SATIVUS TECH CORP. - Quarter Report: 2019 March (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

 

OR

 

 

Commission file number: 333-208814

SEEDO CORP.

 (Exact name of registrant as specified in its charter)

 

 

 

Registrant’s telephone number, including area code

 

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day.

 

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes ☐     No ☒

(Does not currently apply to the Registrant)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 if the Exchange Act.

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

 

Yes ☐  No ☒

 

Securities registered under Section 12(b) of the Exchange Act: None.

 

Securities registered under Section 12(g) of the Exchange Act:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

 

When used in this quarterly report, the terms “Seedo,” “the Company,” “we,” “our,” and “us” refer to SEEDO CORP., a Delaware corporation.

TABLE OF CONTENTS

 

PART I. Financial Information

 

	Page
Unaudited Condensed Consolidated Balance Sheets	F-2
Unaudited Condensed Consolidated Statements of Operations	F-3
Unaudited Condensed Consolidated Statements of Changes in Shareholders' Deficiency	F-4
Unaudited Condensed Consolidated Statements of Cash Flows	F-5
Notes to Unaudited Consolidated Financial Statements	F-6 F-20

						March 31				December 31
		Note				2019				2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents						$	2,373			$	921
Restricted bank deposit							91				87
Financial institute							753				830
Other accounts receivable							439				409
Inventory							276				157
Total current assets							3,932				2,404
Property and equipment, net							1,241				1,234
Total assets						$	5,173			$	3,638
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Short-term loan			5			$	692			$	411
Trade payables							689				521
Convertible loans			7				250				771
Loan from related party			6				850				908
Advances from customers							2,806				3,016
Other accounts payable							1,204				1,121
Total current liabilities							6,491				6,748
LONG-TERM LIABILITIES
Convertible loan			7				173				-
COMMITMENTS AND CONTINGENT LIABILITIES			4
SHAREHOLDER'S DEFICIENCY			8
Ordinary shares of $ 0.0001 par value:
Authorized: 500,000,000 shares at March 31, 2019 and December 31, 2018; Issued and Outstanding: 17,518,975 and 16,198,578 shares at March 31, 2019 and December 31, 2018, respectively							2				2
Additional Paid in capital							10,620				5,410
Accumulated deficit							(12,113	)			(8,522	)
Total shareholders' deficiency							(1,491	)			(3,110	)
Total liabilities and shareholders' deficiency						$	5,173			$	3,638

						Three months ended March 31
		Note				2019				2018
Revenues						$	10			$	-
Cost of revenues							14				-
Gross Loss							4				-
Operating expenses:
Research and development						$	830			$	562
Selling and marketing							234				212
General and administrative							616				381
Operating loss							1,684				1,155
Financial expenses			9				1,907				50
Net Loss						$	3,591			$	1,205
Basic and diluted net loss per share						$	(0.21	)		$	(0.11	)
Weighted average number of ordinary shares used in computing basic and diluted loss per share							17,028,124				10,572,078

		Ordinary shares
		Number				Amount				Additional Paid in capital				Accumulated deficit				Total Shareholders' Deficiency
Balance as of December 31, 2017			10,525,587			$	1			$	1,534			$	(2,385	)		$	(850	)
Net Loss			-				-				-				(1,205	)			(1,205	)
Balance as of March 31, 2018			10,525,587			$	1			$	1,534			$	(3,590	)		$	(2,055	)
Balance as of December 31, 2018			16,198,578			$	2			$	5,410			$	(8,522	)		$	(3,110	)
Conversion of convertible loans			1,270,397				*				1,500				-				1,500
Share Based Compensation to non-employees			50,000				*				47				-				47
Beneficial conversion feature related to convertible loan			-				-				96				-				96
Receipt on account of shares and warrants			-				-				3,567				-				3,567
Net Loss			-				-				-				(3,591	)			(3,591	)
Balance as of March 31, 2019			17,518,975			$	2			$	10,620			$	(12,113	)		$	(1,491	)

		Three months ended March 31,
		2019				2018
Cash flows from operating activities:
Net Loss		$	(3,591	)		$	(1,205	)
Adjustments to reconcile loss to net cash used in operating activities:
Depreciation and amortization			43				4
Financial expenses related to convertible loans			579				-
Financial expenses related to short-term loans			369				-
Financial expenses related to loans from related party			942
Loss from changes in fair value of warrants			1				-
Changes in assets and liabilities:
Increase in other accounts receivable			(31	)			(462	)
Increase in inventory			(119	)			-
Increase (Decrease) in advances from customers			(133	)			1,145
Increase in trade payables			168				85
Increase in other accounts Payable			3				1
Net cash used in operating activities			(1,769	)			(432	)
Cash flows from investing activities
Purchase of property and equipment			(50	)			(81	)
Net cash used in investing activities			(50	)			(81	)
Cash flows from financing activities:
Proceeds from convertible loans			258				-
Receipt on account of shares and issuance of warrants			3,017				-
Net cash provided by financing activities			3,275				-
Increase (Decrease) in cash and cash equivalents and restricted cash			1,456				(513	)
Cash and cash equivalents at the beginning of the year			1,008				607
Cash and cash equivalents at the end of the year and restricted cash		$	2,464			$	94
Supplemental disclosures of cash flow information:
Cash and cash equivalents		$	2,373			$	48
Restricted bank deposits included in short term assets			91				46
		$	2,464			$	94
Cash paid for interest		$	35				-
Supplemental disclosures of non- cash flow information:
Conversion of convertible loans		$	2,050			$	-

2019		$	93
2020			124
2021			124
2022			41
		$	382

2019		$	78
2020			89
2021			30
		$	197

		2018
Dividend yield			0%
Risk-free interest rate			2.78%
Expected term (in years)			2
Volatility			126.23%

		2019
Dividend yield			0%
Risk-free interest rate			2.49%
Expected term (in years)			3
Volatility			123.90%

March 31, 2019

December 31, 2018

Authorized

Issued and outstanding

Authorized

Issued and outstanding

Number of shares

Ordinary shares of $0.0001 par value each

500,000,000

17,518,975

500,000,000

16,198,578

Issuance date		Warrants outstanding				Exercise price per warrant				Warrants outstanding and exercisable			Contractual term
		(number)								(number)
September 2, 2018 (1)			100,000			$	2				100,000		September 2, 2020 (1)
December 11, 2018 (2)			333,333			$	1.5				333,333		December 11, 2020 (2)
December 11, 2018 (2)			100,000			$	2				100,000		December 11, 2020 (2)
February 21, 2019 (3)			137,500			$	2				137,500		February 21, 2022 (3)
March 11, 2019 (4)			70,000			$	3				70,000		March 11, 2021(4)
March 11, 2019 (5)			333,333			$	1.5				333,333		March 11, 2021(5)
March 12, 2019 (6)			70,000			$	3				70,000		March 12, 2021(6)
			1,144,166								1,144,166

		Three months ended March 31,
		2019				2018
Bank commissions		$	8			$	9
Financial expenses related to revaluation of Investment in warrants			1				-
Financial expenses related to loans			1,890				-
Foreign currency transactions and other			8				41
		$	1,907			$	50

 

Item 2.  Management’s Discussion and Analysis or Plan of Operation.

 

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR AUDITED FINANCIAL STATEMENTS AND THE RELATED NOTES THAT APPEAR ELSEWHERE IN THIS QUARTERLY REPORT. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT REFLECT OUR PLANS, ESTIMATES AND BELIEFS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS QUARTERLY REPORT.

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws, and is subject to the safe-harbor created by such Act and laws.  Forward-looking statements may include statements regarding our goals, beliefs, strategies, objectives, plans, including product and technology developments, future financial conditions, results or projections or current expectations These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties. Although we believe that the expectations reflected-in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our actual results may differ materially from those anticipated in these forward-looking statements. These forward-looking statements are made as of the date of this report, and we assume no obligation to update these forward-looking statements whether as a result of new information, future events, or otherwise, other than as required by law. In light of these assumptions, risks, and uncertainties, the forward-looking events discussed in this report might not occur and actual results and events may vary significantly from those discussed in the forward-looking statements.

Implications of Being an Emerging Growth Company

Emerging Growth Company - We are an emerging growth company as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, or the Securities Act. We will continue to be an emerging growth company until: (i) the last day of our fiscal year during which we had total annual gross revenues of at least $1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act; (iii) the date on which we have, during the previous 3-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a large accelerated filer, as defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30.

 

As an emerging growth company, we are exempt from:

·

Sections 14A(a) and (b) of the Exchange Act, which require companies to hold stockholder advisory votes on executive compensation and golden parachute compensation;

·

The requirement to provide, in any registration statement, periodic report or other report to be filed with the Securities and Exchange Commission, or the “Commission” or “SEC”, certain modified executive compensation disclosure under Item 402 of Regulation S-K or selected financial data under Item 301 of Regulation S-K for any period before the earliest audited period presented in our initial registration statement;

·

Compliance with new or revised accounting standards until those standards are applicable to private companies;

·

The requirement under Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act,  to provide auditor attestation of our internal controls and procedures; and

·

Any Public Company Accounting Oversight Board, or “PCAOB”, rules regarding mandatory audit firm rotation or an expanded auditor report, and any other PCAOB rules subsequently adopted unless the Commission determines the new rules are necessary for protecting the public.

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the Jumpstart Our Business Startups Act.

We are also a smaller reporting company as defined in Rule 12b-2 of the Exchange Act. As a smaller reporting company, we are not required to provide selected financial data pursuant to Item 301 of Regulation S-K, nor are we required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. We are also permitted to provide certain modified executive compensation disclosure under Item 402 of Regulation S-K.

Organization

 

SEEDO CORP.  (the “Company”, “Our” or “We”) was formed on January 16, 2015, under the laws of the State of Delaware. Prior to September 14, 2018, we were solely a provider of risk management and asset protection (“RAP”) services for businesses, individuals and families.

 

On September 14, 2018, the Company, then under its previous name, GRCR Partners Inc., executed an Acquisition and Share Exchange Agreement with Eroll Grow Tech Ltd., (“Eroll”) an Israeli Corporation that was incorporated on May 18, 2015 under the laws of the state of Israel. Immediately following the transaction, Eroll shareholders held approximately 87.4% of the outstanding Ordinary stock of the Company on a fully diluted basis, in exchange of 100% of the share capital of Eroll, while the pre-merger Company shareholders retained the remaining approximate 12.6%. Following the Transaction, GRCR Partners Inc. issued an aggregate of 12,073,500 shares of its common stock, par value $0.0001 per share (the “Common Stock”), on a pro-rata basis to each of the holders of Eroll, so the total shares of the Company ended up with 15,000,000 shares. As a result of the transaction, Eroll became a wholly-owned subsidiary of GRCR Partners Inc. While GRCR Partners Inc. was the legal acquirer in the transaction, Eroll was deemed the accounting acquirer.

On September 17, 2018, the Board of Directors adopted an Amendment to its Articles, changing the name of the Corporation to SEEDO CORP. The State of Delaware effectuated said change on September 21, 2018; and on November 5, 2018, FINRA granted effectiveness for said change and the new ticker Symbol “SEDO”. Post-Acquisition, SEEDO CORP has changed its main business focus to Eroll’s business activities while continuing with some RAP activities.  The quarterly unaudited condensed consolidated financial statements of the Company reflect the operations of Eroll as the acquirer for accounting purposes, together with a deemed issuance of shares, equivalent to the shares held by the stockholders of the legal acquirer, GRCR Partners Inc. prior to the transaction, and a recapitalization of the equity of the accounting acquirer. The quarterly unaudited condensed consolidated financial statements include the accounts of the Company since the effective date of the reverse merger transaction and the accounts of Eroll since inception.

We are a global technology company focusing on producing cutting edge technology for the agro-tech markets for home, commercial and medical use. We produce automated plant growing devices managed and controlled by an artificial intelligent algorithm, allowing customers to grow their own herbs and vegetables effortlessly from seed to plant, while providing optimal conditions to assure premium quality produce year-round. Seedo delivers the future of automated plant growing technologies today. Our technology affords for pesticide free, soil free in a self-regulating climate - allowing anyone to grow simply, from seed to harvest.

 Our telephone number is +972 546 642 228 and our website is www.Seedolab.com

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited condensed financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

 

These unaudited condensed financial statements should be read in conjunction with our September 30, 2018 annual financial statements included in our Form 10-K, filed with the SEC on January 15, 2019.

Going Concern

Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the audited financial statements for the year ended September 30, 2018 regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

Our unaudited condensed financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited condensed financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. There is no assurance that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.

 

Research and Development Costs

 

Research and development costs are charged to the consolidated statement of operations as incurred. ASC 985-20, Costs of Software to Be Sold, Leased, or Marketed", requires capitalization of certain software development costs subsequent to the establishment of technological feasibility.

Based on our product development process, technological feasibility is established upon the completion of a working model.

We do not incur material costs between the completion of a working model and the point at which the products are ready for general release. Therefore, research and development costs are charged to the consolidated statement of operations as incurred. We did not capitalize expenses during the three months ended March 31, 2019.

Stockholders’ Equity (Deficit)

 

Authorized Shares

 

The Company is authorized to issue up to 500,000,000 shares of common stock, par value $0.0001 par value. Each outstanding share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive rights.

 

Commitments and Contingencies

 

On October 2017, Eroll entered into rental agreements for its office premises which will end on April 30, 2022.

On September 2017, Eroll entered into a vehicle operating lease agreement for a period of 32 months.

 

Subsequent Events

The Company has evaluated subsequent events through the date the unaudited condensed financial statements were issued and filed with the Securities and Exchange Commission and has determined that there are no other such events that warrant disclosure or recognition in the financial statements.

 

Financing

 

We will require additional financing to implement our business plan, which may include joint venture projects and debt or equity financings. The nature of this enterprise and constraint of positive cash flow places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until such time as an economically viable profits and losses can be demonstrated. Therefore, any debt financing of our activities may be costly and result in substantial dilution to our stockholders.

 

Future financing through equity investments is likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other derivative securities, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and financing, including investment banking fees, legal fees, accounting fees, and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition.

 

Our ability to obtain needed financing may be impaired by such factors as the capital markets, both generally and specifically in the Agro-tech industry, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenue from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.

 

There is no assurance that we will be able to obtain financing on terms satisfactory to us, or at all. We do not have any arrangements in place for any future financing. If we are unable to secure additional funding, we may cease or suspend operations. We have no plans, arrangements or contingencies in place in the event that we cease operations.

 

Marketing and the SEEDO “Community”

We are investing in organic marketing and have approximately:

As of March 31, 2019, we received Pre orders for more than 3,000 units in a pre-order campaign. We believe that following the delivery of the pre-order units combined with a marketing campaign and our community strength, we will be able to sell and deliver thousands of our “Home Cultivator” devises world-wide.

 

We target the world-wide population which wants to grow their own herbs and vegetables pesticide free, with self-regulating climate control capabilities - allowing each to grow its own, from seed to harvest. Our cutting-edge technology addresses cannabis customers market for adults and medical needs as well as any other need.

 

We believe that the following advantages afford the Company a unique market penetration opportunity:

 

During the last Quarter, the Company has now entered its much-anticipated commercial container phase and has begun with two current industrial projects in Israel, on kibbutz Dan and Moshav Brosh for government licensed pharmaceutical-grade medical cannabis, verifying our technology and expertise to the agro-commercial world. Our implemented technology now enables industrial farmers full control and automation of all plant feeding and environmental parameters, better unified standardized yields suitable for medical pharma industry in a hermetically sealed system - full isolation, with no need for pesticides at all. This affords dramatic space savings as well as water consumption and human resources. We are targeting this product for any herb and/or vegetable growth including, but not limited to, medical grade cannabis.

We currently expect two main types of businesses:

1)

Partnerships, accordingly we will become partners in new established farms and manage its establishment and operations.

2)

Supplying Commercial Containers to Farms, research institutions etc.

 

 

R&D Expenses for the 3 months ended March 31, 2019 and 2018, were $830 thousand versus $562 thousand respectively from the main activity of the Company. This was primarily due to increased R&D efforts for progressing the Home Cultivator from a prototype version into mass production, which resulted mainly due to increased HC costs of $24 thousand, increased R&D material costs of $214 thousand, an increase of $30 thousand in depreciation expenses related to R&D.

Total marketing expenses for the 3 months ended March 31, 2019 and 2018, were $234 thousand versus $212 thousand, respectively. This was primarily due to increased marketing campaign efforts, which resulted mainly due to increased Marketing material costs of $69, the increase was offset with decrease of $12 thousand in HC costs and $35 thousands in other expenses and payment providers.

Total General and Administrative expenses for the 3 months ended March 31, 2019 and 2018, were $616 versus $381 thousand, respectively. This was primarily due to an increase of $47 thousand in expenses for HC, increase of $37 thousand in travel expenses, increase of $144 thousands in expenses for external advisors and professional services and increase of $7 thousands in depreciation expenses.

Liquidity and Capital Resources

Overview

 

Since inception on January 16, 2015, the Company had a cumulative deficit of $12,113 thousand and we have a working capital deficit of $2,559 thousand as of March 31, 2019. Our future growth is dependent upon achieving further purchase orders and execution, management of operating expenses and ability of the Company to obtain the necessary financing to fund future obligations, and upon profitable operations.

 

Historically, we have financed our cash flow and operations from the initial contribution of our majority shareholder and by raising equity and convertible loans. Since incorporation and as of March 31, 2019 The Company has raised approximately $11.7 million, during the 3 months ended March 31, 2019 the Company raised $5.2 million.

As of March 31, 2019, our cash balance was $2,373 thousand, we believe we will require a minimum of $6 million in working capital over the next 12 months to grow the company as currently planned, which is inclusive of Cost of Sales, covering our operation costs and maintaining our regulatory reporting and filings. Should our revenues not increase as expected, or if our costs and expenses prove to be greater than we currently anticipate, or should we change our current business plan in a manner that will increase or accelerate our anticipated costs and expenses; we may need funds in excess of that currently planned.

 

Consistent with Section 144 of the Delaware General Corporation Law, it is our current policy that all transactions between the Company and our officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the existing directors, are approved by vote of the stockholders, or are fair to us as a corporation as approved or ratified by our Board of Directors or authorized officer. We will conduct an appropriate review of all related party transactions on an ongoing basis, and, where appropriate, we review the potential of conflicts of interest.

 

Off Balance Sheet Arrangements

 

As of March 31, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

For information with respect to recent accounting pronouncements, see Note 3 to the unaudited condensed consolidated financial statements of SEEDO CORP. included elsewhere in this Form 10-Q.

Critical Accounting Policies

 

Our discussion and analysis of the financial condition and results of operations are based upon the Company’s unaudited condensed financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our unaudited condensed financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, allowance for doubtful accounts and income taxes. These policies require that we make estimates in the preparation of our unaudited condensed financial statements as of a given date.

Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

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

 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

 

In connection with the preparation of our Quarterly Report on Form 10-Q, an evaluation was carried out by management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act) as of March 31, 2019. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

During evaluation of disclosure controls and procedures as of March 31, 2019 conducted as part of our preparation of the quarterly unaudited condensed financial statements, management conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures and concluded that our disclosure controls and procedures were effective.,

Management’s Report on Internal Control over Financial Reporting

 

Management is responsible for the preparation and fair presentation of the unaudited condensed financial statements included in this quarterly report. The unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States and reflect management’s judgment and estimates concerning effects of events and transactions that are accounted for or disclosed.

 

Management is also responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting includes those policies and procedures that pertain to our ability to record, process, summarize and report reliable data. Management recognizes that there are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and the circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to unaudited condensed financial statements presentation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.

 

In order to ensure that our internal control over financial reporting is effective, management regularly assesses controls and did so most recently for its financial reporting as of March 31, 2019.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim unaudited condensed financial statements will not be prevented or detected on a timely basis.

The material weaknesses identified are described below.

 

Procedures for Control Evaluation. Management has not established with appropriate rigor the procedures for evaluating internal controls over financial reporting. Due to limited resources and lack of segregation of duties, documentation of the limited control structure has not been accomplished.

 

Lack of Audit Committee. To date, the Company has not established an Audit Committee. It is management’s view that such a committee, including a financial expert, is an utmost important entity level control over the financial reporting process.

 

Insufficient Documentation of Review Procedures We employ policies and procedures for reconciliation of the unaudited condensed financial statements and note disclosures.

 

Insufficient Information Technology Procedures. Management has not established methodical and consistent data back-up procedures to ensure loss of data will not occur.

 

As a result of the management evaluation of company internal control over financial reporting described above, the Company’s management has concluded that, as of March 31, 2019, the Company’s internal control over financial reporting was not based on the criteria in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

This quarterly report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this quarterly report.

 

Changes in Internal Control Over Financial Reporting

 

As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended March 31, 2019, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 5. Change in Fiscal Year

 

The Board of Directors of SEEDO CORP. has changed our fiscal year end from September 30 to December 31, as announced in our 8K to this effect filed with the SEC on February 5, 2019. We made this change to align the Company's fiscal year end with its subsidiaries following the reverse merger. Subsequent to this, our Form 10-K will cover the calendar year January 1 to December 31. 

Part II- Other Information

 

Item 1. Legal Proceedings

 

The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated. No director, officer, or affiliate of the issuer and no owner of record or beneficiary of more than 5% of the securities of the issuer, or any security holder is a party adverse to the small business issuer or has a material interest adverse to the small business issuer.

 

Item 1A. Risk Factors

 

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

 

Item 2. Recent Sale of Unregistered Securities

During the Quarter ending March 31, 2019, the Company issued 1,320,397 common shares as follows:

50,000 common shares as consideration to two consultants.

500,000 Shares were issued to a new shareholder as part of a convertible loan agreement.

770,397 Shares to Cannabics Pharmaceuticals Inc. as part of a loan agreement.

Item 3. Exhibits

 

* Filed along with this document

 

 

SIGNATURES