# Nexentis Technologies Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Nexentis Technologies Inc.](/companies/nxts.md) (CIK 1789192)
- Form: 10-Q
- Filed: 2024-08-14
- Accepted by EDGAR: Aug 14, 2024, 20:05 ET
- Period: 2024-06-30
- Accession: 0001493152-24-032148
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1789192/000149315224032148/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1789192/000149315224032148/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $16.5k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $60.4k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $5.8k | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $33.8k | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $10.8k | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $26.6k | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-04-01 to 2024-06-30 | $11.7k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2024-01-01 to 2024-06-30 | $127.6k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | −$866.2k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | −$1.8m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$787.4k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$1.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.23 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.49 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.23 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.49 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 3,408,878 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 3,184,772 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$2.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-06-30 | $4.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $5.5m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $7.5m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $1.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $1.6m | us-gaap:Liabilities |
| Short-term borrowings | at 2024-06-30 | $1.2m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-06-30 | $6.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 28,329 characters.

*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 265 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.

### Recent Developments

#### Solterra Loan Agreement

On June 30, 2024, we entered into a loan agreement (the “Loan Agreement”) with Solterra Renewable Energy Ltd., (the “Solterra”) and certain other lenders, pursuant to which the Lenders committed to loan Solterra an aggregate principal amount of € 500,000 (approximately $541,541) (€ 375,000 (approximately $406,156) of which was committed by us) with interest accruing on the principal at the rate of 7% per annum, to be paid annually beginning on June 30, 2025. If the loan is not converted or repaid within nine months of the merger, as described below, the interest rate will increase to 12%. Furthermore, if the loan is not converted into AI shares or repaid in full by June 30, 2026, Solterra will be required to repay the loan in full. In connection with, and contingent upon, the merger of Solterra with AI Conversation Systems Ltd., an Israeli company (“AI”) on July 21, 2024, the loan may be converted, at the sole discretion of Solterra into ordinary shares of AI at a price equal to the lowest price per share of AI, under which Solterra has raised capital from June 30, 2024 until such conversion.

Amitai Weiss currently serves as the chairman of our board of directors and is a shareholder and serves as a member of the board of directors of AI.

#### Loan and Partnership Agreement

In connection with the Loan Agreement, on July 31, 2024, we entered into a loan and partnership agreement (the “Loan and Partnership Agreement”), with Horizons RES PE1 UG (haftungsbeschränkt) & Co. KG, a German partnership which is wholly owned by Solterra (the “Partnership”), and certain other lenders (collectively, the “Lenders”), pursuant to which the Lenders committed to loan the Partnership (the “Loan”) an aggregate principal amount of € 2,080,000 (approximately $2,288,000) (€ 1,560,000 (approximately $1,716,000) of which was committed by us). Interest accrues on the loan at the rate of 7% per annum. The Loan matures on the earlier of (i) the sale of the Partnership or (ii) five years from the date of the Loan and Partnership Agreement. All loans to the Partnership from Solterra will be subordinate to the Loan.

Pursuant to the Loan and Partnership Agreement, the Lenders are entitled to participation rights of 50% (of which we will be entitled to receive 50% thereof) of the Partnership’s profits (the “Profits”), whether directly or by way of 50% membership or ownership in the Partnership, or through legal rights for the distribution of 50% of the Partnership’s Profits where Solterra acts as a trustee on behalf of the Lenders (the “Profit Rights Alternatives”). The Lenders will decide within three months from the date of the Loan and Partnership Agreement on the chosen Profit Right Alternative. 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 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.

#### Special Stockholder Meeting to Approve Reverse Stock Split and Increase in Authorized Shares

At a special meeting of our stockholders held on June 28, 2024, our stockholders approved an amendment to our Articles of Incorporation to implement a reverse stock split (the “Reverse Split Amendment”) of the issued and outstanding shares of our common stock (the “Reverse Stock Split”) at a ratio of not less than 1-for-2 and not more than 1-for-35 (the “Reverse Split Range”), and to grant our board of directors the discretionary authority to determine the exact ratio of the Reverse Stock Amendment within the Reverse Split Range and to effect the Reverse Split Amendment at such time and date, if at all, as to be determined by the board of directors in its sole discretion. The other proposal brought before the meeting to increase the aggregate number of authorized shares of our 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 by our stockholders.

#### 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.

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.

### 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:

*U.S. dollars in thousands, except share and per share data*

|  | Six Months Ended June 30, 2024 | 2023 | Three Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Revenues from sales of products | 60,377 | 157,618 | 16,546 | 36,608 |
| Cost of sales | (33,762) | (69,753) | (5,782) | (27,007) |
| Gross profit | 26,615 | 87,865 | 10,764 | 9,601 |

### 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.

*U.S. dollars in thousands*

|  | Six Months Ended June 30, 2024 | 2023 | Three Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Salaries and related expenses | - | 67,672 | - | (6,959) |
| Professional fees | 126,288 | 47,812 | 11,172 | 8,158 |
| Laboratory and field tests | - | 823 | - | 62 |
| Depreciation | 1,050 | 8,276 | 518 | 3,767 |
| Other expenses | 218 | 11,182 | - | 11,829 |
| Total | 127,556 | 135,765 | 11,690 | 16,857 |

### 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*

|  | Six Months Ended June 30, 2024 | 2023 | Three Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Salaries and related expenses | 47,203 | 91,492 | 22,454 | 52,560 |
| Professional fees | 18,700 | 16,211 | 16,200 | 7,500 |
| Commissions | - | 9,204 | - | - |
| Travel | 7,431 | 8,182 | 1,476 | 4,281 |
| Transport and storage | 26,997 | 21,752 | 10,948 | 15,964 |
| Other expenses | 13,948 | 11,080 | 5,953 | 8,470 |
| Total | 114,279 | 157,921 | 57,031 | 88,775 |

24

### 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*

|  | Six Months Ended June 30, 2024 | 2023 | Three Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Professional services | 1,113,813 | 1,000,563 | 621,670 | 436,520 |
| Share based compensation | 260,487 | 933,491 | 120,935 | 134,972 |
| Salaries and related expenses | 34,079 | 129,638 | (6,291) | 51,142 |
| Insurance | 85,315 | 137,240 | 42,696 | 53,144 |
| Other expenses | 56,360 | 177,219 | 29,241 | 68,509 |
| Total | 1,550,054 | 2,378,151 | 808,251 | 744,287 |

### Three months ended June 30, 2024 compared to three months ended June 30, 2023

### Revenues

Revenues for the three months ended June 30, 2024 were $16,546, a decrease of $20,062 or 55%, compared to $36,608 during the three months ended June 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 three months ended June 30, 2024 was $5,782, a decrease of $21,225, or 79%, compared to cost of sales of $27,007 for the three months ended June 30, 2023. The decrease is mainly a result of a decrease in our revenues as a result of a decrease in our sales in Mexico, in addition to certain cost reductions.

### Gross Profit

Gross profit for the three months ended June 30, 2024 was $10,764, an increase of $1,163, or 12%, compared to a gross profit of $9,601 for the three months ended June 30, 2023. The increase is mainly a result of certain cost reductions.

### 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 June 30, 2024 were $11,690, a decrease of $5,167, or 31%, compared to research and development expenses of $16,857 for the three months ended June 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 June 30, 2024 were $57,031, a decrease of $31,744, or 36%, compared to selling and marketing expenses of $88,775 for the three months ended June 30, 2023. The decrease is mainly attributable to the decrease in salaries resulting from a reduction in personnel following our cost reduction measures, offset by an increase in other professional fees associated with our sales.

### 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 June 30, 2024 were $808,251, an increase of $63,964, or 9%, compared to general and administrative expenses of $744,287 for the three months ended June 30, 2023. The increase is mainly a result of the increase in professional services offset by a decrease in salaries and related costs, share-based compensation, 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 June 30, 2024 were $81,055, an increase of $92,037, or 838%, compared to financing income, net of $10,982 for the three months ended June 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 June 30, 2024 was $800,142, compared to $714,935 for the three months ended June 30, 2023, an increase of $85,207, or 12%.

### Six months ended June 30, 2024 compared to six months ended June 30, 2023

### Revenues

Revenues for the six months ended June 30, 2024 were $60,377, a decrease of $97,241, or 62%, compared to $157,618 during the six months ended June 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 six months ended June 30, 2024 were $33,762, a decrease of $35,991, or 52%, compared to $69,753 for the six months ended June 30, 2023. The decrease is mainly results from a decrease in our revenues.

### Gross Profit

Gross profit for the six months ended June 30, 2024 was $26,615, a decrease of $61,250, or 70%, compared to a gross profit of $87,865 for the six months ended June 30, 2023. The decrease is mainly a result of the decrease in revenues.

### 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 six months ended June 30, 2024 were $127,556, a decrease of $8,209, or 6%, compared to research and development expenses of $135,765 for the six months ended June 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.

### 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 six months ended June 30, 2024 were $114,279, a decrease of $43,642, or 28%, compared to total selling and marketing expenses of $157,921 for the six months ended June 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 six months ended June 30, 2024 were $1,550,054, a decrease of $828,097, or 35%, compared to total general and administrative expenses of $2,378,151 for the six months ended June 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 six months ended June 30, 2024, were $76,119, an increase of $109,206, or 330%, compared to total financing expenses of $33,087 for the six months ended June 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 six months ended June 30, 2024 was $1,622,500, compared to $2,436,484 for the six months ended June 30, 2023, a decrease of $813,985, or 33%.

### Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures. Since our inception through June 30, 2024, we have funded our operations, principally with the issuance of equity and debt.

As of June 30, 2024, we had cash and cash equivalents of $4,467,529, as compared to $2,969,707 as of June 30, 2023. As of June 30, 2024, we had working capital of $3,872,992, as compared to $3,365,898 as of June 30, 2023. The increase in our cash balance is mainly attributable to proceeds from the issuance of promissory notes.

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.

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 August 14, 2024, we have sold 1,170,813 shares of common stock at an average purchase price of $0.93 per share to the Investor.

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.

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%.

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

|  | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | (2,037,468) | (1,634,418) |
| Net cash used in investing activities | (161,886) | (1,101,669) |
| Net cash provided by financing activities | 2,208,854 | - |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | 2,592 | 2,719 |
| Increase (decrease) in cash and cash equivalents | 12,092 | (2,733,368) |

28

### 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 June 30, 2024, we had an accumulated deficit of approximately $31 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 date of this Quarterly Report.

We believe that our existing capital resources will be sufficient to support our operating plan through the first quarter of 2025; however, there can be no assurance of this. We will need to raise additional capital to support our growth 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, or 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 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 $2,037,468 for the six months ended June 30, 2024, as compared to $1,634,418 for the six months ended June 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 $161,886 for the six months ended June 30, 2024, as compared to net cash used in investing activities of $1,101,669 for the six months ended June 30, 2023. The decrease is mainly attributable to our investment in Plantify in April 2023.

### Financing Activities

Net cash provided by financing activities was $2,208,854 for the six months ended June 30, 2024, as compared to no net cash provided by financing activities for the six months ended June 30, 2023. The increase is the result of proceeds from the standby equity purchase agreement with the Investor entered into on December 22, 2023 and proceeds from a promissory note to the Investor in April 2024, net of repayments.

## Market risk

As filed, 152 characters.

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.

## Controls and procedures

As filed, 1,585 characters.

#### 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 June 30, 2024. Based on such evaluation, each of our Principal Executive Officer and Principal Financial Officer has concluded that, as of June 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.

## Risk factors

As filed, 10,096 characters.

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 and Iran have accelerated, and each of these clashes may escalate in the future into a greater regional conflict.

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 recent 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” 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, with an outlook on the long-term ratings “negative”, as well as the recent 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 the ongoing Israel – Hamas war. Due to the continuous drone attacks, missile strikes and shootings in the region, the area has been almost completely evacuated of civilians. Plantify has reduced its operations in the facility in Kibbutz Gonen 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, to date, Plantify has borrowed $162,000.

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.

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.

Filed Aug 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001493152-24-032148. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.