|
)
|
|
|
(454
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from convertible loans
|
|
|
258
|
|
|
|
-
|
|
Proceeds from short-term loans
|
|
|
463
|
|
|
|
1,669
|
|
Repayment of short-term loan
|
|
|
(300
|
)
|
|
|
-
|
|
Proceeds from issuances of shares of common stock
|
|
|
4,404
|
|
|
|
500
|
|
Issuance of warrants
|
|
|
514
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
5,339
|
|
|
|
2,169
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in cash and cash equivalents and restricted cash
|
|
|
(763
|
)
|
|
|
(76
|
)
|
Cash and cash equivalents and restricted cash at the beginning of the year
|
|
|
1,008
|
|
|
|
607
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the year and restricted cash
|
|
$
|
245
|
|
|
$
|
531
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
94
|
|
|
$
|
472
|
|
Restricted bank deposits included in short term assets
|
|
|
151
|
|
|
|
59
|
|
|
|
$
|
245
|
|
|
$
|
531
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
210
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of non- cash flow information:
|
|
|
|
|
|
|
|
|
Conversion of convertible loans
|
|
$
|
2,300
|
|
|
$
|
-
|
|
Exercise of warrants
|
|
$
|
700
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
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. Prior to September 14, 2018, we were solely a provider
of risk management and asset protection (“RAP”) services for businesses, individuals and families. On September 14,
2018, we acquired Eroll Grow Tech Ltd. (“Eroll”), an Israeli company and now the wholly owned subsidiary of the Company.
On September 17, 2018, the Company’s name was changed to Seedo Corp. Since the acquisition of Eroll, we produce 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 14, 2018, the
Company and Eroll completed a merger transaction. Eroll survived the merger as a wholly-owned subsidiary of the Company.
Immediately following the
merger, Eroll shareholders held approximately 87.4% of the outstanding shares of common stock of the Company in exchange of
1,137 shares of common stock of Eroll on a fully diluted basis while the pre-merger Company shareholders retained the remaining
approximate 12.6%.
Pursuant to the terms and conditions
of the agreement governing the Reverse Merger, at the time of the Reverse Merger, the Company issued 12,073,500 nonassessable
shares of its shares of common stock. Each of the holders of the pre-Reverse Merger issued and outstanding shares of common stock
of Eroll received their pro-rata allotment of these shares in the Company according to their then current shareholding in Eroll.
At the closing of this Reverse Merger, there were 15,000,000 shares of common stock 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 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 since inception.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
Eroll was incorporated pursuant
to the laws of the state of Israel on May 18, 2015.
Eroll has seven subsidiaries
as followings:
Seedo U.S. Inc. (Seedo
Inc.) incorporated pursuant to the laws of the state of Colorado, U.S in November 2016. To date, the subsidiary has no activities.
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.
Seedo FarmTech Ltd. incorporated
pursuant to the laws of the state of Israel on April 10, 2019. To this date the subsidiary has no activities.
Dan SeedoFarm Ltd Ltd incorporated
pursuant to the laws of the state of Israel on June 27, 2019. To this date the subsidiary has no activities.
Tech Farm Agricola S.R.L incorporated
pursuant to the laws of the state of Messina, Italy on May 20, 2019. To this date the subsidiary has no activities. The Company
holds 33% of Tech Farm Agricola S.R.L.
|
b.
|
The Company operates mainly in the fields of development and distribution of home growing automated
machines and commercial containers for variety of herbs and vegetables worldwide. The Company also plans, establishes and will
operate container farms.
|
|
c.
|
Basis of presentation:
|
Effective December 31, 2018,
the Company changed its fiscal year end from September 30 to December 31. This change is being made in order to align the Company’s
fiscal year end with its subsidiaries following the reverse merger. The Company refers to the period beginning October 1, 2017
and ending September 30, 2018 as “fiscal 2018.”
|
d.
|
The Company has an accumulated deficit in the total amount of $18,837 as of September 30, 2019,
the Company has negative operating cash flow in the total amount of $6,040 for the period of nine months ended September 30, 2019,
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.
|
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
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.
As of September 30, 2019, the
condensed consolidated financial statements 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.
|
NOTE 2:-
|
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
The accompanying unaudited interim
condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles
and standards of the Public Company Accounting Oversight Board for interim financial information. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting principles in the United States for complete financial
statements. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the Company’s (i) consolidated financial position as of September 30,
2019, (ii) consolidated results of operations for the three and nine months ended September 30, 2019 and (iii) consolidated cash
flows for the nine months ended September 30, 2019. The results for the three and nine months periods ended September 30, 2019,
as applicable, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.
|
NOTE 3:-
|
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.
|
a.
|
The significant accounting policies applied in the audited consolidated financial statements of
the Company as disclosed in the Company’s annual report on Form 10-K for the year ended September 30, 2018 filed with the
SEC on January 15, 2019, are applied consistently in these unaudited interim condensed consolidated financial statements, except
as discussed below.
|
The Company generates revenues
from sales of products. The Company sells its products directly to end customers.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
|
NOTE 3:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
b.
|
Revenue Recognition (Cont.):
|
In accordance with Topic 606,
revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with
the transfer of control of our products. Revenue is measured as the amount of consideration to which we expect to be entitled
In exchange for transferring
products or providing services. To achieve this core principle, the Company applies the following five steps:
|
1.
|
Identify the contract with a customer
|
A contract
with a customer exists when (i) the Company enters into a written agreement with a customer that defines each party’s rights regarding
the products or services to be transferred and identifies the payment terms related to these products or services, (ii) both parties
to the contract are committed to perform their respective obligations, (iii) the contract has commercial substance, and (iv) the
Company determines that collection of substantially all consideration for products or services that are transferred is probable
based on the customer’s intent and ability to pay the promised consideration.
|
2.
|
Identify the performance obligations in the contract
|
Performance obligations promised
in a contract are identified based on the products or services that will be transferred to the customer that are both capable of
being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources
that are readily available from the Company, and are distinct in the context of the contract, whereby the transfer of the products
or services is separately identifiable from other promises in the contract.
|
3.
|
Determine the transaction price
|
The transaction price is determined
based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer.
To the extent the transaction price is variable, revenue is recognized at an amount equal the consideration to which the Company
expects to be entitled. This estimate includes customer sales incentives which are accounted for as a reduction to revenue and
estimated using either the expected value method or the most likely amount method, depending on the nature of the program.
|
4.
|
Allocate the transaction price to performance obligations in the contract
|
If the contract contains a
single performance obligation, the entire transaction price is allocated to the single performance obligation. The Company determines
standalone selling price based on the price at which the performance obligation is sold separately.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
|
NOTE 3:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
b.
|
Revenue Recognition (Cont.):
|
|
5.
|
Recognize revenue when or as the Company satisfies a performance obligation.
|
The Company generally satisfies
performance obligations at a point in time, once the customer has obtained the legal title to the items purchased. Revenue is recognized
based on the transaction price at the time the related performance obligation is satisfied by transferring a promised product or
service to a customer.
Typical timing of payment
The Company offers several
payment methods that includes but not limited to full advance payment and partial amount in advanced while collecting the remaining
amount before delivery.
Revenue
expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining to contracts
that have an original expected duration of one year or less.
The Company’s unfilled
performance obligations as of September 30, 2019 is $2.4 million.
The Company recognized revenues
of $703 for the nine month ended September 30, 2019, as part of advances recognized in prior periods.
Warranties are classified as
assurance type. A warranty is considered an assurance type warranty if it provides the consumer with assurance that the product
will function as intended for a limited period of time. As of September 30, 2019, the Company recorded a provision for warranty
in a total amount of $35.
|
c.
|
Accounting for share-based Compensation:
|
The Company accounts for share-based
compensation in accordance with ASC No. 718, “Compensation-Stock Compensation” (“ASC No. 718”). ASC
No. 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an Option-Pricing
Model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite
service periods in the Company’s consolidated statements of operations. The Company recognizes compensation expenses for
the value of its awards granted based on the straight-line method over the requisite service period of each of the awards.
The Company selected the
Black-Scholes-Merton option pricing model as the most appropriate fair value method for its share-option awards. The
option-pricing model requires a number of assumptions, of which the most significant are the fair market value of the
underlying ordinary share, expected share price volatility and the expected option term. Expected volatility was calculated
based upon certain peer companies that the Company considered to be comparable. The expected option term represents the
period of time that options granted are expected to be outstanding. The expected option term is determined based on the
simplified method in accordance with Staff Accounting Bulletin No. 110, as adequate historical experience is not
available to provide a reasonable estimate. The simplified method will continue to apply until enough historical experience
is available to provide a reasonable estimate of the expected term. The risk-free interest rate is based on the yield from
U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to
pay dividends.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
|
NOTE 3:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
c.
|
Accounting for share-based Compensation (Cont):
|
The fair value of
Restricted Stock Units (“RSUs”) granted is determined based on the price of the Company’s shares of common
stock on the date of grant.
The fair value for options granted
in April 2019, is estimated at the date of grant using a Black-Scholes-Merton option pricing model with the following
assumptions:
Expected volatility
|
|
|
131.93
|
%
|
Risk-free rate
|
|
|
2.29
|
%
|
Expected term (in years)
|
|
|
4.66-4.75
|
|
Share price
|
|
$
|
4.01
|
|
The Company accounts for options
granted to consultants and other service providers under ASC No. 718 and ASC No. 505, “Equity-based payments to non-employees.”
The fair value of these options was estimated using a Black-Scholes-Merton option-pricing model.
In the nine months ended
September 30, 2019, the non-cash compensation expenses related to nonemployees were $766. As of September 30, 2019,
there were $3,971 of total unrecognized compensation cost related to non-vested share-based compensation to non-employees.
|
d.
|
New Accounting Pronouncements
|
Recently Implemented Accounting
Pronouncements
|
1.
|
Revenues -
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic
606) (“ASU 2014-09”), which provides a single comprehensive model for entities
to use in accounting for revenue arising from contracts with customers and will supersede
most current revenue recognition guidance, including industry-specific guidance. The
core principle is that an entity will recognize revenue to depict the transfer of goods
or services to customers in an amount that reflects the consideration that the company
expects to receive for those goods or services. The standard provides a five-step model
to be applied to all contracts with customers, which steps are to (i) identify the contract(s)
with the customer, (ii) identify the performance obligations in the contract, (iii) determine
the transaction price, (iv) allocate the transaction price to the performance obligations
in the contract and (v) recognize revenue when each performance obligation is satisfied.
|
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
|
NOTE 3:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
d.
|
New Accounting Pronouncements (Cont.):
|
The Company
early adopted ASU 2014-09 as of the January 1, 2019. The adoption did not have a significant impact on the Company’s net
income.
Recently
Implemented Accounting Pronouncements :
|
2.
|
Cash Flow - On November 17, 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic
230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).” This ASU requires the statement of cash flows
to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash
or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents are to
be included with cash and cash equivalents when reconciling the beginning of period and end of period amounts shown on the statement
of cash flows. The Company adopted ASU 2016-18 on October 1, 2018, and it did not have a material impact on its accounting and
disclosures.
|
In July 2017, the FASB issued
ASU 2017-11, “Earnings per share: I. Accounting for Certain Financial Instruments with Down Round Features,” which
allows companies to exclude a down round feature when determining whether a financial instrument is considered indexed to the entity’s
own stock. As a result, financial instruments with down round features may no longer be required to be accounted classified as
liabilities. A company will recognize the value of a down round feature only when it is triggered, and the strike price has been
adjusted downward. For equity-classified freestanding financial instruments, such as warrants, an entity will treat the value of
the effect of the down round, when triggered, as a dividend and a reduction of income available to common shareholders in computing
basic earnings per share. The guidance in ASU 2017-11 is effective for fiscal years beginning after December 15, 2019, and interim
periods within those fiscal years. Early adoption is permitted, and the guidance is to be applied using a full or modified retrospective
approach. The Company early adopted this guidance in connection with the down round feature within the embedded optional conversion
feature of the warrants, as discussed in Note 7d.
|
3.
|
In June 2018, the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be ubstantially aligned.
This ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The Company early adopted this standard, the adoption of this standard had an immaterial impact on the Company’s consolidated financial statements.
|
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
|
NOTE 4:-
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
In October
2017, Eroll entered into rental agreements for its office premises in Israel which will end on June 30, 2022. The agreement is
secured by bank guarantees and monthly debentures equivalent with the lease payments.
On June 20,
2019 the Company signed an amendment to its rental agreement, accordingly the Company signed an extension to its original agreement
until June 30, 2022, and rented two additional office premises until June 30, 2024.
The future
minimum lease fees payable for the lease agreement as of September 30, 2019, are as following:
2019
|
|
$
|
50
|
|
2020
|
|
|
244
|
|
2021
|
|
|
262
|
|
2022
|
|
|
202
|
|
And thereafter
|
|
|
213
|
|
|
|
$
|
971
|
|
The Company
enters 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, 2019, are as following:
2019
|
|
$
|
27
|
|
2020
|
|
|
94
|
|
2021
|
|
|
31
|
|
|
|
$
|
152
|
|
|
NOTE 5:-
|
SHORT TERM LOANS
|
|
a.
|
On December 11, 2018, the Company received a loan from a lender in the principal
amount of $1,000 (out of which $50 was directly transferred as finder fee). The loan is to be repaid in full at the end of 180
days, the principal amount shall bear interest at the rate of 17.5% calculated per the commencing of the date of the actual provision
of the principal amount and ending on the maturity date, on a linear daily basis, up to a maximum amount of approximately $175.
The interest shall be accrued but not compounded.
|
The Company
also granted the foregoing lender warrants to purchase 333,333 and 100,000 shares of common stock of the Company at an exercise price
of $1.5 and $2 per share, respectively. The warrants were classified as shareholders’ equity.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
|
NOTE 5:-
|
SHORT TERM LOANS (Cont.)
|
The Company
estimated the fair value of warrants using the Black-Scholes-Merton option pricing model using the following weighted average assumptions:
|
|
2018
|
|
Dividend yield
|
|
|
0
|
%
|
Risk-free interest rate
|
|
|
2.78
|
%
|
Expected term (in years)
|
|
|
2
|
|
Volatility
|
|
|
126.23
|
%
|
The Company
also granted the broker 33,333 shares of common stock of the Company which were issued on April 12, 2019.
The Company accounted for
the loan in accordance with ASC 470, Debt. The Company allocated the consideration of the loan, the related warrants
and the shares of common stock based on their relative fair value at the date of issuance, which is also the commitment
date.
On June 19,
2019 the Company executed an amendment to the loan agreement. Total debt was $1,175 according to the amendment the lender will
exercise its 433,333 warrants pursuant to the original agreement for a total amount of $700. The remaining debt
of $475 will be paid in three separate monthly payments of $158.333 each for the next three months.
On August
15, 2019 the company issued 433,333 shares in respect of exercise of 433,333 warrants granted as part of the loan agreement signed
on December 11, 2018.
During the
nine months period ended September 30, 2019 the Company recorded interest and financial expenses related to the loan in the amount
of $800.
|
b.
|
On August 18, 2019, the Eroll received a loan from a lender in the principal
amount of $311 (NIS1,100) (out of which $9 was deducted as fee), the loan has a one-month term and shall be repaid on September
19, 2019 (The “Maturity Date”).
|
The principal
amount shall bear interest at a monthly rate of 2%. In case the Company doesn’t repay the loan on Maturity Date the Company
is obligated give the lender a 7 days notice then the loan and the outstanding interest amount shall bear a monthly interest rate
of 5%, if the company fails to notify the lender the loan and the outstanding interest amount shall bear an annual interest rate
of 32.92%
As of September
30, 2019 the Company did not repay the loan amount but gave the lender a 7 days notice therefore entered the 5% interest, accordingly
the Company recorded interest for the nine months ended September 30, 2019 in the amount of $13.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
|
a.
|
As of September 30, 2019, and December 31, 2018, the Company recorded a
provision in the amount of $547 and $520, respectively, that classified in other accounts payable to a related party for management
services.
|
|
b.
|
On August 10, 2018, Eroll entered into a Convertible Loan Agreement (the “August Loan Agreement”)
with Cannabics Pharmaceuticals Inc. (“Cannabics”), a U.S. public company and one of the Company’s shareholders.
Pursuant to the terms of the August Loan Agreement, Cannabics was obligated to invest up to $2,000 in Eroll Grow Tech. According
to the agreement Cannabics is obligated to invest $500 upon execution of the August Loan 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 invested the initial $500 pursuant to its obligations under the August Loan Agreement.
|
According to the August
Loan Agreement, the Company shall issue Cannabics shares of common stock 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 Loan, Cannabics shall hold 15%
of the outstanding shares on a fully-diluted basis of the Company. In addition, according to the agreement Cannabics shall
issue to the Company 1,000,000 warrants with an exercise price of $2 per share, of the Cannabics shares, for a period of 12
months. The warrants were issued on August 14, 2018. The warrants were classified as an asset and are evaluated every report
date. During the nine months period ended September 30, 2019 the Company recorded expenses due to the warrant in the amount
of $1. As of September 30, 2019, and December 31, 2018 the warrants fair value amount was $0 and $1, respectively.
On September
12, 2018, Eroll and Cannabics executed an amendment to the August Loan Agreement, solely amending the mechanics of the percentage
of the Company shares Cannabics may convert for its investment, though the finite amount remains unchanged. The amendment to the
August Loan was as follows: Cannabics is to receive 10% of the shares of common stock, for the initial $1,000 financing (as opposed to
15%); and for the Second Loan, Cannabics shall receive 10% (5% issued on the date of the money transfer and an additional 5% issued
on the date of conversion) of the shares of common stock on a fully diluted basis.
On September
26, 2018, pursuant to the August Loan Agreement with Cannabics, the Company received its second installment of $500.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
|
NOTE 6:-
|
RELATED PARTIES (Cont.)
|
In addition,
under the agreement the Company shall pay to Cannabics 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 (which is the 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. In the event the Second Loan is converted into shares, the aggregate royalties to be paid hereunder will be
capped at max $8,000.
On November
6, 2018, pursuant to the August Loan Agreement with Cannabics the Company received $300 towards the Second Loan, and on December
10, 2018, pursuant to the August Loan Agreement the Company received the remaining $700 out of the Second Loan.
As part of
the completion of the August Loan Agreement the Company recorded a provision for royalties in a total amount of $500.
The Company
allocated the remaining consideration ($500) of the second convertible loan and issuance of shares based on their relative fair
value at the date of issuance. As such the Company recorded issuance of the shares in a total amount of $250.
The Company
accounted for the convertible loan in accordance with ASC 470-20, Debt with conversion and other Options. According to ASC 470-20-30-8,
since the intrinsic value of the beneficial conversion feature (“BCF”) exceeds the entire proceeds of the loan, the
Company allocated the entire proceeds of $250 related to the convertible loan to the BCF as additional paid in capital.
On January
15, 2019 according to the original agreement and the amendment stated above the Company converted the Second Loan, in the amount
of $1,000 and issued Cannabics 770,397 shares of common stock with $0.0001 par value each. As a result, the Company recorded financial
expenses related to the loan in the amount of $942. The total holding as of September 30, 2019, for Cannabics is 17.52% of the
Company’s shares of common stock.
|
c.
|
During September 7, 2018, Eroll has entered into a loan agreement with Cannabics 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 shares of common stock, in return to services provided as part Reverse Merger.
|
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
|
NOTE 6:-
|
RELATED PARTIES (Cont.)
|
As a result on September 27,
2018, the Company issued 540,000 shares of common stock with 0.0001 par value each with respect to share based
compensation. As defined in an amendment as of November 6, 2018, the loan shall have a due date certain of November 4,
2019.
|
d.
|
On September 19, 2019, the Eroll received a loan from a lender in the principal
amount of $100. The principal amount shall bear interest at an annual rate of 1%.
|
The Company shall repay the
loan as soon as practicable following the date of Seedo Corp’s receipt of a loan from a third party.
The Company repaid the loan on
October 23, 2019.
|
NOTE 7:-
|
CONVERTIBLE LOANS
|
|
a.
|
On June 6, 2018, Eroll entered into a loan agreement (the “June Loan
Agreement”) with a third party (the “June Lender”), in a total amount of $500 (the “June Loan”).
The June Loan bears interest at a monthly rate of 2%, for a year. Eroll shall pay the June Lan and interest within one year from
the closing date. In future event when Eroll will merge with public company the June Lender has the right to convert the June Loan
and interest into equity securities of the public company, at a price per share equal to the lower of (i) a valuation of the Company
of $15,000, or (ii) the fair market value of the Company as shall be evaluated as of the Company’s first raising via equity
issuance. 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.
On March 5,
2019, the June Loan was converted into 500,000 shares of common stock with $0.0001 par value each.
During the
nine months period ended September 30, 2019, the Company recorded an interest expenses in the total amount of $10.
|
b.
|
During July 2018, Eroll entered into a convertible loan
agreement (the “July Agreement”) with a third party (the “July Lender”), in a total amount of $250 (the
“July Loan”). The July Loan bears interest at a monthly rate of 2%, for a year. Pursuant to the terms of the July
Agreement, if Eroll will merge with a public company the July lender has the right to convert the July Loan and interest into
equity securities of the public Company, at a price per share equals to the lower of (i) a valuation of the Company of $25,000,
or (ii) 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
nine months period ended September 30, 2019, the Company recorded an interest expenses in the total amount of $10. According to
ASC 470 the Company did not record a BCF with respect to July Loan since the contingent BCF shall not be recognized in earnings
until the contingency is resolved.
On April 11,
2019 the July Loan was converted into 150,000 shares of common stock with $0.0001 par value each.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands, except share and per share
data
|
|
NOTE 7:-
|
CONVERTIBLE LOANS (Cont.)
|
|
c.
|
On December 3, 2018, the Company received a convertible loan from third
party (the “December Lender”) the loan has two year term, in the principal amount of $550 which bears 10% annual interest
rate (out of which $50 was directly transferred as finder fee).
|
The Company
at its option shall have the right to redeem, in part or in whole, outstanding principal and interest under the December 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 December Lender shall be
entitled to convert at its option any portion of the outstanding and unpaid conversion amount into fully paid
and nonassessable shares of common stock, at the lower of the fixed conversion price then in effect or the market conversion
price. The number 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 $1.2 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.
The Company
accounted for the convertible loan in accordance with ASC 470-20, Debt with conversion and other Options. According to ASC 470-20-30-8,
since the intrinsic value of the BCF exceeds the entire proceeds of the loan, The Company allocated the entire proceeds to the
BCF as additional paid in capital.
On April 3, 2019, the loan
and the accrued interest in the amount of $568 were converted to 473,025 shares of common stock with $0.0001 par value each.
During the
nine months period ended September 30, 2019, the Company recorded interest and financial expenses related to the convertible loan
in the amount of $543.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands, except exercise price per warrant
|
|
NOTE 7:-
|
CONVERTIBLE LOANS (Cont.)
|
|
d.
|
On February 21, 2019, the Company received a convertible
loan from third party (the “February Lender”), the loan has two year term, in the principal amount of $550 which bears
10% annual interest rate (out of which $50 was directly transferred as finder fee).
|
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 Lender shall 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 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.
The Company also granted the
February Lender a warrant to purchase 137,500 shares of common stock of the Company at an exercise price of $2 per share, such exercise
price is subject to any future price-based anti-dilution adjustments. As the Company early adopted ASU 2017-11 the warrants were
classified in shareholders equity.
The Company
estimated the fair value of warrants using the Black-Scholes-Merton option pricing model using the following weighted average assumptions:
|
|
2019
|
|
|
|
|
|
Dividend yield
|
|
|
0
|
%
|
Risk-free interest rate
|
|
|
2.49
|
%
|
Expected term (in years)
|
|
|
3
|
|
Volatility
|
|
|
123.90
|
%
|
The fair value
of the warrants granted was $242.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands, except share and per share data
|
|
NOTE 7:-
|
CONVERTIBLE LOANS (Cont.)
|
The Company
accounted for the convertible loan in accordance with ASC 470-20, Debt with conversion and other Options. The intrinsic value of
the BCF was calculated and the Company allocated $96 to the BCF as additional paid in capital. The remaining consideration of $162
was allocated to convertible loan.
During the nine months
period ended September 30, 2019, the Company recorded interest and financial expenses related to convertible loan in the
amount of $105.
|
NOTE 8:-
|
SHAREHOLDERS’ DEFICIENCY
|
|
a.
|
As of September 30, 2019, and December 31, 2018, the Company’s share capital is composed as follows:
|
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
|
|
Authorized
|
|
|
Issued and outstanding
|
|
|
Authorized
|
|
|
Issued and outstanding
|
|
|
|
Number of shares
|
|
Shares of common stock of $0.0001 par value each
|
|
|
500,000,000
|
|
|
|
20,440,477
|
|
|
|
500,000,000
|
|
|
|
16,198,578
|
|
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.
|
On January 15, 2019 the Company converted a loan in the amount of $1,000 to 770,397 shares of common stock
with a par value each of $0.0001. (See note 6-b).
|
|
2.
|
On January 28, 2019 the Company issued 50,000 shares of common stock with $0.0001 par value
each to one of its consultants, in exchange for services rendered whose fair value was $47.
|
|
3.
|
On March 5, 2019 the Company converted a loan in the amount of $500 to 500,000 shares of common stock
with a par value each of $0.0001. (See note 7-a).
|
|
4.
|
On April 3, 2019 the Company converted a loan received on December 3, 2018,
to 473,025 shares of common stock with a par value of $0.0001 each. (See note 7-c).
|
|
5.
|
On April 10, 2019, the Company converted a loan received on July 18, 2018, to 150,000 shares
of common stock with $0.0001 par value each. (See note 7-b).
|
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands, except share and per share data
|
|
NOTE 8:-
|
SHAREHOLDERS’ DEFICIENCY (Cont.)
|
|
b.
|
Issuance of shares (Cont.):
|
|
6.
|
On April 11, 2019 the Company issued 1,493,908 shares of common stock with
a par value of $0.0001 each to 26 investors as part of investment
round in a private placement in a total amount of $4,107. The
Company also issued 11,236 shares of common stock with a par value of $0.0001 each to broker involved in the investment
round, and the Company recorded an expenses in a total amount
$32.
|
|
7.
|
On March 11, 2019, the company signed agreement with new investor for a total consideration
of $216, accordingly, on April 11, 2019, the Company issued 120,000 shares of common stock with $0.0001 par value each. (See
note 8-c-3).
|
|
8.
|
On March 11, 2019, the company signed agreement with new investor for a total consideration of
$100, accordingly, on April 11, 2019, the Company issued 66,667 shares of common stock with $0.0001 par. (See note 8-c-4).
|
|
9.
|
On March 12, 2019, the company signed agreement with new investor for a total consideration
of $252, accordingly, on April 11, 2019, the Company issued 140,000 shares of common stock with $0.0001 par value each. (See
note 8-c-5).
|
|
10.
|
On April 12, 2019, the Company issued 33,333 shares of common stock with $0.0001 par value
each, which were granted as part of a loan agreement received on December 11, 2018. (See note 5).
|
|
11.
|
On August 15, 2019 the company issued 433,333 shares in respect of exercise of 433,333 warrants
granted as part of the loan agreement signed on December 11, 2018. (see note 5-a).
|
Issuance date
|
|
Warrants outstanding
|
|
|
Exercise
price
per warrant
|
|
|
Warrants outstanding and
exercisable
|
|
|
Contractual term
|
September 2, 2018 (1)
|
|
|
100,000
|
|
|
$
|
2
|
|
|
|
100,000
|
|
|
September 2, 2020 (1)
|
February 21, 2019 (2)
|
|
|
137,500
|
|
|
$
|
2
|
|
|
|
137,500
|
|
|
February 21, 2022 (2)
|
March 11, 2019 (3)
|
|
|
70,000
|
|
|
$
|
3
|
|
|
|
70,000
|
|
|
March 11, 2021(3)
|
March 11, 2019 (4)
|
|
|
333,333
|
|
|
$
|
1.5
|
|
|
|
333,333
|
|
|
March 11, 2021(4)
|
March 12, 2019 (5)
|
|
|
70,000
|
|
|
$
|
3
|
|
|
|
70,000
|
|
|
March 12, 2021(5)
|
|
|
|
710,833
|
|
|
|
|
|
|
|
710,833
|
|
|
|
|
1.
|
On September 2, 2018, Eroll received a convertible loan from a private investor in the
amount of $250 that bears 2% monthly interest, which on October
23, 2018, was converted to 250,000 shares of common stock with
0.0001 par value each. Eroll also granted the lender a warrant to purchase 100,000 shares of common stock of the Company at an
exercise price of $2 per share. The warrants were classified as
shareholders’ equity.
|
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands, except share and per share data
|
|
NOTE 8:-
|
SHAREHOLDERS’ DEFICIENCY (Cont.)
|
|
c.
|
Issuance of warrants (Cont.):
|
|
2.
|
On February 21, 2019, the Company received a convertible loan from the February
Lender in the amount of $550 (See Note 7-d). The Company granted the February Lender a warrant to purchase 137,500 shares of common stock
of the Company at an exercise price of $2 per share. The warrants were classified as shareholders’ equity.
|
|
3.
|
On March 11, 2019, the Company signed agreements with a new investor, accordingly, the
Company issued 120,000 shares of common stock with a par value of $0.0001 each, for a total consideration of $216. The Company
also granted the investor warrants to purchase 70,000 shares of common stock at a price of $3 per share for a period of 24
months.
|
|
4.
|
On March 11, 2019, the Company signed an agreement with a new investor, accordingly, the
Company issued 66,667 shares of common stock with a par value of $0.0001 each, for a total consideration of $100.
|
Also as part
of the agreement the investor may, in its sole determination, from the closing date until the 24-month anniversary of the closing
date, elect to purchase in one or more purchases, additional shares of common stock of the Company with an aggregate
Subscription
amount thereof equal to up to $500, at the price per share of $1.5 (such securities, the “Greenshoe Securities” and
such right to receive the Greenshoe Securities).
|
5.
|
On March 12, 2019, the Company signed agreement with a
new investor, accordingly, the Company is obligated to issue
140,000 shares of common stock with a par value of $0.0001 each, for a
total consideration of $252. The Company also granted the investor warrants to purchase 70,000 shares of common stock at a price of
$3 per share for a period of 24 months.
|
|
d.
|
Restricted Share Units and Share option plans:
|
On April 1,
2019, the Company’s board of directors adopted the Seedo Corp. 2018 Share Options Plan (the “2018 Plan”). As
of September 30, 2019, the Company had reserved 3,019,330 shares of common stock under the 2018 Plan, for issuance to the Company’s
and its affiliates’ respective employees, directors, officers, consultants and contractors.
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.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands, except share and per share data
|
|
NOTE 8:-
|
SHAREHOLDERS’ DEFICIENCY (Cont.)
|
|
d.
|
Restricted Share Units and Share option plans (Cont.):
|
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.
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.
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands, except share and per share data
|
|
NOTE 8:-
|
SHAREHOLDERS’ DEFICIENCY (Cont.)
|
|
d.
|
Restricted Share Units and Share option plans (Cont.):
|
A summary
of employee share options activity during the nine months ended September 30, 2019 is as follows:
Nine months ended September 30, 2019
|
|
|
Number
|
|
|
Average
exercise
price
|
|
|
Average
remaining
contractual
life (in years)
|
|
|
Aggregate
intrinsic
value (in
thousands
|
|
Options outstanding at the beginning of the period
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Options granted
|
|
|
1,635,880
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
Options exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(30,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at the end of the period
|
|
|
1,605,880
|
|
|
$
|
1
|
|
|
|
6.4
|
|
|
|
161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at the end of the period
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
A summary
of RSUs activity during the nine months ended September 30, 2019 is as follows:
|
|
Nine Months ended
September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
Number of shares underlying outstanding RSUs
|
|
|
Weighted average grant date fair value
|
|
Unvested RSUs at the beginning of the period
|
|
|
-
|
|
|
|
-
|
|
RSUs granted
|
|
|
150,000
|
|
|
|
4.01
|
|
RSUs vested
|
|
|
(75,000
|
)
|
|
|
4.01
|
|
|
|
|
75,000
|
|
|
|
4.01
|
|
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands, except share and per share data
|
|
NOTE 8:-
|
SHAREHOLDERS’ DEFICIENCY (Cont.)
|
|
e.
|
Share-based awards to non-employee:
|
The Company granted 360,000 options
and 873,450 RSU’s units during the nine months ended September 30, 2019 to a non-employee consultant and directors.
|
f.
|
Share-based
compensation expense for employees and non-employees:
|
The Company recognized non-cash
share-based compensation expense for both employees and non-employees for the nine months period ended September 30, 2019 in the
condensed consolidated statements of operations as follows:
|
|
Nine Months
Ended
September 30,
2019
|
|
|
|
|
|
Cost of revenues
|
|
$
|
34
|
|
Research and development, net
|
|
|
303
|
|
Sales and marketing
|
|
|
18
|
|
General and administrative
|
|
|
1,534
|
|
Total
|
|
|
1,889
|
|
SEEDO CORP.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
U.S. dollars in thousands
|
|
NOTE 9:-
|
FINANCIAL EXPENSES
|
|
|
Three
months ended
September 30,
|
|
|
Nine
months ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank commissions
|
|
$
|
16
|
|
|
$
|
11
|
|
|
$
|
43
|
|
|
$
|
23
|
|
Financial expenses related to revaluation of investment in
warrants
|
|
|
-
|
|
|
|
10
|
|
|
|
1
|
|
|
|
10
|
|
Financial expenses related to loans
|
|
|
60
|
|
|
|
213
|
|
|
|
2,424
|
|
|
|
227
|
|
Foreign currency transactions and other
|
|
|
24
|
|
|
|
1
|
|
|
|
111
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
100
|
|
|
$
|
235
|
|
|
$
|
2,579
|
|
|
$
|
251
|
|
|
NOTE 10:-
|
SUBSEQUENT EVENTS
|
|
a.
|
On October 15, 2019, the Company received a convertible loan from a third party (the “Lender”).
The loan has two years term, in the principal amount of $1,100 that bears an annual 10% interest rate. Prior to the maturity date
of the convertible loan, 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 volume-weighted average price of the Company’s ordinary shares
is less than $1.25 and (ii) there is no equity condition failures as defined therein. In the event that the Company wishes to redeem
any amount under the convertible loan, 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 in addition to outstanding and accrued interest.
|
The Lender shall 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 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.
|
b.
|
On October 14, 2019, the “Company entered into a binding Memorandum of Understanding (the
“MOU”) with Spanky’s Clothing Inc. (“Spanky’s Clothing”), a company affiliated with Mr. Calvin
Cordozar Broadus Jr., professionally known as “Snoop Dogg” (“Snoop Dogg”), with respect to services that
Snoop Dogg will provide to the Company as its brand ambassador. Pursuant to the MOU, Snoop Dogg will, among other things, promote
the Company’s products on his various social media channels, host a Company sponsored VIP event and provide other brand ambassador
services. In return, the Company will pay to Snoop Dogg and/or his affiliates aggregate cash payments of $1,000 over the term of
the MOU. The Company will also pay expenses related to the Company sponsored VIP event and the marketing and personal services
provided by Snoop Dogg and a marketing budget for the Company’s product. In addition, the Company will issue to Snoop Dogg
and/or his affiliates convertible debentures (the “Debentures”)
with an aggregate original principal amount of $1,400. Half of the Debentures were issued upon signing of the MOU (of which a portion
of the principal amount was issued under the name of Stampede Management, the facilitator of the transactions contemplated under
the MoU), and the remainder shall be issued on or before the date that is six (6) months following the signing of the MOU.
|
The Debentures are
unsecured, have a maturity date six months from the month following the signing of the respective Debenture, bear no interest
and may be converted, at the election of the holder, into common stock par value $0.0001 each of the Company at a conversion
price of the lesser of (x) $1.40 per share, or (y) the closing bid price of the Company’s common stock on the trading
day immediately preceding the date of the applicable notice of conversion. The Debentures contain anti-dilution protection
during the period which the Debentures are outstanding, for decrease in share price and additional issuances, to maintain the
aggregate percentage of equity holdings of the holders of all Debentures at 4.99%.
|
c.
|
On November
11, 2019, Eroll received a loan from a a related party in the principal amount of approximately $286 (NIS 1,000) The
principal amount shall bear no interest.
|
|
|
|
|
|
Eroll shall repay the loan amount in full at the lapse of 90 days from the loan date.
|