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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 ACMT OF 1934

For the quarterly period ended September 30, 2024

  
     
  or  
     
☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

  

 

Commission File Number: 001-40578

 

 

 

 

AGRIFORCE GROWING SYSTEMS LTD.

(Exact name of registrant as specified in its charter)

 

 

 

British Columbia   Not Applicable

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

     

800 – 525 West 8th Avenue

Vancouver, BC, Canada

   V5Z 1C6
(Address of principal executive offices)   (Zip Code)

 

(604) 757-0952

(Registrant’s telephone number, including area code)

 

N/A

(Former name or 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 each exchange on which registered
Common Shares   AGRI   NASDAQ Capital Market

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting 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 Act). Yes ☐ No ☒

 

As of November 19, 2024, the registrant has 155,029,573 shares of common stock, no par value per share, outstanding.

 

 

 

 
 

 

TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION  
     
Item 1. Financial Statements 4
     
  Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023 4
     
  Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2024 and September 30, 2023 5
     
  Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2024 and September 30, 2023 6
     
  Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and September 30, 2023 8
     
  Notes to Unaudited Condensed Financial Statements 9
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 34
     
Item 4. Controls and Procedures 34
     
PART II — OTHER INFORMATION  
     
Item 1. Legal Proceedings 35
     
Item 1A. Risk Factors 35
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35
     
Item 3. Defaults Upon Senior Securities 36
     
Item 4. Mine Safety Disclosures 36
     
Item 5. Other Information 36
     
Item 6. Exhibits 36

 

2
 

 

Cautionary Note Regarding Forward-Looking Information

 

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of 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”). These forward-looking statements represent our expectations, beliefs, intentions or strategies concerning future events, including, but not limited to, any statements regarding our assumptions about financial performance; the continuation of historical trends; the sufficiency of our cash balances for future liquidity and capital resource needs; the expected impact of changes in accounting policies on our results of operations, financial condition or cash flows; anticipated problems and our plans for future operations; and the economy in general or the future of the agriculture technology industry, all of which were subject to various risks and uncertainties.

 

When used in this Quarterly Report on Form 10- Q and other reports, statements, and information we have filed with the Securities and Exchange Commission (“Commission” or “SEC”), in our press releases, in our periodic reports on Forms 10-K and 10-Q, in oral statements made by or with the approval of an executive officer, the words or phrases “believes,” “may,” “will,” “expects,” “should,” “continue,” “anticipates,” “intends,” “will likely result,” “estimates,” “projects” or similar expressions and variations thereof are intended to identify such forward-looking statements. However, any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. We caution that these statements by their nature involve risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors.

 

We do not assume the obligation to update any forward-looking statement. You should carefully evaluate such statements in light of factors described in this annual report. In this Quarterly Report on Form 10-Q, AgriFORCE Growing Systems Ltd. has identified important factors that could cause actual results to differ from expected or historic results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.

 

3
 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

AGRIFORCE GROWING SYSTEMS LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in US dollars)

 

   Note  

September 30, 2024

  

December 31, 2023

 
       (Unaudited)     
ASSETS               
                
Current               
Cash       $1,373,294   $3,878,578 
Accounts receivable        163    - 
Other receivable        23,646    30,859 
Prepaid expenses and other current assets   4    499,682    272,872 
Inventories   5    47,174    38,857 
Total current assets        1,943,959    4,221,166 
                
Non-current               
Property and equipment, net        2,612    11,801 
Intangible assets, net   6    8,370,423    12,733,885 
Goodwill        

314,387

    

-

 
Lease deposit        48,206    63,708 
Construction in progress        112,281    113,566 
Investment   7    -    223,801 
Total assets       $10,791,868   $17,367,927 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY               
                
Current               
Accounts payable and accrued liabilities   8   $2,024,621   $1,942,011 
Debentures   9    1,093,907    4,084,643 
Contingent consideration payable - current        

41,659

    

-

 
Contract liabilities   10    -    15,336 
Total current liabilities        3,160,187    6,041,990 
                
Non-current               
Other liabilities        25,165    25,684 
Derivative liabilities   12    854,022    2,690,308 

Contingent consideration payable – non-current

        

38,559

    

-

 
Long term loan   11    44,448    45,365 
Total liabilities        4,122,381    8,803,347 
Commitments and contingencies   16    -     -  
                
Shareholders’ equity               
Common shares, no par value per share - unlimited shares authorized; 99,343,334 and 5,841,045 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively*   13    62,130,241    49,828,942 
Additional paid-in-capital        2,964,795    3,472,444 
Obligation to issue shares   13    44,214    97,094 
Accumulated deficit        (57,914,468)   (44,507,304)
Accumulated other comprehensive loss        (555,295)   (326,596)
Total shareholders’ equity        6,669,487    8,564,580 
                
Total liabilities and shareholders’ equity       $10,791,868   $17,367,927 

 

* reflects the 1:50 reverse stock split effected on October 11, 2023.

 

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements.

 

4
 

 

AGRIFORCE GROWING SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

(Expressed in US dollars)

 

   2024   2023   2024   2023 
  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
   2024   2023   2024   2023 
                 
Revenue   -    -    41,315    - 
                     
Cost of Sales   -    -    34,192    - 
                     
Gross profit   -    -    7,123    - 
                     
Operating expenses                    
Wages and salaries  $486,521   $603,242   $1,205,741   $2,319,026 
Consulting   177,215    147,190    363,411    1,032,210 
Professional fees   112,361    277,694    442,090    1,026,044 
Office and administrative   285,186    191,829    864,983    821,358 
Investor and public relations   61,814    61,319    104,460    451,184 
Depreciation and amortization   169,248    172,096    499,187    512,695 
Share based compensation   63,552    80,537    127,674    565,861 
Sales and marketing   20,281    11,242    96,107    173,568 
Lease expense   782    73,261    59,358    222,535 
Travel and entertainment   23,757    3,813    31,915    104,938 
Shareholder and regulatory   13,431    35,857    98,880    114,674 
Research and development   54,036    (27,046)   58,130    22,312 

Intangible asset impairment (Note 6)

   

4,137,271

    

-

    

4,137,271

    

-

 
Operating expenses   5,605,455    1,631,034    8,089,207    7,366,405 
                     
Operating loss   (5,605,455)   (1,631,034)   (8,082,084)   (7,366,405)
                     
Other expenses                    
Accretion of interest on debentures (Note 9)   469,684    2,064,936    2,672,765    6,045,214 
Loss on conversion of convertible debt (Note 9)   235,376    108,125    1,627,858    541,730 
Loss on debt extinguishment (Note 9)   (75,119)   -    2,223,250    - 
(Gain) loss on extinguishment of warrant liability   (14,769)   -    (14,769)   - 
Change in fair value of derivative liabilities (Note 12)   (505,628)   (326,042)   (1,198,554)   (6,159,067)
Loss on long-term investment   

97,488

    

-

    

97,488

    

-

 
Foreign exchange gain   63,834    25,472    (22,918)   (1,317)
Other loss   -    -    4,252    - 
Write-off of inventory   -    -    38,470    - 
Write-off of deposit (Note 4)   -    -    -    12,000 
Other income   (28,956)   (10,472)   (102,762)   (64,887)
                     
Net loss  $(5,847,365)  $(3,493,053)  $(13,407,164)  $(7,740,078)
                     
Other comprehensive income (loss)                    
Foreign currency translation   179,950    (226,286)   (228,699)   84,719 
                     
Comprehensive loss attributable to common shareholders  $(5,667,415)  $(3,719,339)  $(13,635,863)  $(7,655,359)
                     
Basic and diluted net loss attributed to common share  $(0.06)  $(4,03)  $(0.27)  $(12.58)
                     
Weighted average number of common shares outstanding – basic and diluted*   92,015,605    867,110    50,333,281    615,152 

 

* reflects the 1:50 reverse stock split effected on October 11, 2023.

 

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements.

 

5
 

 

AGRIFORCE GROWING SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(Expressed in US dollars, except share numbers)

 

   # of
Shares*		   Amount   paid-in-
capital		   to issue
shares		   Accumulated
deficit		   comprehensive
income		   shareholders’
equity		 
   For the three months ended September 30     
   Common shares   Additional   Obligation       Accumulated other   Total 
   # of
Shares*		   Amount   paid-in-
capital		   to issue
shares		   Accumulated
deficit		   comprehensive
income		   shareholders’
equity		 
                             
Balance, July 1, 2024   84,333,892   $61,085,023   $2,953,883   $86,432   $(52,067,103)  $(735,245)  $  11,322,990 
Shares issued for conversion of convertible debt   9,500,000    708,000    -    -    -    -    708,000 
Shares issued for compensation   509,442    42,218    -    (42,218)   -    -    - 
Shares issued for business combination   5,000,000    295,000    -    -    -    -    295,000 
Share based compensation   -    -    10,912    -    -    -    10,912 
Net loss   -    -    -    -    (5,847,365)   -    (5,847,365)
Foreign currency translation   -    -    -    -    -    179,950    179,950 
Balance, September 30, 2024   99,343,334   $62,130,241   $2,964,795   $44,214   $(57,914,468)  $(555,295)  $6,669,487 

 

   For the nine months ended September 30     
Balance, January 1, 2024   5,841,045   $49,828,942   $3,472,444   $97,094   $(44,507,304)  $(326,596)  $8,564,580 
Shares issued for conversion of convertible debt   87,499,099    11,332,607    -    -    -    -    11,332,607 
Shares issued for compensation   854,455    115,639    -    (52,880)   -    -    62,759 
Shares issued for consulting services   142,310    27,624    -    -    -    -    27,624 
Shares issued for business combination   5,000,000    295,000    -    -    -    -    295,000 
Shares issued on conversion of vested prefunded warrants   6,425    530,429    (530,429)   -    -    -    - 
Share based compensation   -    -    22,780    -    -    -    22,780 
Net loss   -    -    -    -    (13,407,164)   -    (13,407,164)
Foreign currency translation   -    -    -    -    -    (228,699)   (228,699)
Balance, September 30, 2024   99,343,334   $62,130,241   $2,964,795   $44,214   $(57,914,468)  $(555,295)  $6,669,487 

 

6
 

 

   # of
Shares*		   Amount   paid-in-
capital		   to issue
shares		   Accumulated
deficit		   comprehensive
income		   shareholders’
equity		 
   For the three months ended September 30     
   Common shares   Additional   Obligation       Accumulated other   Total 
   # of
Shares*		   Amount   paid-in-
capital		   to issue
shares		   Accumulated
deficit		   comprehensive
income		   shareholders’
equity		 
                             
Balance, July 1, 2023   454,335   $33,086,067   $11,478,156   $97,837   $(37,021,119)  $(331,705)  $    7,309,236 
Shares issued for conversion of convertible debt   422,104    3,013,171    -    -    -    -    3,013,171 
Shares issued for compensation   31,890    205,678    -    (53,623)   -    -    152,055 
Shares issued for cash, net of issuance costs   103,177    640,096    -    -    -    -    640,096 
Shares issued for consulting services   350    27,150    -    -    -    -    27,150 
Shares issued on conversion of vested prefunded warrants   59,660    4,919,568    (4,919,568)   -    -    -    - 
Share based compensation   -    -    (72,056)   -    -    -    (72,056)
Net loss   -    -    -    -    (3,493,053)   -    (3,493,053)
Foreign currency translation   -    -    -    -    -    (226,286)   (226,286)
Balance, September 30, 2023   1,071,516   $41,891,730   $6,486,532   $44,214   $(40,514,172)  $(557,991)  $7,350,313 

 

   For the nine months ended September 30     
Balance, January 1, 2023   315,916   $27,142,762   $16,816,695   $-   $(32,774,094)  $(642,710)  $10,542,653 
Shares issued for conversion of convertible debt   472,431    4,756,872    -    -    -    -    4,756,872 
Shares issued for compensation   35,007    311,190    -    44,214    -    -    355,404 
Shares issued for cash, net of issuance costs   124,652    939,695    -    -    -    -    939,695 
Shares issued in private placement   20,000    204,880    -    -    -    -    204,880 
Shares issued for consulting services   900    80,885    -    -    -    -    80,885 
Shares issued on conversion of vested prefunded warrants   102,610    8,455,446    (8,455,446)   -    -    -    - 
Cancelled prefunded warrants   -    -    (2,085,960)   -    -    -    (2,085,960)
Share based compensation   -    -    211,243    -    -    -    211,243 
Net loss   -    -    -    -    (7,740,078)   -    (7,740,078)
Foreign currency translation   -    -    -    -    -    84,719    84,719 
Balance, September 30, 2023   1,071,516   $41,891,730   $6,486,532   $44,214   $(40,514,172)  $(557,991)  $7,350,313 

 

* reflects the 1:50 reverse stock split effected on October 11, 2023.

 

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Interim Financial Statements.

 

7
 

 

AGRIFORCE GROWING SYSTEMS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Expressed in US Dollars)

 

   Note   2024   2023 
      

For the nine months ended September 30,

 
   Note   2024   2023 
             
CASH FLOWS FROM OPERATING ACTIVITIES               
Net loss for the period       $(13,407,164)  $(7,740,078)
Adjustments to reconcile net loss to net cash used in operating activities:               
Depreciation and amortization        499,187    512,695 
Impairment of intangible asset        4,137,271    - 
Share based compensation        22,780    211,243 
Shares issued for consulting services        27,624    80,885 
Shares issued for compensation        62,759    355,404 
Amortization of debt issuance costs        2,619,362    5,873,396 
Change in fair value of derivative liabilities   12    (1,198,554)   (6,159,067)
Loss on debt conversion   9    1,627,858    541,730 
Loss on debt extinguishment   9    2,223,250    - 
Loss on disposal of fixed assets        4,252    - 
Loss on long-term investment        

97,488

    

-

 
Write-off of deposit        -    12,000 
Changes in operating assets and liabilities:               
Accounts receivable        (164)   - 
Other receivables        7,213    (25,794)
Prepaid expenses and other current assets        (226,810)   344,309 
Inventories        (8,317)    (38,167)
Advance        -    (225,000)
Accounts payable and accrued liabilities        82,610    783,725 
Lease deposit asset        15,502    - 
Contract liabilities        (15,336)   23,333 
Right-of-use asset        -    134,688 
Lease liabilities        -    (122,894)
Net cash used in operating activities        (3,429,189)   (5,437,592)
                
CASH FLOWS FROM INVESTING ACTIVITIES               
Purchase of note payable        (202,093)   - 
Cash consideration paid for business combination        (153,986)   

-

Net cash used in investing activities        (356,079)   -
                
CASH FLOWS FROM FINANCING ACTIVITIES               
Proceeds from common shares issued for cash   13    -    1,342,915 
Share issuance costs paid   13    -    (153,220)
Proceeds from debentures – net of discount   9    2,250,000    4,615,385 
Repayment of convertible debentures   9    (802,282)   (1,741,950)
Financing costs of debentures   9    (84,463)   (325,962)
Net cash provided by financing activities        1,363,255    3,737,168 
                
Effect of exchange rate changes on cash and cash equivalent        (83,271)   17,669 
Change in cash        (2,505,284)   (1,682,755)
Cash, beginning of period