SAVE
FOODS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(U.S.
dollars except share and per share data)
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Asse t s
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
180,003
|
|
|
|
290,815
|
|
Restricted Cash
|
|
|
37,027
|
|
|
|
38,194
|
|
Accounts receivable,
net
|
|
|
-
|
|
|
|
64,003
|
|
Inventories
|
|
|
11,267
|
|
|
|
16,302
|
|
Other
current assets
|
|
|
26,159
|
|
|
|
15,300
|
|
Total Current assets
|
|
|
254,456
|
|
|
|
424,614
|
|
|
|
|
|
|
|
|
|
|
Right
Of Use asset arising from operating lease
|
|
|
37,314
|
|
|
|
48,982
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment, Net
|
|
|
73,703
|
|
|
|
81,119
|
|
|
|
|
|
|
|
|
|
|
Funds
in Respect of Employee Rights Upon Retirement
|
|
|
109,871
|
|
|
|
109,955
|
|
Total assets
|
|
|
475,344
|
|
|
|
664,670
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders’ Deficit
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Short-term loan
from banking institution
|
|
|
7,049
|
|
|
|
7,230
|
|
Accounts payable
|
|
|
219,145
|
|
|
|
235,864
|
|
Other
accounts liabilities
|
|
|
392,148
|
|
|
|
380,732
|
|
Total current liabilities
|
|
|
618,342
|
|
|
|
623,826
|
|
Convertible
Loans
|
|
|
403,011
|
|
|
|
285,917
|
|
Long
term from banking institution
|
|
|
12,717
|
|
|
|
14,955
|
|
|
|
|
142,357
|
|
|
|
142,142
|
|
Liability
for employee rights upon retirement
|
|
|
142,357
|
|
|
|
142,091
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,176,427
|
|
|
|
1,066,789
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Deficit
|
|
|
|
|
|
|
|
|
Common stocks of US$ 0.0001 par value
each (“Common Stocks”):
495,000,000 shares authorized as of March 31, 2020 and December 31, 2019; issued and
outstanding 10,209,487 shares as of March 31, 2020 and December 31, 2019.
|
|
|
1,021
|
|
|
|
1,021
|
|
Preferred stocks of US$ 0.0001 par
value (“Preferred stocks”):
5,000,000 shares authorized as of March 31, 2020 and December 31, 2019; issued
and outstanding 0 shares as of March 31, 2020 and December 31, 2019.
|
|
|
-
|
|
|
|
-
|
|
Additional paid-in
capital
|
|
|
10,398,420
|
|
|
|
10,328,696
|
|
Foreign currency
translation adjustments
|
|
|
(26,275
|
)
|
|
|
(26,275
|
)
|
Accumulated
deficit
|
|
|
(11,050,155
|
)
|
|
|
(10,684,508
|
)
|
|
|
|
(676,989
|
)
|
|
|
(381,066
|
)
|
Non-controlling
interests
|
|
|
(24,094
|
)
|
|
|
(21,053
|
)
|
Total stockholders’ deficit
|
|
|
(701,083
|
)
|
|
|
(402,119
|
)
|
Total liabilities and stockholders’ deficit
|
|
|
475,344
|
|
|
|
664,670
|
|
The
accompanying notes are an integral part of the condensed consolidated financial statements.
SAVE
FOODS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(U.S.
dollars except share and per share data)
|
|
Three
months ended
|
|
|
|
March
31
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Revenues from sales of products
|
|
|
63,566
|
|
|
|
129,733
|
|
Cost of sales
|
|
|
(20,775
|
)
|
|
|
(34,041
|
)
|
Gross
profit
|
|
|
42,791
|
|
|
|
95,692
|
|
Research and development expenses
|
|
|
(157,636
|
)
|
|
|
(131,826
|
)
|
Selling and marketing expenses
|
|
|
(28,937
|
)
|
|
|
(146,562
|
)
|
General and administrative
expenses
|
|
|
(218,079
|
)
|
|
|
(163,148
|
)
|
Operating
loss
|
|
|
(361,861
|
)
|
|
|
(345,844
|
)
|
Financing expenses, net
|
|
|
(7,202
|
)
|
|
|
(13,502
|
)
|
Net
loss
|
|
|
(369,063
|
)
|
|
|
(359,346
|
)
|
Less: Net loss
attributable to non-controlling interests
|
|
|
3,416
|
|
|
|
3,584
|
|
Net
loss attributable to the Company
|
|
|
(365,647
|
)
|
|
|
(355,762
|
)
|
|
|
|
|
|
|
|
|
|
Loss
per share (basic and diluted)
|
|
|
(0.04
|
)
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average number of shares of common stock outstanding
|
|
|
10,209,487
|
|
|
|
9,521,981
|
|
The
accompanying notes are an integral part of the condensed consolidated financial statements.
SAVE
FOODS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(U.S.
dollars, except share and per share data)
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Additional
paid-in capital
|
|
|
Accumulated
other comprehensive income (loss)
|
|
|
Proceeds
on account of shares
|
|
|
Accumulated
deficit
|
|
|
Total
Company’s stockholders’ equity
|
|
|
Non-controlling
interests
|
|
|
Total
stockholders’ deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
AT DECEMBER 31, 2018
|
|
|
9,228,339
|
|
|
|
923
|
|
|
|
8,851,670
|
|
|
|
(26,275
|
)
|
|
|
105,000
|
|
|
|
(8,713,091
|
)
|
|
|
218,227
|
|
|
|
(6,712
|
)
|
|
|
211,515
|
|
CHANGES
DURING THE PERIOD OF THREE MONTHS ENDED MARCH 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares for cash
|
|
|
605,563
|
|
|
|
61
|
|
|
|
561,606
|
|
|
|
|
|
|
|
(105,000
|
)
|
|
|
|
|
|
|
456,667
|
|
|
|
-
|
|
|
|
456,667
|
|
Stock
based compensation
|
|
|
|
|
|
|
|
|
|
|
67,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,235
|
|
|
|
720
|
|
|
|
67,955
|
|
Comprehensive
loss for three month ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(355,762
|
)
|
|
|
(355,762
|
)
|
|
|
(3,584
|
)
|
|
|
(359,346
|
)
|
BALANCE
AT MARCH 31, 2019 (Unaudited)
|
|
|
9,833,902
|
|
|
|
984
|
|
|
|
9,480,511
|
|
|
|
(26,275
|
)
|
|
|
-
|
|
|
|
(9,068,853
|
)
|
|
|
386,367
|
|
|
|
(9,576
|
)
|
|
|
376,791
|
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Additional
paid-in capital
|
|
|
Accumulated
other comprehensive income (loss)
|
|
|
Proceeds
on account of shares
|
|
|
Accumulated
deficit
|
|
|
Total
Company’s stockholders’ equity
|
|
|
Non-controlling
interests
|
|
|
Total
stockholders’ deficit
|
|
BALANCE
AT DECEMBER 31, 2019
|
|
|
10,209,487
|
|
|
|
1,021
|
|
|
|
10,328,696
|
|
|
|
(26,275
|
)
|
|
|
-
|
|
|
|
(10,684,508
|
)
|
|
|
(381,066
|
)
|
|
|
(21,053
|
)
|
|
|
(402,119
|
)
|
CHANGES
DURING THE PERIOD OF THREE MONTHS ENDED MARCH 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of warrant issued in convertible loans
|
|
|
|
|
|
|
|
|
|
|
34,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,696
|
|
|
|
|
|
|
|
34,696
|
|
Stock
based compensation
|
|
|
|
|
|
|
|
|
|
|
35,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,028
|
|
|
|
375
|
|
|
|
35,403
|
|
Comprehensive
loss for three month ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(365,647
|
)
|
|
|
(365,647
|
)
|
|
|
(3,416
|
)
|
|
|
(369,063
|
)
|
BALANCE
AT MARCH 31, 2020 (Unaudited)
|
|
|
10,209,487
|
|
|
|
1,021
|
|
|
|
10,398,420
|
|
|
|
(26,275
|
)
|
|
|
-
|
|
|
|
(11,050,155
|
)
|
|
|
(676,989
|
)
|
|
|
(24,094
|
)
|
|
|
(701,083
|
)
|
The
accompanying notes are an integral part of the condensed consolidated financial statements.
SAVE
FOODS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S.
dollars except)
|
|
Three
months ended
|
|
|
|
March
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
|
(369,063
|
)
|
|
|
(359,346
|
)
|
Adjustments required
to reconcile net loss for the period to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
19,084
|
|
|
|
3,757
|
|
Increase in liability for employee rights upon retirement
|
|
|
266
|
|
|
|
6,021
|
|
Stock based compensation
|
|
|
35,403
|
|
|
|
67,955
|
|
Interest on
convertible loans
|
|
|
17,325
|
|
|
|
1,011
|
|
Decrease (increase)
in accounts receivable
|
|
|
64,003
|
|
|
|
(27,211
|
)
|
Decrease in inventory
|
|
|
5,035
|
|
|
|
12,441
|
|
Increase in other
current assets
|
|
|
(10,859
|
)
|
|
|
(20,377
|
)
|
Decrease in accounts
payable
|
|
|
(16,719
|
)
|
|
|
(50,669
|
)
|
Increase in other accounts payable
|
|
|
21,889
|
|
|
|
39,524
|
|
Net
cash used in operating activities
|
|
|
(233,636
|
)
|
|
|
(326,894
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Increase
(decrease) in funds in respect of employee rights upon retirement
|
|
|
84
|
|
|
|
(4,484
|
)
|
Net
cash provided by (used in) investing activities
|
|
|
84
|
|
|
|
(4,484
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Secured promissory
notes
|
|
|
135,000
|
|
|
|
-
|
|
Repayments
of right to use asset arising from operating lease
|
|
|
(10,473
|
)
|
|
|
-
|
|
Repayments of long
term banking institute
|
|
|
(1,787
|
)
|
|
|
(5,795
|
)
|
Proceeds
from stock issued for cash
|
|
|
-
|
|
|
|
456,667
|
|
Net
cash provided by financing activities
|
|
|
122,740
|
|
|
|
450,872
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS
|
|
|
(110,812
|
)
|
|
|
119,494
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
290,815
|
|
|
|
439,806
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
|
|
180,003
|
|
|
|
559,300
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Non
cash transactions:
|
|
|
|
|
|
|
|
|
Issuance
of shares in exchange for proceeds received in prior periods
|
|
|
-
|
|
|
|
105,000
|
|
Issuance
of warrants in convertible loans
|
|
|
34,696
|
|
|
|
-
|
|
The
accompanying notes are an integral part of the condensed consolidated financial statement
SAVE
FOODS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE
1 - GENERAL
Save
Foods Inc. (the “Company”) was incorporated on April 1, 2009, under the laws of the State of Delaware. On April 27,
2009, the Company acquired from its stockholders all of the issued and outstanding shares of Save Foods Ltd (formerly Pimi Agro
Cleantech Ltd). (hereinafter: “Save Foods Israel”), including preferred and ordinary shares.
Save
Foods Israel was incorporated in 2004 and commenced its operations in 2005. Save Foods Israel develops, produces, and focuses
on delivering innovative solutions for the food industry aimed at improving food safety and prolonging shelf life of fresh produce.
In
February 2010, the Company’s shares of common stock began quotation on the OTC Bulletin Board under the symbol “PIMZ.OB”.
As of the date of the financial statements the Company’s shares of common stock are quoted on the OTC Pink under the symbol
“SAFO”.
Going
Concern
Since
its incorporation (April 1, 2009), the Company has not had any operations other than those carried out by Save Foods Israel. The
development and commercialization of Save Foods Israel’s products will require substantial expenditures. Save Foods Israel
and the Company have not yet generated sufficient revenues from their operations to fund the Group activities and are therefore
dependent upon external sources for financing their operations. There can be no assurance that Save Foods Israel and the Company
will succeed in obtaining the necessary financing to continue their operations. As of March 31, 2020, the Company had $180,003
in cash, a negative working capital of $363,886 and an accumulated deficit of $11,050,155.
The
Company will need to secure additional capital in the future in order to meet its anticipated liquidity needs primarily through
the sale of additional Common Stock or other equity securities and/or debt financing. Funds from these sources may not be available
to the Company on acceptable terms, if at all, and the Company cannot give assurance that it will be successful in securing such
additional capital.
The
Company focuses its solutions towards vegetables and fruits which are considered the largest in terms of worldwide consumption.
Among other things, the Company tries to cooperate with major fruit packing houses in Israel and abroad. As of balance sheet date,
the Company had not signed any significant agreements.
These
factors raise substantial doubt about Save Foods Israel and the Company’s ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
On March 11, 2020, the World
Health Organization declared the outbreak of a novel coronavirus (SARS-CoV-2) to be a global pandemic (COVID-19), which
continues to spread throughout the United States and around the world. The COVID-19 pandemic is having significant effects on
global markets, supply chains, businesses, and communities. Specific to the Company, COVID-19 may impact various parts of its
2020 operations and financial results including but not limited to reduction in sales, difficulties in obtaining additional financing,
or potential shortages of personnel. The Company believes it is taking appropriate actions to mitigate the negative impact. However,
the full impact of COVID-19 is unknown and cannot be reasonably estimated as these events occurred subsequent to year end and
are still developing.
SAVE
FOODS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Unaudited
Interim Financial Statements
The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiary, prepared
in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the
instructions to Form 10-Q. In the opinion of management, the financial statements presented herein have not been audited by an
independent registered public accounting firm but include all material adjustments (consisting of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and
cash flows for the for three-months ended March 31, 2020. However, these results are not necessarily indicative of results for
any other interim period or for the year ended December 31, 2020. The preparation of financial statements in conformity with GAAP
requires the Company to make certain estimates and assumptions for the reporting periods covered by the financial statements.
These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could
differ from these estimates.
Certain
information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting
principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). These financial
statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual
Report on published on the OTCIQ Alternative Reporting System, for the year ended December 31, 2019
Principles
of Consolidation
The
consolidated financial statements are prepared in accordance with US GAAP. The consolidated financial statements of the Company
include the Company and its wholly-owned and majority-owned subsidiaries. All inter-company balances and transactions have been
eliminated.
Use
of Estimates
The preparation of unaudited condensed
consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and
disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those
estimates. As applicable to these financial statements, the most significant estimates and assumptions relate to the going
concern assumptions and convertible loans.
SAVE
FOODS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Recent
Accounting Pronouncements
In
June 2016, FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments”. In November 2018, FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326,
Financial Instruments-Credit Losses”, which amends the scope and transition requirements of ASU 2016-13. Topic 326 requires
a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected
to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical
experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount.
Topic 326 will originally become effective for the Company beginning January 1, 2020, with early adoption permitted, on a modified
retrospective approach. As a smaller reporting company, the effective date for the Company has been delayed until fiscal years
beginning after December 15, 2022, in accordance with ASU 2019-10, although early adoption is still permitted. This standard is
not expected to have a material impact to the Company’s consolidated financial statements after evaluation.
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments
in this ASU simplify the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and
clarifies certain aspects of the current guidance to improve consistent application among reporting entities. ASU 2019-12 is effective
for fiscal years beginning after December 15, 2021 and interim periods within annual periods beginning after December 15, 2022,
though early adoption is permitted, including adoption in any interim period for which financial statements have not yet been
issued. This standard is not expected to have a material impact to the Company’s consolidated financial statements after
evaluation.
NOTE
3 – CONVERTIBLE LOANS
In
December 2019, the Company entered into a series of Convertible Loan Agreements (each a “CLA”) with third parties
and certain existing shareholders (the “Lenders”), pursuant to which the Lenders agreed to provide the Company loans
in the aggregate amount of $379,000 and in exchange the Company issued to the Lenders (i) convertible promissory notes (the “Notes”)
and (ii) warrants with an exercise price of $1.20. In January and March 2020, the Company entered into two additional CLA agreements
in the aggregate amount of $135,000, in the same terms.
The
Notes will bear interest at a rate of 5% per annum. The loan amount represented by the Notes will be repaid to the Lenders according
to the following schedule: (i) the principal amount represented by the Notes will be repaid in twenty four equal monthly installments,
commencing on the twenty fifth month following the closing of each CLA and (ii) the interest accrued on the loan amount will be
paid in two bi-annual installments, commencing on the first anniversary of the first payment of the principal amount.
The
outstanding loan amount will mature on the earlier of (i) the third anniversary of each CLA or (ii) a deemed liquidation event
(as defined therein), and the Lenders may convert all or any portion of the Notes at any time prior to the one-year anniversary
of each issuance into shares of Common Stock at a conversion price of US$1.20 per share.
SAVE
FOODS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE
3 – CONVERTIBLE LOANS (continue)
In
accordance with ASC 815-15-25 the conversion feature was considered embedded derivative instruments, and is to be recorded at
their fair value as its fair value can be separated from the convertible loan and its conversion is independent of the underlying
note value. The Company recorded finance expenses in respect of the convertible component in the convertible loan in the excess
amount of the convertible component fair value over the face loan amount. The conversion liability is then marked to market each
reporting period with the resulting gains or losses shown in the statements of operations.
As a result of the above issuances,
the Company recorded in the periods ended March 31, 2020 and December 31, 2019 a total amounts of US$34,696 and US$97,406, respectively,
in respect of the detachable warrants, as a credit to stockholders’ equity (additional paid in capital). The fair value
of the Warrants was determined using the Black-Scholes pricing model, assuming a risk free rate of 1.6%, a volatility factor of
54.00 %, dividend yields of 0 % and an expected life of 3 years. During the periods ended March 31, 2020 and December 31, 2019,
the Company recorded interest and amortization expenses in the amounts of $16,790 and $4,323, respectively,
in respect of the discounts recorded on the debentures.
NOTE
4 – STOCK OPTIONS
The
following table presents the Company’s stock option activity for employees and directors of the Company for the three months
ended March 31, 2020:
|
|
Number
of Options
|
|
|
Weighted
Average Exercise Price
|
|
Outstanding at December 31,2019
|
|
|
1,150,004
|
|
|
|
0.45
|
|
Granted
|
|
|
-
|
|
|
|
0.45
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited or
expired
|
|
|
(58,333
|
)
|
|
|
0.45
|
|
Outstanding at March 31,2020
|
|
|
1,091,671
|
|
|
|
0.45
|
|
Number of options exercisable at
March 31, 2020
|
|
|
625,002
|
|
|
|
-
|
|
The
aggregate intrinsic value of the awards outstanding as of March 31, 2020 is US$491,252. These amounts represent the total intrinsic
value, based on the Company’s stock price of US$ 0.9 as of March 31, 2020, less the weighted exercise price. This represents
the potential amount received by the option holders had all option holders exercised their options as of that date.
Costs
incurred in respect of stock-based compensation for employees and directors, for the three months ended March 31, 2020 and 2019
were $35,403 and $67,955, respectively
SAVE
FOODS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE
5 – RELATED PARTIES
A.
Transactions and balances with related parties
|
|
Three
months ended
March
31
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
General and administrative
expenses:
|
|
|
|
|
|
|
|
|
Directors
compensation (*)
|
|
|
52,002
|
|
|
|
43,148
|
|
Salaries
and fees to officers (*)
|
|
|
78,003
|
|
|
|
26,438
|
|
|
|
|
130,005
|
|
|
|
69,586
|
|
(*) share based
compensation
|
|
|
39,054
|
|
|
|
14,811
|
|
|
|
|
|
|
|
|
|
|
Research and development
expenses:
|
|
|
|
|
|
|
|
|
Salaries
and fees to officers
|
|
|
25,272
|
|
|
|
38,139
|
|
(*) share based
compensation
|
|
|
-
|
|
|
|
4,387
|
|
B.
Balances with related parties and officers:
|
|
As
of March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Other
accounts payables
|
|
|
227,309
|
|
|
|
128,327
|
|
NOTE
6 – SUBSEQUENT EVENTS
On
May 9, 2020, the Company entered into Securities Purchase Agreement with an existing shareholder (the “Investor”),
pursuant to which the Company sold to the Investor for an aggregate amount of $100,000, 91,743 units at a price per unit of $1.09
(the “Units”), whereby each Unit consists of (i) one share of common stock of the Company and (ii) one warrants to
purchase one share of Company’s common stock with an exercise price of $1.20 for a period of 36 months following the issuance
date.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Readers
are advised to review the following discussion and analysis of our financial condition and results of operations together with
our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the
consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31,
2019. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including
information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and
uncertainties. See “Cautionary Note Regarding Forward-Looking Statements”. You should review the “Risk Factors”
section of our Annual Report for the fiscal year ended December 31, 2019 for a discussion of important factors that could cause
actual results to differ materially from the results described in or implied by the forward-looking statements contained in the
following discussion and analysis.
We
are a small and innovative company that develops, produces, and focuses on delivering “green” solutions within the
food industry, aimed at improving food safety and prolonging shelf life of fresh produce. We have developed a set of eco-friendly
and “green” sanitizing solutions for fresh produce with high efficiency against human pathogens like Salmonella, E.
coli, and Listeria as well as against plant pathogens. This also allows us to ensure food safety, extend shelf life and reduce
food waste.
Our
technology is based on proprietary blend of food acids combined with an oxidizer like hydrogen peroxide or per-acetic acid, and
is capable of cleaning, sanitizing and controlling pathogens that render produce unsafe for human consumption or which lead to
certain forms of decay in fruit and vegetable.
When
used with hydrogen peroxide, our formulation creates an optimal environment for hydrogen peroxide and significantly extends the
contact time of the hydrogen peroxide with the target pathogens, which in due course ensures high levels of product safety. This
formulation ultimately allows us to use a very low concentration of hydrogen peroxide, and generates a hostile environment for
the pathogens by forming a temporary protective shield around the sanitized produce.
In
addition, unlike conventional bactericides and fungicides, the active ingredients in our products do not leave any residues of
toxicological concern on the treated produce; hydrogen peroxide rapidly decomposes to water and oxygen and the ingredients of
our acids blend are recognized by the United States Food and Drug Administration, or FDA, as GRAS, or Generally Recognized As
Safe. More importantly, it significantly reduces the need for additional post-harvest applications such as conventional chemical
bactericides and fungicides, which have regulatory limitations on maximum residue levels (MRL) allowed.
Further,
our innovative solution provides packing house workers and other users of our products a safe and environmentally friendly, clean
sanitizing process, which emissions do not irritate the eyes, skin or airways.
Our
first application is in post-harvest treatment, and mainly targets fruit and vegetable packing houses that treat, clean and package
citrus, avocado, papaya, mango, potatoes, onion and sweet potatoes. We are currently exploring additional applications for pre-harvest
treatments and for the food industry, including fresh cut, fresh salads and processed foods. Our latest application is in greenhouses.
We already conducted a proof of concept with a proven product safety and efficacy as applied towards a range of micro-greens and
cannabis. While we have not completed a thorough study or examination of our technology vis-à-vis cannabis products, we
believe our technology presents a unique solution for a variety of cannabis providers since it might help them significantly reduce
yield losses that are caused by microbial infection. In addition, we believe that we may play a significant role in ensuring cannabis
(both medicinal and recreational) is made safe for consumers, specifically with respect to reducing levels of pesticide residues
and toxins produced by specific microbial infections and also eliminating the presence of human pathogens.
Critical
Accounting Policies
Please
see Note 2 of this Quarterly Report on Form 10-Q for the summary of significant accounting policies. Management’s Discussion
and Analysis of Financial Condition and Results of Operation of our Annual Report on Form 10-K for the year ended December 31,
2019 (filed on March 30, 2020) with respect to our Critical Accounting Policies and Estimates. There have been no other material
changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31,
2019.
Going
Concern Uncertainty
The
development and commercialization of our product will require substantial expenditures. We have not yet generated any material
revenues and have incurred substantial accumulated deficit and negative operating cash flows. We currently have no sources of
recurring revenue and are therefore dependent upon external sources for financing our operations. There can be no assurance that
we will succeed in obtaining the necessary financing to continue our operations. As a result, our independent registered public
accounting firm has expressed substantial doubt about our ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
Results
of Operations
Comparison
of the three months ended March 31, 2020 and 2019
Revenues.
Revenues
for the three months ended March 31, 2020 were $63,566, a decrease of $66,167, or 51%, compared to total revenues of $129,733
for the three months ended March 31, 2019. The decrease is mainly a result of the Company’s efforts towards obtaining regulatory
approval for its new products resulting in a temporary freeze of its sales in Israel and reductions in sales in the U.S.
We
do not have backlogs or firm commitments from our clients for our products. Our sales might deteriorate if we fail to achieve
clinical success or obtain regulatory approval of any of our products.
Cost
of Revenues
Cost
of revenues consists primarily of salaries, materials, transportation and overhead costs of manufacturing our products. Cost of
revenues for the three months ended March 31, 2020 was $20,775, an increase of $13,266, or 39%, compared to total cost of revenues
of $34,041 for the three months ended March 31, 2019. The decrease is mainly a result of the decrease in salaries and related
expenses.
Research
and Development
Research
and development expenses consist of salaries and related expenses, consulting fees, service providers’ costs, related materials
and overhead expenses. Research and development expenses for the three months ended March 31, 2020 were $157,636, an increase
of $25,810, or 20%, compared to total research and development expenses of $131,826 for the three months ended March 31, 2019.
The increase is mainly attributable to the increase in professional fees and payroll and related expenses associated to research
and development expenses.
Selling
and Marketing Expenses
Selling
and marketing expenses consist primarily of salaries and related costs for sales and marketing personnel, travel related expenses
and services providers. Selling and marketing expenses for the three months ended March 31, 2020 were $28,937, a decrease of $117,625,
or 80%, compared to total selling and marketing expenses of $146,562 for the three months ended March 31, 2019. The decrease is
mainly attributable to the decrease in payroll expenses and service providers used in relation to selling and marketing activities.
General
and Administrative Expenses
General
and administrative expenses consist primarily of salaries and related expenses including share based compensation and other non-personnel
related expenses such as legal expenses and directors and insurance costs. General and administrative expenses for the three months
ended March 31, 2020 were $218,079, an increase of $54,931, or 34%, compared to total general and administrative expenses of $163,148
for the three months ended March 31, 2019. The increase is mainly a result of the increase in professional expenses, and share
based compensation to our service providers and directors.
Financing
Expenses, Net
Financing expenses,
net for the three months ended March 31, 2020 was $7,202, a decrease of $6,300 or 47% compared to total financing
expenses of $13,502 for the three months ended March 31, 2019. The increase is mainly a result of currency exchange differences
between the US Dollar and the New Israeli Shekel.
Liquidity
and Capital Resources
Liquidity
is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise
operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts
receivable and accounts payable and capital expenditures.
As
of March 31, 2020, we had cash of $180,003, as compared to $290,815 as of December 31, 2019. As of March 31, 2020, we had a negative
working capital of $363,886, as compared to negative working capital of $199,212 as of December 31, 2019. The increase is mainly
attributable to the increase in our net loss described above and payments to account payables, somewhat offset by share based
compensation expenses and sales of our shares.
Net
cash used in operating activities was $233,636 for the three months ended March 31, 2020, as compared to $326,894 for the three
months ended March 31, 2019.
Net
cash used in investing activities was $84 for the three months ended March 31, 2020, as compared to Net cash provided by $4,484
for the three months ended March 31, 2019. The increase is mainly attributable to employee rights upon termination.
Net
cash provided by financing activities was $122,740 for the three months ended March 31, 2020, as compared to $450,872 for the
three months ended March 31, 2019. The decrease is mainly the result of a decrease in equity financing and proceeds from convertible
loans.
The
spread of COVID-19 throughout the world may result in a period of business and manufacturing disruption, and in reduced operations,
any of which could materially affect our business, financial condition and results of operations especially regarding its ability
to obtain the necessary finance to continue the Company’s operations. The extent to which COVID-19 impacts the Company’s
business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which
may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.
Off-Balance
Sheet Arrangements
As
of March 31, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.