UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
| For the transition period from | to |
Commission
File No.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
| The
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
The number of shares of the registrant’s common stock, $0.0001 par value, outstanding as of August 11, 2021: .
As used in this Quarterly Report and unless otherwise indicated, the terms “Save Foods,” “we,” “us,” “our,” or “our Company” refer to Save Foods, Inc. and Save Foods Ltd., our 98.48% owned subsidiary. Unless otherwise specified, all dollar amounts are expressed in United States dollars.
Save Foods, Inc.
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events. Such forward-looking statements include statements regarding, among other things:
| ● | our current and future capital requirements and our ability to satisfy our capital needs through financing transactions or otherwise; | |
| ● | sales of our products; | |
| ● | the size and growth of our product market; | |
| ● | our activity in the civilian market; | |
| ● | our manufacturing capabilities; | |
| ● | our entering into certain partnerships with third parties; | |
| ● | obtaining required regulatory approvals for sales or exports of our products; | |
| ● | our marketing plans; | |
| ● | our expectations regarding our short- and long-term capital requirements; | |
| ● | our expectation regarding the impact of COVID-19 on our business and operations; | |
| ● | our outlook for the coming months and future periods, including but not limited to our expectations regarding future revenue and expenses; and | |
| ● | information with respect to any other plans and strategies for our business. |
Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. These statements may be found under the section of our Annual Report on Form 10-K for the year ended December 31, 2020 (filed on March 29, 2021) (“2020 Annual Report”) entitled “Risk Factors” as well as in our other public filings.
In light of these risks and uncertainties, and especially given the start-up nature of our business, there can be no assurance that the forward-looking statements contained herein will in fact occur. Readers should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
On February 23, 2021, we implemented a one-for-seven reverse stock split of our common stock, par value $0.0001 per share (the “Common Stock”) pursuant to which holders of our Common Stock received one share of our Common Stock for every seven shares of Common Stock held. Unless the context expressly dictates otherwise, all references to share and per share amounts referred to herein reflect the reverse stock split.
| 3 |
PART I – FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
SAVE FOODS, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2021
IN U.S. DOLLARS
TABLE OF CONTENTS
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SAVE FOODS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars except share and per share data)
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Other current assets | ||||||||
| Total Current assets | ||||||||
| Right of use asset arising from operating lease | ||||||||
| Property and equipment, net | ||||||||
| Funds in respect of employee rights upon retirement | ||||||||
| Total assets | ||||||||
| Liabilities and Shareholders’ Equity ( Deficit) | ||||||||
| Current Liabilities | ||||||||
| Short-term loan from banking institution | ||||||||
| Current maturities of convertible loans | - | |||||||
| Accounts payable | ||||||||
| Other liabilities | ||||||||
| Total current liabilities | ||||||||
| Fair value of convertible component in convertible loans | - | |||||||
| Convertible loans | - | |||||||
| Long term loan from banking institution | ||||||||
| Liability for employee rights upon retirement | ||||||||
| Total liabilities | ||||||||
| Stockholders’ Equity | ||||||||
Common stock, par value $ per share (“Common Stocks”): shares authorized as of June 30, 2021 and December 31, 2020; issued and outstanding shares as of June 30, 2021 and shares as of December 31, 2020. | ||||||||
| Preferred stock, par value $ per share (“Preferred stock”): shares authorized as of June 30, 2021 and December 31, 2020; issued and outstanding shares as of June 30, 2021 and December 31, 2020. | - | - | ||||||
| Additional paid-in capital | ||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| ( | ) | |||||||
| Non-controlling interests | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity (deficit) | ||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 5 |
SAVE FOODS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(U.S. dollars except share and per share data)
| Six months ended | Three months ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues from sales of products | - | |||||||||||||||
| Cost of sales | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit (loss) | ( | ) | ||||||||||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Selling and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Financing income (expenses), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain on disposal of affiliated company | - | - | ||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Net loss attributable to non-controlling interests | ||||||||||||||||
| Net loss attributable to the Company | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss per share (basic and diluted) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and diluted weighted average number of shares of Common Stock outstanding (1) | ||||||||||||||||
| (1) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 6 |
SAVE FOODS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY (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’ deficit | Non- controlling interests | Total stockholders’ deficit | ||||||||||||||||||||||||||||
| BALANCE AT JANUARY 1, 2020 | ( | ) | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Value of warrant issued in convertible loans | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Comprehensive loss for three months ended March 31, 2020 | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| BALANCE AT JUNE 30, 2020 | ( | ) | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Receipts on account of shares | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Conversion of convertible loans | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Comprehensive loss for three months ended June 30, 2020 | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| BALANCE AT JUNE 30, 2020 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
Number of shares | Amount | Additional paid-in capital | Accumulated other comprehensive income (loss) | Accumulated deficit | Total Company’s stockholders’ equity | Non- controlling interests | Total stockholders’ equity | |||||||||||||||||||||||||
| BALANCE AT JANUARY 1, 2021 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock based compensation | - | - | - | - | ||||||||||||||||||||||||||||
| Comprehensive loss for three months ended March 31, 2021 | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| BALANCE AT MARCH 31, 2021 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Issuance of shares, net of issuance costs
of $ | - | - | - | |||||||||||||||||||||||||||||
| Conversion of convertible loans | - | - | - | |||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | ||||||||||||||||||||||||||||
| Share based compensation for services providers | - | - | - | |||||||||||||||||||||||||||||
| Comprehensive loss for three months ended June 30, 2021 | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| BALANCE AT JUNE 30, 2021 (1) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| (1) | Prior periods results have been adjusted to reflect |
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 7 |
SAVE FOODS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars except share and per share data)
| Six months ended | ||||||||
| June 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Loss for the period | ( | ) | ( | ) | ||||
| Adjustments required to reconcile net loss for the period to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Gain on disposal of affiliated company | - | ( | ) | |||||
| Increase (decrease) in liability for employee rights upon retirement | ( | ) | ||||||
| Stock based compensation | ||||||||
| Expenses on convertible loans | ||||||||
| Conversion of convertible loans | ||||||||
| Decrease in accounts receivable | ||||||||
| Decrease in inventory | ||||||||
| Increase in other current assets | ( | ) | ( | ) | ||||
| Increase (decrease) in accounts payable | ( | ) | ||||||
| Increase in other accounts payable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Payments on investment in unconsolidated entity | - | |||||||
| Decrease (increase) in funds in respect of employee rights upon retirement | ( | ) | ||||||
| Net cash provided by investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from secured promissory notes | ||||||||
| Proceeds on account of shares | - | |||||||
| Repayments of right to use asset arising from operating lease | ( | ) | ( | ) | ||||
| Repayments of long-term banking institutes | ( | ) | ( | ) | ||||
| Proceeds from stock issued for cash, net of issuance costs
of $ | - | |||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | - | |||||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | ||||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non cash transactions: | ||||||||
| Disposal of affiliated company | - | |||||||
| Issuance of warrants in convertible loans | - | |||||||
| Conversion of convertible loans | ||||||||
| Deferred issuance expenses | - | |||||||
The accompanying notes are an integral part of the condensed consolidated financial statement
| 8 |
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
Through
May 13, 2021, the Company’s Common Stock was quoted on the OTC, Pink Tier, under the symbol “SAFO”. On May 13,
2021, the Company completed an underwritten public offering of shares of Common Stock of the Company
at a price to the public of per
share. The gross proceeds to the Company from this offering were $
Commencing on May 14, 2021, the Company’s Common Stock was initially listed on the Nasdaq Capital Market under the symbol “SVFD”.
In March 2020, the World Health Organization declared the coronavirus (COVID-19) outbreak a global pandemic. To date, the impact of the pandemic on the Company’s operations has been mainly limited to a temporary facility closure in the context of a government-mandated general lockdown, which temporary delayed certain development activities. Due to the effects of COVID-19, as of the date of this report, some of Company's employees are on temporary leave without pay (furlough), including Company's Chief Technology Officer, and we have postponed some of our planned field tests due to the current restriction on international travels. However, to date, the Company did not experience any material impact on our financial condition and results of operations due to COVID-19 However, the Company is unable to assess with certainty the extent of future impact, in part due to the uncertainty regarding the duration of the COVID-19 pandemic, its force and its effects on the markets in which the Company operates and the effects of possible government measures to prevent the spread of the virus.
Reverse Stock Split
On
February 23, 2021, the Company amended its Certificate of Incorporation to effect a
As a result of the reverse stock split, every 7 shares of the Company’s outstanding Common Stock prior to the effect of that amendment were combined and reclassified into one share of the Company’s Common Stock. No fractional shares were issued in connection with or following the reverse split. The number of authorized capital of the Company’s Common Stock and par value of the shares remained unchanged.
All share, stock option and per share information in these condensed consolidated financial statements have been restated to reflect the stock split on a retroactive basis.
| 9 |
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 (“U.S. GAAP”). 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 three and six-months ended June 30, 2021 and 2020. However, these results are not necessarily indicative of results for any other interim period or for the year ended December 31, 2021. The preparation of financial statements in conformity with U.S. 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.
These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
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 majority-owned subsidiary. All inter-company balances and transactions have been eliminated.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP 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 share based compensation.
| 10 |
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 August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in the ASU 2020-06 also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets. The amendments in ASU 2020-06 are effective for the Company for fiscal years beginning after December 15, 2021. Early adoption is permitted. The guidance must be adopted as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this new guidance, but does not expect it to have a material impact on its financial statements.
NOTE 3 – CONVERTIBLE LOANS
On
September 21, 2020, the Company entered into a series of convertible loan agreements with certain lenders to sell convertible promissory
notes with an aggregate principal amount of $
During
October 2020, the Company entered into a series of additional convertible loan agreements with additional lenders to sell notes with
an aggregate principal amount of $
During
January 2021, the Company entered into a series of additional convertible loan agreements with additional lenders to sell notes with
an aggregate principal amount of $
As part of the foregoing convertible loan agreements, the Company entered into registration rights agreements with each of the lenders, whereby each lender received piggyback registration rights for the shares of Common Stock issuable upon conversion of the notes.
On
May 11, 2021 and May 12, 2021, the lenders of the convertible loans agreements utilized their optional conversion,
of the entire balance of the convertible promissory notes in the aggregate principal amount of $
| 11 |
SAVE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 4 – COMMON STOCK
On May 13, 2021, the Company completed an underwritten public offering of shares of Common Stock of the Company at a price to the public of per share – see note 1 above.
On
May 15, 2021, the Company signed consulting agreement with a third party according to which the Consultant will provide the Company with
investor relations services for a period of 12 months following the commencement date. As consideration for the agreement, the
Company will pay the consultant an annual fee of $
Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding at December 31,2020 | ||||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited or expired | ||||||||
| Outstanding at June 30,2021 | ||||||||
| Number of options exercisable at June 30, 2021 | ||||||||
The aggregate intrinsic value of the awards outstanding as of June 30, 2021 is . These amounts represent the total intrinsic value, based on the Company’s stock price of $ as of June 30, 2021, 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 six months ended June 30, 2021 and 2020 were and respectively
| 12 |
SAVE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 6 – COMMITMENT AND CONTINGENT LIABILITIES
| A. | On
June 15, 2021, the Company signed consulting agreement with a third party according to which the consultant will provide the
Company with public relations services. Based on the agreement the Company will pay the consultant a monthly fee of $ | |
| B. | On
June 1, 2021, the Company terminated consulting agreements previously executed on October 10, 2018, with two of its
consultants and signed new consulting agreements with the same parties. According to the agreements, the consultants
shall provide the Company with business development and strategic consulting services including ongoing consulting for the Company,
board and management. The agreement shall be effective until terminated by each of the parties by giving a 30 days prior notice.
Based on the agreements, the Company agreed to pay each a monthly fee of $ |
NOTE 7 – RELATED PARTIES
A. Transactions and balances with related parties
Six months ended June 30 | ||||||||
| 2021 | 2020 | |||||||
| General and administrative expenses: | ||||||||
| Directors compensation (*) | ||||||||
| Salaries and fees to officers (*) | ||||||||
| (*) share based compensation included in the above | ||||||||
| Research and development expenses: | ||||||||
| Salaries and fees to officers | ||||||||
| 13 |
SAVE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
B. Balances with related parties and officers:
| As of June 30, | ||||||||
| 2021 | 2020 | |||||||
| Other accounts payables | ||||||||
C. Other information:
| 1. | On
November 5, 2020, the board of directors of the Company appointed Mr. David Palach, to serve as Chief Executive Officer of the
Company, effective as of the same date. In connection with Mr. Palach’s appointment, the parties entered into a Consulting
Agreement pursuant to which the Company and Mr. Palach agreed upon, inter alia, the following engagement terms: (a) a monthly fee of $ | |
| 2. | On
June 17, 2021, the board of directors of the Company approved the compensation of Vered Raz Avayo
as its Chief Financial Officer, according to which she shall be entitled to a monthly fee of $ | |
| 3. | On
June 17, 2021, the board of directors of the Company approved the compensation of its Chairman of the
Board, according to which the Chairman of the Board shall be entitled to a monthly fee of $ | |
| 4. | On
June 17, 2021, the board of directors of the Company approved the compensation for each non-executive
member of the board, according to which the each such member shall be entitled to an annual fee of NIS |
| 14 |
SAVE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 8 – SUBSEQUENT EVENTS
On
July 1, 2021, the Company and a digital communication consultant signed an Addendum to a certain Service Agreement,
previously executed on October 20, 2020 (the “Original Agreement”), according to which the Company agreed to pay the
consultant $
On
August 5, 2021, the Company signed consulting agreement with a third party according to which the Consultant will provide the
Company with strategic consulting and digital marketing services for a period of six months commencing on September 1, 2021. As
consideration for the agreement, the Company agreed to pay the consultant a total fee of $
| 15 |
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 2020 Annual Report. 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 2020 Annual Report 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. Furthermore, certain disclosures and references made herein apply to Save Foods Ltd., the subsidiary of Save Foods, Inc. The primary business activities and operations discussed herein are performed by Save Foods Ltd., whereas Save Foods, Inc. operates as a holding company and is the Registrant for purposes of this Quarterly Report on Form 10-Q.
We develop eco-friendly “green” solutions for the food industry. Our solutions are developed to improve the food safety and shelf life of fresh produce. We do this by controlling human and plant pathogens, thereby reducing spoilage, and in turn, reducing food loss.
Our products are based on a proprietary blend of food acids which have a synergistic effect when combined with certain types of oxidizing agent-based sanitizers and fungicides at low concentrations. Our green products are capable of cleaning, sanitizing and controlling pathogens on fresh produce with the goal of making them safer for human consumption and extending their shelf life by reducing their decay. One of the main advantages of our products is that our active ingredients do not leave any toxicological residues on the fresh produce we treat. In contrary, by forming a temporary protective shield around the fresh produce we treat, our products make it difficult for pathogens to develop and potentially provide protection which also reduces cross-contamination.
Our shares of Common Stock are listed on the Nasdaq Capital Market under the symbol “SVFD.”
Due to the effects of COVID-19, as of the date of this report, some of our employees are on temporary leave without pay (furlough), including our Chief Technology Officer, and we have postponed some of our planned field tests due to restrictions on international travels. However, to date, we did not experience any material impact on our financial condition and results of operations due to COVID-19, and we do not expect to experience any material impact on our overall liquidity positions and outlook as a result of the outbreak. Nevertheless, it is not possible at this time to estimate the full impact that the COVID-19 pandemic, the continued spread of COVID-19, and any additional measures taken by governments, health officials or by us in response to such spread, could have on our business results of operations and financial condition.
| 16 |
Results of Operations
Components of Results of Operation
Revenues and Cost of Revenues
Our total revenue consists of products and our cost of revenues consists of cost of products.
The following table discloses the breakdown of revenues and costs of revenues:
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| U.S. dollars in thousands, except share and per share data | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenues | $ | 177,477 | $ | 63,566 | $ | 54,403 | $ | - | ||||||||
| Cost of revenues | (14,287 | ) | (25,686 | ) | (11,354 | ) | (4,911 | ) | ||||||||
| Gross (loss) profit | $ | 163,190 | $ | 37,880 | $ | 43,049 | $ | (4,911 | ) | |||||||
Operating Expenses
Our current operating expenses consist of three components — research and development expenses, selling and marketing expenses and general and administrative expenses.
Research and Development Expenses, net
Our research and development expenses consist primarily of salaries and related personnel expenses, share base compensation, professional fees and other related research and development expenses such as field tests.
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| U.S. dollars in thousands | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Salaries and related expenses | $ | 17,927 | $ | 38,643 | $ | 15,841 | $ | - | ||||||||
| Share based compensation | 31,344 | 33,636 | 13,428 | 19,050 | ||||||||||||
| Professional fees | 210,932 | 68,961 | 179,918 | 20,251 | ||||||||||||
| Laboratory and field tests | 7,376 | 77,525 | 1,116 | 42,920 | ||||||||||||
| Other expenses | 28,954 | 34,578 | 16,439 | 13,486 | ||||||||||||
| Total | $ | 296,533 | $ | 253,343 | $ | 226,742 | $ | 95,707 | ||||||||
We expect that our research and development expenses will increase as we continue to develop our products and services, field trials and recruit additional research and development employees.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries and related expenses, share based compensation and other expenses.
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Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| U.S. dollars in thousands | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Salaries and related expenses | $ | 3,414 | $ | 30,152 | $ | 2,637 | $ | - | ||||||||
| Share based compensation | 791 | (22,366 | ) | 329 | 983 | |||||||||||
| Other expenses | 29,204 | 28,962 | 15,746 | 6,828 | ||||||||||||
| Total | $ | 33,409 | $ | 36,748 | $ | 18,712 | $ | 7,811 | ||||||||
We expect that our selling and marketing expenses will increase as we continue to increase our selling and marketing efforts including commercial validation pilots and recruit additional employees or contractor to support our selling and marketing efforts in our targeted geographical areas.
General and Administrative Expenses
General and administrative expenses consist primarily of professional services, share based compensation and other non-personnel related expenses.
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| U.S. dollars in thousands | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Salaries and related expenses | $ | 32,056 | $ | - | $ | 32,056 | $ | - | ||||||||
| Professional services | 1,277,693 | 208,439 | 1,123,805 | 88,935 | ||||||||||||
| Share based compensation | 112,738 | 205,087 | 47,309 | 162,756 | ||||||||||||
| Legal expenses | 20,753 | 36,582 | 10,687 | 18,155 | ||||||||||||
| Other expenses | 229,467 | 63,268 | 205,879 | 25,451 | ||||||||||||
| Total | $ | 1,672,707 | $ | 513,376 | $ | 1,419,736 | $ | 295,297 | ||||||||
Three months ended June 30, 2021 compared to three months ended June 30, 2020
Revenues.
Revenues for the three months ended June 30, 2021 were $54,403, compared to $0 during the three months ended June 30, 2020. The increase is mainly a result of our sale of new products, which we commenced in the fourth quarter of 2020.
We do not have backlogs or firm commitments from our customers for our products. Our sales might deteriorate if we fail to achieve commercial success or obtain regulatory approval of any of our products.
Cost of Sales
Cost of sales consists primarily of salaries, materials, transportation and overhead costs of manufacturing our products. Cost of revenues for the three months ended June 30, 2021 was $11,354, an increase of $6,443, or 131%, compared to total cost of revenues of $4,911 for the three months ended June 30, 2020. The increase is mainly a result of our increase in sales for the three months ended June 30, 2021.
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Gross Profit
Gross profit for the three months ended June 30, 2021 was $43,049, an increase of $47,960, compared to gross loss of $4,911 for the three months ended June 30, 2020. The increase is mainly a result of the increase in revenues as detailed above.
Research and Development
Research and development expenses consist of salaries and related expenses, share base compensation, consulting fees, service providers’ costs, related materials and overhead expenses. Research and development expenses for the three months ended June 30, 2021 were $226,742, an increase of $131,035, or 137%, compared to total research and development expenses of $95,707 for the three months ended June 30, 2020. The increase is mainly attributable to an increase in professional fees and salary and related expenses offset by a decrease in share based compensation and in expenses associated with international travel and field trials which have been postponed due to COVID-19.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries and related costs for selling and marketing personnel, travel related expenses and services providers. Selling and marketing expenses for the three months ended June 30, 2021 were $18,712, an increase of $10,901, or 139%, compared to total selling and marketing expenses of $7,811 for the three months ended June 30, 2020. The increase is mainly attributable to the increase in service providers’ delivery costs associated with our sales.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related expenses including share based compensation and other professional services as well as other non-personnel related expenses such as legal expenses and directors and insurance costs. General and administrative expenses for the three months ended June 30, 2021 were $1,419,736, an increase of $1,124,439, or 381%, compared to total general and administrative expenses of $295,297 for the three months ended June 30, 2020. The increase is mainly a result of the increase in professional services and compensation payable to directors following the listing of our Common Stock on the Nasdaq Capital Market, which occurred during the second quarter of 2021, offset partially by a decrease share-based compensation to our employees and service providers.
Financing Expenses, Net
Financing income, net for the three months ended June 30, 2021 were $120,916, a change of $314,066, compared to total financing expenses of $193,149 for the three months ended June 30, 2020. The decrease is mainly a result of the decrease in compensation expenses related to the accrued interest and amortization expenses associated with our convertible loans which were fully converted during the three months ended June 30, 2021.
Total Comprehensive Loss
As a result of the foregoing, our total comprehensive loss for the three months ended June 30, 2021 was $1,481,580, compared to $577,045 for the three months ended June 30, 2020, an increase of $904,535, or 157%.
Six months ended June 30, 2021 compared to six months ended June 30, 2020
Revenues.
Revenues for the six months ended June 30, 2021 were $177,477, an increase of $113,911, or 179%, compared to total revenues of $63,566 for the six months ended June 30, 2020. The increase is mainly a result of our sales of new products, which we commenced in the fourth quarter of 2020.
We do not have backlogs or firm commitments from our customers for our products. Our sales might deteriorate if we fail to achieve commercial success or obtain regulatory approval of any of our products.
Cost of Sales
Cost of sales consists primarily of salaries, materials, transportation and overhead costs of manufacturing our products. Cost of revenues for the six months ended June 30, 2021 was $14,287, a decrease of $11,399, or 44%, compared to total cost of revenues of $25,686 for the six months ended June 30, 2020. The decrease is mainly a result of the decrease in the overall cost of materials, due to our efforts to outsource production of our new solutions.
Gross Profit
Gross profit for the six months ended June 30, 2021 was $163,190, an increase of $125,310, or 331%, compared to gross profit of $37,880 for the six months ended June 30, 2020. The increase is mainly a result of the increase in revenues and the decrease in cost of revenues, as detailed above.
Research and Development
Research and development expenses consist of salaries and related expenses, share base compensation, consulting fees, service providers’ costs, related materials and overhead expenses. Research and development expenses for the six months ended June 30, 2021 were $296,533, an increase of $43,190, or 17%, compared to total research and development expenses of $253,343 for the six months ended June 30, 2020. The increase is mainly attributable to the increase in professional fees partially offset by a decrease in share based compensation and in payroll and decrease in expenses associated with international travel and field trials which have been postponed due to COVID-19.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries and related costs for selling and marketing personnel, travel related expenses and services providers. Selling and marketing expenses for the six months ended June 30, 2021 were $33,409, a decrease of $3,339, or 9%, compared to total selling and marketing expenses of $36,748 for the six months ended June 30, 2020. The decrease is mainly attributable to the increase in payroll expenses and service providers used in relation to selling and marketing activities mainly associated with the termination of the employment of our former vice president of sales in February 2020 partially offset by an increase in share based compensation expenses.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related expenses including share based compensation, professional fees and other non-personnel related expenses such as legal expenses and directors and insurance costs. General and administrative expenses for the six months ended June 30, 2021 were $1,672,707, an increase of $1,159,331, or 226%, compared to total general and administrative expenses of $513,376 for the six months ended June 30, 2020. The increase is mainly a result of the increase in professional services and compensation payable to directors following the listing of our Common Stock on the Nasdaq Capital Market, which occurred during the second quarter of 2021, offset partially by a decrease share-based compensation to our employees and service providers.
Financing Expenses, Net
Financing expenses, net for the six months ended June 30, 2021 were $156,061, a decrease of $44,290, or 22%, compared to total financing expenses of $200,351 for the six months ended June 30, 2020. The decrease is mainly a result of the decrease in compensation expenses related to the accrued interest and amortization expenses associated with our convertible loans which were fully converted during the three months ended June 30, 2021.
Total Comprehensive Loss
As a result of the foregoing, our total comprehensive loss for the six months ended June 30, 2021 was $1,973,843, compared to $942,692 for the six months ended June 30, 2020, an increase of $1,031,151, or 109%.
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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. Since our inception through June 30, 2021, we have funded our operations principally with approximately $23,244,172 (net of issuance expenses) from the issuance of shares of our Common Stock, options and loans.
On May 13, 2021, we completed an underwritten public offering of 1,090,909 shares of Common Stock at a price to the public of $11.00 per share. The gross proceeds we received from this offering were $12,000,000 (net proceeds of $10,457,862) (the “Underwritten Offering”).
The table below presents our cash flows for the periods indicated:
Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Net cash used in operating activities | $ | (1,711,222 | ) | $ | (468,999 | ) | ||
| Net cash provided by investing activities | 4,375 | (574 | ) | |||||
| Net cash provided by financing activities | 10,761,603 | 214,009 | ||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | 8,144 | - | ||||||
| Increase (decrease) in cash and cash equivalents | $ | 9,062,900 | $ | (255,564 | ) | |||
As of June 30, 2021, we had cash of $9,305,800, as compared to $242,900 as of December 31, 2020. As of June 30, 2021, we had a working capital of $8,904,187, as compared to a negative working capital of $290,062 as of December 31, 2020. The increase in our cash balance is mainly attributable to the Underwritten Offering described above and proceeds from convertible loans.
In view of our cash balance following the above transactions, we anticipate that our cash balances will be sufficient to permit us to conduct our operations for at least a period of twelve months from the date of the issuance of these unaudited condensed consolidated financial statements. We may also satisfy its liquidity through the sale of its securities, either in public or private transactions.
If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and operating results. If we obtain additional funds by selling any of our equity securities or by issuing Common Stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the Common Stock. If adequate funds are not available to us when needed on satisfactory terms, we may be required to cease operating or otherwise modify our business strategy.
Operating Activities
Net cash used in operating activities was $1,711,222 for the six months ended June 30, 2021, as compared to $468,999 for the six months ended June 30, 2020.
Investing Activities
Net cash provided by investing activities was $4,375 for the six months ended June 30, 2021, as compared to net cash used in investing activities of $574 for the six months ended June 30, 2020. The increase is mainly attributable to the increase in funds in respect of employee rights upon retirement.
Financing Activities
Net cash provided by financing activities was $10,761,603 for the six months ended June 30, 2021, as compared to $214,009 for the six months ended June 30, 2020. The increase is mainly the result of proceeds from to the Underwritten Offering described above and convertible loans.
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Financial Arrangements
Since our inception, we have financed our operation primarily through proceeds from sales of our shares of Common Stock, convertible loan agreements and grants from the Israeli Innovation Authority, formerly known as the Office of the Chief Scientist of the Ministry of Economy and Industry.
During January 2021, we entered into a series of convertible loan agreements with an aggregate principal amount of $274,000 that each bear interest at a rate of 5% per annum.
On May 11, 2021 and May 12, 2021, we issued an aggregate of 66,877 shares of Common Stock following the conversion of convertible promissory notes in the aggregate principal amount of $499,000 and of aggregated accrued interest amount of $11,211, at a conversion price of $7.63 per share.
On May 18, 2021, we closed the Underwritten Offering pursuant to which we issued a total of 1,090,909 shares of our Common Stock at a purchase price of $11.00 per share. In connection with the Underwritten Offering, we agreed to grant ThinkEquity, a division of Fordham Financial Management, Inc. (the “Underwriters”), a 45-day option to purchase up to 163,636 additional shares of Common Stock at the public offering price of $11.00 per share, less the underwriting discounts and commissions solely to cover over-allotments, which was not exercised by the Underwriters, and to issue the Underwriters a five-year warrants to purchase up to 54,545 shares of Common Stock, at a per share exercise price equal to 125% of the Underwritten Offering price per share of Common Stock, or $13.75. The gross proceeds from the Underwritten Offering were approximately $12,000,000.
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Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
Changes to Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are set forth in our 2020 Annual Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of June 30, 2021, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, and due to certain material weaknesses identified by management, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of June 30, 2021.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1A. RISK FACTORS.
Our business faces many risks, a number of which are described under the caption “Risk Factors” in our 2020 Annual Report. Other than as set forth below, there have been no material changes from the risk factors previously disclosed in our 2020 Annual Report. The risks described in our 2020 Annual Report and below may not be the only risks we face. Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results. If any of the events or circumstances described in the risk factors contained in our 2020 Annual Report or described below occurs, our business, financial condition or results of operations could be adversely impacted and the value of an investment in our securities could decline. Investors and prospective investors should consider the risks described in our 2020 Annual Report and below, and the information contained under the caption “Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q before deciding whether to invest in our securities.
ITEM 6. EXHIBITS.
(a) The following documents are filed as exhibits to this Quarterly Report or incorporated by reference herein.
| Exhibit | ||
| Number | Description | |
| 31.1* | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act | |
| 31.2* | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act | |
| 32.1** | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2** | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.INS* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: August 16, 2021 | SAVE FOODS INC. | |
| By: | /s/ David Palach | |
| Name: | David Palach | |
| Title: | Chief Executive Officer | |
| Save Foods, Inc. | ||
| By: | /s/ Vered Raz Avayo | |
| Name: | Vered Raz Avayo | |
| Title: | Chief Financial Officer | |
| Save Foods, Inc. |
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