SATIVUS TECH CORP. - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period from   January 1, 2021   to March 31, 2021.

Commission   file number:   333-208814

SEEDO CORP.

(Exact name of registrant as specified in its charter)

800 608-6432

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 ☒

As of May 20^th, 2021, the registrant had 32,395,816 shares of its Common Stock, $0.0001 par value, outstanding.

When used in this quarterly report, the terms “Seedo Corp.” “the Company,” “we,” “our,” and “us” refer to Seedo Corp.

TABLE OF CONTENTS

PART I. Financial Information

SEEDO CORP.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2021

SEEDO CORP.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2021

IN THOUSANDS OF U.S. DOLLARS

INDEX

- - - - - - - - - - - -

SEEDO CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

The accompanying notes are an integral part of these condensed consolidated financial statements.

SEEDO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

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

The accompanying notes are an integral part of these condensed consolidated financial statements.

SEEDO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

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

The accompanying notes are an integral part of these condensed consolidated financial statements.

SEEDO CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

U.S. dollars in thousands

The accompanying notes are an integral part of these condensed consolidated financial statements.

During the third quarter of 2019, Eroll was experiencing financial and operational difficulties and during 2020, and entered liquidation proceeding through the Israeli court. On March 25, 2020, the Nazareth District Court of the State of Israel (the “Court”) approved the purchase of all of Eroll's assets by a non-related third-party and therefore, the Company no longer has any legal ties nor privity with Eroll.

The Company is focusing on its in-house research and development of agriculture technology products, among others, in the fields of exotic plants and mushrooms.

On July 19, 2020, the Company formed a new wholly-owned subsidiary in Israel, Hachevra Legiduley Pkaot Beisrael Ltd. (the “New Subsidiary”), to develop a fully automated and remotely managed system for growing saffron and other vegetables. On November 5, 2020, the New Subsidiary changed its name to Saffron-Tech Ltd. (“Saffron Tech”).

The Company, through Saffron Tech, is focusing on its in-house research and development of agriculture technology products, among others, in the fields of exotic plants and mushrooms. Saffron Tech plans to roll out its proof of concept in the coming months. This technology will provide turnkey automated growing containers for high-quality, high-yield saffron all year round. The Company is in advanced stages of developing and testing a fully automated and remotely managed system for growing high-quality, high-yield saffron anywhere and anytime.

On December 24, 2020, Saffron Tech, announced its intention to raise up to 5 million New Israeli Shekels (“NIS”) (approximately $1.6 million) at a pre-money valuation of NIS 20 million (approximately $6.225 million) through the Israeli crowd funding platform – Pipelbiz “Crowd Funding Round”). The Crowd Funding Round was closed on February 16, 2021 having raised the full amount. Following the Crowd Funding Round, the Company owns 79.82% of Saffron Tech.

The Company intends to finance operating costs over the next twelve months with existing cash on hand, reducing operating spend, and future issuances of equity and debt securities, or through a combination of the foregoing. However, the Company will need to seek additional sources of financing if the Company requires more funds than anticipated during the next 12 months or in later periods.

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business.

The consolidated financial statements for the three months ended March 31, 2021, do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

Basis of Presentation and Principles of Consolidation:

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary and were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)

All intercompany accounts and transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2020 and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 17, 2021 (the “2020 Annual Report”). The results for any interim period are not necessarily indicative of results for any future period.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position and results of operations for the interim periods presented .The results for the three months ended March 31, 2021 are not necessarily indicative of the results for the year ending December 31, 2021, or for any future period.

As of March 31, 2021, there have been no material changes in the Company’s significant accounting policies from those that were disclosed in the 2020 Annual Report.

Fair value of financial instruments

ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The carrying amounts of cash and cash equivalents, short term deposits, trade receivables, trade payables and short-term loan approximate their fair value due to the short-term maturity of such instruments.

The Company elected to measure some of the convertible loans under the fair value option. Under the fair value option the convertible loans will be measured at fair value in each reporting period until they will be converted, with changes in the fair values being recognized in the Company’s consolidated statement of operations as financial income or expense. The proceeds received for the issuance of the convertible loans were allocated at fair value conducted on an arm’s-length basis.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:

On February 20, 2021, the Company and the third party extended the loan to August 20, 2021.

The Company at its option shall have the right to redeem, in part or in whole, outstanding principal amount and interest under this loan agreement prior to the maturity date. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium equal to 20% of the outstanding principal amount being redeemed plus outstanding and accrued interest.

The February 2019 Lender shall be entitled to convert at its option any portion of the outstanding and unpaid principal or accrued interest into fully paid and nonassessable of shares of common stock, at the lower of the fixed conversion price then in effect or the market conversion price. The number of shares of common stock issuable upon conversion of any conversion amount shall be determined by dividing (x) such conversion amount by (y) the fixed conversion price of $2 or (z) 80% of the lowest the volume-weighted average price of the Company’s shares of common stock during the 10 trading days immediately preceding the conversion date.

The Company accounted for the February 2019 Loan in accordance with ASC 470-20, Debt with conversion and other Options. In 2019, the intrinsic value of the BCF was calculated and the Company allocated $550 to the BCF as additional paid in capital.

The February 2019 Loan is included in the convertible loans in current liabilities as of March 31, 2021 in the amount of $384 , and $350 as of December 31, 2020.

During the three months ended March 31, 2021 and 2020, the Company recorded interest and financial expenses related to February 2019 Loan in the amount of $34 and $83, respectively.

The October 2019 Lender shall be entitled to convert the principal loan and the outstanding interest (the “Conversion Amount”) into such number of ordinary shares determined by dividing (x) such Conversion Amount by (y) the fixed conversion price of $1.25 or (z) 80% of the lowest the volume-weighted average price of the Company’s ordinary shares during the 10 trading days immediately preceding the conversion date.

As of March 31, 2021 and December 31, 2020, the BCF was revalued at $ 652 and $610, accordingly.

The Company estimated the fair value of BCF using the Monte Carlo option pricing model using the following weighted average assumptions:

The October 2019 Loan is included in the convertible loans in current liabilities as of March 31, 2021 in the amount of $933, and $754 as of December 31, 2020.

During the three months ended March 31, 2021 and 2020, the Company recorded interest and financial expenses related to October 2019 Loan in the amount of $179 and $179, respectively.

The August 2020 Loans are convertible by the August 2020 Lenders into Shares, at their discretion, at the lower of a fixed price of $0.102 (the “Fixed Conversion Price”) or 80% of the lowest volume weighted average price (“VWAP”) of the Company’s common stock during the 10 trading days immediately preceding the conversion date (the “Market Conversion Price”).

The Company accounted for the August 2020 Loan in accordance with ASC 470-20, Debt with conversion and other Options. As of March 31, 2021 and December 31, 2020, the BCF was revalued at $1,360 and $502, accordingly.

The Company estimated the fair value of BCF using the Monte Carlo option pricing model using the following weighted average assumptions:

The August 2020 Lenders are included in the convertible loans in long term liabilities as of March 31, 2021 in the amount of $118, and $73 as of December 31, 2020.

During the three months ended March 31, 2021 and 2020, the Company recorded interest and financial expenses related to August 2020 Lenders in the amount of $45 and nil, respectively.

During January 2021 through to February 16, 2021, the Company received an additional $530 from third party investors from the issuance Promissory Notes (“2021 Promissory Notes). One of the investors received 330,000 Promissory Warrants.

The Company estimated the fair value of warrants using the Black-Scholes-Merton option pricing model using the following weighted average assumptions:

The fair value of the 2020 Promissory Warrants granted was $41, is included in the warrants as additional paid in capital for the year ended December 31, 2020.

The value of the 2021 Promissory Warrants granted was $39, is included in the warrants as additional paid in capital for the three months ended March 31, 2021 .

The Company accounted for the 2020 and 2021 Promissory Notes in accordance with ASC 470-20, Debt with conversion and other Options. The intrinsic value of the BCF for the 2020 Promissory Notes was calculated and the Company allocated $425 to the BCF as additional paid in capital in 2020. The intrinsic value of the BCF for the 2021 Promissory Notes was calculated and the Company allocated $530 to the BCF as additional paid in capital in 2021.

The 2020 and 2021 Promissory Notes are included in the convertible loans in current liabilities as of March 31, 2021 in the amount of $265, and $24 as of December 31, 2020.

During the three months period ended March 31, 2021 and 2020, the Company recorded interest and financial expenses related to Promissory Notes in the amount of $104 and nil, respectively.

A summary of warrant activity during the three months period ended March 31, 2021 and year ended December 31, 2020 is as follows:

The following warrants and are outstanding as of March 31, 2021:

On April 1, 2019, the Company’s board of directors adopted the Seedo Corp. 2018 Share Options Plan (the “2018 Plan”).

Awards granted under the 2018 Plan are subject to vesting schedules and unless determined otherwise by the administrator of the 2018 Plan, generally vest following a period of four years from the applicable vesting commencement date, such that the awards vest in four annual equal installments and/or generally vest following a period of one year from the applicable vesting commencement date, such that the awards vest in four quarterly equal installments.

Subject to the discretion of the 2018 Plan administrator, if an award has not been exercised within seven years after the date of the grant, the award expires.

(i) A summary of employee share options activity during the three-month period ended March 31, 2021 and for the year ended December 31, 2020 is as follows:

RSUs under the 2018 Plan may be granted upon such terms and conditions, no monetary payment (other than payments made for applicable taxes) shall be required as a condition of receiving the Company’s shares pursuant to a grant of RSUs, and unless determined otherwise by the Company, the aggregate nominal value of such RSUs shall not be paid and the Company shall capitalize applicable profits or take any other action to ensure that it meets any requirement of applicable laws regarding issuance of shares for consideration that is lower than the nominal value of such shares. If, however, the Company’s board of directors determines that the nominal value of the shares shall not be waived and shall be paid by the grantees, then it shall determine procedures for payment of such nominal value by the grantees or for collection of such amount from the grantees by the Company.

Shares issued pursuant to any RSUs units may (but need not) be made subject to exercise conditions, as shall be established by the Company and set forth in the applicable notice of grant evidencing such award. During any restriction period in which shares acquired pursuant to an award of RSUs remain subject to exercise conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of unless otherwise provided in the 2018 Plan. Upon request by the Company, each grantee shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares hereunder and the Company may place appropriate legends evidencing any such transfer restrictions on the relevant share certificates.

A summary of RSU activity during the three months ended March 31, 2021 years ended December 31, 2020 is as follows:

On April 1, 2021, the Company issued two directors 100,000 shares in respect of RSU’s issued in March 2021. The fair value of the RSU’s was $59 (see note 5d(1)

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR AUDITED FINANCIAL STATEMENTS AND THE RELATED NOTES THAT APPEAR ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q AND THE FINANCIAL STATEMENTS AND RELATED NOTES THERETO FOR THE FISCAL YEAR ENDED MARCH 31, 2021 AND THE RELATED MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, BOTH OF WHICH ARE CONTAINED IN OUR ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), ON JANUARY 15, 2019. PAST OPERATING RESULTS ARE NOT NECESSARILY INDICATIVE OF RESULTS THAT MAY OCCUR IN FUTURE PERIODS. 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. Further information on potential factors that could affect our business is described under the heading “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021. Readers are also urged to carefully review and consider the various disclosures we have made in that report.

When used in this quarterly report, the terms “Seedo,” “the Company,” “we,” “our,” and “us” refer to SEEDO CORP., a Delaware corporation, unless otherwise indicated or as otherwise required by the context.

Company Overview

SEEDO CORP. (f/k/a GRCR Partners Inc.) (the “Company”, “Our” or “We”) was formed on January 16, 2015 under the laws of the State of Delaware. Prior to September 14^th, 2018, we were solely a provider of risk management and asset protection (“RAP”) services for businesses, individuals and families. On September 14^th, 2018, (“the Company”) executed an Acquisition and Share Exchange Agreement with Eroll Grow Tech Ltd. (“Eroll”), an Israeli Corporation that was formed on May 18^th, 2015 under the laws of the state of Israel. 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 changed its main business focus to Eroll’s business activities while continuing with some RAP activities.

On July 19, 2020, the Company formed a new wholly-owned subsidiary in Israel, Hachevra Legiduley Pkaot Beisrael Ltd. (the “New Subsidiary”), to develop a fully automated and remotely managed system for growing saffron and other vegetables. On November 5, 2020, the New Subsidiary changed its name to Saffron-Tech Ltd. (or “Saffron”).

The Company, through Saffron, plans to roll out its proof of concept in the coming months. This technology will provide turnkey automated growing containers for high-quality, high-yield saffron all year round. The Company is in advanced stages of developing and testing a fully automated and remotely managed system for growing high-quality, high-yield saffron anywhere and anytime.

The Company’s technology offers a controlled environment based on the Company’s deep knowledge in plant biology. The technology provides optimal conditions for each stage of the plant’s development to reach optimal product quality.

The Company’s proof of concept utilizes the “Grow Next to Consumer” policy and is therefore sustainable and fit the COVID-19 restrictions on transport. It is also environmentally friendly, using economic levels of water, space, fertilizer, and energy. Accounting to the Company’s calculations, we believe that the controlled indoor growing area will produce ten times more yield compared to the same land area using traditional methods. The sealed environment eliminates the need for harmful pesticides and herbicides, producing a clean and safe product that is easy to control from anywhere. The Company’s solution is easily scalable and pre-designed to quickly grow operations.

Saffron is used in many industries, such as the food industry, particularly by famous chefs and Michelin starred restaurants, the natural cosmetics industry and the natural medicine industry and as a dye in the textile industry. Medicinal claims as an anti-depressant, antioxidant, and antiseptic are constantly increasing.

The global saffron market size was valued at $1 Billion in 2019 and is anticipated to attain a revenue based CAGR of 7.3% from 2020 to 2027. The market is expected to grow over the next few years on account of demand from the pharmaceutical sector, particularly in countries with rapid population expansion.

Since the incorporation Saffron Tech, Saffron Tech has hired one employee and several consultants to commence the roll out of our proof of concept. Saffron Tech has signed several agreements with Israeli companies, including Growin Ltd (“Growin”) and the Israeli Ministry of Agricultures research organization – The Volcani Center (“Volcani”). Growin is an owner of proprietary systems for indoor agriculture and Saffron Tech has acquired the exclusive right to market, sell and commercialize our product based on the Growin’s hydroponic machines. Volcani will assist Saffron Tech in writing the protocols required to grow saffron in a controlled and automated way, including the use of robotics and AI.

On April 22, 2021 the Company announced the appointment of Dr. Efrat Greenwald as its Chief Data Scientist, in charge of developing growing protocol IP and analyzing information technology data systems. Dr. Greenwald is a seasoned researcher and data scientist with a PhD in Physics from the Department of Physics of Complex Systems at the Weizmann Institute in Israel.

On May 4, 2021 the Company announced that it had entered a research agreement with The Polytechnic University of Valencia to develop vertical farming protocols for saffron with Professor Rosa V. Molina . Professor Molina has extensive knowledge in the cultivation of saffron from her university research programs in Spain and will join the scientific committee of the project.

On August 7 and 11, 2020, the Company executed Securities Purchase Agreement of convertible debentures (“Convertible Debentures”), and ancillary agreements with YAII PN, Ltd., and Mr. Shmuel Yannay (collectively, the “Investors”) in the aggregate amount of $300,000 (the “Agreements”). Per the terms of the Agreements, the Convertible Debentures have a maturity date of August 7, 2022 (“Maturity Date”) and accrue annual interest at a rate of 10%.

The Convertible Debentures are convertible by the Investors into common stock of the Company, at their discretion, at the lower of a fixed price of $0.102 (the “Fixed Conversion Price”) or 80% of the lowest volume weighted average price (“VWAP”) of the Company’s common stock during the 10 trading days immediately preceding the conversion date (the “Market Conversion Price”).

Prior to the Maturity Date of the Convertible Debentures, provided that the VWAP of the Company’s common stock is below the Fixed Conversion Price and there is no Equity Conditions Failures as defined in the Agreements, the Company at its option, has the right to redeem in cash in part or in whole, the amounts outstanding under the Convertible Debentures plus a redemption premium equal to 10% of the amount being redeemed plus outstanding and accrued interest.

Pursuant to the Agreements we also issued to the Investors warrants to purchase 750,000 Shares’s common stock at an exercise price of $0.20 for a period of 5 years.

Pursuant to the Agreements, we shall use the net proceeds for immediate cash infusion for ordinary working capital purposes. The Agreement does not contain any right of first refusal, participation rights or penalties. YAII PN Ltd. has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our Common Stock during any time.

From November 2020 through to February 2021, the Company continued to raise funds to support its operations and received $855,000 from third party investors and issued convertible promissory notes in respect thereof (“Promissory Notes”). The Promissory Notes bear no interest, are convertible into Shares based on a fixed conversion price of $0.10 per share and mature between 12 and 24 months from the issuance date. Pursuant to Promissory Notes one of the investors received warrants to purchase 660,000 Shares’s common stock at an exercise price of $0.15 for a period of 1 year.

On December 24, 2020, Saffron Tech, announced its intention to raise up to 5 million New Israeli Shekels (“NIS”) (approximately $1.6 million) at a pre-money valuation of NIS 20 million (approximately $6.225 million) through the Israeli crowd funding platform – Pipelbiz “Crowd Funding Round”). Assuming the maximum amount is raised, the Company will own approximately 80% of the Saffron Tech. The Crowd Funding Round was closed on February 16, 2021 having raised the full amount.

During January 2021 through to February 16, 2021, the Company received $530 from third party investors from the issuance of convertible promissory notes in respect thereof (“2021 Promissory Notes”). The Promissory Notes bear no interest, are convertible into Shares based on a fixed conversion price of $0.10 per share and mature between 6 and 24 months from the issuance date. Pursuant to Promissory Notes one of the investors received warrants to purchase 330,000 Shares at an exercise price of $0.15 for a period of one year.

On April 1, 2021, the Company issued two directors 100,000 shares in respect of RSU’s issued in March 2021.

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 December 31, 2020 annual financial statements included in our Form 10-K, filed with the SEC on March 17, 2021.

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 December 31, 2020 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.

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.

Results of Operations

Three months ended March 31, 2021 compared to the three months ended March 31, 2020

Operating Expenses

R&D expenses for the three months ended March 31, 2021 were $176 thousand compared to $nil for the same period in 2020. This increase was primarily due to increased R&D.

Total marketing expenses for the three months ended March 31, 2021, were $68 thousand compared to $nil for the same period in 2020.

Total general and administrative (“G&A”) expenses for the three months ended March 31, 2021, were $540 thousand compared to $nil, for the same period in 2020. This was primarily due to increases of $361 thousand in stock based compensation.

Total financial expenses for the three months ended March 31, 2021, were $1,447 compared to $327 thousand for the same period in 2020. The increase of $1,120 thousand was primarily due to an increase of $1,101 in expenses related to interest and revaluation of convertible component in convertible loans.

Liquidity and Capital Resources

Overview

Since inception on January 16, 2015, the Company has a cumulative deficit of $19,655 thousand and a working capital deficit of $470 thousand as of March 31, 2021. 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.

As of March 31, 2021, we had current assets of $1,869 thousand consisting of $1,801 thousand in cash and cash equivalents and $68 thousand in other accounts receivables.

We had $2,339 thousand in current liabilities consisting of $104 in other accounts payable and accrued liabilities, $1,582 Convertible loans, $652 BCF liability and $1 trade payable.

As of December 31, 2020, we had current assets of $418 thousand consisting of $411 thousand in cash and cash equivalents and $7 thousand in other receivables. We had $1,889 thousand in current liabilities, which consisted of $100 in other accounts payable and accrued liabilities, $51 trade payable, $1,128 Convertible loans and $610 in BCF liability.

We had a negative working capital of $470 thousand and $1,471 thousand as of March 31, 2021 and December 31, 2020, respectively.

Our Current liabilities as of March 31, 2021 were $2,339 thousand compared to $1,889 thousand as of December 31, 2020.

During the three months ended March 31, 2021, we had negative cash flow from operations of $538 thousand which was mainly the result of a net loss of $2,231 thousand, offset by decrease in working capital of $1,001 thousand.

During the three months ended March 31, 2020, we had cash flow from operations of $nil thousand which was mainly the result of a net loss of $8,566 thousand, offset mainly by gain from the sale of a subsidiary of $8,893 and decrease in working capital of $327.

During the three months ended March 31, 2021, we had negative cash flow from investing activities of $8 thousand compared to a none cash flow effect from investing activities during the three months ended March 31, 2020.

During the three months ended March 31, 2021, we had positive cash flow from financing activities of $1,936 thousand compared to a none cash flow effect from financing activities during the three months ended March 31, 2020. Cash flow from financing activities was a result of proceeds of convertible loans in the amount of $530 thousand, and issuance of shares to minority interests in a subsidiary in the amount of $1,406 thousand.

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 of 1934, as amended (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 Exchange Act as of March 31, 2021. 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, 2021 conducted as part of our preparation of the quarterly unaudited condensed financial statements, management, including our Chief Executive Officer and Chief Financial Officer, 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 not effective.

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 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II- Other Information

Item 6. Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.

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