THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR AUDITED
FINANCIAL STATEMENTS AND THE RELATED NOTES THAT APPEAR ELSEWHERE IN THIS ANNUAL
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 ANNUAL REPORT.
Emerging Growth Company - We are an emerging growth company as defined in
Section 2(a)(19) of 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 $1,000,000,000 or more; (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 $1,000,000,000 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 Exchange Act.
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 (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 to
provide auditor attestation of our internal controls and procedures; and
? Any Public Company Accounting Oversight Board ("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.
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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.
This form 10-K contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. For this purpose, any
statements contained in this Form 10-K that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"estimate" or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending on a
variety of factors, many of which are not within our control. These factors
include by are not limited to economic conditions generally and in the
industries in which we may participate; competition within our chosen industry,
including competition from much larger competitors; technological advances and
failure to successfully develop business relationships.
This discussion contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results may differ materially from those
anticipated in these forward-looking statements.
This discussion summarizes the significant factors affecting the consolidated
financial statements, financial condition, liquidity, and cash flows of Sativus
Tech, Corp, for the fiscal year ended December 31, 2021 and 2020. The following
discussion and analysis should be read in conjunction with the consolidated
financial statements and notes included elsewhere in this Form 10-K.
Executive 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 intelligence 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 in 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 cultivation protocol and technology products, among
others, in the fields of exotic plants and mushrooms. Saffron Tech plans to roll
out commercial cultivation pilot site in the coming year. This technology is
designed to provide automated indoor cultivation farm for high-quality,
high-yield saffron all year round. The Company developed a Saffron indoor
cultivation protocol allowing 4 cultivation cycles a year, and a R&D center.
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It is also environmentally friendly, using economic levels of water, space, and
fertilizer. 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.
Saffron is used in many industries, such as the food industry, particularly by
famous chefs and Michelin starred restaurants, the natural cosmetics industry,
the food supplements 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.
Saffron Tech is focusing on its in-house research and development of agriculture
technology products. Saffron Tech developed a growth protocol and supporting
technology, allowing indoor Saffron cultivation, producing high-quality,
high-yield saffron multiple times a year.
On December 8, 2021, Saffron Tech announced it has begun construction of a new
state-of-the-art indoor farm that will help increase its production of the
saffron spice. Saffron Tech has already successfully completed two harvests of
saffron using vertical farming technology at its initial location in Ganot,
Israel. The Company's mission with this new facility, located at Mavki'im,
Israel, is to complete the cultivation protocol, and prove it's ability to
produce 4 flowering cycles a year. Traditional agriculture only produces one
harvest of saffron per year through a labor-intensive process.
On December 9, 2021, FINRA gave final approval for the Company's 1-for-10
consolidation, or reverse split, of our issued and outstanding common shares, as
noted in our 8K of December 13, 2021. Except where otherwise indicated, all
share and per share data in this 10-K have been retroactively restated to
reflect said consolidation.
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
immediate 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 54% post-raise.
7
Results of Operations during the year ended December 31, 2022, as compared to
the year ended December 31, 2021
Operating Expenses
Research and Development Expenses for the year ended December 31, 2022, amounted
to $673 thousand as compared to $911 for the year ended December 31, 2021.
During 2022, Saffron Tech reduced its research and development expenses in
Israel due to financial constraints.
General and Administrative expenses for the year ended December 31, 2022,
amounted to $670 thousand as compared to $1,639 thousand for the year ended
December 31, 2021. The decrease during the year ended December 31, 2022, was
mainly due the decrease in share-based expenses that amounted to $217 thousand,
compared to $1,052 thousand for the year ended December 31, 2021.
Financing expenses for the year ended December 31, 2022, amounted to $480
thousand as compared to $1,391 thousand for the year ended December 31, 2021.
Financing expenses include interest on loans and convertibles loans,
amortization of BCF and adjustments to the fair value of certain convertible
loans.
Results of Operations during the year ended December 31, 2021, as compared to
the year ended December 31, 2020
Operating Expenses
Research and Development Expenses for the year ended December 31, 2021, amounted
to $911 thousand as compared to $107 for the year ended December 31, 2020.
During 2020, the Saffron Tech began its research and development expenses in
Israel.
General and Administrative expenses for the year ended December 31, 2021,
amounted to $1,639 thousand as compared to $456 thousand for the year ended
December 31, 2020. The increase during the year ended December 31, 2021, was
mainly due to share-based expenses that amounted to $1,318, compared to $171 for
the year ended December 31, 2020.
Financing expenses for the year ended December 31, 2021, amounted to $1,391
thousand as compared to $1,388 thousand for the year ended December 31, 2020.
Financing expenses include interest on loans and convertibles loans,
amortization of BCF and adjustments to the fair value of certain convertible
loans.
Gain on liquation of subsidiary for the year ended December 31, 2021, amount to
$Nil as compared to $9,593 for the year ended December 31, 2020. The gain in
2020 related to Eroll being liquidated by the Israeli court thereby removing the
liability form the Company's balance sheet.
Liquidity and Capital Resources
Overview
Since inception on January 16, 2015, the Company had a cumulative deficit as of
December 31, 2022, of $22,604 thousand and we have a working capital deficit of
$2,569 thousand as of December 31, 2022. 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. Those factors raise
substantial doubt about the Company's ability to continue as a going concern.
The ability to continue as a going concern is dependent upon the Company
obtaining the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they become due.
Historically, we have financed our cash flow and operations from the initial
contribution of our majority shareholder and by raising equity, convertible
loans and warrants. As of December 31, 2022, our cash balance was $810 thousand.
During November and December 2020 and January 2021, the Company continued to
raise funds to support its operations and received $955 thousand 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 $1.00 per share and mature
between 12 and 24 months from the issuance date. As of December 31, 2022,
Promissory Notes in the amount of $830,000 have been converted into shares and
amount of $100,000 were repaid to the investors.
8
On December 24, 2020, Saffron Tech, announced its intention to raise up to 5.2
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. Fund raising expenses accumulated to $155 and the net amount raised
through Pipelbiz was $1.4 million.
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
crowd funding platform - Pipelbiz ("2022 Crowd Funding Round"). Assuming the
maximum amount is raised, the Company will own approximately 61% of the Saffron
Tech. The 2022 Crowd Funding Round was closed on December 1, 2022, having raised
3.8 million NIS (approximately $1.3 million). Fund raising 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
crowd funding 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
during December 2022 through to January 2023, via another crowd funding 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, announced it has 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 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 54% post-raise.
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
the board 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.
Year ended December 31, 2022 as compared to the year ended December 31, 2021
During the year ended December 31, 2022, the Company's overall position of cash
and cash equivalents decreased by $56 thousand. This decrease in cash can be
attributed to the following:
The Company's net cash used in operating activities during the year ended
December 31, 2022, was $986 thousand as compared to $1,374 for the year ended
December 31, 2021. This decrease is mostly due to a significant decrease in the
net loss of the Company.
The Company's net cash used in investing activities during the year ended
December 31, 2022, was $192 thousand as compared to $27 for the year ended
December 31, 2021. This increase is mostly due to investments in Saffron Tech's
new facility, located at Mavki'im.
Cash provided by financing activities for the year ended December 31, 2022, was
$1,122 thousand as compared to $1,856 thousand for the year ended December 31,
2021. Cash provided in 2022 was from the receipt of $114 in short term loans and
$1,308 from issuance of shares to minority interests, offset in part by
repayment of convertible loans in the amount of $278 thousand. Cash provided in
2021 was from the receipt of $530 in convertible loans and $1,406 from crowd
funding.
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Year ended December 31, 2021 as compared to the year ended December 31, 2020
During the year ended December 31, 2021, the Company's overall position of cash
and cash equivalents increased by $455 thousand. This increase in cash can be
attributed to the following:
The Company's net cash used in operating activities during the year ended
December 31, 2021, was $1,374 thousand as compared to $316 for the year ended
December 31, 2020. This increase is mostly due to a significant increase in the
operations of the Company.
Cash provided by financing activities for the year ended December 31, 2021, was
$1,856 thousand as compared to $725 thousand for the year ended December 31,
2020. Cash provided in 2021 was from the receipt of $530 in convertible loans
and $1,406 from crowd funding as compared to the receipt of $725 from
convertible loans in 2020.
Off Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect or change on the Company's financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors. The term
"off-balance sheet arrangement" generally means any transaction, agreement or
other contractual arrangement to which an entity unconsolidated with the Company
is a party, under which the Company has (i) any obligation arising under a
guarantee contract, derivative instrument or variable interest; or (ii) a
retained or contingent interest in assets transferred to such entity or similar
arrangement that serves as credit, liquidity or market risk support for such
assets. We had no outstanding derivative financial instruments, off-balance
sheet guarantees, interest rate swap transactions or foreign currency contracts.
We do not engage in trading activities involving non-exchange traded contracts.
Recently Issued Accounting Pronouncements
For information with respect to recent accounting pronouncements, see Note 2 to
the audited consolidated financial statements of SATIVUS TECH CORP. included
elsewhere in this Form 10-K
Critical Accounting Policies
Our discussion and analysis of the financial condition and results of operations
are based upon the Company's financial statements, which have been prepared in
accordance with generally accepted accounting principles in the United States
("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 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 are fair value of
convertible loans, and the calculation of share-based compensation and going
concern.
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.
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SATIVUS TECH CORP. 
