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
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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 ☐ No
As of November 14, 2024, the registrant had shares of common stock outstanding.
N2OFF, Inc.
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
| 2 |
FORWARD-LOOKING STATEMENTS
Certain information set forth in this Quarterly Report on Form 10-Q (the “Quarterly Report”) 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 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 customers’ requirements that our products undergo a lengthy pilot period without any assurance of sales; | |
| ● | our history of operating losses and expectation to incur additional losses in the future; | |
| ● | our ability to raise additional capital to meet our liquidity needs; | |
| ● | because of our limited operating history, our ability to successfully operate our business or execute our business plan; | |
| ● | our products and technology requiring additional trials, which could prolong the sales cycle; | |
| ● | commercial success of our new generation products, as well as any future products, and the degree of market acceptance by the packing house community as well as by other prospective markets and industries; | |
| ● | our ability to comply with the continued listing standards of the Nasdaq Capital Market; | |
| ● | sales of our products; | |
| ● | the size and growth of our product market; | |
| ● | our ability to obtain market acceptance of our environmentally friendly solutions for fruits and vegetables; | |
| ● | the success of certain of our investments, including our investments in the solar energy sector; |
| 3 |
| ● | conditions in Israel, including the ongoing war between Israel and Hamas and other actors in the region, and other conflicts in the region, may adversely affect our operations and limit our ability to market our products, which would lead to a decrease in revenues; | |
| ● | our inability to respond effectively to technological changes in our industry, which could reduce the demand for our products; | |
| ● | our ability or our contractors or service providers’ ability to comply with laws and regulations to develop, market and sell our products or future products; | |
| ● | our ability to achieve regulatory approvals and registration in the United States, Mexico, Peru, Brazil, and Israel; |
| ● | significant competition from other companies looking to develop or acquire new alternative environmentally friendly solutions for the treatment of fruits and vegetables and other edible matter; | |
| ● | our reliance on a limited number of suppliers to produce certain key components of our products; | |
| ● | our ability to establish and maintain strategic partnerships with third parties, including for the distribution of products; | |
| ● | our ability to establish sales, marketing and distribution capabilities or enter into successful relationships with third parties to perform these services; | |
| ● | our ability to rapidly establish a global distributorship network in order to effectively market our products; and | |
| ● | results of our tests which may not be indicative of results in future tests and any planned or future tests which may lead to results sufficient for the necessary regulatory approvals. |
These statements are only predictions and involve known and unknown risks, uncertainties and other factors. Readers are urged to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (the “SEC”). We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.
On March 19, 2024, we changed our name from “Save Foods, Inc.” to “N2OFF, Inc.”. Accordingly, all such references in this Quarterly Report have been changed to reflect our new name. In connection with such name change, on the same date, we changed our trading symbol from “SVFD” to “NITO”.
As used in this Quarterly Report and unless otherwise indicated, the terms “N2OFF,” “we,” “us,” “our,” or “our Company” refer to N2OFF, Inc., Save Foods Ltd., our 98.48% owned subsidiary, and NTWO OFF Ltd., our 60% owned subsidiary.
Unless noted otherwise, all references to the number of shares of common stock, stock option and per share information in this Quarterly Report reflect the 1:7 reverse stock split of our common stock that became effective on October 5, 2023.
| 4 |
Item 1. Financial Statements
N2OFF, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(U.S. dollars except share and per share data)
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Accounts receivable, net of allowance for doubtful account of $ | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total Current assets | ||||||||
| Long term prepaid expenses | ||||||||
| Right-of-use asset arising from operating lease | ||||||||
| Property and equipment, net | ||||||||
| Investment in nonconsolidated affiliate (Note 3) | ||||||||
| Long term loans (Note 4) | ||||||||
| Solar PV joint venture project (Note 4) | ||||||||
| Total assets | ||||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | ||||||||
| Other liabilities | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, $ par value (“Common Stock”): shares authorized as of September 30, 2024 and December 31, 2023; issued and outstanding and shares as of September 30, 2024 and December 31, 2023, respectively. | ||||||||
| Preferred stock, $ par value (“Preferred Stock”): shares authorized as of September 30, 2024 and December 31, 2023; shares issued and outstanding as of September 30, 2024 and December 31, 2023. | ||||||||
| Additional paid-in capital | ||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Company’s stockholders’ equity | ||||||||
| Non-controlling interests | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | ||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
| 5 |
N2OFF, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS
(U.S. dollars except share and per share data)
| Nine months ended | Three months ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues from sales of products | ||||||||||||||||
| Cost of sales | ( | ) | ( | ) | ( | ) | ||||||||||
| Gross profit | ( | ) | ( | ) | ||||||||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Selling and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Financing income (expenses), net | ( | ) | ( | ) | ||||||||||||
| Other income, net (Note 5(1)) | ||||||||||||||||
| Changes in fair value of an investment in an associate measured under the fair value option (Notes 3) | ( | ( | ) | ( | ) | ( | ) | |||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: net loss attributable to non-controlling interests | ||||||||||||||||
| Net loss attributable to the Company’s stockholders’ equity | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss per share (basic and diluted) | ) | ) | ) | ) | ||||||||||||
| Basic and diluted weighted average number of shares of Common Stock outstanding | (*) | (*) | ||||||||||||||
| (*) |
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
| 6 |
N2OFF, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(U.S. dollars, except share and per share data)
| Number of shares | Amount | Additional paid-in capital | Foreign currency translation adjustments | Accumulated deficit | Total Company’s stockholders’ equity |
Non-controlling interests | Total equity | ||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2023 | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Issuance of shares for standby equity purchase agreement II | |||||||||||||||||||||||||||||||||
| Issuance of shares to services providers | |||||||||||||||||||||||||||||||||
| Comprehensive loss for the period | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2024 | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Issuance of shares for standby equity purchase agreement II | |||||||||||||||||||||||||||||||||
| Issuance of shares to services providers | |||||||||||||||||||||||||||||||||
| Comprehensive loss for the period | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2024 | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Issuance of shares for standby equity purchase agreement II | |||||||||||||||||||||||||||||||||
| Issuance of shares to services providers | |||||||||||||||||||||||||||||||||
| Comprehensive loss for the period | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2024 | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
| 7 |
N2OFF, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(U.S. dollars, except share and per share data)
| Number of shares (*) |
Amount | Additional paid-in capital | Foreign currency translation adjustments | Accumulated deficit | Total Company’s stockholders’ equity |
Non-controlling interests | Total equity | |||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Issuance of shares to services providers | ||||||||||||||||||||||||||||||||
| Share based compensation to employees and directors | ||||||||||||||||||||||||||||||||
| Comprehensive loss for the period | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| BALANCE AT MARCH 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Issuance of shares for exchange agreement | ||||||||||||||||||||||||||||||||
| Issuance of shares to services providers | ||||||||||||||||||||||||||||||||
| Share based compensation to employees and directors | - | |||||||||||||||||||||||||||||||
| Comprehensive loss for the period | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| BALANCE AT JUNE 30, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Issuance of shares for exchange agreement | ||||||||||||||||||||||||||||||||
| Issuance of shares to services providers | ||||||||||||||||||||||||||||||||
| Share based compensation to employees and directors | - | |||||||||||||||||||||||||||||||
| Issuance of shares for standby equity purchase agreement I | ||||||||||||||||||||||||||||||||
| Transactions with non-controlling interests | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Comprehensive loss for the period | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| (*) |
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
| 8 |
N2OFF, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(U.S. dollars except share and per share data)
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| 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 | ||||||||
| Issuance of shares to employees and services providers | ||||||||
| Non- cash expenses in the Yaaran purchase transaction | ||||||||
| Share based compensation to employees and directors | ||||||||
| Loss (gain) from sales of property and equipment | ( | ) | ||||||
| Gain from standby equity purchase agreement II (Note 5(1)) | ( | ) | ||||||
| Expenses from standby equity purchase agreement II and promissory note (Note 5(1)) | ||||||||
| Change in fair value of investment in nonconsolidated affiliate | ||||||||
| Change in FV of long term loan | ( | ) | ||||||
| Interest income from solar project | ( | ) | ||||||
| Exchange rate differences on operating leases | ||||||||
| Decrease (increase) in accounts receivable, net | ( | ) | ||||||
| Decrease (increase) in inventory | ( | ) | ||||||
| Decrease in prepaid expenses and other current assets | ||||||||
| Decrease in accounts payable | ( | ) | ( | ) | ||||
| Decrease in other liabilities | ( | ) | ( | ) | ||||
| Change in operating lease asset | ||||||||
| Change in operating lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Investment in nonconsolidated affiliate | ( | ) | ( | ) | ||||
| Long term loan | ( | ) | ||||||
| Solar PV joint venture project | ( | ) | ||||||
| Proceeds from sales of property and equipment | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds on account of shares | ||||||||
| Proceeds from promissory note | ||||||||
| Repayments of promissory note | ( | ) | ||||||
| Proceeds from standby equity purchase agreement, net | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | ||||||
| DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ( | ) | ||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR | ||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | ||||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non cash transactions: | ||||||||
| Investment in nonconsolidated affiliate (see Note 3) | ||||||||
| Issuance of shares for future services | ||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements
| 9 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 1 – GENERAL
| A. | Operations |
N2OFF, Inc. (formerly Save Foods, Inc) (the “Company”) was incorporated on April 1, 2009, under the laws of the State of Delaware.
On November 6, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with N2OFF, Inc., a newly formed Nevada corporation and its wholly owned subsidiary (the “Surviving Corporation”), pursuant to which, on the same date, the Company, as parent in this transaction, merged with and into the Surviving Corporation (the “Reincorporation Merger”). The Reincorporation Merger was approved by the Company’s stockholders on October 2, 2023 and became effective on The Nasdaq Capital Market on November 10, 2023. Upon the consummation of the Reincorporation Merger, the Company ceased its legal existence as a Delaware corporation, and the Surviving Corporation continued Company’s business as the surviving corporation. On February 8, 2024, the Company’s stockholders approved the Company’s name change to “N2OFF, Inc.” which became effective on The Nasdaq Capital Market on March 19, 2024.
On
April 27, 2009, the Company acquired from its stockholders
On March 31, 2023, the Company entered into a securities exchange agreement with Plantify Foods, Inc. (“Plantify”), a Canadian corporation traded on the TSX Venture Exchange (“TSXV”), which focuses on the development and production of “clean-label” plant-based products - see Note 1D and 3 below for further information.
On August 29, 2023, the Company entered into an exchange agreement with Yaaran Investments Ltd. and formed an Israeli subsidiary, NTWO OFF Ltd. (“NTWO OFF”) which focus on nitrous oxide (“N2O”), a potent greenhouse gas with significant global warming ramifications (the Company, Save Foods Ltd. and NTWO OFF Ltd collectively, the “Group”)
The Company’s Common Stock is listed on The Nasdaq Capital Market under the symbol “NITO”.
| B. | Reverse stock split |
On
October 4, 2023, following the Company’s 2023 annual meeting of stockholders, the Company filed a Certificate of Amendment (the
“Amendment”) to its Amended and Restated Certificate of Incorporation in Delaware to effect a
As a result of the Reverse Stock Split, every seven 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 and the shares were rounded to the nearest whole number. The authorized capital and par value of the Common Stock remained unchanged.
All shares, stock option and per share information in these consolidated financial statements have been restated to reflect the Reverse Stock Split on a retroactive basis.
| 10 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 1 – GENERAL (continued)
| C. | Going concern uncertainty |
Since
inception, the Company has incurred significant losses and negative cash flows from operations and has an accumulated deficit of $
The Company’s management expects that the Company will continue to generate losses and negative cash flows from operations for the foreseeable future. Based on the projected cash flows and cash balances as of September 30, 2024, management currently is of the opinion that its existing cash will be sufficient to fund operations until the end of the third quarter of 2025. As a result, there is substantial doubt regarding the Company’s ability to continue as a going concern.
Management endeavors to secure sufficient financing through the sale of additional equity securities or capital inflows from strategic partnerships. Additional funds may not be available when the Company needs them, on favorable terms, or at all. If the Company is unsuccessful in securing sufficient financing, it may need to cease operations.
The financial statements do not include adjustments for measurement or presentation of assets and liabilities, which may be required should the Company fail to operate as a going concern.
| D. | Israel – Hamas war |
Because most of the Company’s operations are conducted in Israel and all members of its board of directors, management, as well as a majority of its employees and consultants, including employees of its service providers, are located in Israel, its business and operations are directly affected by economic, political, geopolitical and military conditions affecting Israel.
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers in the southern part of the country. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Following the attack by Hamas on Israel’s southern border, Hezbollah in Lebanon also launched missile, rocket, drone and shooting attacks against Israeli military sites, troops and Israeli towns in northern Israel. In October 2024, Israel began limited ground operations against Hezbollah in Lebanon. In addition, Iran recently launched direct attacks on Israel and has threatened to continue to attack Israel. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, the Houthis in Yemen and various rebel militia groups in Syria and Iraq. While currently no damages were registered in Israel from such attacks, the situation is developing and could lead to additional wars and hostilities in the Middle East. It is possible that the hostilities with Hezbollah and Iran will escalate, and that other terrorist organizations, including Palestinian military organizations in the West Bank, as well as other hostile countries, will join the hostilities. Such hostilities may include terror and missile attacks. In the event that the Company’s facilities are damaged as a result of hostile actions, or hostilities otherwise disrupt its ongoing operations, its ability to deliver or provide products and services in a timely manner to meet its contractual obligations to customers and vendors could be materially and adversely affected.
| 11 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 1 – GENERAL (continued)
Following the brutal attacks on Israel, the mobilization of army reserves and the government declaring a state of war in October 2023, there was a decrease in Israel’s economic and business activity. The security situation has led, among other things, to a disruption in the supply chain and production, a decrease in the volume of national transportation, and a shortage in manpower due to employees being called for active reserve duty as well as a rise in the exchange rate of foreign currencies in relation to the New Israel Shekel. These events may imply wider macroeconomic indications of a deterioration of Israel’s economic standing, which may have a material adverse effect on the Company and its ability to effectively conduct its business, operations and affairs. Although many of such military reservists have since been released, they may be called up for additional reserve duty, depending on developments in the war in Gaza and along Israel’s other borders. Certain of its employees and consultants in Israel, in addition to employees of its service providers located in Israel, have been called, and additional employees may be called, for service in the current or future wars or other armed conflicts with Hamas as well as the other pending or future armed conflicts in which Israel is or may become engaged, and such persons may be absent for an extended period of time.
Save Foods Ltd. has experienced delays in pilots and packaging activities due to the war, as certain packing houses, have halted operations for the time being. Additionally, the Company anticipated engaging additional packing houses to conduct pilots with the Company’s product, but, due to the war, the Company was unable to continue pursuing new collaborations for these pilots, and the Company may not be able to resume any potential collaborations if the current war persists for an extended duration. The Company is unable to predict how long the current conflict will last, as well as the repercussions these delays will have on operations. If the Company is unable to renew pilots or collaborations with local packing houses, the Company’s financial results may be affected.
Plantify has facilities in Kibbutz Gonen, which is located in an area in northern Israel that has been affected by ongoing hostilities with Hezbollah in Lebanon. Due to the continuous drone attacks, missile strikes and shootings in the region, the area has been almost completely evacuated of civilians. All employees were put on unpaid leave until further notice and Plantify has ceased its operations, and may not be able to resume its regular activities, including its ability to deliver products to customers in a timely manner, if the hostilities persist for an extended period.
The Company is continuing to regularly follow developments on the matter and is examining the effects on its operations and the value of its assets.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of presentation
The condensed interim consolidated financial statements included in this Quarterly Report are unaudited. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for a fair statement of the Company’s financial position as of September 30, 2024, and its results of operations and changes in stockholders’ equity for the nine and three months ended September 30, 2024, and 2023, and cash flows for the nine months ended September 30, 2024 and 2023. The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on April 1, 2024. The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2023 included in such Form 10-K. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies.
| 12 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)
Use of Estimates
The preparation of unaudited condensed consolidated interim 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 calculation of fair value of the convertible instruments.
Fair value
Fair value of certain of the Company’s financial instruments including cash, accounts payable, accrued expenses, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.
Fair value, as defined by ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise.
Valuation techniques are generally classified into three categories: (i) the market approach; (ii) the income approach; and (iii) the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
| 13 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)
Fair value (continued)
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.
Fair value measurements are required to be disclosed by the level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), (ii) segregating those gains or losses included in earnings, and (iii) a description of where those gains or losses included in earning are reported in the statement of operations.
The Company’s financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:
| As of September 30, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| US$ | ||||||||||||||||
| Assets: | ||||||||||||||||
| Investment in Plantify | ||||||||||||||||
| Credit Facility | ||||||||||||||||
| Convertible loans to Plantify | ||||||||||||||||
| Convertible loans to Solterra | ||||||||||||||||
| Solar PV joint venture project | ||||||||||||||||
| Total assets | ||||||||||||||||
| As of December 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| US$ | ||||||||||||||||
| Assets: | ||||||||||||||||
| Investment in Plantify | ||||||||||||||||
| Convertible loan | ||||||||||||||||
| Total assets | ||||||||||||||||
| 14 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)
Fair value (continued)
The following table presents the changes in fair value of the level 1 assets for the period December 31, 2023 through September 30, 2024:
| Changes in Fair value | ||||
| US$ | ||||
| Assets: | ||||
| Outstanding at December 31, 2023 | ||||
| Changes in fair value | ( | ) | ||
| Outstanding at September 30, 2024 | ||||
The following table presents the changes in fair value of the level 3 assets for the period December 31, 2023 through September 30, 2024:
| Changes in Fair value | ||||
| US$ | ||||
| Assets: | ||||
| Outstanding at December 31, 2023 | ||||
| Credit facility to Plantify | ||||
| Loan Granted | ||||
| Solar project | ||||
| Changes in fair value | ( | ) | ||
| Outstanding at September 30, 2024 | ||||
Accounting Standards Updates Issued, but Not Adopted
Segment Reporting: In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. These amendments require, among other things, that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing segment disclosures in Topic 208. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments retrospectively to all periods presented in the financial statements.
Income Taxes: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU add specific requirements for income tax disclosures to improve transparency and decision usefulness. The guidance in ASU 2023-09 requires that public business entities disclose specific categories in the income tax rate reconciliation and provide additional qualitative information for reconciling items that meet a quantitative threshold. In addition, the amendments in ASU 2023-09 require that all entities disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes and disaggregated by individual jurisdictions. The ASU also includes other disclosure amendments related to the disaggregation of income tax expense between federal, state and foreign taxes. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis and retrospective application is permitted.
In November 2024, the FASB issued ASU No. 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The ASU improves the disclosures about a public business entity’s expenses and provides more detailed information about the types of expenses in commonly presented expense captions. The amendments require that at each interim and annual reporting period an entity will, inter alia, disclose amounts of purchases of inventory, employee compensation, depreciation and amortization included in each relevant expense caption (such as cost of sales, SG&A and research and development). Amounts remaining in relevant expense captions that are not separately disclosed will be described qualitatively. Certain amounts that are already required to be disclosed under currently effective U.S GAAP will be included in the same disclosure as the other disaggregation requirements. The amendments also require disclosing the total amount of selling expenses and, in annual reporting periods, the definition of selling expenses. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.
| 15 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 3 – INVESTMENT IN NONCONSOLIDATED AFFILIATE
On
March 31, 2023, the Company entered into a Securities Exchange Agreement with Plantify, pursuant to which each party agreed to issue
to the other party
Upon
the closing of the Securities Exchange on April 5, 2023, the Company issued shares of the its Common Stock to Plantify, which
amount represented
In
connection with the Securities Exchange Agreement, the Company and Plantify executed a debenture (the “Debenture”), whereby
the Company agreed to lend C$
On
September 7, 2023, the Company purchased an additional common shares of Plantify at a price of C$ per common share (C$
On
April 2, 2024, the Board of Directors of the Company approved a binding term sheet for a credit facility of up to $
Subject
to the provisions of this Credit Facility, Plantify may drawdown up to $
The Company determined that it has a significant influence over Plantify and such investment is accounted for under the equity method of accounting. At the initial recognition of the equity investment, the Company elected the fair value option where subsequent changes in fair value are recognized in earnings. If the fair value option is applied to an investment that would otherwise be accounted for under the equity method, the Company applies it to all its financial interests in the same entity (equity and debt, including guarantees) that are eligible items.
The equity investment in common shares of Plantify is classified within Level 1 in the fair value hierarchy as the valuation can be obtained from real time quotes in active markets, and is measured based on Plantify’s closing stock price and prevailing foreign exchange rate at each balance sheet date and the changes in fair value are reflected in gain (loss) on equity investments, net in the consolidated statement of income.
As of December 31, 2024, the Company estimated the fair value of the conversion feature loan using the Black-Scholes option pricing model with assistance of a third-party appraiser. The assumptions used to perform the calculations are detailed below:
| 16 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 3 – INVESTMENT IN NONCONSOLIDATED AFFILIATE (continued)
Fair value of the conversion feature as of December 31, 2023:
| Fair value of the conversion feature | December 31, 2023 | |||
| Expected volatility (%) | % | |||
| Risk-free interest rate (%) | % | |||
| Expected dividend yield | % | |||
| Contractual term (years) (*) | ||||
| Conversion price (Canadian dollars) | (US$) C$ | |||
| Underlying share price (Canadian dollars) | (US$) C$ | |||
| Fair value (U.S. dollars) | $ | |||
As of September 30, 2024, the Company estimated the value of the conversion feature as 0.
The Company estimated the fair value of the Debenture and Credit Facility as of September 30, 2024, using the Option Pricing Method (“OPM”) with the assistance of a third party appraiser. The OPM framework involves making assumptions for the equity value, expected time to liquidity, volatility and risk-free rate and is utilized to allocate value to the various classes of securities and loans of Plantify, including the Company’s Debenture and Credit Facility. The equity fair value was calculated based on Plantify’s quotes in active market as of September 30, 2024. The assumptions used to perform the calculations are detailed below:
| Fair value of the conversion feature | September 30, 2024 | |||
| Expected volatility (%) | % | |||
| Risk-free interest rate (%) | % | |||
| Expected dividend yield | % | |||
| Contractual term (years) | ||||
| Plantify’s fair value (U.S. dollars) | $ | |||
For
the nine and three months ended September 30, 2024, the Company recorded changes in fair value of an investment in an associate
measured of $and
$
The following tables present Plantify’s summarized financial information.
Nine months ended September 30, 2024 | Three months ended September 30, 2024 | |||||||
| Revenue | ||||||||
| Gross loss | ( | ) | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ||||
| 17 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 4 – EVENTS DURING THE PERIOD
| 1. | On
June 30, 2024, the Company entered into a Loan Agreement (the “Loan Agreement”) with Solterra Renewable Energy Ltd.
(“Solterra”) and certain other lenders (collectively, the “Lenders”) pursuant to which the Lenders committed
to loan Solterra the aggregate principal amount of € | |
| The Company’s chairman of the board of directors is also a shareholder and director of AI Conversation Systems Ltd., that may merge with Solterra. | ||
| 2. | On
July 31, 2024, the Company entered into a Loan and Partnership Agreement (the “Loan and Partnership Agreement”), with
Horizons RES PE1 UG (haftungsbeschränkt) & Co. KG (the “Partnership”), Solterra, and the Lenders (as defined in section 1 above), pursuant to
which the Lenders committed to loan the Partnership (the “Loan”) an aggregate principal amount of € |
All loans to the Partnership from Solterra will be subordinate to the Loan.
Proceeds from the sale of a Partnership asset must first be used to repay the Lenders, pro rata with each Lender’s respective portion of the Loan.
Repayment of the Loan is secured by a lien on Solterra’s interests in the Partnership.
If a Lender defaults on a payment schedule as scheduled in the Loan and Partnership Agreement, such Lender’s rights to Profits will be proportionately decreased, based on the amount of the Loan that was actually provided by such Lender to the Partnership out of its Loan commitment amount.
As
of September 30, 2024 the Company made payments in the amount of €
| 3. | On
September 26, 2024, the Company entered into a non-binding letter of intent with MitoCareX Bio Ltd (“MitoCareX”) and
SciSparc Ltd. (“SciSparc”) and all other shareholders of MitoCareX (“Sellers”) pursuant to which the
Company will acquire all outstanding securities of MitoCareX, from SciSparc and the Sellers thereby making it a wholly-owned
subsidiary of the Company. As part of the transaction, SciSparc. will transfer
ordinary shares representing approximately |
Following
the closing, the Company will grant additional shares of common stock (“Additional Shares”) to SciSparc and Sellers, totaling
up to
If
SciSparc’s ownership of the Company’s outstanding share of common stock will exceed
At the closing, one of the Sellers will enter into a new employment agreement with MitoCareX, which will include a non-competition clause. The consummation of the acquisition is contingent upon entering into a definitive agreement with customary closing conditions, including approvals from the boards and shareholders, as well as satisfactory due diligence.
| 18 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 5 – COMMON STOCK
| 1. | On
December 22, 2023, the Company entered into a Standby Equity Purchase Agreement (the “SEPA II”) with YA II PN, Ltd. (the
“Investor”), pursuant to which the Investor has agreed to purchase up to $ million shares of common stock over 36 months
after the date of the SEPA II. |
The SEPA II will terminate automatically on the earlier of January 1, 2027 or when the Investor has purchased an aggregate of $ million of the Company’s shares of common stock. The Company has the right to terminate the SEPA II upon five trading days’ prior written notice to the Investor.
In connection with and subject to the satisfaction of certain conditions set forth in the SEPA II, upon the request of the Company, the Investor will pre-advance to the Company up to $ of the $ commitment amount.
The
Company paid a subsidiary of the Investor a structuring fee in the amount of $
During
the nine months ended September 30, 2024, the Company issued shares of common stock, to the Investor pursuant to the terms
of SEPA II valued at $
On
April 4, 2024, the Company, sold a $
The
Note bears interest at a rate of
The
Note sets forth certain events of default, including a breach by the Company of another agreement with the Investor, the failure of the
securities of the Company to remain listed on the Nasdaq and the failure of the Company to timely file periodic reports with the SEC.
Upon the occurrence of an event of default, interest will accrue at a default rate of
As of September 30, 2024 the Company repaid all payments under the Note.
| 2. | On
October 26, 2022, pursuant to an investor relations consulting agreement, the Company’s Board of Directors approved the
quarterly issuances of
shares of common stock to a consultant beginning in the first quarter of 2023. On March 18, 2024 and July 25, 2024, the Company
issued
shares of common stock to a consultant for consulting services provided to the Company. The shares were estimated at $ | |
| 3. | On
March 18, 2024, the Company issued shares of common stock to a consultant for consulting services provided to the Company pursuant
to a consulting agreement dated on November 23, 2023. The Company determined the value of the shares and the services provided at
$ | |
| 4. | On
May 8, 2024 the Company issued shares of common stock to a consultant, for services provided to the Company pursuant to an
amendment of a consulting agreement, dated November 15, 2023. The shares were estimated at $ | |
| 5. | On
August 21, 2024 the Company issued a one-time bonus of shares of common stock to a director of Save Foods Ltd. in connection
with his departure from Save Foods Ltd. The shares were estimated at $ | |
| 6. | On
September 9, 2024, the Board of directors of the Company approved the issuance of an equity grant to executive officers and consultants
amounting to a total of shares of common stock, par value $. The Company estimated the value of the shares issued
at $ | |
| 7. | During the nine months ended September 30, 2024, the Company recorded share based compensation expenses in General and Administrative expenses in the amount of $ related to shares issued by the Company to service providers during the year ended December 31, 2023. |
| 19 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
| Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding at December 31, 2023 | ||||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited or expired | ||||||||
| Outstanding at September 30, 2024 | ||||||||
| Number of options exercisable at September 30, 2024 | ||||||||
The aggregate intrinsic value of the awards outstanding as of September 30, 2024 was $. These amounts represent the total intrinsic value, based on the Company’s stock price of $ as of September 30, 2024, 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-options compensation for employees and directors, for the nine months ended September 30, 2024 and 2023 were $ and $, respectively and $ and $, for the three months ended September 30, 2024 and 2023, respectively.
NOTE 7 – RELATED PARTIES
| A. | Transactions and balances with related parties |
| Nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| General and administrative expenses: | ||||||||
| Directors’ compensation | ||||||||
| Salaries and fees to officers | ||||||||
| (*) | (*) | |||||||
| (*) of which share based compensation | ||||||||
| Research and development expenses: | ||||||||
| Salaries and fees to officers | ||||||||
| Selling and marketing expenses: | ||||||||
| Salaries and fees to officers | ||||||||
| B. | Balances with related parties and officers: |
| As of September 30, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| Other accounts payables | ||||||||
| 20 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 8 – SEGMENT REPORTING
| A. | Information about reported segment profit or loss and assets |
The
Company has
Information related to the operations of the Company’s reportable operating segments is set forth below:
| Pathogen prevention | Global warming solutions | Total | ||||||||||
| Nine months ended September 30, 2024 | ||||||||||||
| Revenues | ||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ||||||
| Unallocated amounts: | ||||||||||||
| Unallocated costs | ( | ) | ||||||||||
| Total operating loss | ( | ) | ||||||||||
| Financing expenses, net | ( | ) | ||||||||||
| Other income | ||||||||||||
| Changes in fair value of an investment in an associate measured under the fair value option | ( | ) | ||||||||||
| Net loss | ( | ) | ||||||||||
| Pathogen prevention | Global warming solutions | Total | ||||||||||
| Three months ended September 30, 2024 | ||||||||||||
| Revenues | ||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ||||||
| Unallocated amounts: | ||||||||||||
| Unallocated costs | ( | ) | ||||||||||
| Total operating loss | ( | ) | ||||||||||
| Financing expenses, net | ( | ) | ||||||||||
| Other income | ||||||||||||
| Changes in fair value of an investment in an associate measured under the fair value option | ( | ) | ||||||||||
| Net loss | ( | ) | ||||||||||
| Pathogen prevention | Global warming solutions | Total | ||||||||||
| Nine months ended September 30, 2023 | ||||||||||||
| Revenues | ||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ||||||
| Unallocated amounts: | ||||||||||||
| Unallocated costs | ( | ) | ||||||||||
| Total operating loss | ( | ) | ||||||||||
| Financing income, net | ||||||||||||
| Other income | ||||||||||||
| Changes in fair value of an investment in an associate measured under the fair value option | ( | ) | ||||||||||
| Net loss | ( | ) | ||||||||||
| Pathogen prevention | Global warming solutions | Total | ||||||||||
| Three months ended September 30, 2023 | ||||||||||||
| Revenues | ||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ||||||
| Unallocated amounts: | ||||||||||||
| Unallocated costs | ( | ) | ||||||||||
| Total operating loss | ( | ) | ||||||||||
| Financing income, net | ||||||||||||
| Other income | ||||||||||||
| Changes in fair value of an investment in an associate measured under the fair value option | ( | ) | ||||||||||
| Net loss | ( | ) | ||||||||||
| B. | Information on sales by geographic distribution: |
Sales are attributed to geographic distribution based on the location of the customer.
| Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Israel | ||||||||||||||||
| United States | ||||||||||||||||
| Mexico | ||||||||||||||||
| Peru | ||||||||||||||||
| Turkey | ||||||||||||||||
| C. | Sales
to single customers exceeding |
| Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Customer A | ||||||||||||||||
| Customer B | ||||||||||||||||
| Customer C | ||||||||||||||||
| D. | Information on Long-Lived Assets - Property, Plant and Equipment and ROU assets by geographic areas: |
The following table presents the locations of the Company’s long-lived assets as of September 30, 2024 and December 31, 2023:
| As of September 30, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| Israel | ||||||||
| United States | ||||||||
| 21 |
N2OFF, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
NOTE 9 – SUBSEQUENT EVENTS
| 1. | During
October 2024, the Company issued
shares of common stock to the Investor pursuant to the terms of the SEPA II for consideration of $ | |
| 2. | On
October 1, 2024, the Company entered into a facility agreement with L.I.A. Pure Capital Ltd. (the “Lender”) for
financing of up to EUR |
Interest
under the Pure Capital Credit Facility will accrue at the rate of
The
Pure Capital Credit Facility will terminate on the earlier of the drawdown of all of the EUR
In
addition, under the facility agreement, the Company agreed to issue the Lender a -year warrant
(the “Warrant”) to purchase
In the event of a fundamental transaction, as detailed in the Warrant, the successor entity will be required to assume the Company’s obligations under the Warrant. The Lender may also request the Company to buy back the Warrant for its Black Scholes Value in cash.
As
of November 14, 2024
| 3. | On November 3, 2024, the Company’s board of directors approved (i) the payment of an aggregate of $ | |
| 4. | On November 13, 2024, the Company held its annual meeting
of stockholders. At this meeting, stockholders approved, among other things (i) an amendment to the Company’s 2022 Share
Incentive Plan (the “2022 Plan”) to increase the number of shares of Common Stock authorized for issuance under the 2022
Plan by an additional
shares of Common Stock, which amendment (the “2022 Plan Amendment”) was adopted by the board on September 9, 2024; (ii)
on an advisory basis, the grant of shares to members of the Board, under the 2022 Plan, and subject to the approval of the increase
of 2022 Plan as noted in (i) above, and (iii) to approve the issuance of securities in one or more non-public offerings where the
maximum discount at which securities will be offered will be equivalent to a discount of |
| 22 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included elsewhere in this Quarterly Report. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements” for a discussion of the uncertainties and assumptions associated with these statements. Our actual results may differ materially from those discussed below.
Overview
We are an agri-food tech company specializing in eco crop protection that helps reduce food waste and ensure food safety while reducing the use of pesticides. 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.
We operate through our two majority-owned Israeli subsidiaries, Save Foods Ltd., which focuses on post-harvest treatments in fruit and vegetables to control and prevent pathogen contamination, significantly reduce the use of hazardous chemicals and prolong fresh produce’s shelf life, and NTWO OFF Ltd., formerly known as Nitrousink Ltd. (“NTWO OFF”), which offers a pioneering solution to mitigate N₂O (nitrous oxide) emissions, a potent greenhouse gas with 310 times the global warming impact of carbon dioxide. Through NTWO OFF we aim to promote agricultural practices that are both environmentally friendly and economically viable and to become a global leader in this field by collaborating with or acquiring other companies that create innovative solutions and tools to solve other aspects of global warming’s impact of carbon dioxide. In addition, we currently own approximately 23% of Plantify Foods Inc. (“Plantify”), a Canadian-based food tech company focused on the development and production of clean-label, plant-based food products.
Our solutions are based on our proprietary blend of food acids combined with certain types of oxidizing agent-based sanitizers and in some cases with fungicides at low concentrations. Our products have a synergistic effect when combined with these oxidizing agent-based sanitizers and fungicides. Our “green” solutions 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 ingredients do not leave any toxicological residues on the fresh produce we treat. By forming a temporary protective shield around the fresh produce we treat, our solutions make it difficult for pathogens to develop and potentially provide protection which also reduces cross-contamination.
Additionally, we collaborate with Solterra Renewable Energy Ltd. (“Solterra”) in connection with certain investment opportunities in solar PV (photovoltaic) projects. These investment opportunities have included projects in Melz, Germany, where we, together with other investors, lent an aggregate amount of €2.08 million. We continue to collaborate with Solterra as Solterra surveys the European solar energy market for additional projects.
Recent Developments
Annual Stockholder Meeting
On November 13, 2024, at our annual meeting of stockholders, our stockholders approved (i) the election of Eliahou Arbib and Udi Kalifi as the two Class III directors to serve on our board of directors for a term of three years; (ii) an amendment to our 2022 Share Incentive Plan (the “2022 Plan”) to increase in the number of shares of common stock available for issuance under the 2022 Plan by an additional 11,000,000 shares from 1,071,429 shares to 12,071,429 shares; (iii) the issuance of securities in one or more non-public offerings where the maximum discount at such securities will be offered will be equivalent to a discount of 20% below the market price, as required by Nasdaq Marketplace Rule 5635 (iv) the ratification of the appointment of Somekh Chaikin, a member of KPMG International, as our independent auditors for the year ended December 31, 2024 and (v) on an advisory basis, the grant of shares to our board of directors under the 2022 Plan. The proposal to authorize the board to amend our articles of incorporation, as amended, to increase the aggregate number of authorized shares of its capital stock, from 500,000,000 shares, consisting of 495,000,000 shares of common stock and 5,000,000 shares of preferred stock, to 10,005,000,000 shares, consisting of 10,000,000,000 shares of common stock and 5,000,000 shares of preferred stock was not approved because the requisite majority of the outstanding voting power of the Company required for approval under Nevada law was not obtained.
Nasdaq Non-Compliance
On July 8, 2024, we received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying us that for the last 30 consecutive business days the closing bid price for our common stock was below $1.00 per share, which is the minimum closing bid price required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Notice”). This Notice has no immediate effect on the listing of our common stock which will continue to trade on The Nasdaq Capital Market under the symbol “NITO”, subject to our compliance with the other Nasdaq listing requirements.
| 23 |
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we are provided a compliance period of 180 calendar days from the date of the Notice, or until January 6, 2025 (the “Compliance Period”), to regain compliance with the minimum closing bid price requirement. If at any time during the Compliance Period, the closing bid price of our common stock is at least $1.00 per share for a minimum of ten consecutive business days (unless the Nasdaq staff exercises its discretion to extend this ten business day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H)), Nasdaq will provide written confirmation of our compliance, and the matter will be closed. If we do not regain compliance during the Compliance Period, we may be eligible for an additional 180-calendar day period to regain compliance, provided that we meet the applicable market value of publicly held shares requirement for continued listing and all other applicable standards for initial listing on The Nasdaq Capital Market (except the minimum bid price requirement), and notify Nasdaq of our intent to cure the deficiency by effecting a reverse stock split of our common stock. If we do not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, our common stock will be subject to delisting.
Share Issuances
On September 12, 2024, we issued an aggregate of 640,000 shares of common stock under the 2022 Plan and an aggregate of 1,050,000 shares of common stock outside of the 2022 Plan in consideration of services provided to our company by certain consultants and officers, including 320,000 shares issued to David Palach, our Chief Executive Officer, and 160,000 shares issued to Lital Barda, our Chief Financial Officer.
On September 23, 2024, we issued 50,000 shares of common stock to an investor pursuant to the terms of a standby equity purchase agreement with such investor entered into on December 23, 2023.
Facility Agreement and Warrant Issuance
On October 1, 2024, we entered into a facility agreement (the “Facility Agreement”) with L.I.A. Pure Capital Ltd. (the “Lender”), for financing of up to EUR 6,000,000 (the “Credit Facility”), EUR 2,000,000 of which may be used to finance one project in Germany, and the remaining EUR 4,000,000 for any other projects subject to pre-approval by the Lender. Under the Facility Agreement, we agreed to issue the Lender a five-year warrant (the “Warrant”) to purchase 1,850,000 shares of its common stock (the “Warrant Shares”), with an exercise price of $1.00 per share. Such warrant may not be exercised by the Lender if such exercise would result in the Lender beneficially owning in excess of 4.99% of our outstanding shares. The Warrant Shares are immediately exercisable. Furthermore, the exercise price and number of Warrant Shares are subject to adjustments upon the issuance of common stock, issuance of options, issuance of convertible securities and stock combination events, as detailed in the Warrant.
In the event we fail to deliver the Warrant Shares in a timely manner and the Lender is required to purchase shares of common stock in the open market to cover a sale of the Warrant Shares, we will be required to compensate the Lender for any additional costs incurred. The Warrant Shares additionally have a cashless exercise mechanism in the event a registration statement covering the resale of the Warrant Shares is not available, based on a specified formula as detailed in the Warrant.
If we do not have sufficient authorized and unreserved shares of common stock to cover the exercise of the Warrant, we will be required to obtain stockholder approval within sixty days to increase its authorized shares. If we cannot deliver the required common stock upon exercise, the Lender will be entitled to demand cash compensation based on the Black Scholes Value of the Warrant.
The Lender is entitled to certain purchase rights with respect to Warrant Shares which the Lender could have acquired upon the exercise of the Warrant. We may not enter into a fundamental transaction, as described in the Warrant, unless the successor entity assumes our obligations under the Warrant. The Lender may also request that we buy back the Warrant calculated using a Black Scholes option pricing model in cash.
Pursuant to the Facility Agreement, we must file a resale registration statement with SEC within 75 days of the date of the Facility Agreement to register the Warrant Shares and must use reasonable efforts to have the registration statement declared effective by the SEC within 90 days of filing.
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Results of Operations
Revenues and Cost of Revenues
Our total revenues consist of the sale of products and our cost of revenues consists of cost of products.
The following table sets forth our revenues and costs of revenues:
Nine Months Ended
September 30, | Three Months Ended
September 30, | |||||||||||||||
| U.S. dollars in thousands, except share and per share data | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Revenues from sales of products | 69,481 | 157,618 | 9,104 | - | ||||||||||||
| Cost of sales | (110,523 | ) | (70,229 | ) | (76,761 | ) | - | |||||||||
| Gross profit (loss) | (41,042 | ) | 87,389 | (67,657 | ) | - | ||||||||||
Operating Expenses
Our operating expenses consist of three components — research and development expenses, selling and marketing expenses and general and administrative expenses.
Research and Development Expenses
Our research and development expenses consist primarily of professional fees and other related research and development expenses.
Nine Months Ended
September 30, | Three Months Ended
September 30, | |||||||||||||||
| U.S. dollars in thousands | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Salaries and related expenses | - | 67, 042 | - | - | ||||||||||||
| Professional fees | 247,347 | 39,078 | 121,060 | 7,056 | ||||||||||||
| Laboratory and field tests | - | 1,762 | - | 939 | ||||||||||||
| Depreciation | 1,499 | 10,695 | 449 | 2,419 | ||||||||||||
| Other expenses | _1,120_ | 1,710,393 | 901 | 1,682,791 | ||||||||||||
| Total | 249,966 | 1,828,970 | 122,410 | 1,693,205 | ||||||||||||
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries and related expenses, professional fees, transport and storage and other expenses.
Nine Months Ended
September 30, | Three Months Ended
September 30, | |||||||||||||||
| U.S. dollars in thousands | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Salaries and related expenses | 64,813 | 134,333 | 17,609 | 42,841 | ||||||||||||
| Professional fees | 37,418 | 23,711 | 18,718 | 7,500 | ||||||||||||
| Commissions | - | 9,204 | - | - | ||||||||||||
| Travel | 20,267 | 13,543 | 12,837 | 5,361 | ||||||||||||
| Transport and storage | 36,558 | 24,968 | 9,562 | 3,216 | ||||||||||||
| Other expenses | 20,038 | 12,148 | 6,089 | 1,544 | ||||||||||||
| Total | 179,094 | 217,907 | 64,815 | 60,462 | ||||||||||||
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General and Administrative Expenses
General and administrative expenses consist primarily of professional services, share based compensation, salaries, insurance and other non-personnel related expenses.
Nine Months Ended
September 30, | Three Months Ended
September 30, | |||||||||||||||
| U.S. dollars in thousands | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Professional services | 1,792,054 | 1,495,576 | 678,241 | 505,609 | ||||||||||||
| Share based compensation | 813,919 | 1,375,675 | 553,432 | 431,588 | ||||||||||||
| Salaries and related expenses | 34,248 | 193,308 | - | 63,670 | ||||||||||||
| Insurance | 124,237 | 191,365 | 38,922 | 54,125 | ||||||||||||
| Other expenses | 80,509 | 225,484 | 24,318 | 48,265 | ||||||||||||
| Total | 2,844,967 | 3,481,408 | 1,294,913 | 1,103,257 | ||||||||||||
Three months ended September 30, 2024 compared to three months ended September 30, 2023
Revenues
Revenues for the three months ended September 30, 2024 were $9,104 compared to $0 during the three months ended September 30, 2023.
Cost of Sales
Cost of sales consists primarily of salaries, materials, and overhead costs of manufacturing our products. Cost of sales for the three months ended September 30, 2024 was $76,761, compared to cost of sales of $0 for the three months ended September 30, 2023. The increase is mainly a result of a one-time inventory write-off in South Africa.
Gross Profit (loss)
Gross loss for the three months ended September 30, 2024 was $67,657, compared to a gross profit of $0 for the three months ended September 30, 2023. The increase is mainly a result of a one-time inventory write-off in South Africa.
Research and Development Expenses
Research and development expenses consist of consulting fees, service providers’ costs, related materials and overhead expenses. Research and development expenses for the three months ended September 30, 2024 were $122,410, a decrease of $1,570,795, or 93%, compared to research and development expenses of $1,693,205 for the three months ended September 30, 2023. The decrease is mainly attributable to a decrease in Save Foods Ltd.’s expenses as a result of the implementation of certain cost reduction measures, including a reduction in Save Foods Ltd.’s research and development budget in light of prevailing macroeconomic conditions and the shift of our focus to the commercialization of our solutions and converting recently completed pilots into paying customers. Additionally, certain results of our operations relating to Save Foods Ltd., were offset by an increase in professional fees associated with NTWO OFF Ltd.’s research and development activities.
Selling and Marketing Expenses
Selling and marketing expenses consisted 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 September 30, 2024 were $64,815, an increase of $4,353, or 7%, compared to selling and marketing expenses of $60,462 for the three months ended September 30, 2023. The increase is mainly attributable to the increase in other professional fees associated with our sales, offset by a decrease in salaries resulting from a reduction in personnel following our cost reduction measures.
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General and Administrative Expenses
General and administrative expenses consisted 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, directors fees and insurance costs. General and administrative expenses for the three months ended September 30, 2024 were $1,294,913, an increase of $191,656, or 17%, compared to general and administrative expenses of $1,103,257 for the three months ended September 30, 2023. The increase is mainly a result of the increase in professional services and share-based compensation, offset by a decrease in salaries and related costs, insurance costs and in franchise tax related to the Company’s reincorporation in Nevada from Delaware.
Financing Income (expenses), Net
Financing expenses, net for the three months ended September 30, 2024 were $41,215, an increase of $51,794, or 490%, compared to financing income, net of $10,579 for the three months ended September 30, 2023. The increase is mainly a result of the interest on a $1,500,000 promissory note issued to YA II PN, Ltd. on April 4, 2024.
Total Comprehensive Loss
As a result of the foregoing, our total comprehensive loss for the three months ended September 30, 2024 was $2,313,707, compared to $3,036,028 for the three months ended September 30, 2023, a decrease of $722,321, or 24%.
Nine months ended September 30, 2024 compared to nine months ended September 30, 2023
Revenues
Revenues for the nine months ended September 30, 2024 were $69,481, a decrease of $88,137, or 56%, compared to $157,618 during the nine months ended September 30, 2023. The decrease is mainly a result of a decrease in our sales in Mexico.
Cost of Sales
Cost of sales consists primarily of salaries, materials and overhead costs of manufacturing our products. Cost of sales for the nine months ended September 30, 2024 were $110,523, an increase of $40,294, or 57%, compared to $70,229 for the nine months ended September 30, 2023. The increase is mainly a result of a one-time inventory write-off in South Africa.
Gross Profit (loss)
Gross loss for the nine months ended September 30, 2024 was $41,042, a decrease of $128,431, or 147%, compared to a gross profit of $87,389 for the nine months ended September 30, 2023. The decrease is mainly a result of the decrease in revenues and one-time inventory write-off in South Africa.
Research and Development Expenses
Research and development expenses consist of salaries and related expenses, consulting fees, related materials and overhead expenses. Research and development expenses for the nine months ended September 30, 2024 were $249,966, a decrease of $1,579,004, or 86%, compared to research and development expenses of $1,828,970 for the nine months ended September 30, 2023. The decrease is mainly attributable the implementation of certain cost reduction measures in light of prevailing macroeconomic conditions and certain results of our operations relating to Save Foods Ltd., which were offset by an increase in professional fees associated with NTWO OFF Ltd.’s research and development activities. Cost reduction measures included the reduction of Save Foods Ltd.’s research and development budget, and the shift of our focus to the commercialization of its solutions with an emphasis on converting recently completed pilots into paying customers.
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Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries and related expenses for selling and marketing personnel, travel related expenses and services providers and commissions. Selling and marketing expenses for the nine months ended September 30, 2024 were $179,094, a decrease of $38,813, or 18%, compared to total selling and marketing expenses of $217,907 for the nine months ended September 30, 2023. The decrease is mainly attributable to the decrease in salaries and related expenses commissions offset by an increase in other related costs associated with our sales.
General and Administrative Expenses
General and administrative expenses consist primarily of professional services, salaries and related expenses including share based compensation as well as other non-personnel related expenses such as legal expenses and directors and insurance costs. General and administrative expenses for the nine months ended September 30, 2024 were $2,844,967, a decrease of $636,441, or 18%, compared to total general and administrative expenses of $3,481,408 for the nine months ended September 30, 2023. The decrease is mainly a result of the decrease in share-based compensation, insurance costs and in franchise tax related to the Company’s reincorporation in Nevada from Delaware offset by an increase in professional services partially offset by an increase in professional services.
Financing Income (expenses), Net
Financing expenses, net, for the nine months ended September 30, 2024, were $117,335, an increase of $161,001, or 369%, compared to total financing income of $43,666 for the nine months ended September 30, 2023. The increase is mainly a result of the interest on a $1,500,000 promissory note issued to YA II PN, Ltd. on April 4, 2024.
Total Comprehensive Loss
As a result of the foregoing, our total comprehensive loss for the nine months ended September 30, 2024 was $3,936,207, compared to $5,472,512 for the nine months ended September 30, 2023, a decrease of $1,536,305, or 28%.
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 September 30, 2024, we have funded our operations, principally with the issuance of equity and debt.
As of September 30, 2024, we had cash and cash equivalents of $2,749,851, as compared to $1,934,634 as of September 30, 2023. As of September 30, 2024, we had working capital of $2,853,704, as compared to 2,211,582 as of September 30, 2023. The increase in our cash balance is mainly attributable to proceeds from our standby equity purchase agreement.
On August 18, 2022, we issued an aggregate of 228,572 shares of common stock at a public offering price of $21.00 per share in an underwritten offering for gross proceeds of approximately $4,800,000. In connection therewith, we granted the underwriter a 45-day option to purchase up to 34,286 additional shares of common stock at the public offering price of $21.00 per share, less underwriting discounts and commissions solely to cover over-allotments and issued ThinkEquity LLC a five-year warrant to purchase up to 11,429 shares of common stock, at a per share exercise price equal to 125% of the offering price per share of common stock.
On July 23, 2023, we entered into a standby equity purchase agreement with YA II PN, Ltd. (the “Investor”), pursuant to which the Investor agreed to purchase up to $3,500,000 shares of our common stock for 40 months from the date of the purchase agreement at a price per share equal to 94% of the lowest volume-weighted average price (“VWAP”) of our common stock for the three days prior to the delivery of each advance notice from us, subject to certain limitations, including that the Investor cannot purchase a number of shares that would result in it beneficially owning more than 4.99% of our outstanding shares of common stock . In December 2023, we raised an aggregate of $3,500,000 under the standby equity purchase agreement.
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On December 22, 2023, we entered into an additional standby equity purchase agreement with the Investor, pursuant to which the Investor has agreed to purchase up to $20 million shares of our common stock for 36 months from the date of the purchase agreement at a price per share equal to 94% of the lowest VWAP of our common stock for the three trading days immediately following the delivery of each advance notice from us. The agreement will terminate automatically on the earlier of January 1, 2027, or when the Investor has purchased an aggregate of $20 million of our shares of common stock. We have the right to terminate the purchase agreement upon five trading days’ prior written notice to the Investor. As of November 14, 2024, we have sold an aggregate of 6,666,667 shares of common stock at an average purchase price of $0.47 per share to the Investor. The maximum number of shares allowed to be issued under the Company’s registration statement is 6,666,667 shares of common stock.
In connection with and subject to the satisfaction of certain conditions set forth in the standby equity purchase agreement, upon our request, the Investor will pre advance to us up to $3,000,000 of the $20,000,000 commitment amount (a “Pre-Advance”), with each Pre-Advance to be evidenced by a promissory note issued at a 3% discount to the principal amount equal to each such note. Each note accrues interest on the outstanding principal balance at the rate of 8% per annum. The Company is required to pay, on a monthly basis, one tenth of the outstanding principal amount of each note, together with accrued and unpaid interest, either (i) in cash or (ii) by submitting an advance notice pursuant to the purchase agreement and selling the Investor shares of our common stock, or any combination thereof as determined by us. The initial payment is due 60 days after the issuance of a note, and every 30 days thereafter. Unless otherwise agreed to by the Investor, any funds received by us pursuant to the purchase agreement for the sale of shares will first be used to satisfy any payments due under an outstanding note. As of September 30, 2024, the note was repaid and extinguished.
On April 4, 2024, the Company issued the Investor an additional promissory note in the principal amount of $1,500,000 for proceeds of $1,455,000, reflecting an original issue discount of 3%.
On October 1, 2024, we entered into the Facility Agreement for financing of up to EUR 6,000,000, as described above.
The table below presents our cash flows for the periods indicated:
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | (2,927,148 | ) | (2,258,869 | ) | ||||
| Net cash used in investing activities | (1,373,044 | ) | (1,519,559 | ) | ||||
| Net cash provided by financing activities | 2,601,032 | - | ||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (6,033 | ) | 8,486 | |||||
| Decrease in cash and cash equivalents | (1,705,193 | ) | (3,769,942 | ) | ||||
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Going Concern
Since our incorporation, we incurred losses from operations and net cash outflows from operating activities as disclosed in the consolidated statements of operations and cash flows. As of September 30, 2024, we had an accumulated deficit of approximately $33 million, and we expect to incur losses for the foreseeable future. We have financed our operations mainly through financing from various investors and have limited revenue from our products and therefore are dependent upon external sources to finance our operations. There can be no assurance that we will succeed in obtaining the necessary financing to continue our operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern through at least twelve months from the date of this Quarterly Report.
We believe that our existing capital resources will be sufficient to support our operating plan through the third quarter of 2025; however, there can be no assurance of this. We will need to raise additional capital to support our operations through the issuance of debt, equity, or a combination thereof. There can be no assurance that we will be successful in raising additional capital on favorable terms, or at all.
As a result, there is substantial doubt about our ability to continue as a going concern. If we are unable to obtain sufficient 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, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, and we may issue securities with rights, preferences or privileges senior to our common stock. If we issue debt securities, there may be negative covenants which may restrict our activities. 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. The financial statements included in this Quarterly Report do not include adjustments for measurement or presentation of assets and liabilities, which may be required should we fail to operate as a going concern.
Operating Activities
Net cash used in operating activities was $2,927,148 for the nine months ended September 30, 2024, as compared to $2,258,869 for the nine months ended September 30, 2023. The increase is mainly attributable to a decrease in other liabilities and an increase in accounts receivable, net.
Investing Activities
Net cash used in investing activities was $1,373,044 for the nine months ended September 30, 2024, as compared to net cash used in investing activities of $1,519,559 for the nine months ended September 30, 2023. The decrease is due to our investment in Plantify in April 2023 partially offset by the investment in renewable energy projects and additional credit facility provided to Plantify, during the nine months ended September, 2024.
Financing Activities
Net cash provided by financing activities was $2,601,032 for the nine months ended September 30, 2024, as compared to $0 net cash provided by financing activities for the nine months ended September 30, 2023. The increase is the result of proceeds from the standby equity purchase agreement with the Investor entered into on December 22, 2023.
Item 3. Quantitative And Qualitative Disclosures About Market Risk.
We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and 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 Principal Executive Officer and our Principal Financial Officer or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our management, including each of our Principal Executive Officer and our Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2024. Based on such evaluation, each of our Principal Executive Officer and Principal Financial Officer has concluded that, as of September 30, 2024, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
During the period covered by this Quarterly Report, there were no changes in our internal control over financial reporting 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 1. Legal Proceedings
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 1, 2024, which could materially affect our business, financial condition or future results. Except as set forth below, there have been no material changes from the risk factors previously disclosed in the “Risk Factors” section of such Annual Report on Form 10-K.
Conditions in Israel, including the ongoing war between Israel and Hamas, and other conflicts in the region, may adversely affect our operations and limit our ability to market our products, which would lead to a decrease in revenues.
Because a substantial part of our operations are conducted in Israel and all members of our board of directors, management, as well as a majority of our employees and consultants, including employees of our service providers, are located in Israel, our business and operations are directly affected by economic, political, geopolitical and military conditions affecting Israel. Any political instability, terrorism, armed conflicts, reserve mobilization, cyberattacks, boycotts, direct or indirect sanctions and restrictions, or any other hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and other hostile non-state actors. These conflicts have involved missile strikes, hostile infiltrations and terrorism against civilian targets in various parts of Israel, which have negatively affected business conditions in Israel.
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers, as well as evacuations of tens of thousands of civilians from their homes. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Furthermore, hostilities along Israel’s northern border with Hezbollah located in Lebanon have accelerated, as a result of such, Israel has begun conducting a limited ground operation in southern Lebanon, which has the potential to escalate into a wider regional conflict. In addition, Iran has directly targeted Israel with ballistic missiles and other weaponry.
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The intensity and duration of Israel’s current war against Hamas is difficult to predict, as are such war’s economic implications on our business and operations and on Israel’s economy in general. These events may be intertwined with wider macroeconomic indications of a deterioration of Israel’s economic standing, for instance, a downgrade in Israel’s credit rating by rating agencies (such as the downgrade by Moody’s of its credit rating of Israel from A1 to A2, as well as the downgrade of its outlook rating from “stable” to “negative” followed by a second more recent downgrade from A2 to BAA1, and the S&P Global lowered its long-term credit rating from AA- to A+, as well as a downgrade of its short-term credit ratings from A-1+ to A-1, and recently, further downgraded this rating to A-, with an outlook on the long-term ratings “negative”, as well as the downgrade by Fitch Ratings of its credit rating of Israel from A+ to A, with an outlook rating of “negative”) which may have a material adverse effect on our company and our ability to effectively conduct its operations.
Our facilities are not only within the range of rockets from the Gaza Strip, but also within the range of rockets that can be fired from Lebanon, Syria or elsewhere in the Middle East. In the event that our facilities are damaged as a result of hostile action or hostilities otherwise disrupt the ongoing operation of our facilities, our ability to deliver products to customers in a timely manner to meet our contractual obligations with customers and vendors could be materially and adversely affected.
Furthermore, Plantify, in which we have an approximately 23% ownership interest, has facilities in Kibbutz Gonen, which is located in an area in northern Israel that has been affected by ongoing hostilities with Hezbollah in Lebanon, as part of ongoing war. Due to the continuous drone attacks, missile strikes, shootings and the limited ground operation in the region, the area has been completely evacuated of civilians, following which all the employees were put on unpaid leave until further notice. Plantify has ceased its operations at the Kibbutz Gonen facility and may not be able to resume its regular activities, including its ability to deliver products to customers in a timely manner, if the hostilities persist for an extended period which may have an adverse effect on its financial condition and ability to repay loans from us under a C$1,500,000 (approximately US$1,124,000) 8% debenture and a credit facility of up to $250,000, of which, Plantify has fully utilized to date.
We have experienced delays in our pilots and packaging activities due to the war, as certain packing houses, such as Mehadrin, have halted operations for the time being. Additionally, we anticipated engaging additional packing houses to conduct pilots on strawberries and citruses with our product, but, due to the war, we were unable to continue pursuing new collaborations for these pilots, and we may not be able to resume any potential collaborations if the current war persists for an extended duration. We are unable to predict how long the current conflict will last, as well as the repercussions these delays will have on our operations. If we are unable to renew our pilots or collaborations with local packing houses our financial results may be affected.
Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.
As a result of the Israeli security cabinet’s decision to declare war against Hamas, and possible hostilities with other organizations, several hundred thousand Israeli military reservists were drafted to perform immediate military service. Certain of our employees and consultants in Israel and employees of our service providers located in Israel, have been called, and additional employees may be called, for service in the current or future wars or other armed conflicts with Hamas, and such persons may be absent for an extended period of time. Although we have certain manufacturing capabilities in the United States, our Israeli operations may be disrupted by such absences, which may materially and adversely affect our business and results of operations. Additionally, the absence of employees of our Israeli suppliers and contract manufacturers due to their military service in the current war or future wars or other armed conflicts may disrupt their operations, which in turn may event our materially and adversely affect our ability to deliver or provide products and services to customers.
In addition, popular uprisings in various countries in the Middle East and North Africa have affected the political stability of those countries. Such instability may lead to a deterioration in the political and trade relationships that exist between the State of Israel and these countries. Moreover, some countries around the world restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases. These restrictions may limit materially our ability to obtain raw materials from these countries or sell our products to companies and customers in these countries.
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Furthermore, following Hamas’ attack on Israel and Israel’s security cabinet declaration of war against Hamas, the Houthi movement, which controls parts of Yemen, launched a number of attacks on marine vessels traversing the Red Sea, which marine vessels were thought to either be in route towards Israel or to be partly owned by Israeli businessmen. The Red Sea is a vital maritime route for international trade traveling to or from Israel. As a result of such disruptions, we may experience in the future delays in supplier deliveries, extended lead times, and increased cost of freight, increased insurance costs, purchased materials and manufacturing labor costs. The risk of ongoing supply disruptions may further result in delayed deliveries of our products.
Prior to the Hamas attack in October 2023, the Israeli government pursued extensive changes to Israel’s judicial system, which sparked extensive political debate and unrest. In response to such initiative, many individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment in Israel including due to reluctance of foreign investors to invest or transact business in Israel as well as to increased currency fluctuations, downgrades in credit rating, increased interest rates, increased volatility in security markets, and other changes in macroeconomic conditions. The risk of such negative developments has increased in light of the recent Hamas attacks and the war against Hamas declared by Israel. To the extent that any of these negative developments do occur, they may have an adverse effect on our business, our results of operations and our ability to raise additional funds, if deemed necessary by our management and board of directors.
Our investment in the solar energy sector is both for strategic and financial reasons but we may not realize a return on our investments.
We have made, and continue to seek to make, investments in the solar energy sector, by and through our collaborate with Solterra, which we believe furthers our strategic objectives and support our key business initiatives. We have thus far invested in certain solar energy projects in Europe and do not restrict ourselves from pursuing additional investments in the solar energy sector. If any project in which we invest fails, we could lose all or part of our investment in that project. If we determine that an other-than-temporary decline in the fair value exists for any such investment, we will have to write down the investment to its fair value and recognize the related write-down as an investment loss. The performance of any of these investments could result in significant impairment charges and gains (losses) on other equity investments. We must also analyze accounting and legal issues when making these investments. If we do not structure these investments properly, we may be subject to certain unfavorable accounting impact, such as potential consolidation of financial results. Furthermore, if the strategic objectives of an investment have been achieved, or if the investment diverges from our strategic objectives, we may seek to dispose of the investment. The occurrence of any of these events could harm our results.
Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds
Except as set forth below, there were no sales of equity securities during the period covered by this Quarterly Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.
On July 25, 2024, we issued 1,286 shares of common stock to a consultant for services provided to us.
On August 21, 2024, we issued 10,000 shares of common stock to a former director for services provided to our subsidiary Save Foods Ltd.
The above issuances did not involve any underwriters, underwriting discounts or commissions or any public offering and we believe are exempt from the registration requirements of the Securities Act by virtue of Section 4(2) thereof as transactions not involving a public offering.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
During
the three months ended September 30, 2024, none of the Company’s directors or officers
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Item 6. Exhibits.
| 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 thereunto duly authorized.
| Date: November 14, 2024 | N2OFF, INC. | |
| By: | /s/ David Palach | |
| Name: | David Palach | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 14, 2024 | By: | /s/ Lital Barda |
| Name: | Chief Financial Officer | |
| Title: | (Principal Financial and Accounting Officer) | |
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