N2OFF, INC. Readers are advised to review the following discussion and analysis of our
financial condition and results of operations together with our consolidated
financial statements and related notes thereto included elsewhere in this
Quarterly Report on Form 10-Q and the consolidated financial statements and
related notes thereto in our 2020 Annual Report. Some of the information
contained in this discussion and analysis or set forth elsewhere in this
Quarterly 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 our 2020 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. Furthermore,
certain disclosures and references made herein apply to
We develop eco-friendly "green" solutions for the food industry. Our solutions are developed to improve the food safety and shelf life of fresh produce. We do this by controlling human and plant pathogens, thereby reducing spoilage, and in turn, reducing food loss.
Our products are based on a proprietary blend of food acids which have a synergistic effect when combined with certain types of oxidizing agent-based sanitizers and fungicides at low concentrations. Our green products are capable of cleaning, sanitizing and controlling pathogens on fresh produce with the goal of making them safer for human consumption and extending their shelf life by reducing their decay. One of the main advantages of our products is that our active ingredients do not leave any toxicological residues on the fresh produce we treat. In contrary, by forming a temporary protective shield around the fresh produce we treat, our products make it difficult for pathogens to develop and potentially provide protection which also reduces cross-contamination.
Our Common Stock is listed on the Nasdaq Capital Market under the symbol "SVFD."
As of the date of this report, we did not experience any material impact on our financial condition and results of operations due to COVID-19, and we do not expect to experience any material impact on our overall liquidity positions and outlook as a result of the outbreak. Nevertheless, it is not possible at this time to estimate the full impact that the COVID-19 pandemic, the continued spread of COVID-19, and any additional measures taken by governments, health officials or by us in response to such spread, could have on our business results of operations and financial condition.
17 Results of Operations
Components of Results of Operation
Revenues and Cost of Revenues
Our total revenue consists of products and our cost of revenues consists of cost of products.
The following table discloses the breakdown of revenues and costs of revenues:
Nine Months Ended Three Months Ended
September 30, September 30,
U.S. dollars in thousands, except
share and per share data 2021 2020 2021 2020
Revenues $ 248,840 $ 63,566 $ 71,363 $ -
Cost of revenues (67,931) (25,686) (53,644)
Gross (loss) profit $ 180,909 $ 37,880 $ 17,719 $
Operating Expenses
Our current operating expenses consist of three components - research and development expenses, selling and marketing expenses and general and administrative expenses.
Research and Development Expenses, net
Our research and development expenses consist primarily of salaries and related personnel expenses, share base compensation, professional fees and other related research and development expenses such as field tests.
Nine Months Ended Three Months Ended
September 30, September 30,
U.S. dollars in thousands 2021 2020 2021 2020
Salaries and related expenses $ 60,327 $ 38,643 $ 42,400 $ -
Share based compensation 16,050 68,657 (15,294 ) 35,021
Professional fees 224,001 104,574 13,069 35,613
Laboratory and field tests 15,733 86,352 8,357 7,724
Depreciation 21,871 27,222 7,972 9,107
Other expenses 25,021 15,360 9,966 -
Total $ 363,003 $ 340,808 $ 66,470 $ 87,465 We expect that our research and development expenses will increase as we continue to develop our products and services, field trials and recruit additional research and development employees.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries and related expenses, share based compensation and other expenses.
18
Nine Months Ended Three Months Ended
September 30, September 30,
U.S. dollars in thousands 2021 2020 2021 2020
Salaries and related expenses $ 15,931 $ 30,152 $ 12,517 $ -
Share based compensation 6,420 (21,583 ) 5,629 783
Professional fees 39,442 11,314 33,448 990
Commissions 20,402 - 11,342 -
Transport and storage 15,268 - 4,929 -
Other expenses 4,965 23,599 1,154 4,961
Total $ 102,428 $ 43,482 $ 69,019 $ 6,734 We expect that our selling and marketing expenses will increase as we continue to increase our selling and marketing efforts including commercial validation pilots and recruit additional employees or contractor to support our selling and marketing efforts in our targeted geographical areas.
General and Administrative Expenses
General and administrative expenses consist primarily of professional services, share based compensation and other non-personnel related expenses.
Nine Months Ended Three Months Ended
September 30, September 30,
U.S. dollars in thousands 2021 2020 2021 2020
Salaries and related expenses $ 113,839 $ - $ 81,783 $ -
Professional services 2,134,281 319,640 801,087 140,994
Share based compensation 134,093 338,108 21,355 133,021
Legal expenses 108,473 59,785 87,720 25,203
Insurance 310,459 48,300 163,334 15,340
Other expenses 46,299 85,429 19,458 23,328
Total $ 2,847,444 $ 851,262 $ 1,174,737 $ 337,886 Three months ended
Revenues.
Revenues for the three months ended
We do not have backlogs or firm commitments from our customers for our products. Our sales might deteriorate if we fail to achieve commercial success or obtain regulatory approval of any of our products.
Cost of Sales
Cost of sales consists primarily of salaries, materials, transportation and
overhead costs of manufacturing our products. Cost of revenues for the three
months ended
19 Gross Profit
Gross profit for the three months ended
Research and Development
Research and development expenses consist of salaries and related expenses,
share base compensation, consulting fees, service providers' costs, related
materials and overhead expenses. Research and development expenses for the three
months ended
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries and related costs
for selling and marketing personnel, travel related expenses and services
providers and commissions. Selling and marketing expenses for the three months
ended
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related
expenses including share based compensation and other professional services as
well as other non-personnel related expenses such as legal expenses and
directors and insurance costs. General and administrative expenses for the three
months ended
Financing Expenses, Net
Financing income, net, for the three months ended
Total Comprehensive Loss
As a result of the foregoing, our total comprehensive loss for the three months
ended
Nine months ended
Revenues
Revenues for the nine months ended
We do not have backlogs or firm commitments from our customers for our products. Our sales might deteriorate if we fail to achieve commercial success or obtain regulatory approval of any of our products.
Cost of Sales
Cost of sales consists primarily of salaries, materials, transportation and
overhead costs of manufacturing our products. Cost of revenues for the nine
months ended
20 Gross Profit
Gross profit for the nine months ended
Research and Development
Research and development expenses consist of salaries and related expenses,
share base compensation, consulting fees, service providers' costs, related
materials and overhead expenses. Research and development expenses for the nine
months ended
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries and related costs
for selling and marketing personnel, travel related expenses and services
providers. Selling and marketing expenses for the nine months ended
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related
expenses including share based compensation, professional fees and other
non-personnel related expenses such as legal expenses and directors and
insurance costs. General and administrative expenses for the nine months ended
Financing Expenses, Net
Financing expenses, net, for the nine months ended
Total Comprehensive Loss
As a result of the foregoing, our total comprehensive loss for the nine months
ended
21
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations, and otherwise operate on an
ongoing basis. Significant factors in the management of liquidity are funds
generated by operations, levels of accounts receivable and accounts payable and
capital expenditures. Since our inception through
On
The table below presents our cash flows for the periods indicated:
Nine Months Ended
September 30,
2021 2020
Net cash used in operating activities $ (3,169,632 ) $ (619,397 )
Net cash provided by (used in) investing activities (23,760 ) 1,809
Net cash provided by financing activities 10,745,759 637,344
Effect of exchange rate changes on cash and cash
equivalents and restricted cash 8,383 -
Increase in cash, cash equivalents and restricted
cash $ 7,560,750 $ 19,756 As of
Operating Activities
Net cash used in operating activities was
Investing Activities
Net cash used in investing activities was
Financing Activities
Net cash provided by financing activities was
22 Financial Arrangements
Since our inception, we have financed our operation primarily through proceeds
from sales of our shares of Common Stock, convertible loan agreements and grants
from the
During
On
On
23
Off-Balance Sheet Arrangements
As of
Changes to Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are set forth in our 2020 Annual Report.
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