10-Q: N2OFF Q2 Loss Widens Amid Strategic Shifts

N2OFF, Inc. reported a significantly wider net loss in Q2 2025, driven by increased operating expenses and fair value adjustments, despite a slight revenue increase and strategic expansion into renewable energy.

Summary

• N2OFF, Inc. reported a net loss of $5.765 million for the six months ended June 30, 2025, a substantial increase from $1.622 million in the same period last year.
• Gross profit increased to $49,000 for the six months ended June 30, 2025, up from $27,000 in the prior year, primarily due to a decrease in cost of sales.
• General and administrative expenses surged by 122% to $3.377 million for the six months, largely due to increased share-based compensation, salaries, and legal expenses.
• Financing expenses, net, dramatically increased by 2,618% to $2.011 million for the six months, mainly due to changes in the fair value of PIPE warrant liabilities and credit facility.
• The company fully impaired its investment in Plantify Foods Inc., recording a $602,000 impairment loss for the six months ended June 30, 2025.
• N2OFF sold its NTWO OFF Ltd. subsidiary for approximately $4,000 cash, resulting in a $44,000 gain from discontinued operations.
• Cash and cash equivalents increased to $3.138 million as of June 30, 2025, from $2.154 million at December 31, 2024, primarily due to financing activities.
• Net cash used in operating activities improved to $1.337 million for the six months, compared to $2.036 million in the prior year.
• Net cash used in investing activities significantly increased to $1.625 million, driven by investments in renewable energy projects and loans to MitoCareX.
• The company raised $3.934 million from financing activities, including proceeds from a private investment in public equity (PIPE) agreement, warrant exercises, and a credit facility.
• As of August 14, 2025, the company had 33,356,412 shares of common stock outstanding, reflecting significant dilution from prior periods.

Sentiment

Score: 2

Explanation: The company faces significant financial distress, evidenced by a substantial increase in net loss, a 'going concern' warning, and an accumulated deficit of over $40 million. While strategic expansion into renewable energy and some operational cash flow improvement, the overall financial health is precarious, and the impairment of a major investment adds to the negative outlook. The high dilution and ongoing need for capital present considerable risks to existing shareholders.

Positives

• Gross profit increased by 81% to $49,000 for the six months ended June 30, 2025, compared to $27,000 in the prior year, driven by lower cost of sales.
• Net cash used in operating activities decreased to $1.337 million for the six months ended June 30, 2025, an improvement from $2.036 million in the same period last year, indicating more efficient cash management in core operations.
• Cash and cash equivalents increased to $3.138 million as of June 30, 2025, from $2.154 million at December 31, 2024, bolstering short-term liquidity.
• The company successfully raised $3.934 million through financing activities, demonstrating continued access to capital markets.
• The sale of NTWO OFF Ltd. resulted in a gain of $44,000 from discontinued operations, streamlining the company's focus.
• Strategic expansion into renewable energy projects, including a 70% interest in SB Storage 1 S.R.L. for battery storage projects in Italy and a joint venture in Germany, diversifies the business model.

Negatives

• Net loss significantly widened to $5.765 million for the six months ended June 30, 2025, from $1.622 million in the prior year, indicating a substantial deterioration in profitability.
• Operating loss increased to $3.452 million for the six months ended June 30, 2025, from $1.628 million in the prior year, reflecting higher core operational expenses.
• General and administrative expenses surged by 122% to $3.377 million for the six months, primarily due to a significant increase in share-based compensation ($2.029 million) and legal expenses.
• Financing expenses, net, increased by 2,618% to $2.011 million for the six months, largely driven by non-cash changes in the fair value of warrant liabilities and credit facility.
• The company recorded a full impairment loss of $602,000 on its investment in Plantify Foods Inc. for the six months, due to the lack of an observable active market and deterioration of Plantify's financial condition, including the insolvency of its operating subsidiary.
• Revenues from sales of products for the three months ended June 30, 2025, were zero, compared to $17,000 in the prior year, mainly due to a decrease in sales in Israel.
• The company's accumulated deficit grew to $40.255 million as of June 30, 2025, from $34.553 million at December 31, 2024, highlighting persistent losses.
• Significant share dilution occurred, with common stock outstanding increasing to 30,096,412 shares as of June 30, 2025, from 12,058,237 shares at December 31, 2024.

Risks

• Substantial doubt exists regarding the company's ability to continue as a going concern, as existing cash is projected to be sufficient only until the end of the first quarter of 2026.
• The company's operations are directly affected by economic, political, geopolitical, and military conditions in Israel, including the ongoing Israel-Hamas war, which caused temporary shutdowns and severely impacted the business of its affiliate, Plantify.
• Reliance on securing sufficient additional financing through equity sales or strategic partnerships, which may not be available on favorable terms or at all, poses a significant risk to continued operations.
• Inherent dangers in the production and transportation of hydrogen peroxide and highly concentrated organic acids could cause disruptions and expose the company to significant losses or liabilities.
• The company's ability to attract and retain sufficient, qualified personnel is crucial for future growth and operations.
• Challenges in obtaining or maintaining patents or other appropriate protection for intellectual property could hinder competitive advantage.
• Potential product liability or intellectual property infringement claims could result in significant legal and financial burdens.
• The evolution of the business strategy, particularly the expansion into renewable energy, may not be successful and could lead to increased operational costs or financial harm.
• International expansion exposes the company to business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States or Israel.

Future Outlook

Management expects to continue generating losses and negative cash flows for the foreseeable future. The company's existing cash is projected to be sufficient to fund operations until the end of the first quarter of 2026. Management plans to secure additional financing through the sale of equity securities or capital inflows from strategic partnerships. The company intends to continue collaborating with Solterra in surveying the European solar energy market for additional projects. The acquisition of MitoCareX is contingent on stockholder approval, with a special meeting scheduled for September 25, 2025.

Management Comments

• Management currently is of the opinion that its existing cash will be sufficient to fund operations until the end of the first quarter of 2026.
• Management plans to continue securing sufficient financing through the sale of additional equity securities or capital inflows from strategic partnerships.
• The company is unable to predict how long the current conflict (Israel-Hamas war) will last, as well as the repercussions these delays will have on its operations.
• If the Company is unable to renew its pilots or collaborations with packing houses its financial results may be affected.
• We currently intend to continue to collaborate with Solterra as Solterra surveys the European solar energy market for additional projects.

Industry Context

N2OFF operates in two distinct but growing sectors: agri-food tech and renewable energy. In agri-food tech, the focus on eco-friendly solutions for food safety and shelf life aligns with increasing consumer demand for sustainable and healthier food options, as well as global efforts to reduce food waste. However, the company's operations in this segment, particularly through its Israeli subsidiary, are highly susceptible to regional geopolitical instability, as evidenced by the severe impact on Plantify's subsidiary due to the Israel-Hamas war. The expansion into renewable energy, specifically solar PV and battery storage projects in Europe, positions the company in a rapidly expanding global market driven by climate change initiatives and energy transition policies. This diversification could provide new revenue streams and reduce reliance on the volatile agri-food tech sector, but it also introduces new capital requirements and project-specific risks.

Comparison to Industry Standards

• The company's gross profit margin of approximately 74% for the six months ended June 30, 2025 (calculated as $49k gross profit / $66k revenue) is relatively high for a product-based business, suggesting strong pricing power or low direct production costs for its agri-food tech solutions. However, this is offset by extremely high operating expenses.
• The significant increase in General and Administrative expenses, particularly share-based compensation, suggests a compensation structure heavily reliant on equity, which can be dilutive to shareholders. This contrasts with more mature companies that typically have lower G&A as a percentage of revenue.
• The substantial net loss and accumulated deficit, coupled with the 'going concern' warning, indicate that N2OFF is far from profitability and sustainable operations, unlike established industry players in either agri-food tech (e.g., Apeel Sciences, Hazel Technologies) or renewable energy (e.g., Enphase Energy, SolarEdge Technologies) that have achieved scale and positive cash flows.
• The company's reliance on continuous dilutive financing (PIPE, warrant exercises, standby equity purchase agreements) is typical of early-stage, high-growth potential companies, but the magnitude of dilution (shares outstanding more than doubled in six months) is a concern compared to companies with more robust internal cash generation or less aggressive capital needs.
• The impairment of the Plantify investment highlights the high-risk nature of early-stage investments and the impact of external geopolitical factors, a common challenge for companies operating in volatile regions, unlike those with diversified global operations or stable domestic markets.

Management Changes

Corporate Governance

Legal Proceedings

• No pending legal proceedings to which the Company is a party or in which any director, officer, or affiliate has a material adverse interest.

Related Party Transactions

• Loans granted to MitoCareX BioLtd. are guaranteed by L.I.A. Pure Capital Ltd., which is owed by the brother of Dr. Alon Silberman, the CEO of MitoCareX.
• The company's chairman of the board of directors and one of its directors are also members of the board of directors of SciSparc, a party to the MitoCareX acquisition agreement.
• The company's chairman of the board of directors also serves as a director of Solterra Energy Ltd., with which the company has a loan agreement and investment.
• The credit facility is with L.I.A. Pure Capital Ltd., a related party through the MitoCareX transaction.
• Salaries and fees to officers and directors compensation are disclosed as related party transactions, totaling $923,000 for the six months ended June 30, 2025, including $533,000 in share-based compensation.

Stakeholder Impact

• **Shareholders**: Face significant dilution from ongoing equity raises and warrant exercises. The 'going concern' warning poses a substantial risk to investment value. Increased share-based compensation to management and consultants further dilutes ownership.
• **Employees**: Operations in Israel are directly affected by geopolitical instability, leading to temporary shutdowns. The potential acquisition of MitoCareX could integrate new personnel, while the sale of NTWO OFF impacts employees in that segment.
• **Customers**: The company's focus on improving food safety and shelf life through eco-friendly solutions aims to benefit customers by providing safer and longer-lasting fresh produce. However, disruptions due to geopolitical events could affect product availability.
• **Creditors**: The company's reliance on debt financing (credit facility, promissory notes) and the 'going concern' uncertainty increase risk for creditors, although some loans are guaranteed or secured.
• **Suppliers**: Potential for disruptions in operations due to geopolitical events or financial instability could impact relationships with suppliers.

Next Steps

• Obtain stockholder approval for the MitoCareX acquisition at a special meeting scheduled for September 25, 2025.
• File the registration statement on Form S-1 with the SEC to register the resale of shares issuable under the Standby Equity Purchase Agreement.
• Secure additional financing through equity sales or strategic partnerships to address going concern uncertainty and fund future operations beyond Q1 2026.
• Continue to develop and construct solar energy projects in Italy and Germany, including a feasibility study for a battery energy storage project in Germany.
• Manage the repayment schedule of the $3 million advance from YA II PN, Ltd. through cash or equity issuances.

Key Dates

Recommendation

The company faces severe financial challenges, including a significantly widened net loss, an explicit 'going concern' warning, and an accumulated deficit of over $40 million. While strategic shifts into renewable energy and some operational cash flow improvements are noted, these are overshadowed by heavy reliance on highly dilutive financing, substantial non-cash expenses from fair value adjustments, and the full impairment of a major investment (Plantify). The geopolitical risks in Israel further complicate operations. For a seasoned investor, the high risk of continued dilution, potential inability to secure future financing, and persistent unprofitability make N2OFF a 'strong sell' as the downside risk appears to outweigh any speculative upside from its new ventures.

Keywords

Agri-food tech, Renewable energy, Solar projects, Food safety, Shelf life, Post-harvest treatments, Battery storage, SEC filing, Quarterly report, Going concern, Israel-Hamas war, Warrants, Private placement, Dilution