SATT Sativus Tech Corporation (PK)

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

for the quarterly period ended June 30, 2023

OR

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

For the period from                to               .

Commission file number: 333-208814

SATIVUS TECH CORP.

(Exact name of registrant as specified in its charter)

800 608-6432

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

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 August 10, 2023, the registrant had 4,215,571 shares of its Common Stock, $0.001 par value, outstanding.

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

TABLE OF CONTENTS

PART I. Financial Information

SATIVUS TECH CORP.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2023

SATIVUS TECH CORP.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2023

IN THOUSANDS OF U.S. DOLLARS

INDEX

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

SATIVUS TECH 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.

SATIVUS TECH 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.

SATIVUS TECH 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.

SATIVUS TECH 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.

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 DECEMBER 31, 2022 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 MARCH 31, 2023. 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, 2022. 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 “Sativus,” “the Company,” “we,” “our,” and “us” refer to SATIVUS TECH CORP., a Delaware corporation, unless otherwise indicated or as otherwise required by the context.

Company Overview

SATIVUS TECH CORP. (formerly SEEDO CORP.) (the “Company”, “Our” or “We”) was formed on January 16, 2015, under the laws of the State of Delaware. Prior to July 2020, we were involved in producing a plant growing device managed and controlled by an artificial intelligent algorithm, allowing consumers to grow their own herbs and vegetables effortlessly from seed to plant, while providing optimal conditions to assure premium quality produce year-round. However, due to financial and operational difficulties and during 2020, we ceased these operations and 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 Tech”). As of the date of this report, and following various financings in Saffron Tech, the Company owns 54% of 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.

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 food supplements industry and as a dye in the textile industry. Medicinal claims as an anti-depressant, antioxidant, and antiseptic are constantly increasing.

On January 6, 2022, the Company announced that its subsidiary, Saffron Tech, has planted approximately 25,000 Saffron bulbs in fields in the Golan Heights, in Norther Israel. The plantation is being managed in conjunction with the Shamir Research Institute.

On April 4, 2022, the Company announced that Mr. Moshe Bar Siman Tov and Mrs. Iris Tova Ginsburg have resigned from the Board of Directors of the Company, and immediately appointed Mrs. Tal Wilk-Glazer to its Board of Directors and as CEO of the Company.

In April 2022, Saffron Tech announced its new state-of-the-art indoor research and development center is operational. From April 2022, through to December 2022, Saffron Tech successfully completed three Saffron cultivation cycles using vertical farming technology, while traditional agriculture only produces one harvest of saffron per year.

On August 30, 2022, Saffron Tech, announced its intention to raise up to 5 million New Israeli Shekels (“NIS”) (approximately $1.5 million) at a pre-money valuation of NIS 32.5 million (approximately $10 million) through the Israeli crowdfunding platform – Pipelbiz (“2022 Crowd Funding Round”). Assuming the maximum amount is raised, the Company will own approximately 61% of Saffron Tech. The 2022 Crowd Funding Round was closed on December 1, 2022, having raised 3.8 million NIS (approximately $1.3 million). Fundraising expenses accumulated to $152 and the net amount raised through Pipelbiz was $1.15 million. Saffron Tech also raised 1.15 million NIS (approximately $328 thousand) through the issuance of SAFEs. The SAFEs are convertible at a 20% discount to the current crowdfunding round. Sativus Tech’s interest in Saffron Tech now totals 67.5% post-raise. All SAFEs were converted before December 31, 2022. Saffron Tech continued to raise funds through Pipelbiz under the same pre-money valuation from December 2022 through to January 2023, via another crowdfunding round “2023 Crowd Funding Round” which closed on February 5, 2023, having raised another 1.1 million NIS (approximately $314 thousand).

On March 1, 2023, Saffron Tech entered into an investment agreement with Korean-based company, Dreamtech Co Ltd (“Dreamtech”), a leading provider and manufacturer of tech components for innovative products including advanced mobile and medical devices. Under this new agreement, Dreamtech will fund an initial investment of $1 million followed by an additional $1 million upon a successful cultivation of saffron in Korea. Saffron Tech aims to be the first company to create a large-scale production of saffron using vertical farming technology to meet the growing demand of the spice for use in beauty, wellness, and pharmaceutical applications. Sativus Tech’s interest in Saffron Tech now totals 59% post-raise.

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, 2022, annual financial statements included in our Form 10-K, filed with the SEC on March 31, 2023.

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 condensed consolidated financial statements for the six months ended June 30, 2023, 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

Six months ended June 30, 2023 compared to the six months ended June 30, 2022

Operating Expenses

Research and development expenses for the six months ended June 30, 2023, were $140 thousand compared to $276 thousand for the same period in 2022. Gross research and development expenses were $535 thousand, offset by the amounts received in respect of participation in expenses by the Israeli Innovation Authority in the amount of $395 thousand (previous period – $117) which reduced total research and development expenses for the six months ended June 30, 2023, to $140 thousand.

General and administrative (“G&A”) expenses for the six months ended June 30, 2023, were $305 thousand compared to $301 thousand for the same period in 2022.

Total financial expenses for the six months ended June 30, 2023, were $871 compared to financial income in the amount of $318 thousand for the same period in 2022. Financial expenses and income are due mainly to financial gains or losses related to revaluations of convertible component in convertible loans.

Three months ended June 30, 2023 compared to the three months ended June 30, 2022

Operating Expenses

Research and development income for the three months ended June 30, 2023, was $93 thousand compared to expenses in the amount of $211 thousand for the same period in 2022. Gross research and development expenses in 2023 were $302 thousand, offset by the amounts received in respect of participation in expenses by the Israeli Innovation Authority in the amount of $395 which reduced total research and development expenses for the three months ended June 30, 2022, to income in the amount of $93 thousand.

General and administrative (“G&A”) expenses for the three months ended June 30, 2023, were $146 thousand compared to $209 thousand for the same period in 2022.

Total financial expenses for the three months ended June 30, 2023, were $947 compared to $260 thousand for the same period in 2022. Financial expenses are due mainly to financial losses related to revaluations of convertible component in convertible loans.

Liquidity and Capital Resources

Overview

Since inception on January 16, 2015, the Company has a cumulative deficit of $22,786 thousand and a working capital deficit of $2,759 thousand as of June 30, 2023. Our future growth is dependent upon achieving further purchase orders and execution, management of operating expenses and the 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 June 30, 2023, we had current assets of $1,492 thousand consisting of $642 thousand in cash and cash equivalents, $801 thousand in short-term deposits and $49 thousand in other current assets.

We had $4,251 thousand in current liabilities consisting of $120 thousand in other current liabilities, $1,995 thousand in Convertible loans, $2,073 thousand in convertible component, $27 thousand in short-term lease liability and $36 thousand accounts payables.

As of December 31, 2022, we had current assets of $901 thousand consisting of $810 thousand in cash and cash equivalents, $6 thousand in short-term deposits and $85 thousand in prepaid expenses and other receivables. We had $3,719 thousand in current liabilities, which consisted of $55 thousand in accounts payable, $114 thousand loans, $160 thousand other accounts payable, $2,031 thousand Convertible loans, $1,327 thousand in BCF liability, and $32 thousand in short term lease liability.

We had a negative working capital of $2,759 thousand and $2,818 thousand as of June 30, 2023, and December 31, 2022, respectively.

Our Current liabilities as of June 30, 2023, were $4,251 thousand compared to $3,719 thousand as of December 31, 2022.

During the six months ended June 30, 2023, we had negative cash flow from operations of $357 thousand which was mainly the result of a net loss of $1,316 thousand, offset by financial losses from revaluations of convertible component in convertible loans in the amount of $747 thousand.

During the six months ended June 30, 2023, we had negative cash flow from investing activities of $839 thousand compared to a negative cash flow from investing activities of $190 thousand during the six months ended June 30, 2022. The increase was mainly due to the increase in short term deposits in the amount of $795 thousand.

During the six months ended June 30, 2023, we had a positive cash flow from financing activities of $1,028 thousand compared to a negative cash flow from financing activities during the six months ended June 30, 2022. Cash flow from financing activities in the six months ended June 30, 2023, was a result of issuance of shares to minority interests in a subsidiary in the amount of $1,273 thousand, offset by repayment of loans and convertible loans in the amount of $235 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 June 30, 2023. 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 June 30, 2023, 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.

7