General form of registration statement for all companies including face-amount certificate companies

Basis of Preparation

v3.20.4
Basis of Preparation
9 Months Ended 12 Months Ended
Sep. 30, 2020
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]    
Basis of Preparation
2. BASIS OF PREPARATION

 

Basis of presentation

 

The accompanying Condensed Consolidated Interim Financial Statements (the “interim financial statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

The financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. In the opinion of the Company’s management, the financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

 

Unaudited Condensed Consolidated Interim Financial Information

 

The accompanying interim financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the years ended December 31, 2019 and 2018, included elsewhere here in this filing. These unaudited interim financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. 

 

The accompanying interim financial statements as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019, and the related interim information contained within the notes to the interim financial statements, are unaudited. The interim condensed financial statements have been prepared in accordance with U.S. GAAP and on the same basis as the audited financial statements. In the opinion of management, the accompanying interim condensed financial statements contain all adjustments which are necessary to state fairly the Company’s financial position as of September 30, 2020, and the results of its operations and cash flows for the nine months ended September 30, 2020 and 2019. Such adjustments are of a normal and recurring nature. The results for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full fiscal year 2020, or for any future period.

 

Principal of consolidation

 

Our interim financial statements include the accounts of our wholly owned subsidiaries. We consolidate variable interest entities (VIEs) when we have variable interests and are the primary beneficiary.

 

All inter-company balances and transactions have been eliminated on consolidation. These interim financial statements include the accounts of the Company and its wholly owned subsidiaries:

 

Name of entity:   Country of Incorporation   Purpose   Date of Incorporation  
AgriFORCE Growing Systems Ltd.   Canada   Parent Company   Dec 22, 2017  
Canivate Growing Solutions Ltd.   Canada   Management Company   May 22, 2018  
Daybreak Ag Systems Ltd.   Canada   Intellectual Property Development   Dec 4, 2019  
AgriFORCE Holdings Inc.*   United States   Intellectual Property   Aug 31, 2018  
West Pender Holdings, Inc.   United States   Real Estate Holding and Development Company   Sep 1, 2018  
AgriFORCE Investments Inc.   United States   Holding Company   Apr 9, 2019  
West Pender Management Co.   United States   Management Advisory Services   Jul 9, 2019  
AGI IP Co.   United States   Intellectual Property   Mar 5, 2020  

 

 

* AgriFORCE Holdings Inc. was dissolved on August 08, 2020

 

During the year ended December 31, 2019, AgriFORCE Investments Inc., West Pender Holdings, Inc. and AgriFORCE Holdings Inc., wholly owned subsidiaries of the Company, commenced operations and its financial results are consolidated into the results of the Company. All other subsidiaries have been created and did not have any operating activities or financial statements as at September 30, 2020.

 

Functional and Presentation Currency

 

The functional currency for each entity included in these interim financial statements is the currency of the primary economic environment in which the entity operates. These interim financial statements are presented in United States dollars (“U.S. dollars”). Currency conversion to U.S. dollars is performed in accordance with ASC 830, Foreign Currency Matters.

 

Use of Estimates

 

The preparation of our interim financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our interim financial statements and accompanying notes. Actual results could differ from these estimates and those differences could be material.

 

Risks and Uncertainties

 

On January 30, 2020, the World Health Organization declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. As of the time of filing, it is not possible to reliably estimate the length and severity of these developments and its impact on the financial results and condition of the Company.

 

Going Concern

 

The Company has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future. As reflected in the interim financial statements for the nine months ended September 30, 2020, the Company had a net loss of approximately $2.6 million, approximately $1.6 million of net cash used in operating activities, and the Company had a negative working capital of approximately $0.9 million.

 

The accompanying interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The interim financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The Company is at the stage of development of its first facility. As such it is likely that additional financing will be needed by the Company to fund its operations and to develop and commercialize its technology. These factors raise substantial doubt about the Company’s ability to continue as a going concern. For the next twelve months from issuance of these interim financial statements, the Company will seek to obtain additional capital through the sale of debt or equity financings or other arrangements to fund operations; however, there can be no assurance that the Company will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to currently outstanding shares of common stock. Issued debt securities may contain covenants and limit the Company’s ability to pay dividends or make other distributions to stockholders. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in the Company’s ability to raise capital, management believes that there is substantial doubt in the Company’s ability to continue as a going concern for twelve months from the issuance of these interim financial statements.

 

Reverse Stock Split

 

On November 29, 2020, the Company effectuated a one-for-4.75 reverse stock split of the Company’s common stock (the “Reverse Split”). As a result of the Reverse Split, every 4.75 shares of the Company’s old common stock were converted into one share of the Company’s new common stock. Fractional shares resulting from the reverse split were rounded to the nearest whole number. The Reverse Split automatically and proportionately adjusted, based on the 1:4.75 split ratio, all issued and outstanding shares of the Company’s common stock, as well as common stock underlying convertible preferred stock, convertible debentures, stock options and warrants outstanding at the time of the effectiveness of the Reverse Split. The exercise price on outstanding equity based-grants was proportionately increased, while the number of shares available under the Company’s equity-based plans was also proportionately reduced. Share and per share data (except par value) for the periods presented reflect the effects of the Reverse Split. References to numbers of shares of common stock and per share data in the accompanying interim financial statements and notes thereto for periods ended prior to November 29, 2020 have been adjusted to reflect the Reverse Split on a retroactive basis.

2. BASIS OF PREPARATION

 

Basis of presentation

 

The accompanying consolidated financial statements (the “financial statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

The financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. In the opinion of the Company’s management, the financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

 

Principal of consolidation

 

Our consolidated financial statements include the accounts of our wholly owned subsidiaries. We consolidate variable interest entities (VIEs) when we have variable interests and are the primary beneficiary.

 

All inter-company balances and transactions have been eliminated on consolidation. These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries:

 

Name of entity:   Country of Incorporation   Purpose     Date of Incorporation  
AgriFORCE Growing Systems Ltd.   Canada   Parent Company     Dec 22, 2017  
Canivate Growing Solutions Ltd.   Canada   Management Company     May 22, 2018  
Canivate Growing Systems Ltd.   Canada   Intellectual Property Development     Dec 4, 2019  
AgriFORCE Holdings Inc.   United States   Intellectual Property     Aug 31, 2018  
West Pender Holdings, Inc.   United States   Real Estate Holding and Development Company     Sep 1, 2018  
AgriFORCE Investments Inc.   United States   Holding Company     Apr 9, 2019  
West Pender Management Co.   United States   Management Advisory Services     Jul 9, 2019  

   

During the year ended December 31, 2019, AgriFORCE Investments Inc., West Pender Holdings, Inc. and AgriFORCE Holdings Inc., wholly owned subsidiaries of the Company, commenced operations and its financial results are consolidated into the results of the Company. All other subsidiaries have been created and did not have any operating activities or Financial Statements as at December 31, 2019.

 

Functional and Presentation Currency

 

The functional currency for each entity included in these consolidated financial statements is the currency of the primary economic environment in which the entity operates. These consolidated financial statements are presented in United States dollars (“U.S. dollars”). Currency conversion to U.S. dollars is performed in accordance with ASC 830, Foreign Currency Matters.

 

Use of Estimates

 

The preparation of our financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ from these estimates and those differences could be material.

 

Going Concern

 

The Company has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future. As reflected in the financial statements for the year ended December 31, 2019, the Company had a net loss of approximately $5.1 million, approximately $4.3 million of net cash used in operating activities, and the Company had working capital of approximately $0.9 million.

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The Company is at the stage of development of its first facility. As such it is likely that additional financing will be needed by the Company to fund its operations and to develop and commercialize its technology. These factors raise substantial doubt about the Company’s ability to continue as a going concern. For the next twelve months from issuance of these financial statements, the Company will seek to obtain additional capital through the sale of debt or equity financings or other arrangements to fund operations; however, there can be no assurance that the Company will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to currently outstanding shares of common stock. Issued debt securities may contain covenants and limit the Company’s ability to pay dividends or make other distributions to stockholders. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in the Company’s ability to raise capital, management believes that there is substantial doubt in the Company’s ability to continue as a going concern for twelve months from the issuance of these condensed financial statements

 

Reverse Stock Split

 

On November 29, 2020 , the Company effectuated a one-for-4.75 reverse stock split of the Company’s common stock (the “Reverse Split”). As a result of the Reverse Split, every 4.75 shares of the Company’s old common stock were converted into one share of the Company’s new common stock. Fractional shares resulting from the reverse split were rounded to the nearest whole number. The Reverse Split automatically and proportionately adjusted, based on the 1:4.75 split ratio, all issued and outstanding shares of the Company’s common stock, as well as common stock underlying convertible preferred stock, convertible debentures, stock options and warrants outstanding at the time of the effectiveness of the Reverse Split. The exercise price on outstanding equity based-grants was proportionately increased, while the number of shares available under the Company’s equity-based plans was also proportionately reduced. Share and per share data (except par value) for the periods presented reflect the effects of the Reverse Split. References to numbers of shares of common stock and per share data in the accompanying financial statements and notes thereto for periods ended prior to November 29, 2020  have been adjusted to reflect the Reverse Split on a retroactive basis.