AGRIFORCE GROWING SYSTEMS LTD. Prospective investors should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements." You should review the "Risk Factors" section of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Company History and Our Business
At AgriFORCE, our purpose is clear: to positively transform farm, food, and family every day, everywhere. With years of in-depth research and development experience, we are pioneers, ready to deliver integrated, practical, and sustainable solutions that can be applied throughout multiple verticals in AgTech. We drive our business through two operating divisions, AgriFORCE Solutions and AgriFORCE Brands.
Our two divisions-AgriFORCE Solutions and AgriFORCE Brands-work in partnership to address some of the existential challenges being faced by the world today-climate change, extreme weather, food security and sovereignty, the environmental impact of industrial and commercial farming-working towards providing better tasting, more nutritious plant-based foods and other products to consumers on a global level.
Status as an
On
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We are in the process of evaluating the benefits of relying on other exemptions
and reduced reporting requirements provided by the JOBS Act. Subject to certain
conditions set forth in the JOBS Act, as an "emerging growth company," we intend
to rely on certain of these exemptions from, without limitation, (i) providing
an auditor's attestation report on our system of internal controls over
financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and
(ii) complying with any requirement that may be adopted by the
Our Business Plan
The Company plans to develop its business by focusing on both an organic growth plan and through M&A. The Company's organic growth plan is focused on four distinct phases:
AgriFORCE Solutions
AgriFORCE Solutions provides consulting services for AgTech knowledge, operational solutions, and research and development (R&D), which is augmented with patented and patent pending controlled-environment agriculture (CEA) and additional agriculture facilities and platforms.
We have taken a strategic and holistic view of agriculture to provide solutions that address the key challenges facing this important industry. We develop and acquire innovative intellectual property (IP) and technology to improve farming. Our expertise goes from seed to table and ranges through the life cycle of a plant-from micropropagation and tissue culture to cultivation-with a proprietary approach that brings together all of the elements, including crops, operations, facilities, systems, and environment designed to allow the plant to reach its full genetic potential.
PHASE 1: COMPLETED: 2017-2021
? Conceptualization, engineering, and design of facility and systems
(Completed).
? Completed selection process of key environmental systems with preferred
vendors (Completed).
? The signing of revenue contracts with the Exclusive Independent Operator
(EIO) for the first three facilities completed (Completed).
? The arrangement of three offtake agreements signed with Exclusive
Independent Operator (EIO) for those three facilities when complete.
(Subsequently these agreements were terminated in Q2 2021).
? ForceFilm material ordered (Completed).
PHASE 2: 2022-2024:
? Purchase of the land parcel in Coachella, CA
? Complete new contracts' structures for those first three facilities with
new independent operators.
? Site preparation and utilities infrastructure build out for the campus (up
to eight facilities).
? Fit out and complete genetics lab for micropropagation, breeding, and R&D
to achieve near term revenue (8 months) of the sale of tissue culture
clones for variant crops.
? Additional raw materials procurement of AgriFORCE IP specific automated
grow system, supplemental grow lighting and controls systems, and
manufacture of the building envelope materials.
? Conceptualization and design of vertical grow solutions in order to
develop a small-scale vertical grow house.
? Focus on the delivery and installation of the first facility.
? Initiate the design of a R&D facility for food solutions and plant-based
pharma.
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PHASE 3: 2024-2027:
? Compete construction of first facility and commence operations
? Focus on the delivery and installation of the second and third facilities.
Proof of quantitative and qualitative benefits are expected to drive both
sales pipeline acceleration for subsequent years.
? Complete the design and construction of a R&D facility for food solutions
and plant-based pharma. Commence engagement with universities and
pharmaceutical companies.
? Construct small scale vertical grow house and operate successfully.
? Finalize the design and engineering of vertical grow solution with
construction commencement late in the third year. Commence engagement with
local restaurants and grocery stores and develop a vertical grow house
branding strategy.
PHASE 4: 2027:
? Focus on delivery and installation of additional facilities.
? Expand geographic presence into other states whilst also introducing the
grow house to other international markets with a view to securing
additional locations and markets by year four.
? Targeted additional contracts of three facilities.
? Commence and complete first vertical grow commercial facility to serve
Southern California market by end of year 4.
The Company's initial AgriFORCE grow houses are planned to be constructed in
AgriFORCE Brands
AgriFORCE Brands division is focused on the development and commercialization of plant-based ingredients and products that deliver healthier and more nutritious solutions. We will market and commercialize both branded consumer product offerings and ingredient supply. This started with the acquisition of the MNG (Manna) intellectual property which is a patent-pending technology to naturally process and convert grains, pulses, and root vegetables. The process results in low-starch, low-sugar, high-protein, fiber-rich baking flour products, and nutrition liquid. The nutrition values of the flour have the potential to transform consumers' diet in multiple verticals.
MNG Wheat flour has 30 times more fiber, up to 3 times more proteins and less
than 15% of the starch as Regular All-Purpose Baking flour as independently
tested and conducted by
PHASE 1: COMPLETED: 2017-2020
? Product and Process Testing and Validation (Completed)
? Filing of US and International Patent (Completed)
? Conceptual Engineering and Preliminary Budgeting on Commercial Pilot Plant
(Completed)
PHASE 2: 2021-2022
? Design, Build, Start-up and Operation of the Pilot Plant
? Develop Range of Finished Products in Wheat Grain Flours
? Collaborate with Nutritional Flour Medical Research Institute (an IRS
section 501(c)(3) Medical Research Organization) funded by private &
public research grants
PHASE 3: 2022-2023
? Launch First Range of Products in US/Canada
? Drive Business with Finished Products in direct to consumer ("D2C"),
Retail, Food Service
? Drive Business as Ingredients for Bakery, Snack and Plant Based Protein
Products Manufacturers
? Develop Manufacturing Base through Partnerships and Licensing
? Conceptual Engineering and Preliminary Budgeting on Large-Scale Processing
Plant
? Develop Range of Finished Products in other Grain Flours, Pulses/Protein
Flours and Juices
PHASE 4: 2024-2025
? Expand Product Range in US/Canada
? Expand Business to other Geographies (select Markets in Europe , Asia ,
Latin America )
? Design, Build Start-up and Operation of Large-Scale Processing Plan
Merger and Acquisition ("M&A")
With respect to M&A growth, the Company is creating a separate corporate office to aggressively pursue acquisitions. The Company plans to focus on identifying target companies, which help expand AgriFORCE Brand's mandate to deliver more nutritious (better for you) crops, ingredients, and plant-based products that are sustainably produced. The Company believes that AgriFORCE Solutions platform of IP and group of companies acquired through M&A can identify opportunities to produce crops more sustainably and that offer unique competitive advantages through the supply chain to ultimately have them converted into ingredients and plant based products or simply sold to consumers through AgriFORCE Brands.
Below is a summary of the intended strategy with respect to the Company's M&A strategy:
Strategy
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FOR THE THREE AND SIX MONTHS ENDED
Results of Operations
The following discussion should be read in conjunction with the condensed
unaudited financial statements for the interim periods ended
Revenues
The Company has generated no revenue since inception.
Operating Expenses
Operating expenses increased in the three months ended
Operating expenses increased in the six months ended
Other (Income) / Expenses
Other expenses for the three months ended
Other expenses for the six months ended
Net Loss
The Company recorded a net loss of
The Company recorded a net loss of
Liquidity and Capital Resources
The Company's primary need for liquidity is to fund working capital
requirements, capital expenditures, and for general corporate purposes. The
Company's ability to fund operations and make planned capital expenditures and
debt service obligations depends on future operating performance and cash flows,
which are subject to prevailing economic conditions, financial markets, business
and other factors. We have recorded a net loss of
We had
Our future capital requirements will depend on many factors, including:
? the cost and timing of our regulatory activities, especially the process to
obtain regulatory approval for our intellectual properties in the
foreign countries ? the costs of R&D activities we undertake to further develop our technology ? the costs of constructing our grow houses, including any impact of
complications, delays, and other unknown events ? the costs of commercialization activities, including sales, marketing and
production
? the level of working capital required to support our growth ? our need for additional personnel, information technology or other operating
infrastructure to support our growth and operations as a public company ? completion of planned acquisitions
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The Company is at the stage of development of its first facility and other IP. As such it is likely that additional financing will be needed by the Company to fund its operations and to develop and commercialize its technology. These factors raise substantial doubt about the Company's ability to continue as a going concern.
For the next twelve months from issuance of these financial statements, the Company will seek to obtain additional capital through the sale of debt or equity financings or other arrangements to fund operations; however, there can be no assurance that the Company will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing shareholders and newly issued shares may contain senior rights and preferences compared to currently outstanding common shares. Issued debt securities may contain covenants and limit the Company's ability to pay dividends or make other distributions to shareholders. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in the Company's ability to raise capital, management believes that there is substantial doubt in the Company's ability to continue as a going concern for twelve months from the issuance of these financial statements.
19 Cash Flows
The net cash used by operating activities for the six months ended
The net cash used in investing activities for six months ended
Net cash used in financing activities for the six months ended
Recent Financings
On
On
On
Off Balance Sheet Arrangements
None.
Significant Accounting Policies
See the footnotes to our unaudited financial statements for the six months ended
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