THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR AUDITED
FINANCIAL STATEMENTS AND THE RELATED NOTES THAT APPEAR ELSEWHERE IN THIS
QUARTERLY REPORT ON FORM 10-Q AND THE FINANCIAL STATEMENTS AND RELATED NOTES
THERETO FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021 AND THE RELATED MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, BOTH
OF WHICH ARE CONTAINED IN OUR ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), ON MARCH 31, 2022. PAST
OPERATING RESULTS ARE NOT NECESSARILY INDICATIVE OF RESULTS THAT MAY OCCUR IN
FUTURE PERIODS. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS
THAT REFLECT OUR PLANS, ESTIMATES AND BELIEFS. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW AND
ELSEWHERE IN THIS QUARTERLY REPORT.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and
other Federal securities laws, and is subject to the safe-harbor created by such
Act and laws. Forward-looking statements may include statements regarding our
goals, beliefs, strategies, objectives, plans, including product and technology
developments, future financial conditions, results or projections or current
expectations These forward-looking statements involve known or unknown risks,
uncertainties and other factors that may cause the actual results, performance,
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "may," "should," "potential," "continue," "expects,"
"anticipates," "intends," "plans," "believes," "estimates," and similar
expressions. These statements are based on our current beliefs, expectations,
and assumptions and are subject to a number of risks and uncertainties. Although
we believe that the expectations reflected-in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Our actual results may differ materially from those anticipated
in these forward-looking statements. These forward-looking statements are made
as of the date of this report, and we assume no obligation to update these
forward-looking statements whether as a result of new information, future
events, or otherwise, other than as required by law. In light of these
assumptions, risks, and uncertainties, the forward-looking events discussed in
this report might not occur and actual results and events may vary significantly
from those discussed in the forward-looking statements. Further information on
potential factors that could affect our business is described under the heading
"Risk Factors" in Part I, Item 1A, of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2022. Readers are also urged to carefully review
and consider the various disclosures we have made in that report.
When used in this quarterly report, the terms "Sativus," "the Company," "we,"
"our," and "us" refer to SATIVUS TECH CORP., a Delaware corporation, unless
otherwise indicated or as otherwise required by the context.
Company Overview
Sativus Tech Corp. (the "Company") was formed on January 16, 2015, under the
laws of the State of Delaware. Prior to September 14th, 2018, the Company was
solely a provider of risk management and asset protection ("RAP") services for
businesses, individuals and families. On September 14th, 2018, executed an
Acquisition and Share Exchange Agreement with Eroll Grow Tech Ltd. ("Eroll"), an
Israeli Corporation that was formed on May 18th, 2015, under the laws of the
state of Israel. On September 17, 2018, the Board of Directors adopted an
Amendment to its Articles, changing the name of the Corporation to SEEDO CORP.
Since the Acquisition of Eroll and through to December 31, 2019, Eroll produced
a 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. On December 13, 2021, the Company changed
its name from Seedo Corp to Sativus Tech Corp.
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On July 19, 2020, the Company formed a new wholly-owned subsidiary in Israel,
Hachevra Legiduley Pkaot Beisrael Ltd. (the "New Subsidiary"), to develop a
fully automated and remotely managed system for growing saffron and other
vegetables. On November 5, 2020, the New Subsidiary changed its name to
Saffron-Tech Ltd. ("Saffron Tech").
The Company, through Saffron Tech, is focusing on its in-house research and
development of agriculture technology products, among others, in the fields of
exotic plants and mushrooms. Saffron Tech plans to roll out its proof of concept
in the coming months. This technology will provide turnkey automated growing
containers for high-quality, high-yield saffron all year round. The Company is
in advanced stages of developing and testing a fully automated and remotely
managed system for growing high-quality, high-yield saffron anywhere and
anytime.
The Company's proof of concept utilizes the "Grow Next to Consumer" policy and
is therefore sustainable and fit the COVID-19 restrictions on transport. It is
also environmentally friendly, using economic levels of water, space,
fertilizer, and energy. Accounting to the Company's calculations, we believe
that the controlled indoor growing area will produce ten times more yield
compared to the same land area using traditional methods. The sealed environment
eliminates the need for harmful pesticides and herbicides, producing a clean and
safe product that is easy to control from anywhere. The Company's solution is
easily scalable and pre-designed to quickly grow operations.
Saffron is used in many industries, such as the food industry, particularly by
famous chefs and Michelin starred restaurants, the natural cosmetics industry,
and the natural medicine industry and as a dye in the textile industry.
Medicinal claims as an anti-depressant, antioxidant, and antiseptic are
constantly increasing.
On December 8, 2021, Saffron Tech announced it has begun construction of a new
state-of-the-art indoor farm that will help increase its production of the
saffron spice. Saffron Tech has already successfully completed two harvests of
saffron using vertical farming technology at its initial location in Ganot,
Israel. The Company's mission with this new facility, located at Mavki'im,
Israel, is to complete a third cycle to triple the amount of saffron produced
annually. Traditional agriculture only produces one harvest of saffron per year
through a labor-intensive process.
On December 9, 2021, FINRA gave final approval for the Company's 1-for-10
consolidation, or reverse split, of our issued and outstanding common shares, as
noted in our 8K of December 13, 2021. Except where otherwise indicated, all
share and per share data in these financial statements have been retroactively
restated to reflect said consolidation.
On January 6, 2022, the Company announced that its subsidiary, Saffron Tech, has
planted approximately 25,000 Saffron bulbs in fields in the Golan Heights, in
Norther Israel. The planation is being managed in conjunction with the Shamir
Research Institute, which operates under the auspices of the Haifa University,
Israel.
On April 4, 2022, the Company appointed Mrs. Tal Wilk-Glazer as Director and CEO
of the Company. Gadi Levin stepped down as CEO and remains the Company's CFO. On
the same day, Mr. Moshe Bar Siman Tov and Mrs. Iris Ginsburg resigned from their
positions as Directors. Their resignation was not the result of any disputes
with the Company.
From June 2022 through to August 2022, Saffron Tech entered into a number of
Simple Agreement for Future Equity ("2022 SAFES") agreements with third parties
for gross proceeds of approximately $239.
During July 2022, Saffron Tech received a total of $100 in respect of the
issuance of 76,890 shares to third party investors at price of NIS 4.5 per share
(approximate $1.36 per share). The investors also received an option to convert
the shares of Saffron Tech into shares of the Company. The option expires on
January 1, 2023.
On August 30, 2022, the Company announced that Saffron Tech has announced its
intention to raise up to 5 million New Israeli Shekels ("NIS") (approximately
$1.5 million) at a pre-money valuation of NIS 32.5 million (approximately $10
million) through the Israeli crowd funding platform - Pipelbiz. Assuming the
maximum amount is raised, the Company will own approximately 61% of the Saffron
Tech. As of the day of this report the Saffron Tech has raised $ 0.6 million.
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Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
("U.S. GAAP") for interim financial statement presentation and in accordance
with Form 10-Q. Accordingly, they do not include all of the information and
footnotes required in annual financial statements. In the opinion of management,
the unaudited condensed financial statements contain all adjustments (consisting
only of normal recurring accruals) necessary to present fairly the financial
position and results of operations and cash flows. The results of operations
presented are not necessarily indicative of the results to be expected for any
other interim period or for the entire year.
These unaudited condensed financial statements should be read in conjunction
with our December 31, 2021, annual financial statements included in our
Form 10-K, filed with the SEC on March 31, 2022.
Going Concern
Due to the uncertainty of our ability to meet our current operating and capital
expenses, our independent auditors included an explanatory paragraph in their
report on the condensed consolidated financial statements for the nine months
ended September 30, 2022, regarding concerns about our ability to continue as a
going concern. Our financial statements contain additional note disclosures
describing the circumstances that lead to this disclosure by our independent
auditors.
Our unaudited condensed financial statements have been prepared on a going
concern basis, which assumes the realization of assets and settlement of
liabilities in the normal course of business. Our ability to continue as a going
concern is dependent upon our ability to generate profitable operations in the
future and/or to obtain the necessary financing to meet our obligations and
repay our liabilities arising from normal business operations when they become
due. The outcome of these matters cannot be predicted with any certainty at this
time and raise substantial doubt that we will be able to continue as a going
concern. Our unaudited condensed financial statements do not include any
adjustments to the amount and classification of assets and liabilities that may
be necessary should we be unable to continue as a going concern. There is no
assurance that our operations will be profitable. Our continued existence and
plans for future growth depend on our ability to obtain the additional capital
necessary to operate either through the generation of revenue or the issuance of
additional debt or equity.
Financing
We will require additional financing to implement our business plan, which may
include joint venture projects and debt or equity financings. The nature of this
enterprise and constraint of positive cash flow places debt financing beyond the
credit-worthiness required by most banks or typical investors of corporate debt
until such time as an economically viable profits and losses can be
demonstrated. Therefore, any debt financing of our activities may be costly and
result in substantial dilution to our stockholders.
Future financing through equity investments is likely to be dilutive to existing
stockholders. Also, the terms of securities we may issue in future capital
transactions may be more favorable for our new investors. Newly issued
securities may include preferences, superior voting rights, and the issuance of
warrants or other derivative securities, which may have additional dilutive
effects. Further, we may incur substantial costs in pursuing future capital and
financing, including investment banking fees, legal fees, accounting fees, and
other costs. We may also be required to recognize non-cash expenses in
connection with certain securities we may issue, such as convertible notes and
warrants, which will adversely impact our financial condition.
Our ability to obtain needed financing may be impaired by such factors as the
capital markets, both generally and specifically in the Agro-tech industry,
which could impact the availability or cost of future financings. If the amount
of capital we are able to raise from financing activities, together with our
revenue from operations, is not sufficient to satisfy our capital needs, even to
the extent that we reduce our operations accordingly, we may be required to
cease operations.
There is no assurance that we will be able to obtain financing on terms
satisfactory to us, or at all. We do not have any arrangements in place for any
future financing. If we are unable to secure additional funding, we may cease or
suspend operations. We have no plans, arrangements, or contingencies in place in
the event that we cease operations.
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Results of Operations
Nine months ended September 30, 2022, compared to the nine months ended
September 30, 2021
Operating Expenses
Research and development expenses for the nine months ended September 30, 2022,
were $494 thousand compared to $443 thousand for the same period in 2021. Gross
research and development expenses were $704 thousand, offset by the cancellation
of share-based expenses from previous years in the amount of $105 thousand and
amounts received in respect of participation in expenses by the Israeli
Innovation Authority in the amount of $105 thousand (previous period - nil)
which reduced total research and development expenses for the nine months ended
September 30, 2022, to $494 thousand.
Total marketing expenses for the nine months ended September 30, 2022, were $nil
compared to $131 thousand for the same period in 2021.
General and administrative ("G&A") expenses for the nine months ended September
30, 2022, were $490 thousand compared to $1,020 thousand for the same period in
2021. Gross general and administrative expenses were $596 thousand, offset by
the cancellation of share-based expenses from previous year in the amount of
$106 thousand which reduced total general and administrative expenses for the
nine months ended September 30, 2022, to $490 thousand.
Total financial expenses for the nine months ended September 30, 2022, was $117
compared to $1,340 thousand expenses for the same period in 2021. The reason for
the change is due to financial losses related to revaluations of convertible
component in convertible loans.
Three months ended September 30, 2022, compared to the three months ended
September 30, 2021
Operating Expenses
Research and development expenses for the three months ended September 30, 2022,
were $218 thousand compared to $125 thousand for the same period in 2021.
Total marketing expenses for the three months ended September 30, 2022, were
$nil compared to $50 thousand for the same period in 2021.
General and administrative ("G&A") expenses for the three months ended September
30, 2022, were $189 thousand compared to $315 thousand for the same period in
2021.
Total financial expenses for the three months ended September 30, 2022, was $435
compared to $98 thousand for the same period in 2021. The reason for the change
is due to financial losses related to revaluations of convertible component in
convertible loans.
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Liquidity and Capital Resources
Overview
Since inception on January 16, 2015, the Company has a cumulative deficit of
$21,973 thousand and a working capital deficit of $3,395 thousand as of
September 30, 2022. Our future growth is dependent upon achieving further
purchase orders and execution, management of operating expenses and ability of
the Company to obtain the necessary financing to fund future obligations, and
upon profitable operations.
Historically, we have financed our cash flow and operations from the initial
contribution of our majority shareholder and by raising equity and convertible
loans.
As of September 30, 2022, we had current assets of $242 thousand consisting of
$191 thousand in cash and cash equivalents, $11 thousand in restricted cash and
$40 thousand in other current assets.
We had $3,637 thousand in current liabilities consisting of $111 thousand in
other current liabilities, $2,176 thousand in Convertible loans, $1,302 thousand
in convertible component, $15 thousand in short-term lease liability and $33
thousand accounts payables.
As of December 31, 2021, we had current assets of $963 thousand consisting of
$866 thousand in cash and cash equivalents, $20 thousand in restricted cash and
$77 thousand in prepaid expenses and other receivables. We had $3,358 thousand
in current liabilities, which consisted of $12 thousand in accounts payable,
$110 thousand other accounts payable, $2,994 thousand Convertible loans, $222
thousand in BCF liability, and $20 thousand in short term lease liability
We had a negative working capital of $3,395 thousand and $2,395 thousand as of
September 30, 2022, and December 31, 2021, respectively.
Our Current liabilities as of September 30, 2022, were $3,637 thousand compared
to $3,358 thousand as of December 31, 2021.
During the nine months ended September 30, 2022, we had negative cash flow from
operations of $732 thousand which was mainly the result of a net loss of $1,101
thousand, share-based expenses of $172 thousand and offset by financial gains
from revaluations of convertible component in convertible loans in the amount of
$100 thousand.
During the nine months ended September 30, 2022, we had negative cash flow from
investing activities of $190 thousand compared to a negative cash flow from
investing activities of $31 thousand during the nine months ended September 30,
2021. The increase is due to investment in leasehold improvements.
During the nine months ended September 30, 2022, we had positive cash flow from
financing activities of $248 thousand compared to a positive cash flow from
financing activities of $1,862 during the nine months ended September 30, 2021.
Cash flow from financing activities in the nine months ended September 30, 2022,
was mainly a result of proceeds of convertible loans in the amount of $239
thousand, and proceeds from issuance of shares to minority interests in a
subsidiary in the amount of $100 thousand. Cash flow from financing activities
in the nine months ended September 30, 2021, was mainly a result of proceeds of
convertible loans in the amount of $530 thousand, and issuance of shares to
minority interests in a subsidiary in the amount of $1,406 thousand.
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