Nexentis Technologies Inc.: Form 10-Q for the period ended Mar 31, 2025

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 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 majority-owned Israeli subsidiary and our joint venture:

(1) Save Foods Ltd. (“Save Foods”), 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.

(2) A joint venture with Solterra Renewable Energy Ltd. (“Solterra”), which operates in the solar energy industry and presents certain investment opportunities in solar PV projects.

Save Foods’ solutions are based on its proprietary blend of food acids combined with certain types of oxidizing agent-based sanitizers and in some cases with fungicides at low concentrations. Save Foods’ products have a synergistic effect when combined with these oxidizing agent-based sanitizers and fungicides. Save Foods’ “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 Save Foods’ products is that its ingredients do not leave any toxicological residues on the fresh produce it treats. In contrast, by forming a temporary protective shield around the fresh produce Save Foods treats, its products make it difficult for pathogens to develop and potentially provide protection which also reduces cross-contamination.

Solterra engages in the development of renewable energy projects through its subsidiaries. Currently, operations are conducted in Italy, Poland, and Germany, with potential expansion to additional countries in the future. Solterra’s business strategy primarily involves selling renewable energy projects to third parties at various stages of development, from the initial land identification and project advancement through construction, operation, or sale to a third party. Currently, most projects are expected to be sold at various development stages, with the possibility of a larger portion of projects being held long-term for operation by Solterra in the future.

Recent Developments

Purchase Agreement

On May 12, 2025, we entered into a Purchase Agreement (the “Agreement”) with YA II PN, Ltd. (the “Investor”) pursuant to which the Investor committed to advance us the aggregate principal amount of $3,000,000, of which (i) up to $1,500,000 will be made available within 60 days following the date a new registration statement has been filed by us with the SEC registering the resale of the shares of common stock issuable pursuant to the Standby Equity Purchase Agreement dated as of December 22, 2023 (the “SEPA”) between us and the Investor (the “First Closing”), and (ii) up to $1,500,000 will be made available within 60 days following the date that said registration statement is declared effective by the SEC (the “Second Closing,” and together with the First Closing, each, a “Closing”). A balance of approximately $16 million remains available under the SEPA, however, all of the shares of common stock previously registered under a registration statement which was declared effective by the SEC on February 6, 2025 (registration statement no. 333-276474) have been sold. In order to continue to access the SEPA, we need to register additional shares of common stock to be offered and sold to the Investor pursuant to the terms of the SEPA. The Second Closing must take place within 180 days of the First Closing.

Pursuant to the terms of the Agreement, among other things, we will not incur any additional debt other than as permitted by the Agreement and will not issue any securities with a conversion price that is based on the price of our shares of common stock, including any reset provisions or any equity line of credit or similar arrangements. We are further prohibited from selling securities at an implied discount to the market price in excess of 30%. Any equity financing permitted by the Investor will be used by us to repay the Notes.

The Notes to be issued at each Closing will be issued at a purchase price equal to 100% of the amount advanced to us, bear interest at 8% per annum and mature 12 months from issuance. Sixty days after the issuance of each Note, we will pay the Investor in ten equal monthly installments $150,000 of principal and accrued and unpaid interest thereon. Such monthly installments can be made, at our option, in cash or by submitting an advance notice pursuant to the SEPA, or any combination thereof. The Note provides for typical events of default, including our failure to remain on The Nasdaq Capital Market LLC or file with the SEC any periodic report; upon an event of default interest accrues at the rate of 18% per annum. We have the right to prepay all or a portion of the outstanding principal and accrued interest thereon by paying a prepayment premium of 5% of the principal amount of each prepayment.

We paid the Investor a structuring fee of $15,000 and will issue 675,675 shares of common stock to the Investor which represents $300,000 worth of shares of common stock based on the last closing price of the shares of common stock immediately before the execution and delivery of the Agreement.

Issuances to certain consultants and officers

On May 11, 2025, we issued (i) 300,000 shares of common stock to a consultant for accounting and controller services provided to the Company; (ii) 600,000 shares of common stock to David Palach, our Chief Executive Officer, and (iii) 300,000 shares of common stock to Lital Barda, our Chief Financial Officer, under our 2022 Share Incentive Plan and an aggregate of 3,200,000 shares of common stock outside of such Plan to consultants in consideration of various financial, investor relations and business development services provided to the Company.

NTWO OFF Ltd. Purchase Agreement

On April 9, 2025, we entered into a share purchase agreement (the “NTWO Agreement”), with Yaaran Investments Ltd., a company organized under the laws of the State of Israel (“Yaaran”), and NTWO OFF Ltd., our former 60% owned subsidiary (“NTWO”), pursuant to which we sold 4,200,000 ordinary shares, representing all of our share ownership in NTWO, toYaaran for NIS 15,000. The NTWO Agreement also provided that all obligations under the Stock Exchange Agreement, dated July 11, 2023, between us, Yaaran and NTWO, as amended on July 24, 2023 and August 13, 2023, are null and void and of no further force and effect. Upon the consummation of NTWO Agreement, each of our representatives on the board of directors of NTWO, David Palach and Udi Kalifi, resigned.

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 sets forth our revenues and costs of revenues:

U.S. dollars in thousands

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

Selling and Marketing Expenses

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

U.S. dollars in thousands

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 March 31, 2025 compared to three months ended March 31, 2024

Revenues

Revenues for the three months ended March 31, 2025 were $66,000, an increase of $22,000 or 50%, compared to $44,000 during the three months ended March 31, 2024. The increase is mainly a result of an increase in sales to our US client.

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 March 31, 2025 was $14,000, a decrease of $14,000, or 50%, compared to the cost of sales of $28,000 for the three months ended March 31, 2024. The decrease is mainly a result of an inventory write-off in Turkey in 2024 and a decrease in salaries.

Gross Profit

Gross profit for the three months ended March 31, 2025 was $52,000, an increase of $36,000, or 225%, compared to a gross profit of $16,000 for the three months ended March 31, 2024. The increase is mainly a result of the decrease in cost of sales.

Research and Development Expenses

Research and development expenses consist of service providers’ costs and overhead expenses. Research and development expenses for the three months ended March 31, 2025 were $20,000, a decrease of $96,000, or 83%, compared to research and development expenses of $116,000 for the three months ended March 31, 2024. The decrease is mainly attributable to decrease in professional fees associated with NTWO OFF Ltd.’s 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 March 31, 2025 were $47,000, a decrease of $10,000, or 19%, compared to total selling and marketing expenses of $57,000 for the three months ended March 31, 2024. The decrease is mainly attributable to the decrease in salaries, and related costs associated with our sales, resulting from a reduction in personnel following our cost reduction measures in 2024 offset by an increase in professional fees.

General and Administrative Expenses

General and administrative expenses consisted primarily of professional services, share based compensation and salaries and related expenses, 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 March 31, 2025 were $604,000, a decrease of $138,000, or 19%, compared to general and administrative expenses of $742,000 for the three months ended March 31, 2024. The decrease is mainly a result of the decrease in share-based compensation, professional services and insurance costs.

Financing (expenses) Income, Net

Financing expenses, net for the three months ended March 31, 2025 was $813,000, an increase of $818,000, or 16,360%, compared to financing income, net of $5,000 for the three months ended March 31, 2024. The increase is mainly a result of an increase in financing expenses related to changes in the fair value of PIPE’s warrant liability and credit facility.

Total Comprehensive Loss

As a result of the foregoing, our total comprehensive loss for the three months ended March 31, 2025 was $1,257,000 compared to $822,000 for the three months ended March 31, 2024, an increase of $435,000, or 53%.

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 March 31, 2025, we have funded our operations, principally with the issuance of equity and debt.

As of March 31, 2025, we had cash and cash equivalents of $2,724,000, as compared to $3,490,000 as of March 31, 2024. As of March 31, 2025, we had a working capital of $3,359,000, as compared to $3,861,000 as of March 31, 2024. The decrease in our cash balance is mainly attributable to cash used in operations and cash used in investing activities offset by cash provided by financing activities.

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 August 2022 Underwritten Offering price per share of common stock.

On July 23, 2023, we entered into a standby equity purchase agreement with 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 the common stock for the three days prior to the delivery of each advance notice from us, 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. In December 2023, we completed an investment round in the aggregate amount of $3,500,000.

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 May 15, 2025, we have sold 6,666,667 shares of common stock at an average purchase price of $0.47 to the Investor.

In connection with and subject to the satisfaction of certain conditions set forth in the purchase agreement, upon our request, the Investor pre-advanced 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 (each, a “Note”). The Pre-Advance made to us will be subject to a 3% discount to the principal amount equal to each 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, or any combination of (i) or (ii) as determined by us. The initial repayment is due 60 days after the issuance of a Note, followed by subsequent payments due every 30 days after the previous payment. 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.

A balance of approximately $16 million remains available under the standby equity purchase agreement, accordingly, as described above in Recent Developments, on May 12, 2025, we entered into a purchase agreement with the Investor pursuant to which the Investor committed to advance us the aggregate principal amount of $3,000,000.

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

25

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 March 31, 2025, we had an accumulated deficit of $35,746,000, 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 our 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 end of the fourth quarter of 2025; 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 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 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 our company’s activities. If adequate funds are not available to our company 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 $809,000 for the three months ended March 31, 2025, as compared to $1,008,000 for the three months ended March 31, 2024. The decrease is mainly attributable to a decrease in our cash operating expenses and decrease in the change in accounts payable compared to the three months ended March 31, 2024 .

Investing Activities

Net cash used in investing activities was $1,176,000 for the three months ended March 31, 2025, as compared to net cash used in investing activities of $0 for the three months ended March 31, 2024. The increase is mainly attributable to the investment in renewable energy projects and loans to Solterra.

Financing Activities

Net cash provided by financing activities was $2,532,000 for the three months ended March 31, 2025, as compared to net cash provided by financing activities of $40,000 for the three months ended March 31, 2024. The increase is the result of proceeds from a private offering of common stock and warrants and a credit facility.

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 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 March 31, 2025. Based on such evaluation, each of our Principal Executive Officer and Principal Financial Officer has concluded that, as of March 31, 2025, 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.

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.