Nexentis Technologies Inc.: Form 10-Q for the period ended Sep 30, 2023

Readers are advised to review the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated interim financial statements (unaudited) and related notes thereto included elsewhere in this Quarterly Report and the consolidated financial statements and related notes thereto in our 2022 Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements”. You should review the “Risk Factors” section contained in the S-1 Registration Statement for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Furthermore, certain disclosures and references made herein apply to Save Foods Ltd., the subsidiary of Save Foods, Inc. The primary business activities and operations discussed herein are performed by Save Foods Ltd., whereas Save Foods, Inc. operates as a holding company and is the Registrant for purposes of this Quarterly Report.

Overview

We develop eco-friendly “green” solutions for the food industry. Our solutions are developed to improve the food safety and shelf life of fresh produce. We do this by controlling human and plant pathogens, thereby reducing spoilage, and in turn, reducing food loss.

Our products are based on a proprietary blend of food acids which have a synergistic effect when combined with certain types of oxidizing agent-based sanitizers and fungicides at low concentrations. Our green treatments 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. On the contrary, by forming a temporary protective shield around the fresh produce we treat, our products make it difficult for pathogens to develop and potentially provide protection which also reduces cross-contamination.

Our Common Stock is listed on the Nasdaq Capital Market under the symbol “SVFD”.

Recent Developments

Plantify Transactions

On March 31, 2023, we entered into a securities exchange agreement with Plantify Foods, Inc. (“Plantify”), pursuant to which each of the respective parties agreed to issue to the other party 19.99% of its issued and outstanding capital stock.

Upon the closing of the transaction on April 5, 2023, we issued 166,340 shares of Common Stock to Plantify, which amount represented 19.99% of our outstanding capital stock as of immediately prior to the closing (and 16.66% of our outstanding capital stock as of immediately following the closing), and Plantify issued 30,004,349 of its common shares to us which represented 19.99% of Plantify’s outstanding share capital as of immediately prior to the closing (and 16.66% of Plantify’s outstanding share capital as of immediately following the closing).

In connection with the execution of the agreement, Plantify issued us a convertible debenture (the “Debenture”) in the principal amount of CDN$1,500,000 (approximately $1,124,000) which accrues interest at the rate of 8% annually and matures and is due and payable by Plantify on October 4, 2024. The outstanding principal may be converted, at our sole discretion, into common shares of Plantify at a price per share of CDN$0.05 until the first anniversary of the Debenture issuance date and CDN$0.10 per share thereafter. Accrued interest under the Debenture is convertible at the market price of Plantify’s common shares, subject to Toronto Stock Exchange -Venture Exchange (“TSXV”) approval, at the time of conversion. Payment and other obligations under the Debenture are secured by all of the property and assets of Plantify’s subsidiary, Peas of Bean Ltd.

On September 18, 2023, the Company purchased an additional 55,004,349 common shares of Plantify, Following the additional purchase, we hold 23.13% of Plantify’s issued and outstanding share capital.

YA II PN Transaction

On July 23, 2023, we entered into the Purchase Agreement with YA II PN, Ltd. (the “Investor”), pursuant to which the Investor has agreed to purchase up to $3.5 million of the shares of Common Stock over the course of 40 months after the date of the Purchase Agreement. The price of shares to be issued under the Purchase Agreement will be 94% of the VWAP of the Common Stock for the three days prior to delivery of each advance notice by us. Each issuance and sale by us to the Investor under the Purchase Agreement (an “Advance”) is subject to a maximum amount equal to the greater of 100% of the Daily Traded Amount (being the product obtained by multiplying the daily trading volume of the Company’s shares as reported by Bloomberg L.P., by the VWAP for such trading day) during the five trading days prior to an Advance notice and $200,000. With respect to each Advance notice, if we notify the Investor of a minimum acceptable price with respect to such Advance, then if there is no VWAP or if such price is below the minimum price indicated by us, there will be an automatic reduction to the amount of the Advance by one third, and that day will be excluded from the pricing period.

The Advances are subject to certain limitations, including that the Investor cannot purchase any shares that would result in it beneficially owning more than 4.99% of our outstanding shares of Common Stock at the time of an Advance or acquiring more than 19.99% of our outstanding shares of Common Stock as of the date of the Purchase Agreement (the “Exchange Cap”). The Exchange Cap will not apply under certain circumstances, including, where we have obtained stockholder approval to issue in excess of the Exchange Cap in accordance with the rules of Nasdaq or such issuances do not require stockholder approval under Nasdaq’s “minimum price rule.”

The Purchase Agreement will terminate automatically on the earlier of December 1, 2026 or when the Investor has purchased an aggregate of $3.5 million shares of Common Stock. We have the right to terminate the Purchase Agreement upon five trading days’ prior written notice to the Investor provided that (i) there are no outstanding advance notices (as defined in the Purchase Agreement), the Common Shares under which have yet to be issued, and (ii) the Company has paid all amounts owed to the Investor pursuant to the Purchase Agreement.

The issuance of more than 20% of our issued and outstanding Common Stock pursuant to the Purchase Agreement was approved by our stockholders on October 2, 2023. Accordingly, we may now request Advances from the Investor under the Purchase Agreement that will result in the issuance of more than 20% of our issued and outstanding shares of Common Stock as of the date of the Purchase Agreement without being subject to the Exchange Cap.

On October 11, 2023, the Company filed the S-1 Registration Statement that was declared effective by the SEC on October 30, 2023, registering for resale up to 1,000,000 shares of our Common Stock on behalf of the Investor, that may be offered and sold by the Investor from time to time under the terms of the Purchase Agreement. These 1,000,000 shares of Common Stock registered under the S-1 Registration Statement include 26,224 shares of Common Stock that we issued to the Investor as a commitment fee for entering into the Purchase Agreement(the “Commitment Shares”) and 973,776 shares that we may sell to the Investor pursuant to the Purchase Agreement from time to time after the Registration Statement is declared effective and the other terms and conditions of the Purchase Agreement are satisfied.

On October 31, 2023, following the effectiveness of the Registration Statement, we issued a one-year promissory note in the principal amount of $700,000 (the “Note”) to the Investor pursuant to the Purchase Agreement. The Note has a purchase price of $679,000, representing a 3% original issue discount, bears interest at 8% per annum on the outstanding principal balance. The Company is required to pay, on a monthly basis, one tenth of the outstanding principal amount of the Note and accrued interest either (i) in cash or (ii) by submitting an advance notice pursuant to the Purchase Agreement, shares our Common Stock under the terms of the Purchase Agreement or a combination thereof as determined by the Company. The first payment under the Note is due December 31, 2023. Unless otherwise agreed by the Investor, the funds received by the Company pursuant to the Purchase Agreement for the sale of shares of our Common Stock to the Investor will first be used to satisfy any payments due under the Note.

On November 6, 2023, we sold 20,000 shares of our Common Stock to the Investor pursuant to the terms of the Purchase Agreement in consideration of $45,156.

Yaaran Investments Transaction

On August 29, 2023, we closed the exchange transactions (the “Exchange”) pursuant to the terms of a stock exchange agreement (the “Exchange Agreement”), entered on July 11, 2023, by and among the us, Save Foods Ltd., Yaaran Investments Ltd., an Israeli company (“Yaaran”), and a yet-to-be formed Israeli company (“NewCo”), as amended by the First Amendment, dated July 24, 2023, and the Second Amendment, dated August 13, 2023 (collectively, the “Exchange Agreement”). The closing conditions for the consummation of the Exchange, required, among other things, the incorporation of NewCo in the State of Israel. On August 29, 2023, NewCo was incorporated under the name of “Nitrousink Ltd.”, and on the same date, Nitrousink Ltd. (“Nitrousink”) issued us 4,200,000 shares, representing 60% of its share capital on a fully diluted pre-closing basis in exchange for 223,008 of our shares issued to Yaaran on July 27, 2023. As a result, Nitrousink became our direct majority-owned subsidiary.

As part of the Exchange Agreement, we committed to support Nitrousink’s commercialization efforts of certain technologies researched and developed together with the Government of Israel on behalf of the State of Israel, represented by the Head of Agricultural Research Organization and the Treasurer of A.R.O., by making available up to $1.2 million in three conditional installments.

Reverse Stock Split and Nasdaq Minimum Bid Price Compliance

On October 2, 2023, at the annual meeting of our stockholders (the “annual meeting”), our stockholders approved an amendment to our amended and restated certificate of incorporation in Delaware (the “Amendment”) to effect a reverse stock split of the outstanding shares of our common stock, at a split ratio of between 1-for-7 and 1-for-10, with the final ratio to be determined by our board of directors in their sole discretion, prior to the one-year anniversary of this annual meeting. Pursuant to such authority granted by our stockholders, our board of directors approved a 1-for-7 reverse stock split (the “Reverse Stock Split”) of our common stock and the filing of the Amendment to effectuate the Reverse Stock Split. The Amendment was filed with the Secretary of State of the State of Delaware and the Reverse Stock Split became effective in accordance with the terms of the Amendment on October 5, 2023 (the “Effective Time”). Pursuant to the Amendment, at the Effective Time, every seven shares of the outstanding Common Stock prior to the effect of that amendment were combined and reclassified into one share of 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.

We effected the Reverse Stock Split to regain compliance with a minimum bid price of at least $1.00 per share of Common Stock, which is the minimum closing bid price required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price”). On April 25, 2023, we received a deficiency letter (the “Notice”) from Nasdaq’s Listing Qualification Department (“Nasdaq”) notifying us that for the last 30 consecutive business days the bid price for our Common Stock had closed below the Minimum Bid Price requirement and that we had until October 22, 2023 to regain compliance.

Upon the opening of the market on October 6, 2023, our Common Stock began trading on The Nasdaq Capital Market on a post-Reverse Stock Split basis at a price of $3.08 per share. On October 20, 2023, Nasdaq notified us that that, from October 6, 2023 to October 19, 2023, the closing bid price of our Common Stock had been $1.00 per share or greater. Accordingly, Nasdaq informed us that we regained compliance with the Minimum Bid Price, and the matter was closed.

Reincorporation from Delaware to Nevada by a Parent-Subsidiary Merger

On October 2, 2023, at the annual meeting, our stockholders approved the reincorporation of the Company from the State of Delaware to the State of Nevada by a parent-subsidiary merger. On November 6, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Save Foods, 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”). Upon the consummation of the Reincorporation Merger, the Company ceased its legal existence as a Delaware corporation, and the Surviving Corporation continued the Company’s business as the surviving corporation in the Reincorporation Merger under the name “Save Foods, Inc.” succeeding to all Company’s rights, assets, liabilities and obligations, except that its affairs ceased to be governed by the Delaware General Corporation Law (“DGCL”) and became subject to the Nevada Revised Statutes (the “NRS”). The Reincorporation Merger became effective on The Nasdaq Capital Market on November 10, 2023.

The Reincorporation Merger did not materially modify the rights of the Company’s stockholders. However, as upon effectiveness of the Reincorporation Merger, the rights of the Company’s stockholders are governed by the NRS, the Articles of Incorporation and the Nevada Bylaws.

New Director

On November 12, 2023, Liat Sidi was appointed as a Class II director to serve until the Company’s 2026 annual meeting of stockholders. Ms. Sidi currently also serves as a director of Plantify.

Results of Operations

Components of Results of Operations

Revenues and Cost of Revenues

Our total revenue consists of the sale of products and our cost of revenues consists of cost of products.

The following table discloses the breakdown of revenues and costs of revenues:

U.S. dollars in thousands

25

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 salaries and related personnel expenses, laboratory and field tests, professional fees and other related research and development expenses.

U.S. dollars in thousands

Following careful consideration, our board of directors decided to implement certain cost reduction measures in 2023, including, the reduction of our research and development expenses.

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of salaries and related expenses, professional fees, transport and storage and other expenses.

U.S. dollars in thousands

26

General and Administrative Expenses

General and administrative expenses consist primarily of professional services, share based compensation, salaries, insurance and other non-personnel related expenses.

U.S. dollars in thousands

Three months ended September 30, 2023 compared to three months ended September 30, 2022

Revenues

Revenues for the three months ended September 30, 2023 were $0, a decrease of $51,233 or 100%, compared to $51,233 during the three months ended September 30, 2022. The decrease is mainly a result of a decrease in our sales in Mexico.

We do not have backlogs or firm commitments from our customers for our products. Our sales may deteriorate if we fail to achieve commercial success or obtain regulatory approval of any of our products.

Cost of Sales

Cost of sales consists primarily of salaries, materials, transportation and overhead costs of manufacturing our products. Cost of revenues for the three months ended September 30, 2023 was $0, a decrease of $24,402, or 100%, compared to total cost of revenues of $24,402 for the three months ended September 30, 2022. We did not record any revenue, nor cost of sales during the three months ended September 30, 2023.

Gross Profit (loss)

Gross loss for the three months ended September 30, 2023 was $476, a decrease of $27,307, or 102%, compared to a gross profit of $26,831 for the three months ended September 30, 2022. The decrease is mainly a result of the decrease in our cost of sales.

Research and Development Expenses

Research and development expenses consist of salaries and related expenses, consulting fees, service providers’ costs, related materials, overhead expenses and IPR&D costs. Research and development expenses for the three months ended September 30, 2023 were $1,693,205, an increase of $1,494,704, or 753%, compared to total research and development expenses of $198,501 for the three months ended September 30, 2022. The increase is mainly attributable to IPR&D costs associated with the issuance of 223,008 shares to Yaaran Investment Ltd., valued at $997,024, offset by a decrease in salaries and related expenses and field tests followed by our board of directors’ implementation of certain cost reduction measures in light of prevailing macroeconomic conditions and certain results of our operations. Cost reduction measures, included the reduction of our budget in connection with our research and development activities shifting our focus mainly to the commercialization of our solutions with emphasis on converting recently completed pilots into paying customers.

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of salaries and related costs for selling and marketing personnel, travel related expenses and services providers. Selling and marketing expenses for the three months ended September 30, 2023 were $60,462, a decrease of $56,645, or 48%, compared to total selling and marketing expenses of $117,107 for the three months ended September 30, 2022. The decrease is mainly attributable to the decrease in salaries and related costs and other professional fees associated with our sales, resulting from a reduction in manpower following our cost reduction measures.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related expenses including share based compensation and other professional services as well as other non-personnel related expenses such as legal expenses and directors and insurance costs. General and administrative expenses for the three months ended September 30, 2023 were $1,103,257, a decrease of $375,807, or 25%, compared to total general and administrative expenses of $1,479,064 for the three months ended September 30, 2022. The decrease is mainly a result of the decrease in professional services and insurance costs offset by an increase in share-based compensation to our employees and service providers.

Financing Income, Net

Financing income, net for the three months ended September 30, 2023 was $10,579, a decrease of $11,913, or 893%, compared to financing expenses of $1,334 for the three months ended September 30, 2022. The decrease is mainly a result of the increase in exchange rate differences expenses offset by an increase in interest income on our cash balances.

Total Comprehensive Loss

As a result of the foregoing, our total comprehensive loss for the three months ended September 30, 2023 was $2,371,345, compared to $1,769,175 for the three months ended September 30, 2022, an increase of $602,170, or 34%.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022

Revenues

Revenues for the nine months ended September 30, 2023 were $157,618, a decrease of $12,325, or 7%, compared to $169,943 during the nine months ended September 30, 2022. The decrease is mainly a result of a decrease in our sales in Mexico and Israel.

We do not have backlogs or firm commitments from our customers for our products. Our sales may deteriorate if we fail to achieve commercial success or obtain regulatory approval of any of our products.

Cost of Sales

Cost of sales consists primarily of salaries, materials, transportation and overhead costs of manufacturing our products. Cost of sales for the nine months ended September 30, 2023 were $70,229, a decrease of $9,020, or 11%, compared to $79,249 for the nine months ended September 30, 2022. The decrease is mainly results from a decrease in our revenues.

Gross Profit

Gross profit for the nine months ended September 30, 2023 was $87,389, a decrease of $3,305, or 4%, compared to a gross profit of $90,694 for the nine months ended September 30, 2022. The decrease is mainly a result of the decrease in revenues as detailed above under the heading “Revenues”.

Research and Development Expenses

Research and development expenses consist of salaries and related expenses, share based compensation, consulting fees, related materials, overhead expenses and IPR&D costs. Research and development expenses for the nine months ended September 30, 2023 were $1,828,970, an increase of $1,307,731, or 251%, compared to total research and development expenses of $521,239 for the nine months ended September 30, 2022. The increase is mainly attributable to IPR&D costs associated with the issuance of 223,008 shares to Yaaran Investment Ltd. valued at $997,024, offset by a decrease in salaries and related expenses and field tests followed by our board of directors’ implementation of certain cost reduction measures, in light of the prevailing macroeconomic conditions and certain results of our operations. The cost reduction measures, included to the reduction of our budget in connection with our research and development activities shifting our focus mainly to the commercialization of our solutions with emphasis on converting recently completed pilots into paying customers.

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, 2023 were $217,907, a decrease of $222,249, or 50%, compared to total selling and marketing expenses of $440,156 for the nine months ended September 30, 2022. The decrease is mainly attributable to the decrease in salaries and related costs and other professional fees associated with our sales resulting from a reduction in manpower following our cost reduction measures.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related expenses including share-based compensation and other professional services as well as other non-personnel related expenses, including legal expenses and directors and insurance costs. General and administrative expenses for the nine months ended September 30, 2023 were $3,481,408, a decrease of $38,338, or 1%, compared to total general and administrative expenses of $3,519,746 for the nine months ended September 30, 2022. The decrease is mainly a result of the decrease in professional services, salaries and related expenses and insurance costs offset by an increase in share-based compensation expenses.

Financing Income, Net

Financing income, net, for the nine months ended September 30, 2023 was $43,666, an increase of $26,168, or 150%, compared to total financing income of $17,498 for the nine months ended September 30, 2022. The increase is mainly a result of the increase in interest on our cash balances offset by a decrease in exchange rate differences.

Total Comprehensive Loss

As a result of the foregoing, our total comprehensive loss for the nine months ended September 30, 2023 was $4,807,829, compared to $4,372,949 for the nine months ended September 30, 2022, an increase of $434,880, or 10%.

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, 2023, we have funded our operations, principally with the issuance of equity and debt.

On May 13, 2021, we completed an underwritten public offering of 155,845 shares of Common Stock at an initial public offering price of $77.00 per share. The gross proceeds we received from this offering were $12,000,000 (net proceeds of $10,457,862) (the “May 2021 Underwritten Offering”).

On August 15, 2022, we completed an underwritten public offering of 228,572 shares of Common Stock at an initial public offering price of $21.00 per share. The gross proceeds we received from this offering were $4,800,000 (net proceeds of $4,103,330) (the “August 2022 Underwritten Offering”).

On March 29, 2023, the Board of Directors approved the amendment of the consulting agreement with EU Agritech, pursuant to which EU Agritech received $100,000 in restricted shares of Common Stock. On April 3, 2023, the Company issued to EU Agritech 21,009 restricted shares of Common Stock.

On April 3, 2023, the Company approved the equity grant of 142,860 shares of Common Stock to executive officers, employees, directors and consultants (such number includes the restricted shares issued pursuant to the amendment of the consulting agreement with Joachim Fuchs on March 29, 2023).

On April 6, 2023, we closed the Securities Exchange with Plantify, in which we issued 166,340 shares of Common Stock representing 19.99% of our outstanding capital stock as of immediately prior to the closing (and 16.66% of our outstanding capital stock as of immediately following the closing), and Plantify issued 30,004,349 common shares to us, representing 19.99% of Plantify’s outstanding share capital as of immediately prior to the closing (and 16.66% of Plantify’s outstanding share capital as of immediately following the Closing).

In connection with the Securities Exchange, the Company and Plantify executed a debenture pursuant to which the Company agreed to lend C$1,500,000 (approximately US$1,124,000) to Plantify. The debenture accrues interest at a rate of 8% annually and is due and payable by Plantify on October 4, 2024. Outstanding principal under the debenture may be converted, at the Company’s sole discretion, into common shares of Plantify at a price of C$0.05 per share until the first anniversary of the debenture’s issuance and C$0.10 per share thereafter. Accrued interest under the debenture may be converted at the market price of Plantify’s common shares, subject to TSXV approval at the time of conversion. Plantify executed a general security agreement in Company’s favor and pledged to the Company the shares of Plantify’ subsidiary, Peas of Bean Ltd.

On September 7, 2023, the Company purchased additional 55,004,349 common shares of Plantify at a price of C$0.01 per common share (US$404,890), in a rights offering, resulting in an increase of approximately 7% in the Company’s aggregate ownership of the issued and outstanding common shares of Plantify. Following the additional acquisition, the Company owns 85,008,698 common shares of Plantify, representing approximately 23% of the current issued and outstanding common shares.

The table below presents our cash flows for the periods indicated:

As of September 30, 2023, we had cash and cash equivalents of $1,934,634, as compared to $6,689,979 as of September 30, 2022. As of September 30, 2023, we had a working capital of $2,211,582, as compared to the working capital of $6,875,001 as of September 30, 2022. The decrease in our cash balance is mainly attributable to cash used in operations.

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, respectively. As of September 30, 2023, we had an accumulated deficit of $28 million, and we expect to incur losses for the foreseeable future. We have financed our operations mainly through fundraising 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 report date.

We believe that our existing capital resources will be sufficient to support our operating plan through the middle of the third quarter of 2024; however, there can be no assurance of this. We will likely seek to raise additional capital to support our growth or other strategic initiatives through the issuance of debt, equity, or a combination thereof. There can be no assurance the Company 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 amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and operating results. If we obtain additional funds by selling any of our equity, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the Common Stock. If we issue debt securities, there may be negative covenants which may restrict the Company’s 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 the Company fail to operate as a going concern.

Operating Activities

Net cash used in operating activities was $2,258,869 for the nine months ended September 30, 2023, as compared to $4,126,702 for the nine months ended September 30, 2022. The decrease is mainly attributable to our net loss of $4,807,829, a decrease in account receivable offset by an increase in non-cash expenses such as share-based compensation.

Investing Activities

Net cash used in investing activities was $1,519,559 for the nine months ended September 30, 2023, as compared to net cash used in investing activities of $35,430 for the nine months ended September 30, 2022. The increase is mainly attributable to the investment in Plantify in April and September 2023.

Financing Activities

Net cash provided by financing activities was $0 for the nine months ended September 30, 2023, as compared to net cash provided by financing activities of $4,097,441 for the nine months ended September 30, 2022. The decrease is mainly the result of proceeds from the August 2022 Underwritten Offering.

Financial Arrangements

During January 2021, we entered into a series of convertible loan agreements with an aggregate principal amount of $274,000 that each bear interest at a rate of 5% per annum.

On May 11, 2021 and May 12, 2021, we issued an aggregate of 9,555 shares of Common Stock following the conversion of convertible promissory notes in the aggregate principal amount of $499,000 and aggregate accrued interest of $11,211, at a conversion price of $53.41 per share.

On May 18, 2021, we closed the May 2021 Underwritten Offering pursuant to which we issued a total of 155,845 shares of Common Stock at an initial public offering price of $77.00 per share. In connection with the May 2021 Underwritten Offering, we agreed to grant the underwriter a 45-day option to purchase up to 23,377 additional shares of Common Stock at the initial public offering price of $77.00 per share, less the underwriting discounts and commissions solely to cover over-allotments, and to issue the Representative a five-year warrant to purchase up to 7,793 shares of Common Stock, at a per share exercise price equal to 125% of the May 2021 Underwritten Offering price per share of Common Stock. The gross proceeds from the May 2021 Underwritten Offering were approximately $12,000,000.

On August 18, 2022, we closed the August 2022 Underwritten Offering pursuant to which we issued a total of 228,572 shares of Common Stock at a public offering price of $21.00 per share. In connection with the August 2022 Underwritten Offering, we agreed to grant 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 the underwriting discounts and commissions solely to cover over-allotments, and to issue ThinkEquity LLC, as representative ( the “Representative”) 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 August 2022 Underwritten Offering price per share of Common Stock. The gross proceeds from the August 2022 Underwritten Offering were approximately $4,800,000.

On July 23, 2023, we entered into a purchase agreement with YA II PN, Ltd. (the “Investor”), pursuant to which the Investor agreed to purchase up to $3,500,000 of Common Stock, for 40 months from the date of the purchase agreement. The price of the shares to be issued under the Purchase Agreement will be 94% of the lowest volume-weighted average price of the Common Stock for the three days prior to the delivery of each of our advance notices subject to certain limitations, including that (i) 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. The Company may request the Investor to advance up to $700,000 of the $3,500,000 commitment amount, with such advances to be evidenced by a promissory note. The Company cannot request any such advances after January 31, 2024.

Changes to Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are set forth in our 2022 Annual Report.

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.

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 our Principal Executive Officer and our Principal Financial Officer, have 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, 2023. Based on such evaluation, each of our Principal Executive Officer and Principal Financial Officer has concluded that, as of September 30, 2023, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

No changes in our internal control over financial reporting occurred during the third quarter of 2023 that materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information under this item.