Israeli firm BYND Cannasoft Enterprises Inc. (Nasdaq: BCAN) (CSE: BYND) reported its financials for the nine months ending Sept. 30, showing a marginal fall in revenues, mostly due to lower earnings from cloud hosting services and software licenses.
The company’s revenues dipped to $873,740 during the period, down from $890,886 in the previous year, driven primarily by lower earnings from cloud hosting and software licenses. This was partially offset by an increase in software development revenues.
Notably, the company remains heavily reliant on a single customer for the majority, more than 80%, of its sales.
Net losses climbed to $3.3 million compared to $964,000 in the same period last year. The company’s cash reserves fell to $2.18 million from $2.39 million at the end of 2022.
The cost of sales for the company also rose, leading gross margin to decline from 58% to 52%. The increase in costs was largely attributed to higher salaries, benefits, and software expenses. General and administrative expenses grew to $940,445 from $630,269 for the same period in 2022, driven by increased compensation for senior management ($243,537) and higher professional fees.
The company faced negative cash flow from operating activities, primarily due to the net loss and a decrease in deferred revenue, despite reductions in prepaid expenses and receivables.
Cannasoft said it completed the development of its new CRM platform, with a beta version now available. Still, revenue generation from this new platform is not expected until the first quarter of 2024. The company’s plan to build a cannabis farm is still in early development stages, with revenue anticipated in the second quarter of 2024.
BYND Cannasoft said its long-term strategy involves integrating its proposed cannabis farm with its new CRM platform.
It wrote, “By using data generated by the operation of the cannabis farm, including data relating to the growing, harvesting, and selling of medical cannabis, BYND Israel will be able to better optimize its new cannabis CRM platform to offer stakeholders in the cannabis industry a state-of-the-art resource which will enhance their businesses.”
Yftah Ben Yaackov, BYND’s CEO, previously said that the company wants to become a “pioneer in the sexual wellness industry.”
Cannasoft said last week that a surge in Israeli medical patients “has resulted in more than 2,000 new patients in just one month, approaching the peak numbers of 2021 and bringing the total number to over 132,000 as of November 2023.”
However, the company noted in filings that its operations are currently affected by the ongoing conflict in the region, which has led to disruptions in the company’s workforce, as several employees are engaged in military service.
“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,” the firm wrote.
According to filings, instability in the Middle East and North Africa have raised company concerns about its ability to manage and market its products effectively, with potential risks including damage to facilities and disruption of operations.
The company’s insurance does not cover losses from war, although the Israeli government currently covers direct damages from such event. Escalation of the conflict is also a significant concern, the company noted:
“It is possible that other terrorist organizations will join the hostilities as well, including Hezbollah in Lebanon and Palestinian military organizations in the West Bank. 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.”
Additionally, the company faces risks from potential boycotts and trade restrictions due to the public scrutiny of Israel’s assault on Gaza and displacement of Palestinian people. The Israeli government’s July controversial judicial overhaul had already raised management concerns about the country’s investment climate.
The company recorded a foreign exchange loss due to the weakening of the New Israeli Shekel in its latest report.