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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2024

 

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

 

For the transition period from __________ to ____________

 

Commission File No. 001-40403

 

N2OFF, INC.
(Exact name of registrant as specified in its charter)

 

Nevada   26-4684680
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

HaPardes 134 (Meshek Sander)    
Neve Yarak, Israel   4994500
(Address of principal executive offices)   (Zip Code)

 

(347) 468 9583
(Registrant’s telephone number, including area code)

 

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class   Trading Symbol(s)   Name of exchange on which registered
Common Stock, par value $0.0001 per share   NITO   The Nasdaq Capital Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

☐ Large accelerated filer ☐ Accelerated filer
☒ Non-accelerated filer ☒ Smaller reporting company
    ☒ Emerging growth company

 

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 14, 2024, the registrant had 4,162,383 shares of common stock, par value $0.0001 outstanding.

 

 

 

 

 

 

N2OFF, Inc.

 

Quarterly Report on Form 10-Q

 

TABLE OF CONTENTS

 

    Page
Forward-Looking Statements 3
     
PART I - FINANCIAL INFORMATION 5
     
Item 1. Condensed Consolidated Interim Financial Statements (unaudited) 5
     
  Condensed Consolidated Interim Balance Sheets (unaudited) 7
     
  Condensed Consolidated Interim Statements of Comprehensive Loss (unaudited) 8
     
  Condensed Consolidated Interim Statements of Stockholders’ Equity (unaudited) 9
     
  Condensed Consolidated Interim Statements of Cash Flows (unaudited) 10
     
  Notes to Condensed Consolidated Interim Financial Statements 11-21
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 29
     
Item 4. Control and Procedures 29
     
PART II - OTHER INFORMATION 30
     
Item 1 Legal Proceedings 30
     
Item 1A. Risk Factors 30
     
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 31
     
Item 3 Defaults Upon Senior Securities 32
     
Item 4 Mine Safety Disclosures 32
     
Item 5 Other Information 32
     
Item 6. Exhibits 32
     
SIGNATURES 33

 

2

 

 

FORWARD-LOOKING STATEMENTS

 

Certain information set forth in this Quarterly Report on Form 10-Q (the “Quarterly Report”) including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events. Such forward-looking statements include statements regarding, among other things:

 

  ● our customers’ requirements that our products undergo a lengthy pilot period without any assurance of sales;
     
  ● our history of operating losses and expectation to incur additional losses in the future;
     
  ● our ability to raise additional capital to meet our liquidity needs;
     
  ● because of our limited operating history, our ability to successfully operate our business or execute our business plan;
     
  ● our products and technology requiring additional trials, which could prolong the sales cycle;
     
  ● commercial success of our new generation products, as well as any future products, and the degree of market acceptance by the packing house community as well as by other prospective markets and industries;
     
  ● our ability to comply with the continued listing standards of the Nasdaq Capital Market;
     
  ● sales of our products;
     
  ● the size and growth of our product market;
     
  ● our ability to obtain market acceptance of our environmentally friendly solutions for fruits and vegetables;
     
  ● conditions in Israel, including the ongoing war between Israel and Hamas, and other conflicts in the region, may adversely affect our operations and limit our ability to market our products, which would lead to a decrease in revenues;
     
  ● our inability to respond effectively to technological changes in our industry, which could reduce the demand for our products;
     
  ● our ability or our contractors or service providers’ ability to comply with laws and regulations to develop, market and sell our products or future products;
     
  ● our ability to achieve regulatory approvals and registration in the United States, Mexico, Peru, Egypt, Brazil, and Israel;

 

3

 

 

  ● significant competition from other companies looking to develop or acquire new alternative environmentally friendly solutions for the treatment of fruits and vegetables and other edible matter;
     
  ● our reliance on a limited number of suppliers to produce certain key components of our products;
     
  ● our ability to establish and maintain strategic partnerships with third parties, including for the distribution of products;
     
  ● our ability to establish sales, marketing and distribution capabilities or enter into successful relationships with third parties to perform these services;
     
  ● our ability to rapidly establish a global distributorship network in order to effectively market our products;
     
  ● results of our tests which may not be indicative of results in future tests and any planned or future tests which may lead to results sufficient for the necessary regulatory approvals;

 

These statements are only predictions and involve known and unknown risks, uncertainties and other factors. Readers are urged to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (the “SEC”). We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

 

On March 19, 2024, we changed our name from “Save Foods, Inc.” to “N2OFF, Inc.”. Accordingly, all such references in this Quarterly Report have been changed to reflect our new name. In connection with such name change, on the same date, we changed our trading symbol from “SVFD” to “NITO”.

 

As used in this Quarterly Report and unless otherwise indicated, the terms “N2OFF,” “we,” “us,” “our,” or “our Company” refer to N2OFF, Inc., Save Foods Ltd., our 98.48% owned subsidiary, and NTWO OFF Ltd., our 60% owned subsidiary.

 

Unless noted otherwise, all references to the number of shares of common stock, stock option and per share information in this Quarterly Report reflect the 1:7 reverse stock split of our common stock that became effective on October 5, 2023.

 

4

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

N2OFF, INC.

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

AS OF JUNE 30, 2024

 

5

 

 

N2OFF, INC.

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

 

AS OF JUNE 30, 2024

IN U.S. DOLLARS

 

TABLE OF CONTENTS

 

  Page
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED):  
   
Condensed Consolidated Interim Balance Sheets (unaudited) 7
   
Condensed Consolidated Interim Statements of Comprehensive Loss (unaudited) 8
   
Condensed Consolidated Interim Statements of Stockholders’ Equity (unaudited) 9
   
Condensed Consolidated Interim Statements of Cash Flows (unaudited) 10
   
Notes to Condensed Consolidated Interim Financial Statements 11 - 21

 

6

 

 

N2OFF, INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(U.S. dollars except share and per share data)

 

   June 30,   December 31, 
   2024   2023 
Assets          
Current Assets          
Cash and cash equivalents   4,467,529    4,447,003 
Restricted cash   22,737    31,171 
Accounts receivable, net of allowance for doubtful account of $56,954 and $64,031 as of June 30, 2024 and December 31, 2023, respectively.   157,963    107,007 
Inventory   106,342    121,513 
Prepaid expenses   653,358    719,389 
Other current assets   55,798    39,538 
Total Current assets   5,463,727    5,465,621 
           
Right-of-use asset arising from operating lease   28,756    56,568 
           
Property and equipment, net   56,102    66,581 
           
Investment in nonconsolidated affiliate (Note 3)   1,931,129    1,655,461 
           
Total assets   7,479,714    7,244,231 
           
Liabilities and Shareholders’ Equity          
Current Liabilities          
Short term loan (Note 5(1))   1,200,000    - 
Accounts payable   24,973    43,539 
Other liabilities   365,762    734,933 
Total current liabilities   1,590,735    778,472 
           
Operating lease liabilities   3,305    7,181 
          
Total liabilities   1,594,040    785,653 
           
Stockholders’ Equity          
Common stock, $ 0.0001 par value (“Common Stock”):
495,000,000 shares authorized as of June 30, 2024 and December 31, 2023; issued and outstanding 4,161,097 and 2,955,490 shares as of June 30, 2024 and December 31, 2023, respectively.		   416    296 
Preferred stock, $ 0.0001 par value (“Preferred Stock”):
5,000,000 shares authorized as of June 30, 2024 and December 31, 2023; no shares issued and outstanding as of June 30, 2024 and December 31, 2023.		   -    - 
Additional paid-in capital   36,915,699    35,866,223 
Foreign currency translation adjustments   (26,275)   (26,275)
Accumulated deficit   (30,917,247)   (29,360,235)
Total Company’s stockholders’ equity   5,972,593    6,480,009 
Non-controlling interests   (86,919)   (21,431)
Total stockholders’ equity   5,885,674    6,458,578 
Total liabilities and stockholders’ equity   7,479,714    7,244,231 

 

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

 

7

 

 

N2OFF, INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS

(U.S. dollars except share and per share data)

 

   2024   2023   2024   2023 
   Six months ended   Three months ended 
   June 30   June 30 
   2024   2023   2024   2023 
                 
Revenues from sales of products   60,377    157,618    16,546    36,608 
Cost of sales   (33,762)   (69,753)   (5,782)   (27,007)
Gross profit   26,615    87,865    10,764    9,601 
Research and development expenses   (127,556)   (135,765)   (11,690)   (16,857)
Selling and marketing expenses   (114,279)   (157,921)   (57,031)   (88,775)
General and administrative expenses   (1,550,054)   (2,378,151)   (808,251)   (744,287)
Operating loss   (1,765,274)   (2,583,972)   (866,208)   (840,318)
Financing income (expenses), net   (76,119)   33,087    (81,055)   10,982 
Other income, net (Note 5(1))   105,225    12,294    117,396    12,294 
Changes in fair value of an investment in an associate measured under the fair value option (Note 3)   113,668    102,107    29,725    102,107 
Net loss   (1,622,500)   (2,436,484)   (800,142)   (714,935)
Less: net loss attributable to non-controlling interests   65,488    13,301    12,694    5,430 
Net loss attributable to the Company’s stockholders’ equity   (1,557,012)   (2,423,183)   (787,448)   (709,505)
                     
Loss per share (basic and diluted)   (0.49)   (2.8)   (0.23)   (0.69)
                     
Basic and diluted weighted average number of shares of Common Stock outstanding (*)   3,184,772    862,399    3,408,878    1,027,040 

 

(*) Adjusted to reflect one (1) for seven (7) reverse stock split in October 2023 (see note 1B).

 

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

 

8

 

 

N2OFF, INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(U.S. dollars, except share and per share data)

 

   Number of shares   Amount   Additional paid-in capital   Foreign currency translation adjustments   Accumulated deficit   Total Company’s stockholders’ equity   Non-controlling interests   Total equity 
                                 
BALANCE AT DECEMBER 31, 2023   2,955,490    296    35,866,223    (26,275)   (29,360,235)   6,480,009    (21,431)   6,458,578 
                                         
Issuance of shares for standby equity purchase agreement II   28,333    3    39,947    -    -    39,950    -    39,950 
Issuance of shares to services providers   4,794    -    23,738    -    -    23,738    -    23,738 
Comprehensive loss for the period   -    -    -    -    (769,564)   (769,564)   (52,794)   (822,358)
BALANCE AT MARCH 31, 2024   2,988,617    299    35,929,908    (26,275)   (30,129,799)   5,774,133    (74,225)   5,699,908 
                                         
Issuance of shares for standby equity purchase agreement II   1,142,480    114    936,980    -    -    937,094    -    937,094 
Issuance of shares to services providers   30,000    3    48,811    -    -    48,814    -    48,814 
Comprehensive loss for the period   -    -    -    -    (787,448)   (787,448)   (12,694)   (800,142)
BALANCE AT JUNE 30, 2024   4,161,097    416    36,915,699    (26,275)   (30,917,247)   5,972,593    (86,919)   5,885,674 

 

   Number of shares (*)   Amount   Additional paid-in capital   Foreign currency translation adjustments   Accumulated deficit   Total Company’s stockholders’ equity  

Non-controlling interests

   Total equity 
                                 
BALANCE AT DECEMBER 31, 2022   688,272    69    28,710,412    (26,275)   (22,837,827)   5,846,379    (109,038)   5,737,341 
                                         
Issuance of shares to services providers   6,288    1    67,613    -    -    67,614    -    67,614 
Share based compensation to employees and directors   142,860    14    691,005    -    -    691,019    201    691,220 
Comprehensive loss for the period   -    -    -    -    (1,713,678)   (1,713,678)   (7,871)   (1,721,549)
BALANCE AT MARCH 31, 2023   837,420    84    29,469,030    (26,275)   (24,551,505)   4,891,334    (116,708)   4,774,626 
                                         
Issuance of shares for exchange agreement   166,340    17    826,688    -    -    826,705    -    826,705 
Issuance of shares to services providers   135,926    14    670,226    -    -    670,240    -    670,240 
Share based compensation to employees and directors   -    -    5,699    -    -    5,699    88    5,787 
Comprehensive loss for the period   -    -    -    -    (709,505)   (709,505)   (5,430)   (714,935)
BALANCE AT JUNE 30, 2023   1,139,686    115    30,971,643    (26,275)   (25,261,010)   5,684,473    (122,050)   5,562,423 

 

(*) Adjusted to reflect one (1) for seven (7) reverse stock split in October 2023 (see note 1B).

 

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

 

9

 

 

N2OFF, INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(U.S. dollars except share and per share data)

 

   2024   2023 
   Six months ended 
   June 30, 
   2024   2023 
     
CASH FLOWS FROM OPERATING ACTIVITIES:          
Loss for the period   (1,622,500)   (2,436,484)
Adjustments required to reconcile net loss for the period to net cash used in operating activities:          
Depreciation   10,177    23,215 
Issuance of shares to employees and services providers   72,552    868,825 
Share based compensation to employees and directors   -    14,247 
Loss (gain) from sales of property and equipment   188    (12,294)
Gain from standby equity purchase agreement II (Note 5(1))   (105,413)   - 
Expenses from standby equity purchase agreement II and promissory note (Note 5(1))   109,754    - 
Change in fair value of investment in nonconsolidated affiliate   (113,668)   (102,107)
Exchange rate differences on operating leases   3,631    201 
Decrease (increase) in accounts receivable, net   (50,956)   83,076 
Decrease (increase) in inventory   15,171    (9,996)
Decrease in prepaid expenses and other current assets   13,620    61,725 
Decrease in accounts payable   (21,158)   (27,595)
Decrease in other liabilities   (345,573)   (94,395)
Decrease in operating lease expense   27,812    32,460 
Change in operating lease liability   (31,105)   (35,296)
Net cash used in operating activities   (2,037,468)   (1,634,418)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Investment in nonconsolidated affiliate   (162,000)   (1,124,458)
Proceeds from sales of property and equipment   114    22,789 
Net cash used in investing activities   (161,886)   (1,101,669)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from promissory note   1,455,000    - 
Repayments of promissory note   (328,603)   - 
Proceeds from standby equity purchase agreement, net   1,082,457    - 
Net cash provided by financing activities   2,208,854    - 
           
Effect of exchange rate changes on cash and cash equivalents   2,592    2,719 
           
INCREASE (DECREASE) IN CASH , CASH EQUIVALENTS AND RESTRICTED CASH   12,092    (2,733,368)
           
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR   4,478,174    5,750,771 
           
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD   4,490,266    3,017,403 
           
Supplemental disclosure of cash flow information:          
Non cash transactions:          
Investment in nonconsolidated affiliate (see Note 3)   -    826,705 
Issuance of shares for future services   -    551,790 

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements

 

10

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 1 – GENERAL

 

A.Operations

 

N2OFF, Inc. (formerly Save Foods, Inc) (the “Company”) was incorporated on April 1, 2009, under the laws of the State of Delaware.

 

On November 6, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with N2OFF, Inc., a newly formed Nevada corporation and its wholly owned subsidiary (the “Surviving Corporation”), pursuant to which, on the same date, the Company, as parent in this transaction, merged with and into the Surviving Corporation (the “Reincorporation Merger”). The Reincorporation Merger was approved by the Company’s stockholders on October 2, 2023 and became effective on The Nasdaq Capital Market on November 10, 2023. Upon the consummation of the Reincorporation Merger, the Company ceased its legal existence as a Delaware corporation, and the Surviving Corporation continued Company’s business as the surviving corporation. On February 8, 2024, the Company’s stockholders approved the Company’s name change to “N2OFF, Inc.” which became effective on The Nasdaq Capital Market on March 19, 2024.

 

On April 27, 2009, the Company acquired from its stockholders 98.48% of the issued and outstanding shares of Save Foods Ltd. including preferred and ordinary shares. Save Foods Ltd. was incorporated in 2004 and commenced its operations in 2005. Save Foods Ltd. develops, produces, and focuses on delivering innovative solutions for the food industry aimed at improving food safety and shelf life of fresh produce.

 

On March 31, 2023, the Company entered into a securities exchange agreement with Plantify Foods, Inc. (“Plantify”), a Canadian corporation traded on the TSX Venture Exchange (“TSXV”), which focuses on the development and production of “clean-label” plant-based products - see Note 3 below for further information.

 

On August 29, 2023, the Company entered into an exchange agreement with Yaaran Investments Ltd. and formed an Israeli subsidiary, NTWO OFF Ltd. (“NTWO OFF”) which focus on nitrous oxide (“N2O”), a potent greenhouse gas with significant global warming ramifications (the Company, Save Foods Ltd. and NTWO OFF Ltd collectively, the “Group”).

 

The Company’s common stock is listed on The Nasdaq Capital Market under the symbol “NITO”.

 

  B. Reverse stock split

 

On October 4, 2023, following the Company’s 2023 annual meeting of stockholders, the Company filed a Certificate of Amendment (the “Amendment”) to its Amended and Restated Certificate of Incorporation in Delaware to effect a one for seven reverse stock split of the Company’s outstanding Common Stock (the “Reverse Stock Split”). The Reverse Stock Split became effective on October 5, 2023.

 

As a result of the Reverse Stock Split, every seven shares of the Company’s outstanding Common Stock prior to the effect of that amendment were combined and reclassified into one share of the Company’s Common Stock. No fractional shares were issued in connection with or following the reverse split and the shares were rounded to the nearest whole number. The authorized capital and par value of the Common Stock remained unchanged.

 

All shares, stock option and per share information in these consolidated financial statements have been restated to reflect the Reverse Stock Split on a retroactive basis.

 

11

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 1 – GENERAL (continued)

 

  C. Going concern uncertainty

 

Since inception, the Company has incurred significant losses and negative cash flows from operations and has an accumulated deficit of $31 million. The Company has financed its operations mainly through financing by the issuance of the Company’s equity from various investors.

 

The Company’s management expects that the Company will continue to generate losses and negative cash flows from operations for the foreseeable future. Based on the projected cash flows and cash balances as of June 30, 2024, management currently is of the opinion that its existing cash will be sufficient to fund operations until the end of the first quarter of 2025. As a result, there is substantial doubt regarding the Company’s ability to continue as a going concern.

 

Management endeavors to secure sufficient financing through the sale of additional equity securities or capital inflows from strategic partnerships. Additional funds may not be available when the Company needs them, on favorable terms, or at all. If the Company is unsuccessful in securing sufficient financing, it may need to cease operations.

 

The financial statements do not include adjustments for measurement or presentation of assets and liabilities, which may be required should the Company fail to operate as a going concern.

 

  D. Israel – Hamas war

 

Because most of the Company’s operations are conducted in Israel and all members of its board of directors, management, as well as a majority of its employees and consultants, including employees of its service providers, are located in Israel, its business and operations are directly affected by economic, political, geopolitical and military conditions affecting Israel.

 

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers in the southern part of the country. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Following the attack by Hamas on Israel’s southern border, Hezbollah in Lebanon also launched missile, rocket, drone and shooting attacks against Israeli military sites, troops and Israeli towns in northern Israel. In response to these attacks, the Israeli army has carried out a number of targeted strikes on sites belonging to Hezbollah in Lebanon and Syria. Recently, Iran has directly joined the hostilities against Israel by firing hundreds of drones, ballistic missiles and guided missiles to Israel causing further uncertainty in the region. While currently no damages were registered in Israel from such attack, the situation is developing and could lead to additional wars and hostilities in the Middle East. It is possible that the hostilities with Hezbollah and Iran will escalate, and that other terrorist organizations, including Palestinian military organizations in the West Bank, as well as other hostile countries, will join the hostilities. Such hostilities may include terror and missile attacks. In the event that the Company’s facilities are damaged as a result of hostile actions, or hostilities otherwise disrupt our ongoing operations, its ability to deliver or provide products and services in a timely manner to meet its contractual obligations towards customers and vendors could be materially and adversely affected.

 

12

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 1 – GENERAL (continued)

 

Following the brutal attacks on Israel, the mobilization of army reserves and the government declaring a state of war in October 2023, there was a decrease in Israel’s economic and business activity. The security situation has led, among other things, to a disruption in the supply chain and production, a decrease in the volume of national transportation, and a shortage in manpower due to employees being called for active reserve duty as well as a rise in the exchange rate of foreign currencies in relation to the New Israel Shekel. These events may imply wider macroeconomic indications of a deterioration of Israel’s economic standing, which may have a material adverse effect on the Company and its ability to effectively conduct its business, operations and affairs. Although many of such military reservists have since been released, they may be called up for additional reserve duty, depending on developments in the war in Gaza and along Israel’s other borders. Certain of its employees and consultants in Israel, in addition to employees of its service providers located in Israel, have been called, and additional employees may be called, for service in the current or future wars or other armed conflicts with Hamas as well as the other pending or future armed conflicts in which Israel is or may become engaged, and such persons may be absent for an extended period of time.

 

Save Foods Ltd. has experienced delays in pilots and packaging activities due to the war, as certain packing houses, have halted operations for the time being. Additionally, the Company anticipated engaging additional packing houses to conduct pilots with the Company’s product, but, due to the war, the Company was unable to continue pursuing new collaborations for these pilots, and the Company may not be able to resume any potential collaborations if the current war persists for an extended duration. The Company is unable to predict how long the current conflict will last, as well as the repercussions these delays will have on operations. If the Company is unable to renew pilots or collaborations with local packing houses, the Company’s financial results may be affected.

 

Plantify has facilities in Kibbutz Gonen, which is located in an area in northern Israel that has been affected by ongoing hostilities with Hezbollah in Lebanon, as part of the ongoing Israel – Hamas war. Due to the continuous drone attacks, missile strikes and shootings in the region, the area has been almost completely evacuated of civilians. Plantify has reduced its operations in the facility in Kibbutz Gonen and may not be able to resume its regular activities, including its ability to deliver products to customers in a timely manner, if the hostilities persist for an extended period.

 

If Plantify is unable to repay each of the debenture and amounts borrowed under the credit facility it would make us a creditor of Plantify.

 

The Company is continuing to regularly follow developments on the matter and is examining the effects on its operations and the value of its assets.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

 

Basis of presentation

 

The condensed interim consolidated financial statements included in this Quarterly Report are unaudited. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for a fair statement of the Company’s financial position as of June 30, 2024, and its results of operations for the six months ended June 30, 2024, and 2023, changes in stockholders’ equity for the six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023. The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on April 1, 2024. The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2023 included in such Form 10-K. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies.

 

13

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)

 

Use of Estimates

 

The preparation of unaudited condensed consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates. As applicable to these financial statements, the most significant estimates and assumptions relate to calculation of fair value of the convertible loan.

 

Fair value

 

Fair value of certain of the Company’s financial instruments including cash, accounts payable, accrued expenses, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.

 

Fair value, as defined by ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise.

 

Valuation techniques are generally classified into three categories: (i) the market approach; (ii) the income approach; and (iii) the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

 

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

 

14

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)

 

Fair value (continued)

 

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

 

Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.

 

Fair value measurements are required to be disclosed by the level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), (ii) segregating those gains or losses included in earnings, and (iii) a description of where those gains or losses included in earning are reported in the statement of operations.

 

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

 

                 
   As of June 30, 2024 
   Level 1   Level 2   Level 3   Total 
   US$ 
                 
Assets:                    
Investment in Plantify   621,329       -    -    621,329 
Credit Facility   -    -    145,300    145,300 
Convertible loan   -    -    1,164,500    1,164,500 
Total assets   621,329    -    1,309,800    1,931,129 

 

                 
   As of December 31, 2023
   Level 1  Level 2  Level 3  Total
   US$
             
Assets:                    
Investment in Plantify   641,561    -    -    641,561 
Convertible loan   -    -    1,013,900    1,013,900 
Total assets   641,561    -    1,013,900    1,655,461 

 

The following table presents the changes in fair value of the level 1 assets for the period December 31, 2023 through June 30, 2024:

 

   Changes in Fair value 
   US$ 
Assets:     
Outstanding at December 31, 2023   641,561 
Changes in fair value   (20,232)
Outstanding at June 30, 2024   621,329 

 

The following table presents the changes in fair value of the level 3 assets for the period December 31, 2023 through June 30, 2024:

 

   Changes in Fair value 
   US$ 
Assets:     
Outstanding at December 31, 2023   1,013,900 
Credit facility to Plantify   162,000 
Changes in fair value   133,900 
Outstanding at June 30, 2024   1,309,800 

 

15

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 3 – INVESTMENT IN NONCONSOLIDATED AFFILIATE

 

On March 31, 2023, the Company entered into a Securities Exchange Agreement with Plantify, pursuant to which each party agreed to issue to the other party 19.99% of its issued and outstanding capital stock (the “Securities Exchange”).

 

Upon the closing of the Securities Exchange on April 5, 2023, the Company issued 166,340 shares of the its Common Stock to Plantify, which amount represented 19.99% of its outstanding capital stock as of immediately prior to the closing (and 16.66% of the Company’s outstanding capital stock as of immediately following the closing), and Plantify issued 30,004,349 of its common shares to the Company representing 19.99% of Plantify’s outstanding capital stock as of immediately prior to the closing (and 16.66% of Plantify’s outstanding capital stock as of immediately following the closing).

 

In connection with the Securities Exchange Agreement, the Company and Plantify executed a debenture (the “Debenture”), whereby the Company agreed to lend C$1,500,000 (approximately US$1,124,000) to Plantify. The Debenture accrues interest at a rate of 8% annually and is repayable by Plantify on October 4, 2024. Outstanding principal under the Debenture may be converted, at the Company’s sole discretion, into common shares of Plantify at a price of C$0.05 per share for the first 12 months of the Debenture issuance date and C$0.10 per share thereafter. Accrued interest may be converted at the market price of Plantify’s common shares, subject to TSX Venture Exchange approval at the time of conversion. Plantify executed a general security agreement in the Company’s favor and pledged to the Company the shares of Plantify’ subsidiary, Peas of Bean Ltd.

 

On September 7, 2023, the Company purchased an additional 55,004,349 common shares of Plantify at a price of C$0.01 per common share (C$404,890), in a rights offering, resulting in an increase of approximately 7% of the Company’s ownership of the issued and outstanding common shares of Plantify. Following the additional acquisition, the Company owns 85,008,698 common shares of Plantify, representing approximately 23% of its issued and outstanding common shares.

 

The Company determined that it has a significant influence over Plantify and such investment is accounted for under the equity method of accounting. At the initial recognition of the equity investment, the Company elected the fair value option where subsequent changes in fair value are recognized in earnings. If the fair value option is applied to an investment that would otherwise be accounted for under the equity method, the Company applies it to all its financial interests in the same entity (equity and debt, including guarantees) that are eligible items. The equity investment in common shares of Plantify is classified within Level 1 in the fair value hierarchy as the valuation can be obtained from real time quotes in active markets, and is measured based on Plantify’s closing stock price and prevailing foreign exchange rate at each balance sheet date and the changes in fair value are reflected in gain (loss) on equity investments, net in the consolidated statement of income.

 

The fair value of the conversion feature loan was estimated using the Black-Scholes option pricing model with assistance of a third-party appraiser. The assumptions used to perform the calculations are detailed below:

 

16

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 3 – INVESTMENT IN NONCONSOLIDATED AFFILIATE (continued)

 

Fair value of the conversion feature as of June 30, 2024 and December 31, 2023:

 

Fair value of the conversion feature  June 30, 2024   December 31, 2023 
Expected volatility (%)   158.7%   135.70%
Risk-free interest rate (%)   4.63%   5.08%
Expected dividend yield   0.0%   0.0%
Contractual term (years) (*)   0.25    0.25 
Conversion price (Canadian dollars)   (US$0.07) C$0.10    (US$0.04) C$0.054 
Underlying share price (Canadian dollars)   (US$0.01) C$0.01    (US$0.01) C$0.01 
Fair value (U.S. dollars)  $100   $900 

 

The significant observable inputs used in the fair value measurement of the conversion feature are mainly the expected volatility and risk free interest rate. Significant changes in any of those inputs in isolation would have resulted in a change in the fair value measurement.

 

The fair value of the debt component of the Debenture was estimated with the assistance of a third-party appraiser by discounting the principal and interest at a discount rate of market interest for similar loans. The interest rate was determined, among other things, based on the potential risk factor of the debt investment in Plantify, at 24.7% and was calculated at 1,164,400.

 

For the six and three months ended June 30, 2024, an unrealized gain of $130,368 and $46,425, respectively was recorded in changes in fair value of an investment in an associate measured under the fair value option of comprehensive loss.

 

On April 2, 2024, the Board of Directors of the Company approved a binding term sheet for a credit facility of up to $250,000 and bearing interest at a rate of 8% per annum (the “Credit Facility”) to Plantify. The Credit Facility will be provided for a term beginning April 2, 2024 and ending April 1, 2025, unless earlier terminated by the Company following an Event of Default, as defined in the Credit Facility.

 

Subject to the provisions of this Credit Facility, Plantify may drawdown up to $250,000, at any time and from time to time during the term. Each loan must be repaid by Plantify within twelve months provided any outstanding amounts as of the end of the term must be repaid within ninety days. As of June 30, 2024, Plantify borrowed $162,000 under the Credit Facility.

 

The following tables present Plantify’s summarized financial information.

 

   Six months ended
June 30, 2024		   Three months ended
June 30, 2024		 
         
Revenue   327,000    167,000 
Gross loss   (123,000)   (43,000)
Net loss   (1,553,000)   (864,000)

 

17

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 4 – LOAN AGREEMENT

 

On June 30, 2024, the Company entered into a Loan Agreement (the “Loan Agreement”) with Solterra Renewable Energy Ltd. (“Solterra”) and certain other lenders (collectively, the “Lenders”) pursuant to which the Lenders committed to loan Solterra the aggregate principal amount of € 500,000 (approximately $541,541) (€ 375,000 (approximately $406,156) of which was committed by the Company) with interest accruing on the principal at the rate of 7% per annum, to be paid annually beginning June 30, 2025. On July 8, 2024, the Company paid €375,000 (approximately $406,156) see also note 9 below.

 

NOTE 5 – COMMON STOCK

 

1.On December 22, 2023, the Company entered into a Standby Equity Purchase Agreement (the “SEPA II”) with YA II PN, Ltd. (the “Investor”), pursuant to which the Investor has agreed to purchase up to $20 million shares of common stock over 36 months after the date of the SEPA II. The price of shares to be issued under the SEPA II will be 94% of the lowest volume weighted average trading price (the “VWAP”) of the Company’s common stock for the three consecutive trading days commencing on the delivery of each advance notice by the Company. For additional information, see note 10(21) to the Company’s audited financial statements for the year ended December 31, 2023.

 

The SEPA II will terminate automatically on the earlier of January 1, 2027 or when the Investor has purchased an aggregate of $20 million of the Company’s shares of common stock. The Company has the right to terminate the SEPA II upon five trading days’ prior written notice to the Investor.

 

In connection with and subject to the satisfaction of certain conditions set forth in the SEPA II, upon the request of the Company, the Investor will pre-advance to the Company up to $3,000,000 of the $20,000,000 commitment amount.

 

The Company paid a subsidiary of the Investor a structuring fee in the amount of $10,000 and on December 28, 2023, the Company issued 110,554 shares of common stock as a commitment fee to a subsidiary of the Investor. The Company determined the value of the shares issued at $254,274 based on the share price on the agreement date, which was recorded as prepaid expenses in other current assets during the year ended December 31, 2023 and $34,783 was recorded in the statement of operations under financing expenses for the six months ended June 30, 2024.

 

During the six months ended June 30, 2024, the Company issued 1,170,813 shares of common stock, to the Investor pursuant to the terms of SEPA II valued at $977,044 for gross consideration of $1,082,457.

 

On April 4, 2024, the Company, sold a $1,500,000 promissory note (the “Note”) to the Investor pursuant to the terms of SEPA II in exchange for proceeds of $1,455,000, reflecting an original issue discount of 3% to face value of the Note.

 

The Note bears interest at a rate of 8% per annum and matures April 4, 2025. Commencing June 3, 2024, and every 30 days thereafter, the Company is required to pay $150,000, together with accrued and unpaid interest on the then outstanding principal. Payments under the Note can be made either (i) in cash or (ii) by submitting notice of an advance of shares to be issued and sold to the Investor pursuant to the SEPA II, or any combination of (i) or (ii) as determined by the Company. The entire remaining principal balance and unpaid interest amount of the Note becomes due and payable in full at maturity. The Company determined that the Note is accounted for as a liability in accordance with ASC 470 “Debt”.

 

The Note sets forth certain events of default, including a breach by the Company of another agreement with the Investor, the failure of the securities of the Company to remain listed on the Nasdaq and the failure of the Company to timely file periodic reports with the SEC. Upon the occurrence of an event of default, interest will accrue at a default rate of 18% per annum and the Note will become immediately due and payable, together with all costs, legal fees and expenses of collection through the date of full repayment.

 

2.On October 26, 2022, pursuant to an investor relations consulting agreement, the Company’s Board of Directors approved the quarterly issuances of 1,286 shares of common stock to a consultant beginning in the first quarter of 2023. On March 18, 2024, the Company issued 1,286 shares of common stock to a consultant for consulting services provided to the Company. The shares were estimated at $17,914 based on the share price of the common stock on October 26, 2022. On July 25, 2024, the Company issued to a consultant additional 1,286 shares of common stock - see also note 9 below.

 

3.On March 18, 2024, the Company issued 3,508 shares of common stock to a consultant for consulting services provided to the Company pursuant to a consulting agreement dated on November 23, 2023. The Company determined the value of the shares and the services provided at $5,824 and recorded share based compensation expenses.

 

4.On May 8, 2024 the Company issued 30,000 shares of common stock to a consultant, for services provided to the Company pursuant to an amendment of a consulting agreement, dated November 15, 2023. The shares were estimated at $30,900 based on the share price of the common stock on May 8, 2024.

 

5.During the six months ended June 30, 2024, the Company recorded share based compensation expenses in General and Administrative expenses in the amount of $187,935 related to shares issued by the Company to service providers during the year ended December 31, 2023.

 

18

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 6 – STOCK OPTIONS

 

The following table presents the Company’s stock option activity for employees and directors of the Company for the six months ended June 30, 2024:

 

  

 

Number of Options

   Weighted Average Exercise Price 
Outstanding at December 31, 2023   27,518    23.69 
Granted   -    - 
Exercised   -    - 
Forfeited or expired   -    - 
Outstanding at June 30, 2024   27,518    23.69 
Number of options exercisable at June 30, 2024   27,518    23.69 

 

The aggregate intrinsic value of the awards outstanding as of June 30, 2024 was $0. These amounts represent the total intrinsic value, based on the Company’s stock price of $0.48 as of June 30, 2024, less the weighted exercise price. This represents the potential amount received by the option holders had all option holders exercised their options as of that date.

 

Costs incurred in respect of stock-options compensation for employees and directors, for the six months ended June 30, 2024 and 2023 were $0 and $14,247, respectively and $0 and $5,787, for the three months ended June 30, 2024 and 2023, respectively.

 

NOTE 7 – RELATED PARTIES

 

A.Transactions and balances with related parties

 

         
   Six months ended June 30, 
   2024   2023 
         
General and administrative expenses:          
Directors’ compensation   170,275    192,789 
Salaries and fees to officers   237,271    245,241 
   407,546    (*) 438,030
           
(*) of which share based compensation   -    19,389 
           
Research and development expenses:          
Salaries and fees to officers   -    33,883 
           
Selling and marketing expenses:          
Salaries and fees to officers   -    33,883 

 

(*) of which share based compensation

 

  B. Balances with related parties and officers:

 

   As of June 30,   As of December 31, 
   2024   2023 
         
Other accounts payables   85,751    139,117 

 

  C. The Company’s chairman of the board of directors is also a shareholder and director of AI Conversation Systems Ltd., an Israeli company which merged with Solterra. See also Notes 4 and 9.

 

19

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 8 – SEGMENT REPORTING

 

  A.Information about reported segment profit or loss and assets

 

The Company has two reportable segments: (i) Pathogen prevention and prolong shelf life, and (ii) the N2O emissions Global warming solutions. The Pathogen prevention operating segment consists of Save Food Ltd. and the Global warming solutions operating segment consists of NTWO OFF Ltd.

 

Information related to the operations of the Company’s reportable operating segments is set forth below:

 

   Pathogen prevention   Global warming solutions   Total 
Six months ended June 30, 2024               
Revenues   60,377    -    60,377 
Operating loss   (474,561)   (136,750)   (611,311)
Unallocated amounts:               
Unallocated costs             (1,153,963)
Total operating loss             (1,765,274)
Financing expenses, net             (76,119)
Other income             105,225 
Changes in fair value of an investment in an associate measured under the fair value option             113,668 
Net loss             (1,622,500)

 

   Pathogen prevention   Global warming solutions   Total 
Three months ended June 30, 2024               
Revenues   16,546    -    16,546 
Operating loss   (283,778)   (18,811)   (302,589)
Unallocated amounts:               
Unallocated costs             (563,619)
Total operating loss             (866,208)
Financing expenses, net             (81,055)
Other income             117,396 
Changes in fair value of an investment in an associate measured under the fair value option             29,725 
Net loss             (800,142)

 

  B.Information on sales by geographic distribution:

 

Sales are attributed to geographic distribution based on the location of the customer.

 

                 
   Six months ended June 30,   Three months ended June 30, 
   2024   2023   2024   2023 
                 
Israel   19,303    5,221    14,446    - 
United States   38,974    41,554    -    - 
Mexico   -    109,824    -    36,608 
Peru   2,100    -    2,100    - 
Turkey   -    1,019    -    - 
Revenues from sales   60,377    157,618    16,546    36,608 

 

  C.Sales to single customers exceeding 10% of sales (US$):

 

                 
   Six months ended June 30,   Three months ended June 30, 
   2024   2023   2024   2023 
                 
Customer A   -    109,824    -    36,608 
Customer B   38,974    41,554    -    - 
Customer C   13,035    -    13,035    - 
Revenues from sales   52,009    151,378    13,035    36,608 

 

  D.Information on Long-Lived Assets - Property, Plant and Equipment and ROU assets by geographic areas:

 

The following table presents the locations of the Company’s long-lived assets as of June 30, 2024 and December 31, 2023:

 

   As of   As of 
   June 30, 2024   December 31, 2023 
         
Israel   67,763    102,103 
United States   17,095    21,046 
Property, plant and equipment and ROU assets   84,858    123,149 

 

20

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 9 – SUBSEQUENT EVENTS

 

1.On July 25, 2024, the Company issued to a consultant 1,286 shares of common stock for consulting services provided to the Company. The shares were estimated at $17,914 based on the share price of the common stock on October 26, 2022. see also note 5(2) above.

 

2.On July 8, 2024, the Company paid €375,000 (approximately $406,156) in connection with the June 30, 2024 Loan Agreement as referenced in Note 4. In addition, the Company entered into a Loan and Partnership Agreement (the “Loan and Partnership Agreement”), with Horizons RES PE1 UG (haftungsbeschränkt) & Co. KG (the “Partnership”), Solterra, and the Lenders, pursuant to which the Lenders committed to loan the Partnership (the “Loan”) an aggregate principal amount of € 2,080,000 (approximately $2,288,000) (€ 1,560,000 (approximately $1,716,000) of which was committed by the Company) for projects in the solar energy sector. Interest accrues on the loan at the rate of 7% per annum. The Loan matures on the earlier of (i) the sale of the Partnership or (ii) five years from the date of the Loan and Partnership Agreement.

 

All loans to the Partnership from Solterra will be subordinate to the Loan.

 

Pursuant to the Loan and Partnership Agreement, the Lenders are entitled to participation rights of 50% (of which the Company will be entitled to receive 50% thereof) of the Partnership’s profits (the “Profits”), whether directly or by way of 50% membership or ownership in the Partnership, or through legal rights for the distribution of 50% of the Partnership’s Profits where Solterra acts as a trustee on behalf of the Lenders (the “Profit Rights Alternatives”). The Lenders will decide within three months from the date of the Loan and Partnership Agreement on the chosen Profit Right Alternative.

 

Proceeds from the sale of a Partnership asset must first be used to repay the Lenders, pro rata with each Lender’s respective portion of the Loan.

 

Repayment of the Loan is secured by a lien on Solterra’s interests in the Partnership.

 

If a Lender defaults on a payment schedule as scheduled in the Loan and Partnership Agreement, such Lender’s rights to Profits will be proportionately decreased, based on the amount of the Loan that was actually provided by such Lender to the Partnership out of its Loan commitment amount.

 

On July 31, 2024 the Company paid the first payment in the amount of €337,500 (approximately $365,560) in connection with the Loan and Partnership Agreement.

 

21

 

 

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

 

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included elsewhere in this Quarterly Report. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements” for a discussion of the uncertainties and assumptions associated with these statements. Our actual results may differ materially from those discussed below.

 

Overview

 

We are an agri-food tech company specializing in eco crop protection that helps reduce food waste and ensure food safety while reducing the use of pesticides. 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.

 

We operate through our two majority-owned Israeli subsidiaries, Save Foods Ltd., which focuses on post-harvest treatments in fruit and vegetables to control and prevent pathogen contamination, significantly reduce the use of hazardous chemicals and prolong fresh produce’s shelf life, and NTWO OFF Ltd., formerly known as Nitrousink Ltd. (“NTWO OFF”), which offers a pioneering solution to mitigate N₂O (nitrous oxide) emissions, a potent greenhouse gas with 265 times the global warming impact of carbon dioxide. Through NTWO OFF we aim to promote agricultural practices that are both environmentally friendly and economically viable and to become a global leader in this field by collaborating with or acquiring other companies that create innovative solutions and tools to solve other aspects of global warming’s impact of carbon dioxide. In addition, we currently own approximately 23% of Plantify Foods Inc. (“Plantify”), a Canadian-based food tech company focused on the development and production of clean-label, plant-based food products.

 

Our solutions are based on our proprietary blend of food acids combined with certain types of oxidizing agent-based sanitizers and in some cases with fungicides at low concentrations. Our products have a synergistic effect when combined with these oxidizing agent-based sanitizers and fungicides. Our “green” solutions 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 ingredients do not leave any toxicological residues on the fresh produce we treat. By forming a temporary protective shield around the fresh produce we treat, our solutions make it difficult for pathogens to develop and potentially provide protection which also reduces cross-contamination.

 

Recent Developments

 

Solterra Loan Agreement

 

On June 30, 2024, we entered into a loan agreement (the “Loan Agreement”) with Solterra Renewable Energy Ltd., (the “Solterra”) and certain other lenders, pursuant to which the Lenders committed to loan Solterra an aggregate principal amount of € 500,000 (approximately $541,541) (€ 375,000 (approximately $406,156) of which was committed by us) with interest accruing on the principal at the rate of 7% per annum, to be paid annually beginning on June 30, 2025. If the loan is not converted or repaid within nine months of the merger, as described below, the interest rate will increase to 12%. Furthermore, if the loan is not converted into AI shares or repaid in full by June 30, 2026, Solterra will be required to repay the loan in full. In connection with, and contingent upon, the merger of Solterra with AI Conversation Systems Ltd., an Israeli company (“AI”) on July 21, 2024, the loan may be converted, at the sole discretion of Solterra into ordinary shares of AI at a price equal to the lowest price per share of AI, under which Solterra has raised capital from June 30, 2024 until such conversion.

 

Amitai Weiss currently serves as the chairman of our board of directors and is a shareholder and serves as a member of the board of directors of AI.

 

22

 

 

Loan and Partnership Agreement

 

In connection with the Loan Agreement, on July 31, 2024, we entered into a loan and partnership agreement (the “Loan and Partnership Agreement”), with Horizons RES PE1 UG (haftungsbeschränkt) & Co. KG, a German partnership which is wholly owned by Solterra (the “Partnership”), and certain other lenders (collectively, the “Lenders”), pursuant to which the Lenders committed to loan the Partnership (the “Loan”) an aggregate principal amount of € 2,080,000 (approximately $2,288,000) (€ 1,560,000 (approximately $1,716,000) of which was committed by us). Interest accrues on the loan at the rate of 7% per annum. The Loan matures on the earlier of (i) the sale of the Partnership or (ii) five years from the date of the Loan and Partnership Agreement. All loans to the Partnership from Solterra will be subordinate to the Loan.

 

Pursuant to the Loan and Partnership Agreement, the Lenders are entitled to participation rights of 50% (of which we will be entitled to receive 50% thereof) of the Partnership’s profits (the “Profits”), whether directly or by way of 50% membership or ownership in the Partnership, or through legal rights for the distribution of 50% of the Partnership’s Profits where Solterra acts as a trustee on behalf of the Lenders (the “Profit Rights Alternatives”). The Lenders will decide within three months from the date of the Loan and Partnership Agreement on the chosen Profit Right Alternative. Proceeds from the sale of a Partnership asset must first be used to repay the Lenders, pro rata with each Lender’s respective portion of the Loan. Repayment of the Loan is secured by a lien on Solterra’s interests in the Partnership. If a Lender defaults on a payment as scheduled in the Loan and Partnership Agreement, such Lender’s rights to Profits will be proportionately decreased, based on the amount of the Loan that was actually provided by such Lender to the Partnership out of its Loan commitment amount.

 

Special Stockholder Meeting to Approve Reverse Stock Split and Increase in Authorized Shares

 

At a special meeting of our stockholders held on June 28, 2024, our stockholders approved an amendment to our Articles of Incorporation to implement a reverse stock split (the “Reverse Split Amendment”) of the issued and outstanding shares of our common stock (the “Reverse Stock Split”) at a ratio of not less than 1-for-2 and not more than 1-for-35 (the “Reverse Split Range”), and to grant our board of directors the discretionary authority to determine the exact ratio of the Reverse Stock Amendment within the Reverse Split Range and to effect the Reverse Split Amendment at such time and date, if at all, as to be determined by the board of directors in its sole discretion. The other proposal brought before the meeting to increase the aggregate number of authorized shares of our capital stock, from 500,000,000 shares, consisting of 495,000,000 shares of common stock and 5,000,000 shares of preferred stock to 10,005,000,000 shares, consisting of 10,000,000,000 shares of common stock and 5,000,000 shares of preferred stock was not approved by our stockholders.

 

Nasdaq Non-Compliance

 

On July 8, 2024, we received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying us that for the last 30 consecutive business days the closing bid price for our common stock was below $1.00 per share, which is the minimum closing bid price required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Notice”). This Notice has no immediate effect on the listing of our common stock which will continue to trade on The Nasdaq Capital Market under the symbol “NITO”, subject to our compliance with the other Nasdaq listing requirements.

 

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we are provided a compliance period of 180 calendar days from the date of the Notice, or until January 6, 2025 (the “Compliance Period”), to regain compliance with the minimum closing bid price requirement. If at any time during the Compliance Period, the closing bid price of our common stock is at least $1.00 per share for a minimum of ten consecutive business days (unless the Nasdaq staff exercises its discretion to extend this ten business day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H)), Nasdaq will provide written confirmation of our compliance, and the matter will be closed. If we do not regain compliance during the Compliance Period, we may be eligible for an additional 180-calendar day period to regain compliance, provided that we meet the applicable market value of publicly held shares requirement for continued listing and all other applicable standards for initial listing on The Nasdaq Capital Market (except the minimum bid price requirement), and notify Nasdaq of our intent to cure the deficiency by effecting a reverse stock split of our common stock. If we do not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, our common stock will be subject to delisting.

 

23

 

 

Results of Operations

 

Revenues and Cost of Revenues

 

Our total revenues consist of the sale of products and our cost of revenues consists of cost of products.

 

The following table sets forth our revenues and costs of revenues:

 

  

Six Months Ended

June 30,

  

Three Months Ended

June 30,

 
U.S. dollars in thousands, except share and per share data  2024   2023   2024   2023 
                 
Revenues from sales of products   60,377    157,618    16,546    36,608 
Cost of sales   (33,762)   (69,753)   (5,782)   (27,007)
Gross profit   26,615    87,865    10,764    9,601 

 

Operating Expenses

 

Our operating expenses consist of three components — research and development expenses, selling and marketing expenses and general and administrative expenses.

 

Research and Development Expenses

 

Our research and development expenses consist primarily of professional fees and other related research and development expenses.

 

  

Six Months Ended

June 30,

  

Three Months Ended

June 30,

 
U.S. dollars in thousands  2024   2023   2024   2023 
Salaries and related expenses   -    67,672    -    (6,959)
Professional fees   126,288    47,812    11,172    8,158 
Laboratory and field tests   -    823    -    62 
Depreciation   1,050    8,276    518    3,767 
Other expenses   218    11,182    -    11,829 
Total   127,556    135,765    11,690    16,857 

 

Selling and Marketing Expenses

 

Selling and marketing expenses consist primarily of salaries and related expenses, professional fees, transport and storage and other expenses.

 

  

Six Months Ended

June 30,

  

Three Months Ended

June 30,

 
U.S. dollars in thousands  2024   2023   2024   2023 
Salaries and related expenses   47,203    91,492    22,454    52,560 
Professional fees   18,700    16,211    16,200    7,500 
Commissions   -    9,204    -    - 
Travel   7,431    8,182    1,476    4,281 
Transport and storage   26,997    21,752    10,948    15,964 
Other expenses   13,948    11,080    5,953    8,470 
Total   114,279    157,921    57,031    88,775 

 

24

 

 

General and Administrative Expenses

 

General and administrative expenses consist primarily of professional services, share based compensation, salaries, insurance and other non-personnel related expenses.

 

  

Six Months Ended

June 30,

  

Three Months Ended

June 30,

 
U.S. dollars in thousands  2024   2023   2024   2023 
Professional services   1,113,813    1,000,563    621,670    436,520 
Share based compensation   260,487    933,491    120,935    134,972 
Salaries and related expenses   34,079    129,638    (6,291)   51,142 
Insurance   85,315    137,240    42,696    53,144 
Other expenses   56,360    177,219    29,241    68,509 
Total   1,550,054    2,378,151    808,251    744,287 

 

Three months ended June 30, 2024 compared to three months ended June 30, 2023

 

Revenues

 

Revenues for the three months ended June 30, 2024 were $16,546, a decrease of $20,062 or 55%, compared to $36,608 during the three months ended June 30, 2023. The decrease is mainly a result of a decrease in our sales in Mexico.

 

Cost of Sales

 

Cost of sales consists primarily of salaries, materials, and overhead costs of manufacturing our products. Cost of sales for the three months ended June 30, 2024 was $5,782, a decrease of $21,225, or 79%, compared to cost of sales of $27,007 for the three months ended June 30, 2023. The decrease is mainly a result of a decrease in our revenues as a result of a decrease in our sales in Mexico, in addition to certain cost reductions.

 

Gross Profit

 

Gross profit for the three months ended June 30, 2024 was $10,764, an increase of $1,163, or 12%, compared to a gross profit of $9,601 for the three months ended June 30, 2023. The increase is mainly a result of certain cost reductions.

 

Research and Development Expenses

 

Research and development expenses consist of consulting fees, service providers’ costs, related materials and overhead expenses. Research and development expenses for the three months ended June 30, 2024 were $11,690, a decrease of $5,167, or 31%, compared to research and development expenses of $16,857 for the three months ended June 30, 2023. The decrease is mainly attributable to a decrease in Save Foods Ltd.’s expenses as a result of the implementation of certain cost reduction measures, including a reduction in Save Foods Ltd.’s research and development budget in light of prevailing macroeconomic conditions and the shift of our focus to the commercialization of our solutions and converting recently completed pilots into paying customers. Additionally, certain results of our operations relating to Save Foods Ltd., were offset by an increase in professional fees associated with NTWO OFF Ltd.’s research and development activities.

 

25

 

 

Selling and Marketing Expenses

 

Selling and marketing expenses consisted primarily of salaries and related costs for selling and marketing personnel, travel related expenses and services providers. Selling and marketing expenses for the three months ended June 30, 2024 were $57,031, a decrease of $31,744, or 36%, compared to selling and marketing expenses of $88,775 for the three months ended June 30, 2023. The decrease is mainly attributable to the decrease in salaries resulting from a reduction in personnel following our cost reduction measures, offset by an increase in other professional fees associated with our sales.

 

General and Administrative Expenses

 

General and administrative expenses consisted 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, directors fees and insurance costs. General and administrative expenses for the three months ended June 30, 2024 were $808,251, an increase of $63,964, or 9%, compared to general and administrative expenses of $744,287 for the three months ended June 30, 2023. The increase is mainly a result of the increase in professional services offset by a decrease in salaries and related costs, share-based compensation, insurance costs and in franchise tax related to the Company’s reincorporation in Nevada from Delaware.

 

Financing Income (expenses), Net

 

Financing expenses, net for the three months ended June 30, 2024 were $81,055, an increase of $92,037, or 838%, compared to financing income, net of $10,982 for the three months ended June 30, 2023. The increase is mainly a result of the interest on a $1,500,000 promissory note issued to YA II PN, Ltd. on April 4, 2024.

 

Total Comprehensive Loss

 

As a result of the foregoing, our total comprehensive loss for the three months ended June 30, 2024 was $800,142, compared to $714,935 for the three months ended June 30, 2023, an increase of $85,207, or 12%.

 

Six months ended June 30, 2024 compared to six months ended June 30, 2023

 

Revenues

 

Revenues for the six months ended June 30, 2024 were $60,377, a decrease of $97,241, or 62%, compared to $157,618 during the six months ended June 30, 2023. The decrease is mainly a result of a decrease in our sales in Mexico.

 

Cost of Sales

 

Cost of sales consists primarily of salaries, materials and overhead costs of manufacturing our products. Cost of sales for the six months ended June 30, 2024 were $33,762, a decrease of $35,991, or 52%, compared to $69,753 for the six months ended June 30, 2023. The decrease is mainly results from a decrease in our revenues.

 

Gross Profit

 

Gross profit for the six months ended June 30, 2024 was $26,615, a decrease of $61,250, or 70%, compared to a gross profit of $87,865 for the six months ended June 30, 2023. The decrease is mainly a result of the decrease in revenues.

 

26

 

 

Research and Development Expenses

 

Research and development expenses consist of salaries and related expenses, consulting fees, related materials and overhead expenses. Research and development expenses for the six months ended June 30, 2024 were $127,556, a decrease of $8,209, or 6%, compared to research and development expenses of $135,765 for the six months ended June 30, 2023. The decrease is mainly attributable the implementation of certain cost reduction measures in light of prevailing macroeconomic conditions and certain results of our operations relating to Save Foods Ltd., which were offset by an increase in professional fees associated with NTWO OFF Ltd.’s research and development activities. Cost reduction measures included the reduction of Save Foods Ltd.’s research and development budget, and the shift of our focus to the commercialization of its solutions with an emphasis on converting recently completed pilots into paying customers.

 

Selling and Marketing Expenses

 

Selling and marketing expenses consist primarily of salaries and related expenses for selling and marketing personnel, travel related expenses and services providers and commissions. Selling and marketing expenses for the six months ended June 30, 2024 were $114,279, a decrease of $43,642, or 28%, compared to total selling and marketing expenses of $157,921 for the six months ended June 30, 2023. The decrease is mainly attributable to the decrease in salaries and related expenses commissions offset by an increase in other related costs associated with our sales.

 

General and Administrative Expenses

 

General and administrative expenses consist primarily of professional services, salaries and related expenses including share based compensation as well as other non-personnel related expenses such as legal expenses and directors and insurance costs. General and administrative expenses for the six months ended June 30, 2024 were $1,550,054, a decrease of $828,097, or 35%, compared to total general and administrative expenses of $2,378,151 for the six months ended June 30, 2023. The decrease is mainly a result of the decrease in share-based compensation, insurance costs and in franchise tax related to the Company’s reincorporation in Nevada from Delaware offset by an increase in professional services partially offset by an increase in professional services.

 

Financing Income (expenses), Net

 

Financing expenses, net, for the six months ended June 30, 2024, were $76,119, an increase of $109,206, or 330%, compared to total financing expenses of $33,087 for the six months ended June 30, 2023. The increase is mainly a result of the interest on a $1,500,000 promissory note issued to YA II PN, Ltd. on April 4, 2024.

 

Total Comprehensive Loss

 

As a result of the foregoing, our total comprehensive loss for the six months ended June 30, 2024 was $1,622,500, compared to $2,436,484 for the six months ended June 30, 2023, a decrease of $813,985, or 33%.

 

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 June 30, 2024, we have funded our operations, principally with the issuance of equity and debt.

 

As of June 30, 2024, we had cash and cash equivalents of $4,467,529, as compared to $2,969,707 as of June 30, 2023. As of June 30, 2024, we had working capital of $3,872,992, as compared to $3,365,898 as of June 30, 2023. The increase in our cash balance is mainly attributable to proceeds from the issuance of promissory notes.

 

27

 

 

On August 18, 2022, we issued an aggregate of 228,572 shares of common stock at a public offering price of $21.00 per share in an underwritten offering for gross proceeds of approximately $4,800,000. In connection therewith, we granted the underwriter a 45-day option to purchase up to 34,286 additional shares of common stock at the public offering price of $21.00 per share, less underwriting discounts and commissions solely to cover over-allotments and issued ThinkEquity LLC a five-year warrant to purchase up to 11,429 shares of common stock, at a per share exercise price equal to 125% of the offering price per share of common stock.

 

On July 23, 2023, we entered into a standby equity purchase agreement with YA II PN, Ltd. (the “Investor”), pursuant to which the Investor agreed to purchase up to $3,500,000 shares of our common stock for 40 months from the date of the purchase agreement at a price per share equal to 94% of the lowest volume-weighted average price (“VWAP”) of our common stock for the three days prior to the delivery of each advance notice from us, subject to certain limitations, including that the Investor cannot purchase a number of shares that would result in it beneficially owning more than 4.99% of our outstanding shares of common stock. In December 2023, we raised an aggregate of $3,500,000 under the standby equity purchase agreement.

 

On December 22, 2023, we entered into an additional standby equity purchase agreement with the Investor, pursuant to which the Investor has agreed to purchase up to $20 million shares of our common stock for 36 months from the date of the purchase agreement at a price per share equal to 94% of the lowest VWAP of our common stock for the three trading days immediately following the delivery of each advance notice from us. The agreement will terminate automatically on the earlier of January 1, 2027, or when the Investor has purchased an aggregate of $20 million of our shares of common stock. We have the right to terminate the purchase agreement upon five trading days’ prior written notice to the Investor. As of August 14, 2024, we have sold 1,170,813 shares of common stock at an average purchase price of $0.93 per share to the Investor.

 

In connection with and subject to the satisfaction of certain conditions set forth in the standby equity purchase agreement, upon our request, the Investor will pre advance to us up to $3,000,000 of the $20,000,000 commitment amount (a “Pre-Advance”), with each Pre-Advance to be evidenced by a promissory note issued at a 3% discount to the principal amount equal to each such note. Each note accrues interest on the outstanding principal balance at the rate of 8% per annum. The Company is required to pay, on a monthly basis, one tenth of the outstanding principal amount of each note, together with accrued and unpaid interest, either (i) in cash or (ii) by submitting an advance notice pursuant to the purchase agreement and selling the Investor shares of our common stock, or any combination thereof as determined by us. The initial payment is due 60 days after the issuance of a note, and every 30 days thereafter. Unless otherwise agreed to by the Investor, any funds received by us pursuant to the purchase agreement for the sale of shares will first be used to satisfy any payments due under an outstanding note.

 

On April 4, 2024, the Company, issued the Investor an additional promissory note in the principal amount of $1,500,000 for proceeds of $1,455,000, reflecting an original issue discount of 3%.

 

The table below presents our cash flows for the periods indicated:

 

   Six Months Ended
June 30,		 
   2024   2023 
Net cash used in operating activities   (2,037,468)   (1,634,418)
           
Net cash used in investing activities   (161,886)   (1,101,669)
           
Net cash provided by financing activities   2,208,854    - 
           
Effect of exchange rate changes on cash and cash equivalents and restricted cash   2,592    2,719 
           
Increase (decrease) in cash and cash equivalents   12,092    (2,733,368)

 

28

 

 

Going Concern

 

Since our incorporation, we incurred losses from operations and net cash outflows from operating activities as disclosed in the consolidated statements of operations and cash flows, respectively. As of June 30, 2024, we had an accumulated deficit of approximately $31 million, and we expect to incur losses for the foreseeable future. We have financed our operations mainly through fundraising from various investors and have limited revenue from our products and therefore are dependent upon external sources to finance our operations. There can be no assurance that we will succeed in obtaining the necessary financing to continue our operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern through at least twelve months from the date of this Quarterly Report.

 

We believe that our existing capital resources will be sufficient to support our operating plan through the first quarter of 2025; however, there can be no assurance of this. We will need to raise additional capital to support our growth through the issuance of debt, equity, or a combination thereof. There can be no assurance that we will be successful in raising additional capital on favorable terms, or at all.

 

As a result, there is substantial doubt about our ability to continue as a going concern. If we are unable to obtain sufficient additional capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and operating results. If we obtain additional funds by selling any of our equity, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or we may issue securities with rights, preferences or privileges senior to our common stock. If we issue debt securities, there may be negative covenants which may restrict the Company’s activities. If adequate funds are not available to us when needed on satisfactory terms, we may be required to cease operating or otherwise modify our business strategy. The financial statements included in this Quarterly Report do not include adjustments for measurement or presentation of assets and liabilities, which may be required should the Company fail to operate as a going concern.

 

Operating Activities

 

Net cash used in operating activities was $2,037,468 for the six months ended June 30, 2024, as compared to $1,634,418 for the six months ended June 30, 2023. The increase is mainly attributable to a decrease in other liabilities and an increase in accounts receivable, net.

 

Investing Activities

 

Net cash used in investing activities was $161,886 for the six months ended June 30, 2024, as compared to net cash used in investing activities of $1,101,669 for the six months ended June 30, 2023. The decrease is mainly attributable to our investment in Plantify in April 2023.

 

Financing Activities

 

Net cash provided by financing activities was $2,208,854 for the six months ended June 30, 2024, as compared to no net cash provided by financing activities for the six months ended June 30, 2023. The increase is the result of proceeds from the standby equity purchase agreement with the Investor entered into on December 22, 2023 and proceeds from a promissory note to the Investor in April 2024, net of repayments.

 

Item 3. Quantitative And Qualitative Disclosures About Market Risk.

 

We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information required by this Item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer and our Principal Financial Officer or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our management, including each of our Principal Executive Officer and our Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2024. Based on such evaluation, each of our Principal Executive Officer and Principal Financial Officer has concluded that, as of June 30, 2024, our disclosure controls and procedures were effective.

 

Changes in Internal Control over Financial Reporting

 

During the period covered by this Quarterly Report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

29

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

 

Item 1A. Risk Factors.

 

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 1, 2024, which could materially affect our business, financial condition or future results. Except as set forth below, there have been no material changes from the risk factors previously disclosed in the “Risk Factors” section of such Annual Report on Form 10-K.

 

Conditions in Israel, including the ongoing war between Israel and Hamas, and other conflicts in the region, may adversely affect our operations and limit our ability to market our products, which would lead to a decrease in revenues.

 

Because a substantial part of our operations are conducted in Israel and all members of our board of directors, management, as well as a majority of our employees and consultants, including employees of our service providers, are located in Israel, our business and operations are directly affected by economic, political, geopolitical and military conditions affecting Israel. Any political instability, terrorism, armed conflicts, reserve mobilization, cyberattacks, boycotts, direct or indirect sanctions and restrictions, or any other hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and other hostile non-state actors. These conflicts have involved missile strikes, hostile infiltrations and terrorism against civilian targets in various parts of Israel, which have negatively affected business conditions in Israel.

 

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers, as well as evacuations of tens of thousands of civilians from their homes. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Furthermore, hostilities along Israel’s northern border with Hezbollah located in Lebanon and Iran have accelerated, and each of these clashes may escalate in the future into a greater regional conflict.

 

The intensity and duration of Israel’s current war against Hamas is difficult to predict, as are such war’s economic implications on our business and operations and on Israel’s economy in general. These events may be intertwined with wider macroeconomic indications of a deterioration of Israel’s economic standing, for instance, a downgrade in Israel’s credit rating by rating agencies (such as the recent downgrade by Moody’s of its credit rating of Israel from A1 to A2, as well as the downgrade of its outlook rating from “stable” to “negative” and the S&P Global lowered its long-term credit rating from AA- to A+, as well as a downgrade of its short-term credit ratings from A-1+ to A-1, with an outlook on the long-term ratings “negative”, as well as the recent downgrade by Fitch Ratings of its credit rating of Israel from A+ to A, with an outlook rating of “negative”). which may have a material adverse effect on our company and our ability to effectively conduct its operations.

 

Our facilities are not only within the range of rockets from the Gaza Strip, but also within the range of rockets that can be fired from Lebanon, Syria or elsewhere in the Middle East. In the event that our facilities are damaged as a result of hostile action or hostilities otherwise disrupt the ongoing operation of our facilities, our ability to deliver products to customers in a timely manner to meet our contractual obligations with customers and vendors could be materially and adversely affected.

 

Furthermore, Plantify, in which we have an approximately 23% ownership interest, has facilities in Kibbutz Gonen, which is located in an area in northern Israel that has been affected by ongoing hostilities with Hezbollah in Lebanon, as part of the ongoing Israel – Hamas war. Due to the continuous drone attacks, missile strikes and shootings in the region, the area has been almost completely evacuated of civilians. Plantify has reduced its operations in the facility in Kibbutz Gonen and may not be able to resume its regular activities, including its ability to deliver products to customers in a timely manner, if the hostilities persist for an extended period which may have an adverse effect on its financial condition and ability to repay loans from us under a C$1,500,000 (approximately US$1,124,000) 8% debenture and a credit facility of up to $250,000, of which, to date, Plantify has borrowed $162,000.

 

We have experienced delays in our pilots and packaging activities due to the war, as certain packing houses, such as Mehadrin, have halted operations for the time being. Additionally, we anticipated engaging additional packing houses to conduct pilots on strawberries and citruses with our product, but, due to the war, we were unable to continue pursuing new collaborations for these pilots, and we may not be able to resume any potential collaborations if the current war persists for an extended duration. We are unable to predict how long the current conflict will last, as well as the repercussions these delays will have on our operations. If we are unable to renew our pilots or collaborations with local packing houses our financial results may be affected.

 

30
 

 

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.

 

As a result of the Israeli security cabinet’s decision to declare war against Hamas, and possible hostilities with other organizations, several hundred thousand Israeli military reservists were drafted to perform immediate military service. Certain of our employees and consultants in Israel and employees of our service providers located in Israel, have been called, and additional employees may be called, for service in the current or future wars or other armed conflicts with Hamas, and such persons may be absent for an extended period of time. Although we have certain manufacturing capabilities in the United States, our Israeli operations may be disrupted by such absences, which may materially and adversely affect our business and results of operations. Additionally, the absence of employees of our Israeli suppliers and contract manufacturers due to their military service in the current war or future wars or other armed conflicts may disrupt their operations, which in turn may event our materially and adversely affect our ability to deliver or provide products and services to customers.

 

In addition, popular uprisings in various countries in the Middle East and North Africa have affected the political stability of those countries. Such instability may lead to a deterioration in the political and trade relationships that exist between the State of Israel and these countries. Moreover, some countries around the world restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases. These restrictions may limit materially our ability to obtain raw materials from these countries or sell our products to companies and customers in these countries.

 

Furthermore, following Hamas’ attack on Israel and Israel’s security cabinet declaration of war against Hamas, the Houthi movement, which controls parts of Yemen, launched a number of attacks on marine vessels traversing the Red Sea, which marine vessels were thought to either be in route towards Israel or to be partly owned by Israeli businessmen. The Red Sea is a vital maritime route for international trade traveling to or from Israel. As a result of such disruptions, we may experience in the future delays in supplier deliveries, extended lead times, and increased cost of freight, increased insurance costs, purchased materials and manufacturing labor costs. The risk of ongoing supply disruptions may further result in delayed deliveries of our products.

 

Prior to the Hamas attack in October 2023, the Israeli government pursued extensive changes to Israel’s judicial system, which sparked extensive political debate and unrest. In response to such initiative, many individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment in Israel including due to reluctance of foreign investors to invest or transact business in Israel as well as to increased currency fluctuations, downgrades in credit rating, increased interest rates, increased volatility in security markets, and other changes in macroeconomic conditions. The risk of such negative developments has increased in light of the recent Hamas attacks and the war against Hamas declared by Israel. To the extent that any of these negative developments do occur, they may have an adverse effect on our business, our results of operations and our ability to raise additional funds, if deemed necessary by our management and board of directors.

 

Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds

 

Except as set forth below, there were no sales of equity securities during the period covered by this Quarterly Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.

 

31

 

 

On May 8, 2024, we issued 30,000 shares of common stock to a consultant for services provided to us pursuant to a consulting agreement, dated November 15, 2023.

 

The above issuance did not involve any underwriters, underwriting discounts or commissions or any public offering and we believe are exempt from the registration requirements of the Securities Act by virtue of Section 4(2) thereof as transactions not involving a public offering.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosure

 

Not applicable.

 

Item 5. Other Information

 

During the three months ended June 30, 2024, none of the Company’s directors or officers adopted or terminated any contract, instruction, or written plan for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any non-Rule 10b5-1 trading arrangements as defined in Item 408(a) of Regulation S-K.

 

Item 6. Exhibits.

 

Exhibit    
Number   Description
31.1*   Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
     
31.2*   Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
     
32.1**   Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
32.2**   Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS*   Inline XBRL Instance Document
101.INS*   Inline XBRL Taxonomy Extension Schema Document
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

 

* Filed herewith.
   
** Furnished herewith.

 

32

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: August 14, 2024 N2OFF, INC.
     
  By: /s/ David Palach
  Name: David Palach
  Title: Chief Executive Officer
    (Principal Executive Officer)
     
Date: August 14, 2024 By: /s/ Lital Barda
  Name: Chief Financial Officer
  Title: (Principal Financial and Accounting Officer)

 

33

 

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO

RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, David Palach, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 of N2OFF, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the quarter end covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the quarter end presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
   
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the quarter end in which this report is being prepared;
   
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the quarter end covered by this report based on such evaluation; and
   
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
   
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
   
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
   
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2024  
   
/s/ David Palach  
David Palach  
Chief Executive Officer  
(Principal Executive Officer)  

 

 

 

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO

RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Lital Barda, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 of N2OFF, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the quarter end covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the quarter end presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
   
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the quarter end in which this report is being prepared;
   
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the quarter end covered by this report based on such evaluation; and
   
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
   
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
   
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
   
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2024  
   
/s/ Lital Barda  
Lital Barda  
Chief Financial Officer  
(Principal Financial and Accounting Officer)  

 

 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of N2OFF, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Palach, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
   
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 14, 2024

 

/s/ David Palach  
David Palach  
Chief Executive Officer  
(Principal Executive Officer)  

 

 

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of N2OFF, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lital Barda, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
   
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 14, 2024

 

/s/ Lital Barda  
Lital Barda  
Chief Financial Officer  
(Principal Financial and Accounting Officer)  

 

 

 

v3.24.2.u1
Cover - $ / shares
 6 Months Ended
Jun. 30, 2024
Aug. 14, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2024  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --12-31  
Entity File Number 001-40403  
Entity Registrant Name N2OFF, INC.  
Entity Central Index Key 0001789192  
Entity Tax Identification Number 26-4684680  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One HaPardes 134 (Meshek Sander)  
Entity Address, City or Town Neve Yarak  
Entity Address, Country IL  
Entity Address, Postal Zip Code 4994500  
City Area Code (347)  
Local Phone Number 468 9583  
Title of 12(b) Security Common Stock, par value $0.0001 per share  
Trading Symbol NITO  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Elected Not To Use the Extended Transition Period false  
Entity Shell Company true  
Entity Common Stock, Shares Outstanding   4,162,383
Entity Listing, Par Value Per Share $ 0.0001  
v3.24.2.u1
Condensed Consolidated Interim Balance Sheets (Unaudited) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Current Assets    
Cash and cash equivalents $ 4,467,529 $ 4,447,003
Restricted cash 22,737 31,171
Accounts receivable, net of allowance for doubtful account of $56,954 and $64,031 as of June 30, 2024 and December 31, 2023, respectively. 157,963 107,007
Inventory 106,342 121,513
Prepaid expenses 653,358 719,389
Other current assets 55,798 39,538
Total Current assets 5,463,727 5,465,621
Right-of-use asset arising from operating lease 28,756 56,568
Property and equipment, net 56,102 66,581
Investment in nonconsolidated affiliate (Note 3) 1,931,129 1,655,461
Total assets 7,479,714 7,244,231
Current Liabilities    
Short term loan (Note 5(1)) 1,200,000
Accounts payable 24,973 43,539
Other liabilities 365,762 734,933
Total current liabilities 1,590,735 778,472
Operating lease liabilities 3,305 7,181
Total liabilities 1,594,040 785,653
Stockholders’ Equity    
Common stock, $ 0.0001 par value (“Common Stock”): 495,000,000 shares authorized as of June 30, 2024 and December 31, 2023; issued and outstanding 4,161,097 and 2,955,490 shares as of June 30, 2024 and December 31, 2023, respectively. 416 296
Preferred stock, $ 0.0001 par value (“Preferred Stock”): 5,000,000 shares authorized as of June 30, 2024 and December 31, 2023; no shares issued and outstanding as of June 30, 2024 and December 31, 2023.
Additional paid-in capital 36,915,699 35,866,223
Foreign currency translation adjustments (26,275) (26,275)
Accumulated deficit (30,917,247) (29,360,235)
Total Company’s stockholders’ equity 5,972,593 6,480,009
Non-controlling interests (86,919) (21,431)
Total stockholders’ equity 5,885,674 6,458,578
Total liabilities and stockholders’ equity $ 7,479,714 $ 7,244,231
v3.24.2.u1
Condensed Consolidated Interim Balance Sheets (Unaudited) (Parenthetical) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Allowances for doubtful accounts $ 56,954 $ 64,031
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 495,000,000 495,000,000
Common stock, shares issued 4,161,097 2,955,490
Common stock, shares outstanding 4,161,097 2,955,490
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorised 5,000,000 5,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
v3.24.2.u1
Condensed Consolidated Interim Statements of Comprehensive Loss (Unaudited) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Income Statement [Abstract]        
Revenues from sales of products $ 16,546 $ 36,608 $ 60,377 $ 157,618
Cost of sales (5,782) (27,007) (33,762) (69,753)
Gross profit 10,764 9,601 26,615 87,865
Research and development expenses (11,690) (16,857) (127,556) (135,765)
Selling and marketing expenses (57,031) (88,775) (114,279) (157,921)
General and administrative expenses (808,251) (744,287) (1,550,054) (2,378,151)
Operating loss (866,208) (840,318) (1,765,274) (2,583,972)
Financing income (expenses), net (81,055) 10,982 (76,119) 33,087
Other income, net (Note 5(1)) 117,396 12,294 105,225 12,294
Changes in fair value of an investment in an associate measured under the fair value option (Note 3) 29,725 102,107 113,668 102,107
Net loss (800,142) (714,935) (1,622,500) (2,436,484)
Less: net loss attributable to non-controlling interests 12,694 5,430 65,488 13,301
Net loss attributable to the Company’s stockholders’ equity $ (787,448) $ (709,505) $ (1,557,012) $ (2,423,183)
Loss per share (basic) $ (0.23) $ (0.69) $ (0.49) $ (2.8)
Loss per share (diluted) $ (0.23) $ (0.69) $ (0.49) $ (2.8)
Basic weighted average number of shares of Common Stock outstanding [1] 3,408,878 1,027,040 3,184,772 862,399
Diluted weighted average number of shares of Common Stock outstanding [1] 3,408,878 1,027,040 3,184,772 862,399
[1] Adjusted to reflect one (1) for seven (7) reverse stock split in October 2023 (see note 1B).
v3.24.2.u1
Condensed Consolidated Interim Statements of Comprehensive Loss (Unaudited) (Parenthetical)
 1 Months Ended
Oct. 04, 2023
Oct. 31, 2023
Equity [Abstract]    
Stockholders' equity, reverse stock split one for seven reverse stock split one (1) for seven (7) reverse stock split
v3.24.2.u1
Condensed Consolidated Interim Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Foreign Currency Translation Adjustments [Member]
Retained Earnings [Member]
Parent [Member]
Noncontrolling Interest [Member]
Total
Balance at Dec. 31, 2022 $ 69 $ 28,710,412 $ (26,275) $ (22,837,827) $ 5,846,379 $ (109,038) $ 5,737,341
Balance, shares at Dec. 31, 2022 [1] 688,272            
Issuance of shares to services providers $ 1 67,613 67,614 67,614
Issuance of shares to services providers, shares [1] 6,288            
Comprehensive loss for the period (1,713,678) (1,713,678) (7,871) (1,721,549)
Share based compensation to employees and directors $ 14 691,005 691,019 201 691,220
Share based compensation to employees and directors, shares [1] 142,860            
Balance at Mar. 31, 2023 $ 84 29,469,030 (26,275) (24,551,505) 4,891,334 (116,708) 4,774,626
Balance, shares at Mar. 31, 2023 [1] 837,420            
Balance at Dec. 31, 2022 $ 69 28,710,412 (26,275) (22,837,827) 5,846,379 (109,038) 5,737,341
Balance, shares at Dec. 31, 2022 [1] 688,272            
Comprehensive loss for the period             (2,436,484)
Balance at Jun. 30, 2023 $ 115 30,971,643 (26,275) (25,261,010) 5,684,473 (122,050) 5,562,423
Balance, shares at Jun. 30, 2023 [1] 1,139,686            
Balance at Mar. 31, 2023 $ 84 29,469,030 (26,275) (24,551,505) 4,891,334 (116,708) 4,774,626
Balance, shares at Mar. 31, 2023 [1] 837,420            
Issuance of shares to services providers $ 14 670,226 670,240 670,240
Issuance of shares to services providers, shares [1] 135,926            
Comprehensive loss for the period (709,505) (709,505) (5,430) (714,935)
Issuance of shares for exchange agreement $ 17 826,688 826,705 826,705
Issuance of shares for exchange agreement, shares [1] 166,340            
Share based compensation to employees and directors 5,699 5,699 88 5,787
Balance at Jun. 30, 2023 $ 115 30,971,643 (26,275) (25,261,010) 5,684,473 (122,050) 5,562,423
Balance, shares at Jun. 30, 2023 [1] 1,139,686            
Balance at Dec. 31, 2023 $ 296 35,866,223 (26,275) (29,360,235) 6,480,009 (21,431) 6,458,578
Balance, shares at Dec. 31, 2023 2,955,490            
Issuance of shares for standby equity purchase agreement II $ 3 39,947 39,950 39,950
Issuance of shares for standby equity purchase agreement II, shares 28,333            
Issuance of shares to services providers 23,738 23,738 23,738
Issuance of shares to services providers, shares 4,794            
Comprehensive loss for the period (769,564) (769,564) (52,794) (822,358)
Balance at Mar. 31, 2024 $ 299 35,929,908 (26,275) (30,129,799) 5,774,133 (74,225) 5,699,908
Balance, shares at Mar. 31, 2024 2,988,617            
Balance at Dec. 31, 2023 $ 296 35,866,223 (26,275) (29,360,235) 6,480,009 (21,431) 6,458,578
Balance, shares at Dec. 31, 2023 2,955,490            
Comprehensive loss for the period             (1,622,500)
Balance at Jun. 30, 2024 $ 416 36,915,699 (26,275) (30,917,247) 5,972,593 (86,919) 5,885,674
Balance, shares at Jun. 30, 2024 4,161,097            
Balance at Mar. 31, 2024 $ 299 35,929,908 (26,275) (30,129,799) 5,774,133 (74,225) 5,699,908
Balance, shares at Mar. 31, 2024 2,988,617            
Issuance of shares for standby equity purchase agreement II $ 114 936,980 937,094 937,094
Issuance of shares for standby equity purchase agreement II, shares 1,142,480            
Issuance of shares to services providers $ 3 48,811 48,814 48,814
Issuance of shares to services providers, shares 30,000            
Comprehensive loss for the period (787,448) (787,448) (12,694) (800,142)
Balance at Jun. 30, 2024 $ 416 $ 36,915,699 $ (26,275) $ (30,917,247) $ 5,972,593 $ (86,919) $ 5,885,674
Balance, shares at Jun. 30, 2024 4,161,097            
[1] Adjusted to reflect one (1) for seven (7) reverse stock split in October 2023 (see note 1B).
v3.24.2.u1
Condensed Consolidated Interim Statements of Changes in Stockholders' Equity (Unaudited) (Parenthetical)
 1 Months Ended
Oct. 04, 2023
Oct. 31, 2023
Statement of Stockholders' Equity [Abstract]    
Stockholders' equity, reverse stock split one for seven reverse stock split one (1) for seven (7) reverse stock split
v3.24.2.u1
Condensed Consolidated Interim Statements of Cash Flows (Unaudited) - USD ($)
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:    
Loss for the period $ (1,622,500) $ (2,436,484)
Adjustments required to reconcile net loss for the period to net cash used in operating activities:    
Depreciation 10,177 23,215
Issuance of shares to employees and services providers 72,552 868,825
Share based compensation to employees and directors 14,247
Loss (gain) from sales of property and equipment 188 (12,294)
Gain from standby equity purchase agreement II (Note 5(1)) (105,413)
Expenses from standby equity purchase agreement II and promissory note (Note 5(1)) 109,754
Change in fair value of investment in nonconsolidated affiliate (113,668) (102,107)
Exchange rate differences on operating leases 3,631 201
Decrease (increase) in accounts receivable, net (50,956) 83,076
Decrease (increase) in inventory 15,171 (9,996)
Decrease in prepaid expenses and other current assets 13,620 61,725
Decrease in accounts payable (21,158) (27,595)
Decrease in other liabilities (345,573) (94,395)
Decrease in operating lease expense 27,812 32,460
Change in operating lease liability (31,105) (35,296)
Net cash used in operating activities (2,037,468) (1,634,418)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Investment in nonconsolidated affiliate (162,000) (1,124,458)
Proceeds from sales of property and equipment 114 22,789
Net cash used in investing activities (161,886) (1,101,669)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from promissory note 1,455,000
Repayments of promissory note (328,603)
Proceeds from standby equity purchase agreement, net 1,082,457
Net cash provided by financing activities 2,208,854
Effect of exchange rate changes on cash and cash equivalents 2,592 2,719
INCREASE (DECREASE) IN CASH , CASH EQUIVALENTS AND RESTRICTED CASH 12,092 (2,733,368)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR 4,478,174 5,750,771
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD 4,490,266 3,017,403
Non cash transactions:    
Investment in nonconsolidated affiliate (see Note 3) 826,705
Issuance of shares for future services $ 551,790
v3.24.2.u1
GENERAL
 6 Months Ended
Jun. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
GENERAL

NOTE 1 – GENERAL

 

A.Operations

 

N2OFF, Inc. (formerly Save Foods, Inc) (the “Company”) was incorporated on April 1, 2009, under the laws of the State of Delaware.

 

On November 6, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with N2OFF, Inc., a newly formed Nevada corporation and its wholly owned subsidiary (the “Surviving Corporation”), pursuant to which, on the same date, the Company, as parent in this transaction, merged with and into the Surviving Corporation (the “Reincorporation Merger”). The Reincorporation Merger was approved by the Company’s stockholders on October 2, 2023 and became effective on The Nasdaq Capital Market on November 10, 2023. Upon the consummation of the Reincorporation Merger, the Company ceased its legal existence as a Delaware corporation, and the Surviving Corporation continued Company’s business as the surviving corporation. On February 8, 2024, the Company’s stockholders approved the Company’s name change to “N2OFF, Inc.” which became effective on The Nasdaq Capital Market on March 19, 2024.

 

On April 27, 2009, the Company acquired from its stockholders 98.48% of the issued and outstanding shares of Save Foods Ltd. including preferred and ordinary shares. Save Foods Ltd. was incorporated in 2004 and commenced its operations in 2005. Save Foods Ltd. develops, produces, and focuses on delivering innovative solutions for the food industry aimed at improving food safety and shelf life of fresh produce.

 

On March 31, 2023, the Company entered into a securities exchange agreement with Plantify Foods, Inc. (“Plantify”), a Canadian corporation traded on the TSX Venture Exchange (“TSXV”), which focuses on the development and production of “clean-label” plant-based products - see Note 3 below for further information.

 

On August 29, 2023, the Company entered into an exchange agreement with Yaaran Investments Ltd. and formed an Israeli subsidiary, NTWO OFF Ltd. (“NTWO OFF”) which focus on nitrous oxide (“N2O”), a potent greenhouse gas with significant global warming ramifications (the Company, Save Foods Ltd. and NTWO OFF Ltd collectively, the “Group”).

 

The Company’s common stock is listed on The Nasdaq Capital Market under the symbol “NITO”.

 

  B. Reverse stock split

 

On October 4, 2023, following the Company’s 2023 annual meeting of stockholders, the Company filed a Certificate of Amendment (the “Amendment”) to its Amended and Restated Certificate of Incorporation in Delaware to effect a one for seven reverse stock split of the Company’s outstanding Common Stock (the “Reverse Stock Split”). The Reverse Stock Split became effective on October 5, 2023.

 

As a result of the Reverse Stock Split, every seven shares of the Company’s outstanding Common Stock prior to the effect of that amendment were combined and reclassified into one share of the Company’s Common Stock. No fractional shares were issued in connection with or following the reverse split and the shares were rounded to the nearest whole number. The authorized capital and par value of the Common Stock remained unchanged.

 

All shares, stock option and per share information in these consolidated financial statements have been restated to reflect the Reverse Stock Split on a retroactive basis.

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 1 – GENERAL (continued)

 

  C. Going concern uncertainty

 

Since inception, the Company has incurred significant losses and negative cash flows from operations and has an accumulated deficit of $31 million. The Company has financed its operations mainly through financing by the issuance of the Company’s equity from various investors.

 

The Company’s management expects that the Company will continue to generate losses and negative cash flows from operations for the foreseeable future. Based on the projected cash flows and cash balances as of June 30, 2024, management currently is of the opinion that its existing cash will be sufficient to fund operations until the end of the first quarter of 2025. As a result, there is substantial doubt regarding the Company’s ability to continue as a going concern.

 

Management endeavors to secure sufficient financing through the sale of additional equity securities or capital inflows from strategic partnerships. Additional funds may not be available when the Company needs them, on favorable terms, or at all. If the Company is unsuccessful in securing sufficient financing, it may need to cease operations.

 

The financial statements do not include adjustments for measurement or presentation of assets and liabilities, which may be required should the Company fail to operate as a going concern.

 

  D. Israel – Hamas war

 

Because most of the Company’s operations are conducted in Israel and all members of its board of directors, management, as well as a majority of its employees and consultants, including employees of its service providers, are located in Israel, its business and operations are directly affected by economic, political, geopolitical and military conditions affecting Israel.

 

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers in the southern part of the country. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Following the attack by Hamas on Israel’s southern border, Hezbollah in Lebanon also launched missile, rocket, drone and shooting attacks against Israeli military sites, troops and Israeli towns in northern Israel. In response to these attacks, the Israeli army has carried out a number of targeted strikes on sites belonging to Hezbollah in Lebanon and Syria. Recently, Iran has directly joined the hostilities against Israel by firing hundreds of drones, ballistic missiles and guided missiles to Israel causing further uncertainty in the region. While currently no damages were registered in Israel from such attack, the situation is developing and could lead to additional wars and hostilities in the Middle East. It is possible that the hostilities with Hezbollah and Iran will escalate, and that other terrorist organizations, including Palestinian military organizations in the West Bank, as well as other hostile countries, will join the hostilities. Such hostilities may include terror and missile attacks. In the event that the Company’s facilities are damaged as a result of hostile actions, or hostilities otherwise disrupt our ongoing operations, its ability to deliver or provide products and services in a timely manner to meet its contractual obligations towards customers and vendors could be materially and adversely affected.

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 1 – GENERAL (continued)

 

Following the brutal attacks on Israel, the mobilization of army reserves and the government declaring a state of war in October 2023, there was a decrease in Israel’s economic and business activity. The security situation has led, among other things, to a disruption in the supply chain and production, a decrease in the volume of national transportation, and a shortage in manpower due to employees being called for active reserve duty as well as a rise in the exchange rate of foreign currencies in relation to the New Israel Shekel. These events may imply wider macroeconomic indications of a deterioration of Israel’s economic standing, which may have a material adverse effect on the Company and its ability to effectively conduct its business, operations and affairs. Although many of such military reservists have since been released, they may be called up for additional reserve duty, depending on developments in the war in Gaza and along Israel’s other borders. Certain of its employees and consultants in Israel, in addition to employees of its service providers located in Israel, have been called, and additional employees may be called, for service in the current or future wars or other armed conflicts with Hamas as well as the other pending or future armed conflicts in which Israel is or may become engaged, and such persons may be absent for an extended period of time.

 

Save Foods Ltd. has experienced delays in pilots and packaging activities due to the war, as certain packing houses, have halted operations for the time being. Additionally, the Company anticipated engaging additional packing houses to conduct pilots with the Company’s product, but, due to the war, the Company was unable to continue pursuing new collaborations for these pilots, and the Company may not be able to resume any potential collaborations if the current war persists for an extended duration. The Company is unable to predict how long the current conflict will last, as well as the repercussions these delays will have on operations. If the Company is unable to renew pilots or collaborations with local packing houses, the Company’s financial results may be affected.

 

Plantify has facilities in Kibbutz Gonen, which is located in an area in northern Israel that has been affected by ongoing hostilities with Hezbollah in Lebanon, as part of the ongoing Israel – Hamas war. Due to the continuous drone attacks, missile strikes and shootings in the region, the area has been almost completely evacuated of civilians. Plantify has reduced its operations in the facility in Kibbutz Gonen and may not be able to resume its regular activities, including its ability to deliver products to customers in a timely manner, if the hostilities persist for an extended period.

 

If Plantify is unable to repay each of the debenture and amounts borrowed under the credit facility it would make us a creditor of Plantify.

 

The Company is continuing to regularly follow developments on the matter and is examining the effects on its operations and the value of its assets.

 
v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
 6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

 

Basis of presentation

 

The condensed interim consolidated financial statements included in this Quarterly Report are unaudited. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for a fair statement of the Company’s financial position as of June 30, 2024, and its results of operations for the six months ended June 30, 2024, and 2023, changes in stockholders’ equity for the six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023. The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on April 1, 2024. The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2023 included in such Form 10-K. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies.

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)

 

Use of Estimates

 

The preparation of unaudited condensed consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates. As applicable to these financial statements, the most significant estimates and assumptions relate to calculation of fair value of the convertible loan.

 

Fair value

 

Fair value of certain of the Company’s financial instruments including cash, accounts payable, accrued expenses, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.

 

Fair value, as defined by ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise.

 

Valuation techniques are generally classified into three categories: (i) the market approach; (ii) the income approach; and (iii) the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

 

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)

 

Fair value (continued)

 

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

 

Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.

 

Fair value measurements are required to be disclosed by the level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), (ii) segregating those gains or losses included in earnings, and (iii) a description of where those gains or losses included in earning are reported in the statement of operations.

 

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

 

                 
   As of June 30, 2024 
   Level 1   Level 2   Level 3   Total 
   US$ 
                 
Assets:                    
Investment in Plantify   621,329       -    -    621,329 
Credit Facility   -    -    145,300    145,300 
Convertible loan   -    -    1,164,500    1,164,500 
Total assets   621,329    -    1,309,800    1,931,129 

 

                 
   As of December 31, 2023
   Level 1  Level 2  Level 3  Total
   US$
             
Assets:                    
Investment in Plantify   641,561    -    -    641,561 
Convertible loan   -    -    1,013,900    1,013,900 
Total assets   641,561    -    1,013,900    1,655,461 

 

The following table presents the changes in fair value of the level 1 assets for the period December 31, 2023 through June 30, 2024:

 

   Changes in Fair value 
   US$ 
Assets:     
Outstanding at December 31, 2023   641,561 
Changes in fair value   (20,232)
Outstanding at June 30, 2024   621,329 

 

The following table presents the changes in fair value of the level 3 assets for the period December 31, 2023 through June 30, 2024:

 

   Changes in Fair value 
   US$ 
Assets:     
Outstanding at December 31, 2023   1,013,900 
Credit facility to Plantify   162,000 
Changes in fair value   133,900 
Outstanding at June 30, 2024   1,309,800 

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 
v3.24.2.u1
INVESTMENT IN NONCONSOLIDATED AFFILIATE
 6 Months Ended
Jun. 30, 2024
Equity Method Investments and Joint Ventures [Abstract]  
INVESTMENT IN NONCONSOLIDATED AFFILIATE

NOTE 3 – INVESTMENT IN NONCONSOLIDATED AFFILIATE

 

On March 31, 2023, the Company entered into a Securities Exchange Agreement with Plantify, pursuant to which each party agreed to issue to the other party 19.99% of its issued and outstanding capital stock (the “Securities Exchange”).

 

Upon the closing of the Securities Exchange on April 5, 2023, the Company issued 166,340 shares of the its Common Stock to Plantify, which amount represented 19.99% of its outstanding capital stock as of immediately prior to the closing (and 16.66% of the Company’s outstanding capital stock as of immediately following the closing), and Plantify issued 30,004,349 of its common shares to the Company representing 19.99% of Plantify’s outstanding capital stock as of immediately prior to the closing (and 16.66% of Plantify’s outstanding capital stock as of immediately following the closing).

 

In connection with the Securities Exchange Agreement, the Company and Plantify executed a debenture (the “Debenture”), whereby the Company agreed to lend C$1,500,000 (approximately US$1,124,000) to Plantify. The Debenture accrues interest at a rate of 8% annually and is repayable by Plantify on October 4, 2024. Outstanding principal under the Debenture may be converted, at the Company’s sole discretion, into common shares of Plantify at a price of C$0.05 per share for the first 12 months of the Debenture issuance date and C$0.10 per share thereafter. Accrued interest may be converted at the market price of Plantify’s common shares, subject to TSX Venture Exchange approval at the time of conversion. Plantify executed a general security agreement in the Company’s favor and pledged to the Company the shares of Plantify’ subsidiary, Peas of Bean Ltd.

 

On September 7, 2023, the Company purchased an additional 55,004,349 common shares of Plantify at a price of C$0.01 per common share (C$404,890), in a rights offering, resulting in an increase of approximately 7% of the Company’s ownership of the issued and outstanding common shares of Plantify. Following the additional acquisition, the Company owns 85,008,698 common shares of Plantify, representing approximately 23% of its issued and outstanding common shares.

 

The Company determined that it has a significant influence over Plantify and such investment is accounted for under the equity method of accounting. At the initial recognition of the equity investment, the Company elected the fair value option where subsequent changes in fair value are recognized in earnings. If the fair value option is applied to an investment that would otherwise be accounted for under the equity method, the Company applies it to all its financial interests in the same entity (equity and debt, including guarantees) that are eligible items. The equity investment in common shares of Plantify is classified within Level 1 in the fair value hierarchy as the valuation can be obtained from real time quotes in active markets, and is measured based on Plantify’s closing stock price and prevailing foreign exchange rate at each balance sheet date and the changes in fair value are reflected in gain (loss) on equity investments, net in the consolidated statement of income.

 

The fair value of the conversion feature loan was estimated using the Black-Scholes option pricing model with assistance of a third-party appraiser. The assumptions used to perform the calculations are detailed below:

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 3 – INVESTMENT IN NONCONSOLIDATED AFFILIATE (continued)

 

Fair value of the conversion feature as of June 30, 2024 and December 31, 2023:

 

Fair value of the conversion feature  June 30, 2024   December 31, 2023 
Expected volatility (%)   158.7%   135.70%
Risk-free interest rate (%)   4.63%   5.08%
Expected dividend yield   0.0%   0.0%
Contractual term (years) (*)   0.25    0.25 
Conversion price (Canadian dollars)   (US$0.07) C$0.10    (US$0.04) C$0.054 
Underlying share price (Canadian dollars)   (US$0.01) C$0.01    (US$0.01) C$0.01 
Fair value (U.S. dollars)  $100   $900 

 

The significant observable inputs used in the fair value measurement of the conversion feature are mainly the expected volatility and risk free interest rate. Significant changes in any of those inputs in isolation would have resulted in a change in the fair value measurement.

 

The fair value of the debt component of the Debenture was estimated with the assistance of a third-party appraiser by discounting the principal and interest at a discount rate of market interest for similar loans. The interest rate was determined, among other things, based on the potential risk factor of the debt investment in Plantify, at 24.7% and was calculated at 1,164,400.

 

For the six and three months ended June 30, 2024, an unrealized gain of $130,368 and $46,425, respectively was recorded in changes in fair value of an investment in an associate measured under the fair value option of comprehensive loss.

 

On April 2, 2024, the Board of Directors of the Company approved a binding term sheet for a credit facility of up to $250,000 and bearing interest at a rate of 8% per annum (the “Credit Facility”) to Plantify. The Credit Facility will be provided for a term beginning April 2, 2024 and ending April 1, 2025, unless earlier terminated by the Company following an Event of Default, as defined in the Credit Facility.

 

Subject to the provisions of this Credit Facility, Plantify may drawdown up to $250,000, at any time and from time to time during the term. Each loan must be repaid by Plantify within twelve months provided any outstanding amounts as of the end of the term must be repaid within ninety days. As of June 30, 2024, Plantify borrowed $162,000 under the Credit Facility.

 

The following tables present Plantify’s summarized financial information.

 

   Six months ended
June 30, 2024		   Three months ended
June 30, 2024		 
         
Revenue   327,000    167,000 
Gross loss   (123,000)   (43,000)
Net loss   (1,553,000)   (864,000)

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 
v3.24.2.u1
LOAN AGREEMENT
 6 Months Ended
Jun. 30, 2024
Debt Disclosure [Abstract]  
LOAN AGREEMENT

NOTE 4 – LOAN AGREEMENT

 

On June 30, 2024, the Company entered into a Loan Agreement (the “Loan Agreement”) with Solterra Renewable Energy Ltd. (“Solterra”) and certain other lenders (collectively, the “Lenders”) pursuant to which the Lenders committed to loan Solterra the aggregate principal amount of € 500,000 (approximately $541,541) (€ 375,000 (approximately $406,156) of which was committed by the Company) with interest accruing on the principal at the rate of 7% per annum, to be paid annually beginning June 30, 2025. On July 8, 2024, the Company paid €375,000 (approximately $406,156) see also note 9 below.

 
v3.24.2.u1
COMMON STOCK
 6 Months Ended
Jun. 30, 2024
Equity [Abstract]  
COMMON STOCK

NOTE 5 – COMMON STOCK

 

1.On December 22, 2023, the Company entered into a Standby Equity Purchase Agreement (the “SEPA II”) with YA II PN, Ltd. (the “Investor”), pursuant to which the Investor has agreed to purchase up to $20 million shares of common stock over 36 months after the date of the SEPA II. The price of shares to be issued under the SEPA II will be 94% of the lowest volume weighted average trading price (the “VWAP”) of the Company’s common stock for the three consecutive trading days commencing on the delivery of each advance notice by the Company. For additional information, see note 10(21) to the Company’s audited financial statements for the year ended December 31, 2023.

 

The SEPA II will terminate automatically on the earlier of January 1, 2027 or when the Investor has purchased an aggregate of $20 million of the Company’s shares of common stock. The Company has the right to terminate the SEPA II upon five trading days’ prior written notice to the Investor.

 

In connection with and subject to the satisfaction of certain conditions set forth in the SEPA II, upon the request of the Company, the Investor will pre-advance to the Company up to $3,000,000 of the $20,000,000 commitment amount.

 

The Company paid a subsidiary of the Investor a structuring fee in the amount of $10,000 and on December 28, 2023, the Company issued 110,554 shares of common stock as a commitment fee to a subsidiary of the Investor. The Company determined the value of the shares issued at $254,274 based on the share price on the agreement date, which was recorded as prepaid expenses in other current assets during the year ended December 31, 2023 and $34,783 was recorded in the statement of operations under financing expenses for the six months ended June 30, 2024.

 

During the six months ended June 30, 2024, the Company issued 1,170,813 shares of common stock, to the Investor pursuant to the terms of SEPA II valued at $977,044 for gross consideration of $1,082,457.

 

On April 4, 2024, the Company, sold a $1,500,000 promissory note (the “Note”) to the Investor pursuant to the terms of SEPA II in exchange for proceeds of $1,455,000, reflecting an original issue discount of 3% to face value of the Note.

 

The Note bears interest at a rate of 8% per annum and matures April 4, 2025. Commencing June 3, 2024, and every 30 days thereafter, the Company is required to pay $150,000, together with accrued and unpaid interest on the then outstanding principal. Payments under the Note can be made either (i) in cash or (ii) by submitting notice of an advance of shares to be issued and sold to the Investor pursuant to the SEPA II, or any combination of (i) or (ii) as determined by the Company. The entire remaining principal balance and unpaid interest amount of the Note becomes due and payable in full at maturity. The Company determined that the Note is accounted for as a liability in accordance with ASC 470 “Debt”.

 

The Note sets forth certain events of default, including a breach by the Company of another agreement with the Investor, the failure of the securities of the Company to remain listed on the Nasdaq and the failure of the Company to timely file periodic reports with the SEC. Upon the occurrence of an event of default, interest will accrue at a default rate of 18% per annum and the Note will become immediately due and payable, together with all costs, legal fees and expenses of collection through the date of full repayment.

 

2.On October 26, 2022, pursuant to an investor relations consulting agreement, the Company’s Board of Directors approved the quarterly issuances of 1,286 shares of common stock to a consultant beginning in the first quarter of 2023. On March 18, 2024, the Company issued 1,286 shares of common stock to a consultant for consulting services provided to the Company. The shares were estimated at $17,914 based on the share price of the common stock on October 26, 2022. On July 25, 2024, the Company issued to a consultant additional 1,286 shares of common stock - see also note 9 below.

 

3.On March 18, 2024, the Company issued 3,508 shares of common stock to a consultant for consulting services provided to the Company pursuant to a consulting agreement dated on November 23, 2023. The Company determined the value of the shares and the services provided at $5,824 and recorded share based compensation expenses.

 

4.On May 8, 2024 the Company issued 30,000 shares of common stock to a consultant, for services provided to the Company pursuant to an amendment of a consulting agreement, dated November 15, 2023. The shares were estimated at $30,900 based on the share price of the common stock on May 8, 2024.

 

5.During the six months ended June 30, 2024, the Company recorded share based compensation expenses in General and Administrative expenses in the amount of $187,935 related to shares issued by the Company to service providers during the year ended December 31, 2023.
v3.24.2.u1
STOCK OPTIONS
 6 Months Ended
Jun. 30, 2024
Share-Based Payment Arrangement [Abstract]  
STOCK OPTIONS

NOTE 6 – STOCK OPTIONS

 

The following table presents the Company’s stock option activity for employees and directors of the Company for the six months ended June 30, 2024:

 

  

 

Number of Options

   Weighted Average Exercise Price 
Outstanding at December 31, 2023   27,518    23.69 
Granted   -    - 
Exercised   -    - 
Forfeited or expired   -    - 
Outstanding at June 30, 2024   27,518    23.69 
Number of options exercisable at June 30, 2024   27,518    23.69 

 

The aggregate intrinsic value of the awards outstanding as of June 30, 2024 was $0. These amounts represent the total intrinsic value, based on the Company’s stock price of $0.48 as of June 30, 2024, less the weighted exercise price. This represents the potential amount received by the option holders had all option holders exercised their options as of that date.

 

Costs incurred in respect of stock-options compensation for employees and directors, for the six months ended June 30, 2024 and 2023 were $0 and $14,247, respectively and $0 and $5,787, for the three months ended June 30, 2024 and 2023, respectively.

 
v3.24.2.u1
RELATED PARTIES
 6 Months Ended
Jun. 30, 2024
Related Party Transactions [Abstract]  
RELATED PARTIES

NOTE 7 – RELATED PARTIES

 

A.Transactions and balances with related parties

 

         
   Six months ended June 30, 
   2024   2023 
         
General and administrative expenses:          
Directors’ compensation   170,275    192,789 
Salaries and fees to officers   237,271    245,241 
   407,546    (*) 438,030
           
(*) of which share based compensation   -    19,389 
           
Research and development expenses:          
Salaries and fees to officers   -    33,883 
           
Selling and marketing expenses:          
Salaries and fees to officers   -    33,883 

 

(*) of which share based compensation

 

  B. Balances with related parties and officers:

 

   As of June 30,   As of December 31, 
   2024   2023 
         
Other accounts payables   85,751    139,117 

 

  C. The Company’s chairman of the board of directors is also a shareholder and director of AI Conversation Systems Ltd., an Israeli company which merged with Solterra. See also Notes 4 and 9.

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 
v3.24.2.u1
SEGMENT REPORTING
 6 Months Ended
Jun. 30, 2024
Segment Reporting [Abstract]  
SEGMENT REPORTING

NOTE 8 – SEGMENT REPORTING

 

  A.Information about reported segment profit or loss and assets

 

The Company has two reportable segments: (i) Pathogen prevention and prolong shelf life, and (ii) the N2O emissions Global warming solutions. The Pathogen prevention operating segment consists of Save Food Ltd. and the Global warming solutions operating segment consists of NTWO OFF Ltd.

 

Information related to the operations of the Company’s reportable operating segments is set forth below:

 

   Pathogen prevention   Global warming solutions   Total 
Six months ended June 30, 2024               
Revenues   60,377    -    60,377 
Operating loss   (474,561)   (136,750)   (611,311)
Unallocated amounts:               
Unallocated costs             (1,153,963)
Total operating loss             (1,765,274)
Financing expenses, net             (76,119)
Other income             105,225 
Changes in fair value of an investment in an associate measured under the fair value option             113,668 
Net loss             (1,622,500)

 

   Pathogen prevention   Global warming solutions   Total 
Three months ended June 30, 2024               
Revenues   16,546    -    16,546 
Operating loss   (283,778)   (18,811)   (302,589)
Unallocated amounts:               
Unallocated costs             (563,619)
Total operating loss             (866,208)
Financing expenses, net             (81,055)
Other income             117,396 
Changes in fair value of an investment in an associate measured under the fair value option             29,725 
Net loss             (800,142)

 

  B.Information on sales by geographic distribution:

 

Sales are attributed to geographic distribution based on the location of the customer.

 

                 
   Six months ended June 30,   Three months ended June 30, 
   2024   2023   2024   2023 
                 
Israel   19,303    5,221    14,446    - 
United States   38,974    41,554    -    - 
Mexico   -    109,824    -    36,608 
Peru   2,100    -    2,100    - 
Turkey   -    1,019    -    - 
Revenues from sales   60,377    157,618    16,546    36,608 

 

  C.Sales to single customers exceeding 10% of sales (US$):

 

                 
   Six months ended June 30,   Three months ended June 30, 
   2024   2023   2024   2023 
                 
Customer A   -    109,824    -    36,608 
Customer B   38,974    41,554    -    - 
Customer C   13,035    -    13,035    - 
Revenues from sales   52,009    151,378    13,035    36,608 

 

  D.Information on Long-Lived Assets - Property, Plant and Equipment and ROU assets by geographic areas:

 

The following table presents the locations of the Company’s long-lived assets as of June 30, 2024 and December 31, 2023:

 

   As of   As of 
   June 30, 2024   December 31, 2023 
         
Israel   67,763    102,103 
United States   17,095    21,046 
Property, plant and equipment and ROU assets   84,858    123,149 

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 
v3.24.2.u1
SUBSEQUENT EVENTS
 6 Months Ended
Jun. 30, 2024
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 9 – SUBSEQUENT EVENTS

 

1.On July 25, 2024, the Company issued to a consultant 1,286 shares of common stock for consulting services provided to the Company. The shares were estimated at $17,914 based on the share price of the common stock on October 26, 2022. see also note 5(2) above.

 

2.On July 8, 2024, the Company paid €375,000 (approximately $406,156) in connection with the June 30, 2024 Loan Agreement as referenced in Note 4. In addition, the Company entered into a Loan and Partnership Agreement (the “Loan and Partnership Agreement”), with Horizons RES PE1 UG (haftungsbeschränkt) & Co. KG (the “Partnership”), Solterra, and the Lenders, pursuant to which the Lenders committed to loan the Partnership (the “Loan”) an aggregate principal amount of € 2,080,000 (approximately $2,288,000) (€ 1,560,000 (approximately $1,716,000) of which was committed by the Company) for projects in the solar energy sector. Interest accrues on the loan at the rate of 7% per annum. The Loan matures on the earlier of (i) the sale of the Partnership or (ii) five years from the date of the Loan and Partnership Agreement.

 

All loans to the Partnership from Solterra will be subordinate to the Loan.

 

Pursuant to the Loan and Partnership Agreement, the Lenders are entitled to participation rights of 50% (of which the Company will be entitled to receive 50% thereof) of the Partnership’s profits (the “Profits”), whether directly or by way of 50% membership or ownership in the Partnership, or through legal rights for the distribution of 50% of the Partnership’s Profits where Solterra acts as a trustee on behalf of the Lenders (the “Profit Rights Alternatives”). The Lenders will decide within three months from the date of the Loan and Partnership Agreement on the chosen Profit Right Alternative.

 

Proceeds from the sale of a Partnership asset must first be used to repay the Lenders, pro rata with each Lender’s respective portion of the Loan.

 

Repayment of the Loan is secured by a lien on Solterra’s interests in the Partnership.

 

If a Lender defaults on a payment schedule as scheduled in the Loan and Partnership Agreement, such Lender’s rights to Profits will be proportionately decreased, based on the amount of the Loan that was actually provided by such Lender to the Partnership out of its Loan commitment amount.

 

On July 31, 2024 the Company paid the first payment in the amount of €337,500 (approximately $365,560) in connection with the Loan and Partnership Agreement.
v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Policies)
 6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
Basis of presentation

Basis of presentation

 

The condensed interim consolidated financial statements included in this Quarterly Report are unaudited. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for a fair statement of the Company’s financial position as of June 30, 2024, and its results of operations for the six months ended June 30, 2024, and 2023, changes in stockholders’ equity for the six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023. The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on April 1, 2024. The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2023 included in such Form 10-K. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies.
Use of Estimates

Use of Estimates

 

The preparation of unaudited condensed consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates. As applicable to these financial statements, the most significant estimates and assumptions relate to calculation of fair value of the convertible loan.

 
Fair value

Fair value

 

Fair value of certain of the Company’s financial instruments including cash, accounts payable, accrued expenses, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.

 

Fair value, as defined by ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise.

 

Valuation techniques are generally classified into three categories: (i) the market approach; (ii) the income approach; and (iii) the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

 

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)

 

Fair value (continued)

 

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

 

Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.

 

Fair value measurements are required to be disclosed by the level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), (ii) segregating those gains or losses included in earnings, and (iii) a description of where those gains or losses included in earning are reported in the statement of operations.

 

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

 

                 
   As of June 30, 2024 
   Level 1   Level 2   Level 3   Total 
   US$ 
                 
Assets:                    
Investment in Plantify   621,329       -    -    621,329 
Credit Facility   -    -    145,300    145,300 
Convertible loan   -    -    1,164,500    1,164,500 
Total assets   621,329    -    1,309,800    1,931,129 

 

                 
   As of December 31, 2023
   Level 1  Level 2  Level 3  Total
   US$
             
Assets:                    
Investment in Plantify   641,561    -    -    641,561 
Convertible loan   -    -    1,013,900    1,013,900 
Total assets   641,561    -    1,013,900    1,655,461 

 

The following table presents the changes in fair value of the level 1 assets for the period December 31, 2023 through June 30, 2024:

 

   Changes in Fair value 
   US$ 
Assets:     
Outstanding at December 31, 2023   641,561 
Changes in fair value   (20,232)
Outstanding at June 30, 2024   621,329 

 

The following table presents the changes in fair value of the level 3 assets for the period December 31, 2023 through June 30, 2024:

 

   Changes in Fair value 
   US$ 
Assets:     
Outstanding at December 31, 2023   1,013,900 
Credit facility to Plantify   162,000 
Changes in fair value   133,900 
Outstanding at June 30, 2024   1,309,800 

 

 

N2OFF, INC.

 

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

 
v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Tables)
 6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
SCHEDULE OF FAIR VALUE ASSETS ON RECURRING BASIS

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

 

                 
   As of June 30, 2024 
   Level 1   Level 2   Level 3   Total 
   US$ 
                 
Assets:                    
Investment in Plantify   621,329       -    -    621,329 
Credit Facility   -    -    145,300    145,300 
Convertible loan   -    -    1,164,500    1,164,500 
Total assets   621,329    -    1,309,800    1,931,129 

 

                 
   As of December 31, 2023
   Level 1  Level 2  Level 3  Total
   US$
             
Assets:                    
Investment in Plantify   641,561    -    -    641,561 
Convertible loan   -    -    1,013,900    1,013,900 
Total assets   641,561    -    1,013,900    1,655,461 
SCHEDULE OF CHANGES IN FAIR VALUE OF ASSETS

The following table presents the changes in fair value of the level 1 assets for the period December 31, 2023 through June 30, 2024:

 

   Changes in Fair value 
   US$ 
Assets:     
Outstanding at December 31, 2023   641,561 
Changes in fair value   (20,232)
Outstanding at June 30, 2024   621,329 

 

The following table presents the changes in fair value of the level 3 assets for the period December 31, 2023 through June 30, 2024:

 

   Changes in Fair value 
   US$ 
Assets:     
Outstanding at December 31, 2023   1,013,900 
Credit facility to Plantify   162,000 
Changes in fair value   133,900 
Outstanding at June 30, 2024   1,309,800 
v3.24.2.u1
INVESTMENT IN NONCONSOLIDATED AFFILIATE (Tables)
 6 Months Ended
Jun. 30, 2024
Equity Method Investments and Joint Ventures [Abstract]  
SCHEDULE OF FAIR VALUE CONVERSION

Fair value of the conversion feature as of June 30, 2024 and December 31, 2023:

 

Fair value of the conversion feature  June 30, 2024   December 31, 2023 
Expected volatility (%)   158.7%   135.70%
Risk-free interest rate (%)   4.63%   5.08%
Expected dividend yield   0.0%   0.0%
Contractual term (years) (*)   0.25    0.25 
Conversion price (Canadian dollars)   (US$0.07) C$0.10    (US$0.04) C$0.054 
Underlying share price (Canadian dollars)   (US$0.01) C$0.01    (US$0.01) C$0.01 
Fair value (U.S. dollars)  $100   $900 
SCHEDULE OF EQUITY INVESTMENT

The following tables present Plantify’s summarized financial information.

 

   Six months ended
June 30, 2024		   Three months ended
June 30, 2024		 
         
Revenue   327,000    167,000 
Gross loss   (123,000)   (43,000)
Net loss   (1,553,000)   (864,000)
v3.24.2.u1
STOCK OPTIONS (Tables)
 6 Months Ended
Jun. 30, 2024
Share-Based Payment Arrangement [Abstract]  
SCHEDULE OF STOCK OPTION ACTIVITY

The following table presents the Company’s stock option activity for employees and directors of the Company for the six months ended June 30, 2024:

 

  

 

Number of Options

   Weighted Average Exercise Price 
Outstanding at December 31, 2023   27,518    23.69 
Granted   -    - 
Exercised   -    - 
Forfeited or expired   -    - 
Outstanding at June 30, 2024   27,518    23.69 
Number of options exercisable at June 30, 2024   27,518    23.69 
v3.24.2.u1
RELATED PARTIES (Tables)
 6 Months Ended
Jun. 30, 2024
Related Party Transactions [Abstract]  
SCHEDULE OF TRANSACTIONS AND BALANCES WITH RELATED PARTIES

 

A.Transactions and balances with related parties

 

         
   Six months ended June 30, 
   2024   2023 
         
General and administrative expenses:          
Directors’ compensation   170,275    192,789 
Salaries and fees to officers   237,271    245,241 
   407,546    (*) 438,030
           
(*) of which share based compensation   -    19,389 
           
Research and development expenses:          
Salaries and fees to officers   -    33,883 
           
Selling and marketing expenses:          
Salaries and fees to officers   -    33,883 

 

(*) of which share based compensation

 

  B. Balances with related parties and officers:

 

   As of June 30,   As of December 31, 
   2024   2023 
         
Other accounts payables   85,751    139,117 
v3.24.2.u1
SEGMENT REPORTING (Tables)
 6 Months Ended
Jun. 30, 2024
Segment Reporting [Abstract]  
SCHEDULE OF INFORMATION RELATED TO OPERATIONS OF REPORTABLE OPERATING SEGMENTS

Information related to the operations of the Company’s reportable operating segments is set forth below:

 

   Pathogen prevention   Global warming solutions   Total 
Six months ended June 30, 2024               
Revenues   60,377    -    60,377 
Operating loss   (474,561)   (136,750)   (611,311)
Unallocated amounts:               
Unallocated costs             (1,153,963)
Total operating loss             (1,765,274)
Financing expenses, net             (76,119)
Other income             105,225 
Changes in fair value of an investment in an associate measured under the fair value option             113,668 
Net loss             (1,622,500)

 

   Pathogen prevention   Global warming solutions   Total 
Three months ended June 30, 2024               
Revenues   16,546    -    16,546 
Operating loss   (283,778)   (18,811)   (302,589)
Unallocated amounts:               
Unallocated costs             (563,619)
Total operating loss             (866,208)
Financing expenses, net             (81,055)
Other income             117,396 
Changes in fair value of an investment in an associate measured under the fair value option             29,725 
Net loss             (800,142)
SCHEDULE OF INFORMATION ON SALES BY GEOGRAPHIC DISTRIBUTION

Sales are attributed to geographic distribution based on the location of the customer.

 

                 
   Six months ended June 30,   Three months ended June 30, 
   2024   2023   2024   2023 
                 
Israel   19,303    5,221    14,446    - 
United States   38,974    41,554    -    - 
Mexico   -    109,824    -    36,608 
Peru   2,100    -    2,100    - 
Turkey   -    1,019    -    - 
Revenues from sales   60,377    157,618    16,546    36,608 
SCHEDULE OF SALES TO CUSTOMERS
                 
   Six months ended June 30,   Three months ended June 30, 
   2024   2023   2024   2023 
                 
Customer A   -    109,824    -    36,608 
Customer B   38,974    41,554    -    - 
Customer C   13,035    -    13,035    - 
Revenues from sales   52,009    151,378    13,035    36,608 
SCHEDULE OF INFORMATION ON LONG LIVED ASSETS

The following table presents the locations of the Company’s long-lived assets as of June 30, 2024 and December 31, 2023:

 

   As of   As of 
   June 30, 2024   December 31, 2023 
         
Israel   67,763    102,103 
United States   17,095    21,046 
Property, plant and equipment and ROU assets   84,858    123,149 
v3.24.2.u1
GENERAL (Details Narrative) - USD ($)
 1 Months Ended
Oct. 04, 2023
Oct. 31, 2023
Jun. 30, 2024
Dec. 31, 2023
Apr. 27, 2009
Stockholders' equity, reverse stock split one for seven reverse stock split one (1) for seven (7) reverse stock split      
Accumulated deficit     $ 30,917,247 $ 29,360,235  
Save Foods Ltd [Member]          
Ownership percentage         98.48%
v3.24.2.u1
SCHEDULE OF FAIR VALUE ASSETS ON RECURRING BASIS (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Platform Operator, Crypto Asset [Line Items]    
Total assets $ 1,931,129 $ 1,655,461
Investments [Member] | Plantify Foods Inc [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets 621,329 641,561
Credit Facility [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets 145,300  
Convertible Debt [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets 1,164,500 1,013,900
Fair Value, Inputs, Level 1 [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets 621,329 641,561
Fair Value, Inputs, Level 1 [Member] | Investments [Member] | Plantify Foods Inc [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets 621,329 641,561
Fair Value, Inputs, Level 1 [Member] | Credit Facility [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets  
Fair Value, Inputs, Level 1 [Member] | Convertible Debt [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets
Fair Value, Inputs, Level 2 [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets
Fair Value, Inputs, Level 2 [Member] | Investments [Member] | Plantify Foods Inc [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets
Fair Value, Inputs, Level 2 [Member] | Credit Facility [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets  
Fair Value, Inputs, Level 2 [Member] | Convertible Debt [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets
Fair Value, Inputs, Level 3 [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets 1,309,800 1,013,900
Fair Value, Inputs, Level 3 [Member] | Investments [Member] | Plantify Foods Inc [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets
Fair Value, Inputs, Level 3 [Member] | Credit Facility [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets 145,300  
Fair Value, Inputs, Level 3 [Member] | Convertible Debt [Member]    
Platform Operator, Crypto Asset [Line Items]    
Total assets $ 1,164,500 $ 1,013,900
v3.24.2.u1
SCHEDULE OF CHANGES IN FAIR VALUE OF ASSETS (Details)
 6 Months Ended
Jun. 30, 2024
USD ($)
Fair Value, Inputs, Level 1 [Member]  
Platform Operator, Crypto Asset [Line Items]  
Outstanding at December 31, 2023 $ 641,561
Changes in fair value (20,232)
Outstanding at June 30, 2024 621,329
Fair Value, Inputs, Level 3 [Member]  
Platform Operator, Crypto Asset [Line Items]  
Outstanding at December 31, 2023 1,013,900
Credit facility to Plantify 162,000
Changes in fair value 133,900
Outstanding at June 30, 2024 $ 1,309,800
v3.24.2.u1
SCHEDULE OF FAIR VALUE CONVERSION (Details)
 6 Months Ended 12 Months Ended
Jun. 30, 2024
USD ($)
Dec. 31, 2023
USD ($)
Jun. 30, 2024
$ / shares
Jun. 30, 2024
Jun. 30, 2024
$ / shares
Dec. 31, 2023
$ / shares
Dec. 31, 2023
Dec. 31, 2023
$ / shares
Fair Value Measurement Inputs and Valuation Techniques [Line Items]                
Fair value (US dollars) $ 100 $ 900            
Measurement Input, Price Volatility [Member]                
Fair Value Measurement Inputs and Valuation Techniques [Line Items]                
Equity securities, measurement input       158.7     135.70  
Measurement Input, Risk Free Interest Rate [Member]                
Fair Value Measurement Inputs and Valuation Techniques [Line Items]                
Equity securities, measurement input       4.63     5.08  
Measurement Input, Expected Dividend Rate [Member]                
Fair Value Measurement Inputs and Valuation Techniques [Line Items]                
Equity securities, measurement input       0.0     0.0  
Measurement Input, Expected Term [Member]                
Fair Value Measurement Inputs and Valuation Techniques [Line Items]                
Contractual term 3 months 3 months            
Measurement Input, Conversion Price [Member]                
Fair Value Measurement Inputs and Valuation Techniques [Line Items]                
Equity securities, measurement input     0.07   0.10 0.04   0.054
Measurement Input, Share Price [Member]                
Fair Value Measurement Inputs and Valuation Techniques [Line Items]                
Equity securities, measurement input     0.01   0.01 0.01   0.01
v3.24.2.u1
SCHEDULE OF EQUITY INVESTMENT (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Gross loss $ 10,764 $ 9,601 $ 26,615 $ 87,865
Net loss (787,448) $ (709,505) (1,557,012) $ (2,423,183)
Plantify Foods Inc [Member]        
Revenue 167,000   327,000  
Gross loss (43,000)   (123,000)  
Net loss $ (864,000)   $ (1,553,000)  
v3.24.2.u1
INVESTMENT IN NONCONSOLIDATED AFFILIATE (Details Narrative)
 3 Months Ended 6 Months Ended
Apr. 02, 2024
USD ($)
Sep. 07, 2023
USD ($)
shares
Apr. 05, 2023
shares
Mar. 31, 2023
USD ($)
Jun. 30, 2024
USD ($)
$ / shares
shares
Jun. 30, 2024
USD ($)
$ / shares
shares
Sep. 07, 2023
$ / shares
shares
Mar. 31, 2023
CAD ($)
$ / shares
Percentage of outstanding capital stock before closing     19.99% 19.99%        
Percentage of outstanding capital stock after closing     16.66%          
Conversion price after 12 months | $ / shares         $ 0.48 $ 0.48    
Unrealized gain on investment | $         $ 130,368 $ 46,425    
Common Stock [Member] | Plantify Foods Inc [Member]                
Number of shares issued     300,043.49          
Plantify Foods Inc [Member]                
Percentage of outstanding capital stock before closing     19.99% 19.99%        
Number of shares issued   55,004,349            
Percentage of outstanding capital stock after closing   23.00% 16.66%          
Debt face amount       $ 1,124,000       $ 1,500,000
Percentage of stock issued       8.00%       8.00%
Conversion price for first 12 months | $ / shares               $ 0.05
Conversion price after 12 months | $ / shares               $ 0.10
Purchase price per share | $ / shares             $ 0.01  
Value of shares issued | $   $ 404,890            
Increase in percentage of ownership     7.00%          
Shares owned             85,008,698  
Debenture investment rate         24.70% 24.70%    
Debt investment         1,164,400 1,164,400    
Credit facility, borrowing capacity | $ $ 250,000              
Interest rate 8.00%              
Credit facility, beginning date Apr. 02, 2024              
Credit facility, ending date Apr. 01, 2025              
Credit facility, amount borrowed | $         $ 162,000 $ 162,000    
Plantify Foods Inc [Member] | Common Stock [Member]                
Number of shares issued     166,340          
v3.24.2.u1
LOAN AGREEMENT (Details Narrative) - Loan Agreement [Member]
 6 Months Ended
Jul. 08, 2024
USD ($)
Jul. 08, 2024
EUR (€)
Jun. 30, 2024
USD ($)
Jun. 30, 2024
EUR (€)
Subsequent Event [Member]        
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]        
Payment of debt $ 406,156 € 375,000    
Solterra Renewable Energy Ltd [Member]        
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]        
Aggregate principal amount     $ 541,541 € 500,000
Commited amount     $ 406,156 € 375,000
Accrued interest rate     7.00%  
v3.24.2.u1
COMMON STOCK (Details Narrative) - USD ($)
 3 Months Ended 6 Months Ended
Jul. 25, 2024
May 08, 2024
Apr. 04, 2024
Mar. 18, 2024
Dec. 28, 2023
Dec. 22, 2023
Oct. 22, 2023
Oct. 26, 2022
Jun. 30, 2024
Mar. 31, 2024
Jun. 30, 2023
Mar. 31, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Accumulated Other Comprehensive Income (Loss) [Line Items]                              
Prepaid expenses in other current assets                 $ 653,358       $ 653,358   $ 719,389
Other expenses                         34,783    
Value of shares issued                 937,094 $ 39,950          
Value of shares issued for consultant services                 $ 48,814 $ 23,738 $ 670,240 $ 67,614      
Share based compensation                         $ 14,247  
General and Administrative Expense [Member]                              
Accumulated Other Comprehensive Income (Loss) [Line Items]                              
Share based compensation                         $ 187,935    
Common Stock [Member]                              
Accumulated Other Comprehensive Income (Loss) [Line Items]                              
Number of shares issued                 1,142,480 28,333          
Value of shares issued                 $ 114 $ 3          
Number of shares issued for consultant services                 30,000 4,794 135,926 [1] 6,288 [1]      
Value of shares issued for consultant services                 $ 3 $ 14 $ 1      
Promissory Note [Member]                              
Accumulated Other Comprehensive Income (Loss) [Line Items]                              
Sale of promissory note     $ 1,500,000                        
Proceeds from debt     $ 1,455,000                        
Original issue discount     3.00%                        
Interest rate     8.00%                        
Maturity date     Apr. 04, 2025                        
Debt periodic amount payable     $ 150,000                        
Default interest rate     18.00%                        
Standby Equity Purchase Agreement [Member]                              
Accumulated Other Comprehensive Income (Loss) [Line Items]                              
SharesAggregatePurchaseAmount           $ 20,000,000                  
Shares price description           The price of shares to be issued under the SEPA II will be 94% of the lowest volume weighted average trading price (the “VWAP”) of the Company’s common stock for the three consecutive trading days commencing on the delivery of each advance notice by the Company                  
Pre-advance for purchase of shares           $ 3,000,000                  
Number of shares issued                         1,170,813    
Value of shares issued                         $ 1,082,457    
Standby Equity Purchase Agreement [Member] | Investor [Member]                              
Accumulated Other Comprehensive Income (Loss) [Line Items]                              
Structuring fee             $ 10,000                
Shares issued for commitment fee         110,554                    
Prepaid expenses in other current assets                             $ 254,274
Standby Equity Purchase Agreement Two [Member]                              
Accumulated Other Comprehensive Income (Loss) [Line Items]                              
Value of shares issued                         $ 977,044    
Consulting Agreements [Member]                              
Accumulated Other Comprehensive Income (Loss) [Line Items]                              
Number of shares issued for consultant services   30,000   3,508                      
Value of shares issued for consultant services   $ 30,900   $ 5,824                      
Consulting Agreements [Member] | Subsequent Event [Member]                              
Accumulated Other Comprehensive Income (Loss) [Line Items]                              
Number of shares issued for consultant services 1,286                            
Value of shares issued for consultant services $ 17,914                            
Consulting Agreements [Member] | Common Stock [Member]                              
Accumulated Other Comprehensive Income (Loss) [Line Items]                              
Number of shares issued for consultant services       1,286       1,286              
Value of shares issued for consultant services       $ 17,914                      
[1] Adjusted to reflect one (1) for seven (7) reverse stock split in October 2023 (see note 1B).
v3.24.2.u1
SCHEDULE OF STOCK OPTION ACTIVITY (Details)
 6 Months Ended
Jun. 30, 2024
$ / shares
shares
Share-Based Payment Arrangement [Abstract]  
Number of Options Outstanding, Beginning | shares 27,518
Weighted Average Exercise Price, Beginning | $ / shares $ 23.69
Number of Options, Granted | shares
Weighted Average Exercise Price, Granted | $ / shares
Number of Options, Exercised | shares
Weighted Average Exercise Price, Exercised | $ / shares
Number of Options, Forfeited or expired | shares
Weighted Average Exercise Price, Forfeited or expired | $ / shares
Number of Options Outstanding, Ending | shares 27,518
Weighted Average Exercise Price, Ending | $ / shares $ 23.69
Number of Options Exercisable | shares 27,518
Weighted Average Exercise Price, Exercisable | $ / shares $ 23.69
v3.24.2.u1
STOCK OPTIONS (Details Narrative) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]        
Intrinsic value of awards outstanding $ 0   $ 0  
Stock price $ 0.48   $ 0.48  
Stock-options compensation $ 0 $ 5,787 $ 0 $ 14,247
v3.24.2.u1
SCHEDULE OF TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Related Party Transaction [Line Items]          
General and administrative expenses $ 808,251 $ 744,287 $ 1,550,054 $ 2,378,151  
Share based compensation     14,247  
Research and development expenses 11,690 16,857 127,556 135,765  
Selling and marketing expenses 57,031 $ 88,775 114,279 157,921  
Related Party [Member]          
Related Party Transaction [Line Items]          
General and administrative expenses     407,546 438,030 [1]  
Share based compensation     19,389  
Directors Compensation [Member] | Related Party [Member]          
Related Party Transaction [Line Items]          
General and administrative expenses     170,275 192,789  
Salaries and Fees to Officers [Member] | Related Party [Member]          
Related Party Transaction [Line Items]          
General and administrative expenses     237,271 245,241  
Research and development expenses     33,883  
Selling and marketing expenses     $ 33,883  
Related Parties and Officers [Member]          
Related Party Transaction [Line Items]          
Other accounts payables $ 85,751   $ 85,751   $ 139,117
[1] of which share based compensation
v3.24.2.u1
SCHEDULE OF INFORMATION RELATED TO OPERATIONS OF REPORTABLE OPERATING SEGMENTS (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Mar. 31, 2024
Jun. 30, 2023
Mar. 31, 2023
Jun. 30, 2024
Jun. 30, 2023
Segment Reporting Information [Line Items]            
Revenues $ 16,546   $ 36,608   $ 60,377 $ 157,618
Operating loss (302,589)       (611,311)  
Unallocated costs (563,619)       (1,153,963)  
Total operating loss (866,208)   (840,318)   (1,765,274) (2,583,972)
Financing expenses, net (81,055)       (76,119)  
Other income 117,396   12,294   105,225 12,294
Changes in fair value of an investment in an associate measured under the fair value option 29,725       113,668  
Net loss (800,142) $ (822,358) $ (714,935) $ (1,721,549) (1,622,500) $ (2,436,484)
Pathogen Prevention [Member] | Operating Segments [Member]            
Segment Reporting Information [Line Items]            
Revenues 16,546       60,377  
Operating loss (283,778)       (474,561)  
Global Warming Solutions [Member] | Operating Segments [Member]            
Segment Reporting Information [Line Items]            
Revenues        
Operating loss $ (18,811)       $ (136,750)  
v3.24.2.u1
SCHEDULE OF INFORMATION ON SALES BY GEOGRAPHIC DISTRIBUTION (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Revenues from External Customers and Long-Lived Assets [Line Items]        
Revenues from sales $ 16,546 $ 36,608 $ 60,377 $ 157,618
ISRAEL        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Revenues from sales 14,446 19,303 5,221
UNITED STATES        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Revenues from sales 38,974 41,554
MEXICO        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Revenues from sales 36,608 109,824
PERU        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Revenues from sales 2,100 2,100
TÜRKIYE        
Revenues from External Customers and Long-Lived Assets [Line Items]        
Revenues from sales $ 1,019
v3.24.2.u1
SCHEDULE OF SALES TO CUSTOMERS (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Revenue, Major Customer [Line Items]        
Revenues from sales $ 16,546 $ 36,608 $ 60,377 $ 157,618
Customer A [Member]        
Revenue, Major Customer [Line Items]        
Revenues from sales 36,608 109,824
Customer B [Member]        
Revenue, Major Customer [Line Items]        
Revenues from sales 38,974 41,554
Customer C [Member]        
Revenue, Major Customer [Line Items]        
Revenues from sales 13,035 13,035
Customers [Member]        
Revenue, Major Customer [Line Items]        
Revenues from sales $ 13,035 $ 36,608 $ 52,009 $ 151,378
v3.24.2.u1
SCHEDULE OF INFORMATION ON LONG LIVED ASSETS (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Revenues from External Customers and Long-Lived Assets [Line Items]    
Property, plant and equipment and ROU assets $ 84,858 $ 123,149
ISRAEL    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Property, plant and equipment and ROU assets 67,763 102,103
UNITED STATES    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Property, plant and equipment and ROU assets $ 17,095 $ 21,046
v3.24.2.u1
SEGMENT REPORTING (Details Narrative)
 6 Months Ended
Jun. 30, 2024
Single Customer [Member] | Revenue, Segment Benchmark [Member] | Customer Concentration Risk [Member]  
Revenue, Major Customer [Line Items]  
Concentration Risk, Percentage 10.00%
v3.24.2.u1
SUBSEQUENT EVENTS (Details Narrative)
 3 Months Ended
Jul. 31, 2024
USD ($)
Jul. 31, 2024
EUR (€)
Jul. 25, 2024
USD ($)
shares
Jul. 08, 2024
USD ($)
Jul. 08, 2024
EUR (€)
May 08, 2024
USD ($)
shares
Mar. 18, 2024
USD ($)
shares
Jun. 30, 2024
USD ($)
Mar. 31, 2024
USD ($)
Jun. 30, 2023
USD ($)
Mar. 31, 2023
USD ($)
Jul. 08, 2024
EUR (€)
Subsequent Event [Line Items]                        
Value of issued for consultant services               $ 48,814 $ 23,738 $ 670,240 $ 67,614  
Consulting Agreements [Member]                        
Subsequent Event [Line Items]                        
Number of issued for consultant services | shares           30,000 3,508          
Value of issued for consultant services           $ 30,900 $ 5,824          
Consulting Agreements [Member] | Subsequent Event [Member]                        
Subsequent Event [Line Items]                        
Number of issued for consultant services | shares     1,286                  
Value of issued for consultant services     $ 17,914                  
Loan Agreement [Member] | Subsequent Event [Member]                        
Subsequent Event [Line Items]                        
Payment for loan       $ 406,156 € 375,000              
Loan and Partnership Agreement [Member] | Subsequent Event [Member]                        
Subsequent Event [Line Items]                        
Payment for loan $ 365,560 € 337,500                    
Aggregate principal amount       $ 2,288,000               € 2,080,000
Commited amount | €                       € 1,560,000
Interest rate       7.00%               7.00%
Loan term       5 years 5 years              
Loan description       Pursuant to the Loan and Partnership Agreement, the Lenders are entitled to participation rights of 50% (of which the Company will be entitled to receive 50% thereof) of the Partnership’s profits (the “Profits”), whether directly or by way of 50% membership or ownership in the Partnership, or through legal rights for the distribution of 50% of the Partnership’s Profits where Solterra acts as a trustee on behalf of the Lenders (the “Profit Rights Alternatives”). Pursuant to the Loan and Partnership Agreement, the Lenders are entitled to participation rights of 50% (of which the Company will be entitled to receive 50% thereof) of the Partnership’s profits (the “Profits”), whether directly or by way of 50% membership or ownership in the Partnership, or through legal rights for the distribution of 50% of the Partnership’s Profits where Solterra acts as a trustee on behalf of the Lenders (the “Profit Rights Alternatives”).              
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