SATT 10-Q
Sativus Tech Corp. (SATT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
OR
For the quarterly period ended
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether
the registrant (1) has filed all reports required 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 day. ☒
Indicate by check mark whether
the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted 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 and post such files). Yes ☐
(Does not currently apply to the Registrant)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 if 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 ☐
No
As of November 15, 2021, the registrant had
When used in this quarterly report, the terms “Seedo Corp.” “the Company,” “we,” “our,” and “us” refer to Seedo Corp.
TABLE OF CONTENTS
| PART I. | FINANCIAL INFORMATION | 1 |
| ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 1 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 2 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 8 |
| ITEM 4. | CONTROLS AND PROCEDURES | 8 |
| PART II | OTHER INFORMATION | 9 |
| ITEM 6. | EXHIBITS | 9 |
| SIGNATURES | 10 | |
i
PART I. Financial Information
SEEDO CORP.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2021
1
SEEDO CORP.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2021
IN THOUSANDS OF U.S. DOLLARS
INDEX
- - - - - - - - - - - -
F-1
SEEDO CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
| September 30 | December 31 | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Prepaid expenses and other receivables | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | - | |||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payables | ||||||||
| Convertible loans (Note 3) | ||||||||
| Fair value of convertible component in convertible loans (Note 3) | ||||||||
| Other accounts liabilities | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Fair value of convertible component in convertible loans (Note 3) | ||||||||
| Convertible loan (Note 3) | ||||||||
| Total long term liabilities | ||||||||
| SHAREHOLDER’S DEFICIT (Note 5) | ||||||||
| Ordinary shares of $0.0001 par value | ||||||||
| Additional Paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Non-controlling interests | - | |||||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-2
SEEDO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
U.S. dollars in thousands, except share and per share data
| Three months ended | Nine months ended | |||||||||||||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Selling and marketing | ( | ) | ( | ) | ||||||||||||
| General and administrative | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on liquidation of subsidiary | - | |||||||||||||||
| Financial expenses, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) | ( | ) | ( | ) | $ | ( | ) | $ | ||||||||
| Non-controlling interests | ( | ) | ( | ) | ||||||||||||
| Net Income (loss) attributable to equity holders of the Company | ( | ) | ( | ) | ( | ) | ||||||||||
| Basic and diluted net income (loss) per share | $ | ( | ) | ( | ) | $ | ( | ) | $ | |||||||
| Weighted average number of Ordinary shares used in computing basic and diluted loss per share | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3
SEEDO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
U.S. dollars in thousands, except share and per share data
| Ordinary shares | Additional Paid in | Accumulated | Total Shareholders’ | Non- controlling | ||||||||||||||||||||||||
| Number | Amount | capital | Deficit | Deficiency | interests | Total | ||||||||||||||||||||||
| Balance at January 1, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||||||
| Conversion of convertible loans | ||||||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Balance at March 31, 2020 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||||||
| Conversion of convertible loans | ||||||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Balance at June 30, 2020 (Unaudited) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Issuance of warrants | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at September 30, 2020 (Unaudited) | $ | $ | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
F-4
SEEDO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
U.S. dollars in thousands, except share and per share data
| Additional | Total | Non- | ||||||||||||||||||||||||||
| Ordinary shares | Paid in | Accumulated | Shareholders’ | controlling | ||||||||||||||||||||||||
| Number | Amount | capital | Deficit | Deficiency | interests | Total | ||||||||||||||||||||||
| Balance at January 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||||||
| Transactions with non-controlling interests | - | |||||||||||||||||||||||||||
| Share Based Compensation to employees and non-employees | - | |||||||||||||||||||||||||||
| Beneficial conversion feature related to convertible loans | - | |||||||||||||||||||||||||||
| Exercise of warrants | - | |||||||||||||||||||||||||||
| Issuance of shares in respect of RSU’s | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Balance at March 31, 2021 (Unaudited) | $ | $ | ( | ) | ( | ) | ||||||||||||||||||||||
| Share Based Compensation to employees and non-employees | - | |||||||||||||||||||||||||||
| Conversion of convertible loans | ||||||||||||||||||||||||||||
| Issuance of shares in respect of RSU’s | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2021 (Unaudited) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Share Based Compensation to employees and non-employees | ||||||||||||||||||||||||||||
| Conversion of convertible loans | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2021 (Unaudited) | $ | $ | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-5
SEEDO CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
U.S. dollars in thousands
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Share based compensation expenses to employees and non-employees | ||||||||
| Financial expenses related to convertible loans and warrants | ||||||||
| Change in fair value of convertible component in convertible loans | ||||||||
| Gain on liquidation of subsidiary | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Increase in other accounts receivables | ( | ) | ( | ) | ||||
| Increase (decrease) in accounts payables | ( | ) | ||||||
| Increase (decrease) in other accounts payables | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Increase in restricted cash | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from convertible loans | ||||||||
| Proceeds from issuance of shares to minority interests in subsidiary | ||||||||
| Repayment of convertible loans | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents and restricted cash at the beginning of the year | ||||||||
| Cash and cash equivalents at the end of the period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Supplemental disclosures of non- cash flow information: | ||||||||
| Conversion of convertible loans | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-6
| SEEDO CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 1:- | GENERAL |
| a. | Seedo Corp. (the “Company”), was incorporated on January 16, 2015, as GRCR Partners Inc., under the laws of Delaware. Prior to September 14, 2018, the Company was solely a provider of risk management and asset protection (“RAP”) services for businesses, individuals and families. On September 14, 2018, the Company acquired Eroll Grow Tech Ltd. (“Eroll”), an Israeli company incorporated on May 18, 2015 (the “Acquisition”). On September 17, 2018, the Company’s name was changed 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. |
During the third quarter of 2019, Eroll was experiencing financial and operational difficulties and during 2020, entered liquidation proceedings through the Nazareth District Court of the State of Israel (the “Court”). On March 25, 2020, the Court approved the purchase of all of Eroll’s assets by a non-related third-party and therefore, the Company no longer has any legal ties nor privity with Eroll.
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 is designed to 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.
On August 10, 2021, the Company announced
that its subsidiary, Saffron Tech, has been awarded a $
| b. | The Company has an accumulated deficit in the total amount of $ |
The Company intends to finance operating costs over the next twelve months with existing cash on hand, reducing operating spend, and future issuances of equity and debt securities, or through a combination of the foregoing. However, the Company will need to seek additional sources of financing if the Company requires more funds than anticipated during the next 12 months or in later periods.
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business.
The consolidated financial statements for the nine months ended September 30, 2021, do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.
F-7
| SEEDO CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 1:- | GENERAL (cont.) |
| c. | The COVID-19 pandemic, which originated in China in late 2019, has since spread across the globe and affected the economic condition of most, if not all, countries, including the United States, Israel and many countries in Europe. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. While COVID-19 is still spreading and the final implications of the pandemic are difficult to estimate at this stage, it is clear that it has affected the lives of a large portion of the global population. As of March 31, 2021, the pandemic has caused repeated states of emergency to be declared in various countries, ongoing and extended travel restrictions have been imposed for several months, strict quarantines rules have been established and maintained for an extended period of time in a plethora of jurisdictions and various institutions and companies have been closed and rendered bankrupt. The Company is actively monitoring the pandemic and is taking any necessary measures to respond to the situation in cooperation with the various stakeholders. Due to the uncertainty surrounding the COVID-19 pandemic, the Company will continue to assess the situation, including government-imposed restrictions, market by market. It is not possible at this time to estimate the full impact that the COVID-19 pandemic could have on the Company’s business, the continued spread of COVID-19, and any additional measures taken by governments, health officials or by the Company in response to such spread, could have on the Company’s business, results of operations and financial condition. The COVID-19 pandemic and mitigation measures have also negatively impacted global economic conditions, which, in turn, could adversely affect the Company’s business, results of operations and financial condition. The extent to which the COVID-19 outbreak continues to impact the Company’s financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new government actions or restrictions, new information that may emerge concerning the severity, longevity and impact of the COVID-19 pandemic on economic activity. |
| NOTE 2:- | UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
Basis of Presentation and Principles of Consolidation:
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary and were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
All intercompany accounts and transactions have been eliminated in consolidation.
Unaudited Interim Financial Information
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2020 and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 17, 2021 (the “2020 Annual Report”). The results for any interim period are not necessarily indicative of results for any future period.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position and results of operations for the interim periods presented .The results for the nine months ended September 30, 2021 are not necessarily indicative of the results for the year ending December 31, 2021, or for any future period.
As of September 30, 2021, there have been no material changes in the Company’s significant accounting policies from those that were disclosed in the 2020 Annual Report.
Fair value of financial instruments
ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
F-8
| SEEDO CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 2:- | UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:
| Level 1 — | Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. |
| Level 2 — | Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. |
| Level 3 — | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The carrying amounts of cash and cash equivalents, short term deposits, trade receivables, trade payables and short-term loan approximate their fair value due to the short-term maturity of such instruments.
The Company elected to measure some of the convertible loans under the fair value option. Under the fair value option the convertible loans will be measured at fair value in each reporting period until they will be converted, with changes in the fair values being recognized in the Company’s consolidated statement of operations as financial income or expense. The proceeds received for the issuance of the convertible loans were allocated at fair value conducted on an arm’s-length basis.
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:
| Balance as of September 30, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Fair Value of convertible component in convertible loan, net of discounts and debt issue costs | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
| Balance as of December 31, 2020 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Fair Value of convertible component in convertible loan, net of discounts and debt issue costs | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
| NOTE 3:- | CONVERTIBLE LOANS |
| a. |
On February 20, 2021, the Company and the third party extended the February 2019 loan to November 10, 2021.
The Company at
its option shall have the right to redeem, in part or in whole, outstanding principal amount and interest under this loan agreement prior
to the maturity date. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium equal to
F-9
| SEEDO CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 3:- | CONVERTIBLE LOANS (Cont.) |
The February
2019 Lender is entitled to convert at its option any portion of the outstanding and unpaid principal or accrued interest into fully paid
and nonassessable of shares of common stock, at the lower of the fixed conversion price then in effect or the market conversion price.
The number of shares of common stock issuable upon conversion of any conversion amount shall be determined by dividing (x) such conversion
amount by (y) the fixed conversion price of $
The Company accounted
for the February 2019 Loan in accordance with ASC 470-20, Debt with conversion and other Options. In 2019, the intrinsic value of the
BCF was calculated and the Company allocated $
On May 12, 2021,
the Company repaid a portion of the February 2019 loan and the accrued interest in the amount of $
The February
2019 Loan is included in the convertible loans in current liabilities as of September 30, 2021 in the amount of $
During the nine
months ended September 30, 2021 and 2020, the Company recorded interest and financial expenses related to February 2019 Loan in the amount
of $
| b. | On October 15, 2019, |
The October 2019
Lender is entitled to convert the principal loan and the outstanding interest (the “Conversion Amount”) into such number of
ordinary shares determined by dividing (x) such Conversion Amount by (y) the fixed conversion price of $
As of September
30, 2021 and December 31, 2020, the BCF was revalued at $
F-10
| SEEDO CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 3:- | CONVERTIBLE LOANS (Cont.) |
The Company estimated the fair value of BCF using the Monte Carlo option pricing model using the following weighted average assumptions:
| December 31, 2020 | September 30, 2021 | |||||||
| Share price | $ | $ | ||||||
| Dividend yield | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (in years) | ||||||||
| Volatility | % | % | ||||||
The October
2019 Loan is included in the convertible loans in current liabilities as of September 30, 2021 in the amount of $
During the
nine months ended September 30, 2021 and 2020, the Company recorded interest and financial expenses related to the October 2019 Loan in
the amount of $
| d. | On August 7, 2020 and August 11, 2020, the Company received two convertible loans from two third parties (“August 2020 Lenders”) in the aggregate amount of $ |
The August 2020 Loans are convertible by the August 2020 Lenders into Shares, at their discretion, at the lower of a fixed price of $0.102 (the “Fixed Conversion Price”) or 80% of the lowest volume weighted average price (“VWAP”) of the Company’s common stock during the 10 trading days immediately preceding the conversion date (the “Market Conversion Price”).
F-11
| SEEDO CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 3:- | CONVERTIBLE LOANS (Cont.) |
The Company
accounted for the August 2020 Loan in accordance with ASC 470-20, Debt with conversion and other Options. As of September 30, 2021 and
December 31, 2020, the BCF was revalued at $
The Company estimated the fair value of BCF using the Monte Carlo option pricing model using the following weighted average assumptions:
| December 31, 2020 | September 30, 2021 | |||||||
| Share price | $ | $ | ||||||
| Dividend yield | ||||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (in years) | ||||||||
| Volatility | % | % | ||||||
The August
2020 Loan is included in convertible loans in long term liabilities as of September 30, 2021 in the amount of $
During the
nine months ended September 30, 2021 and 2020, the Company recorded interest and financial expenses related to August 2020 Loan in the
amount of $
| e. | During November 2020 through to December 31, 2020, the Company received $ |
From January
2021 through to February 16, 2021, the Company received an additional $
The Company estimated the fair value of warrants using the Black-Scholes-Merton option pricing model using the following weighted average assumptions:
| December 31, 2020 | January to February 2021 | |||||||
| Promissory Notes | Promissory Notes | |||||||
| Share price | $ | |||||||
| Dividend yield | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (in years) | ||||||||
| Volatility | % | % | ||||||
F-12
| SEEDO CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands |
| NOTE 3:- | CONVERTIBLE LOANS (Cont.) |
The fair value
of the 2020 Promissory Warrants was $
The fair value
of the 2021 Promissory Warrants was $
The Company
accounted for the 2020 and 2021 Promissory Notes in accordance with ASC 470-20, Debt with conversion and other Options. The intrinsic
value of the BCF for the 2020 Promissory Notes was calculated and the Company allocated $
From June
2021 through to August 2021, Promissory Notes in the amount of $
The 2020 and
2021 Promissory Notes are included in convertible loans in current liabilities as of September 30, 2021 in the amount of $
During the
nine months period ended September 30, 2021 and 2020, the Company recorded interest and financial expenses related to 2021 and 2021 Promissory
Notes in the amount of $
| NOTE 4:- | RELATED PARTIES |
| a. | During the nine-month period ended September 30, 2021, the Company granted
| |
| b. | During the nine months ended September 30, 2021 and 2020, the Company paid compensation expenses to related parties (CEO, CFO and directors) in the amount of $ | |
| c. | Amounts owing to related parties (CEO, CFO and directors) as of September 30, 2021 and December 31, 2020 were $
| |
| d. | From July 2021 through to August, 2021, the Company granted three directors |
F-13
| SEEDO CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands, except share and per share data |
| NOTE 5:- | SHAREHOLDERS’ DEFICIENCY |
| a. | Issuance of shares: |
| 1. | On March 9, 2021, the Company issued |
| 2. | On March 23, 2021, the Company issued a total of |
| 3. | On April 1, 2021, the Company issued a total of |
| 4. | From June 2021 through to August 2021, the Company issued
| |
| 5. | From July 2021 through to August, 2021, the Company granted |
| b. | Warrants |
A summary of warrant activity during the nine months period ended September 30, 2021 and year ended December 31, 2020 is as follows:
| Number | Average exercise price |
|||||||
| Warrants outstanding at January 1, 2020 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ( |
) | ||||||
| Warrants outstanding at December 31, 2020 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ( |
) | ||||||
| Warrants outstanding at September 30, 2021 | ||||||||
The following warrants are outstanding and exercisable as of September 30, 2021:
| Issuance date | Warrants outstanding |
Exercise price per warrant |
Warrants outstanding and exercisable |
Expiry date | ||||||||||
| February 21, 2019 | $ | |||||||||||||
| October 15, 2019 | $ | |||||||||||||
| August 7, 2020 | $ | |||||||||||||
| August 11, 2020 | $ | |||||||||||||
| December 17, 2020 | $ | |||||||||||||
| January 3, 2021 | $ | |||||||||||||
| c. | Share option plans: |
On April 1, 2019, the Company’s board of directors adopted the Seedo Corp. 2018 Share Options Plan (the “2018 Plan”).
Awards granted under the 2018 Plan are
subject to vesting schedules and unless determined otherwise by the administrator of the 2018 Plan, generally vest following a period
of
F-14
| SEEDO CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands, except share and per share data |
| NOTE 5:- | SHAREHOLDERS’ DEFICIENCY (Cont.) |
Subject to the discretion of the 2018
Plan administrator, if an award has not been exercised within
(i) A summary of employee share options activity during the nine-month period ended September 30, 2021 and for the year ended December 31, 2020 is as follows:
| Number | Average weighted exercise price |
|||||||
| Options outstanding at January 1, 2020 | $ | |||||||
| Granted | $ | |||||||
| Exercised | ||||||||
| Forfeited | ( |
) | ||||||
| Options outstanding at December 31, 2020 | ||||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited | ||||||||
| Options outstanding at September 30, 2021 | $ | |||||||
| Options exercisable at September 30, 2021 | $ | |||||||
| d. | Restricted Share Units: |
RSUs under the 2018 Plan may be granted upon such terms and conditions, no monetary payment (other than payments made for applicable taxes) shall be required as a condition of receiving the Company’s shares pursuant to a grant of RSUs, and unless determined otherwise by the Company, the aggregate nominal value of such RSUs shall not be paid and the Company shall capitalize applicable profits or take any other action to ensure that it meets any requirement of applicable laws regarding issuance of shares for consideration that is lower than the nominal value of such shares. If, however, the Company’s board of directors determines that the nominal value of the shares shall not be waived and shall be paid by the grantees, then it shall determine procedures for payment of such nominal value by the grantees or for collection of such amount from the grantees by the Company.
Shares issued pursuant to any RSUs units may (but need not) be made subject to exercise conditions, as shall be established by the Company and set forth in the applicable notice of grant evidencing such award. During any restriction period in which shares acquired pursuant to an award of RSUs remain subject to exercise conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of unless otherwise provided in the 2018 Plan. Upon request by the Company, each grantee shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares hereunder and the Company may place appropriate legends evidencing any such transfer restrictions on the relevant share certificates.
F-15
| SEEDO CORP. |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
| U.S. dollars in thousands, except share and per share data |
| NOTE 5:- | SHAREHOLDERS’ DEFICIENCY (Cont.) |
A summary of RSU activity during the nine months ended September 30, 2021 years ended December 31, 2020 is as follows:
| Number | ||||
| RSU outstanding at January 1, 2020 | ||||
| Granted | ||||
| Exercised | ( | ) | ||
| Forfeited | ||||
| RSU outstanding at December 31, 2020 | ||||
| Granted (Note 4a) | ||||
| Exercised (Note 5a(1-3)) | ( | ) | ||
| Forfeited | ||||
| RSU’s outstanding at September 30, 2021 | ||||
| NOTE 6:- | FINANCIAL EXPENSES |
| Three months ended | Nine months ended | |||||||||||||||
| September 30, 2021 |
September 30, 2020 |
September 30, 2021 |
September 30, 2020 |
|||||||||||||
| Financial expenses related to interest and revaluation of convertible component in convertible loans | $ | $ | $ | $ | ||||||||||||
| Financial expenses related to warrants | - | - | ||||||||||||||
| Foreign currency transactions and other | ( |
) | ( |
) | ||||||||||||
| NOTE 7:- | SUBSEQUENT EVENTS |
| 1. | On October 5, 2021, the Company granted a director |
| 2. | During October 2021, a consultant executed an exercise of |
| 3. | On October 28, 2021, |
F-16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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, 2020 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 17, 2021. 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, 2020. 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 “Seedo,” “the Company,” “we,” “our,” and “us” refer to SEEDO CORP., a Delaware corporation, unless otherwise indicated or as otherwise required by the context.
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Company Overview
Our Business
SEEDO CORP. (f/k/a GRCR Partners Inc.) (the “Company”, “Our” or “We”) was formed on January 16, 2015 under the laws of the State of Delaware. Prior to September 14, 2018, we were solely a provider of risk management and asset protection (“RAP”) services for businesses, individuals and families. On September 14, 2018, (“the Company”) executed an Acquisition and Share Exchange Agreement with Eroll Grow Tech Ltd. (“Eroll”), an Israeli Corporation that was formed on May 18, 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. The State of Delaware effectuated said change on September 21, 2018; and on November 5, 2018, FINRA granted effectiveness for said change and the new ticker Symbol “SEDO”. Post-Acquisition, SEEDO CORP changed its main business focus to Eroll’s business activities while continuing with some RAP activities.
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. (or “Saffron”).
The Company, through Saffron, 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 technology offers a controlled environment based on the Company’s deep knowledge in plant biology. The technology provides optimal conditions for each stage of the plant’s development to reach optimal product quality.
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.
The global saffron market size was valued at $1 Billion in 2019 and is anticipated to attain a revenue based CAGR of 7.3% from 2020 to 2027. The market is expected to grow over the next few years on account of demand from the pharmaceutical sector, particularly in countries with rapid population expansion.
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Since the incorporation of Saffron Tech, it has hired employees and several consultants to commence the roll out of our proof of concept. Saffron Tech has signed several agreements with Israeli companies, including Growin Ltd (“Growin”) and the Israeli Ministry of Agricultures research organization – The Volcani Center (“Volcani”). Growin is an owner of proprietary systems for indoor agriculture and Saffron Tech has acquired the exclusive right to market, sell and commercialize our product based on the Growin’s hydroponic machines. Volcani will assist Saffron Tech in writing the protocols required to grow saffron in a controlled and automated way, including the use of robotics and AI.
On May 4, 2021, the Company announced that it had entered a research agreement with The Polytechnic University of Valencia, Spain, to develop vertical farming protocols for saffron with Professor Rosa V. Molina . Professor Molina has extensive knowledge in the cultivation of saffron from her university research programs in Spain and will join the scientific committee of the project.
On August 10, 2021, the Company announced that its subsidiary, Saffron Tech, has been awarded a $1 million grant from the Israeli Innovation Authority. The new grant will allow Saffron Tech to accelerate its R&D program building on its groundbreaking development of the protocols for growing saffron using vertical farming technology. The funds will be allocated to enable the company expand its facilities, allowing it to grow more saffron for commercial use.
Changes in the Board of Directors
On August 24, 2021, the Company announced the appointment of Avi Stern to its board of directors as an independent director. Stern currently serves as the Vice President of Finance at Wix.com, a leading cloud-based website development platform with millions of users worldwide.
On November 1, 2021, the Company announced that a majority of the Company’s shareholders brought forth a Shareholder’s Action by Written Consent to remove David Freidenberg and Gil Feiler from the Board of Directors of the Company, and immediately appoint Shmuel Yannay, Moshe Bar Siman Tov and Iris Tova Ginsburg to its Board of Directors. The three new directors will join Avi Stern, an incumbent Independent Director, in comprising the Board of Directors of Seedo.
Financings
During January 2021 through to February 16, 2021, the Company rasied $530 thousand from third party investors in respect of the issuance of convertible promissory notes (“2021 Promissory Notes”). The Promissory Notes bear no interest, are convertible into Shares based on a fixed conversion price of $0.10 per share and mature between six and 24 months from the issuance date. Pursuant to 2021 Promissory Notes one of the investors received warrants to purchase 330,000 Shares with a per share exercise price of $0.15 which warrants are exercisable through January 3, 2021.
4
Conversion of Notes
From June 2021 through to August 2021, certain Promissory Notes holders converted their notes in the amount of $805 into 8,050,000 shares.
Issuance of Restricted Share Units (“RSU’s”)
During the nine month period ended September 30, 2021, the Company issued 600,000 RSU’s, which were exercised into 600,000 shares of the Company. A further 130,250 shares were also issued during the same period, in respect of exercised RSU’s that had been granted during 2020.
Grants of shares
From July 2021 through to August 2021, the Company granted three directors 471,336 shares.
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, 2020 annual financial statements included in our Form 10-K, filed with the SEC on March 17, 2021.
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 audited financial statements for the year ended December 31, 2020 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.
5
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.
Results of Operations
Nine months ended September 30, 2021 compared to the Nine months ended September 30, 2020
Operating Expenses
Research and development expenses for the nine months ended September 30, 2021, were $443 thousand compared to $2 for the same period in 2020. This increase was primarily due to cost incurred in the development of our prototype technology.
Total marketing expenses for the nine months ended September 30, 2021, were $131 thousand compared to $nil for the same period in 2020.
Total general and administrative expenses for the nine months ended September 30, 2021, were $1,020 thousand compared to $123, for the same period in 2020. This was primarily due to an increase in stock-based compensation and professional expenses.
Total financial expenses for the nine months ended September 30, 2021, were $1,340 compared to $898 thousand for the same period in 2020. The increase of $442 thousand was primarily due to an increase in charges related to interest and to the revaluation of the convertible component of the convertible loans.
Three months ended September 30, 2021 compared to the three months ended September 30, 2020
Operating Expenses
Research and development expenses for the three months ended September 30, 2021, were $125 thousand compared to $2 for the same period in 2020. This increase was primarily due to cost incurred in the development of our prototype technology.
Total marketing expenses for the three months ended September 30, 2021, were $50 thousand compared to $nil for the same period in 2020.
Total general and administrative expenses for the three months ended September 30, 2021, were $315 thousand compared to $123, for the same period in 2020.
Total financial expenses for the three months ended September 30, 2021, were $98 thousand compared to $290 thousand for the same period in 2020. The difference of $192 thousand was primarily due to a decrease in the fair value of a convertible component of the convertible loans.
6
Liquidity and Capital Resources
Overview
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. Since inception on January 16, 2015, the Company had a cumulative deficit of $20,247 thousand and a working capital deficit of $1,714 thousand as of September 30, 2021. 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, 2021, we had current assets of $1,106 thousand consisting of $916 thousand in cash and cash equivalents, $19 thousand in restricted deposits and $171 thousand in other current assets.
We had $2,820 thousand in current liabilities consisting of $38 in accounts payable and other accounts liabilities, $1,886 Convertible loans and $896 BCF liability.
As of December 31, 2020, we had current assets of $418 thousand consisting of $411 thousand in cash and cash equivalents and $7 thousand in other currents assets. We had $1,889 thousand in current liabilities, which consisted of $100 thousand in other accounts liabilities, $51 thousand in accounts payable, $1,128 thousand in convertible loans and $610 thousand in BCF liability.
We had a negative working capital of $1,714 thousand and $1,471 thousand as of September 30, 2021 and December 31, 2020, respectively.
Our current liabilities as of September 30, 2021 were $2,820 thousand compared to $1,889 thousand as of December 31, 2020.
During the nine months ended September 30, 2021, we had negative cash flows from operations of $1,326 thousand, which was mainly the result of a net loss of $2,929 thousand, offset in part by changes in the fair value of convertible loans of $166 thousand, changes in the fair value of a convertible component in convertible loans of $1,222 thousand and share based compensation of $496.
During the nine months ended September 30, 2020, we had negative cash flows from operations of $63 which was mainly the result of a net income of $8,570 thousand, offset mainly by a gain from the sale of a subsidiary of $9,593 thousand and financial expenses related to convertible loans and warrant of $897 thousand.
During the nine months ended September 30, 2021, we had negative cash flows from investing activities of $31 thousand compared to a non cash flow effect from investing activities during the nine months ended September 30, 2020.
During the nine months ended September 30, 2021, we had positive cash flows from financing activities of $1,862 thousand compared to $300 from financing activities during the nine months ended September 30, 2020. Cash flows from financing activities in 2021 was a result of proceeds of convertible loans in the amount of $530 thousand, and proceeds from the issuance of shares to minority interests in a subsidiary in the amount of $1,406 thousand, offset by the repayment of a loan of $74 thousand.
We expect that our existing cash and cash equivalents as well as expected revenues will enable us to fund our operations and capital expenditure requirements through to September 2022. Our requirements for additional capital during this period will depend on many factors.
We may seek to raise any necessary additional capital through a combination of private or public equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights, future revenue streams, or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through private or public equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. We have a stockholders’ deficit of $1,7 million and a working capital deficiency of $1,714 thousand at September 30, 2021 as well as negative operating cash flows. These conditions raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
7
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of our Quarterly Report on Form 10-Q, an evaluation was carried out by management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of September 30, 2021. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
During evaluation of disclosure controls and procedures as of September 30, 2021 conducted as part of our preparation of the quarterly unaudited condensed financial statements, management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures and concluded that our disclosure controls and procedures were not effective. The basis for these conclusions are discussed in our annual report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 17, 2021.
Changes in Internal Control Over Financial Reporting
As of the end of the period covered by this report, there have been no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
8
Part II- Other Information
Item 6. Exhibits
| Exhibit Number |
Description | |
| 10.1 | Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 2, 2019). | |
| 31.1* | Rule 13a-14(a) Certification of the Chief Executive Officer | |
| 31.2* | Rule 13a-14(a) Certification of the Chief Financial Officer | |
| 32.1** | Section 1350 Certification of Chief Executive Officer | |
| 32.2** | Section 1350 Certification of Chief Financial Officer | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | 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 as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith. |
| * | Furnished herewith. |
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.
| Dated: November 15, 2021 | By: | /s/ Gadi Levin |
| Gadi Levin | ||
| Director, Chief Executive Officer | ||
| SEEDO CORP. |
10