The Offer

Company Overview

Opti-Harvest Ventures (OPHV) is an agricultural innovation company offering a range of products supported by a portfolio of patented and patent-pending technologies, aimed at addressing key challenges faced by agribusinesses. These challenges include optimizing crop yield, expediting crop growth, efficiently using land and water resources, reducing labor expenses, and mitigating negative environmental impacts. OPHV's cutting-edge agricultural technology, such as the Opti-Filter™ and precision farming platform, Opti-View™, empowers both commercial growers and home gardeners to harness, optimize, and make better use of sunlight, a fundamental and renewable natural resource.

Key Highlights

Primary Offering: The company intends to issue 1,930,000 Units (or 2,219,500 units if the underwriters exercise the over-allotment option to purchase additional units in full) as part of its initial public offering. Each unit will be priced at USD 4.15 and will consist of one share of common stock along with a warrant to purchase one share of common stock. The exercise price for the warrant will be set at USD 4.15, which is equivalent to 100% of the initial public offering price. These warrants will be immediately exercisable and will have a five-year expiration period starting from the original issuance date. It is important to note that the shares and warrants forming the units will be immediately separable and will be issued independently in this offering.

Use of proceeds:

Based on an assumed initial public offering price of USD 4.15 per share, Opti-Harvest Ventures (OPHV) anticipates that the net proceeds from this initial public offering of securities will amount to approximately USD 6,788,000. However, if the underwriters exercise their option to purchase additional units in full, the net proceeds could increase to approximately USD 7,881,000.

It is important to note that any increase or decrease in the initial public offering price of USD 4.15 per unit, by USD 1.00, will result in a corresponding rise or decline of approximately USD 1,756,000 in OPHV's net proceeds, if the number of units offered by OPHV remains unchanged.

Regarding the allocation of the net proceeds, OPHV's current plans are as follows:

• OPHV intends to allocate up to approximately USD 1,000,000 for the purchase of inventory.
• Up to approximately USD 1,670,000 for the repayment of outstanding principal and interest accrued on OPHV's Convertible and Promissory.
• Approximately USD 2,000,000 to fund sales and marketing, as well as research and development and field trial activities supporting the ongoing commercialization of OPHV's products.
• The remainder of the net proceeds will be utilized for general corporate purposes, including working capital and covering operating expenses.

Dividend policy:

Opti-Harvest Ventures (OPHV) has a current intention of retaining all available funds and future earnings to support its operations and fuel the growth and development of its business. Consequently, OPHV does not have any immediate plans to distribute cash dividends on its common stock. Decisions concerning OPHV's dividend policy will be subject to the discretion of its board of directors and will be contingent upon various factors, including OPHV's operational performance, financial standing, capital requirements, contractual obligations, business prospects, and other pertinent considerations as deemed significant by the board of directors.

Current Challenges in Agriculture and Agribusiness:

• Agriculture is crucial to society, providing the foundation of the food chain and employing 27% of the global workforce.
• Agricultural productivity has significantly increased due to innovation and investment.
• However, the industry faces challenges such as climate change, soil erosion, and changing consumer demands, necessitating increased food production with fewer resources.
• OPHV recognizes the importance of coping with climate change's impact on crop productivity and is focused on developing innovative agriculture technologies that optimize plant utilization of sunlight to enhance sustainability and productivity.

Market Analysis:

• In 2019, agriculture, food, and related industries contributed USD 1.109 trillion (5.2% of GDP) to the U.S. economy, with American farms contributing USD 136.1 billion (0.6% of GDP). However, fruit, tree nuts, and berry farms faced rising production costs, and approximately 45% reported net losses.
• The agriculture industry faces challenges from rapid population growth, urbanization, and environmental stress, necessitating increased efficiency and sustainability. The Agtech sector holds promise in revolutionizing global agriculture, boosting productivity, and reducing environmental and social costs. Significant investment and support for AgTech innovation are crucial to meet future food demands.
• Precision agriculture technologies, if adopted by 15% to 25% of farms, could increase global crop yield by 10% to 15% by 2030, while also cutting greenhouse gas emissions and water use by 10% and 20%, respectively, according to the World Economic Forum.
• The demand for agricultural equipment is influenced by farm income, farmland values, weather conditions, commodity prices, economic conditions, and government policies. The global farm machinery and equipment market is expected to grow at a CAGR of 9.8% from USD 183.8 billion in 2020 to USD 201.8 billion in 2021.
• To address increasing global population and food insecurity, promoting local food production through home gardening and urban agriculture is essential. Home gardening is expected to play a significant role in enhancing food security and nutrition, with steady growth in the U.S. home garden industry and increased spending on gardening supplies in 2020.

Financial Highlights (Expressed in USD):

• Revenues for the three months ended March 31, 2023, were USD 24,000, compared to USD 1,000 in the same period in 2022. The increase in revenue was primarily due to offering product rentals generating USD 19,000, accounting for 79% of revenues.
• Cost of revenues for the three months ended March 31, 2023, amounted to USD 23,000, while it was USD 1,000 in the corresponding period in 2022. Cost of revenues includes manufacturing costs, depreciation on rental equipment sales, and changes in inventory reserves.
• Operating expenses increased during the three months ended March 31, 2023, with selling, general, and administrative expenses reaching USD 2.3 million, compared to USD 2.2 million in 2022. The rise was mainly due to increased stock-based compensation expenses, offset by decreased marketing expenses.
• Net loss decreased to USD 2.9 million during the three months ended March 31, 2023, compared to USD 3.7 million in the corresponding period in 2022, attributable to increased revenue, decreased operating expenses, and lower interest expenses.
• As of March 31, 2023, the company had a stockholders' deficit of USD 5.6 million and cash on hand amounting to USD 12,000. The company believes it has sufficient cash to sustain operations through May 31, 2023, with additional proceeds received after March 31, 2023.

Key Management Highlights

Risk Associated (High)

Investment in the IPO of “OPHV” is exposed to a variety of risks such as:

• Uncertainty Regarding OPHV's Ability to Continue as a Going Concern: The company faces uncertainty about its ability to continue as a going concern, raising the possibility of curtailing or discontinuing operations in the future. Since inception in June 2016, it has incurred net losses of USD 38.0 million and is still in the early stages of its business plan. Generating revenues is anticipated to incur additional losses, necessitating further financing to meet obligations and achieve profitability. The independent public accounting firm's report for 2022 highlighted doubts about the company's ability to continue as a going concern, with recurring losses and cash usage cited as contributing factors.
• Lack of Insurance and Technology Deployment Risks: OPHV's lack of insurance may expose the company to potential liabilities that could lead to ceasing operations. While the company intends to maintain insurance for certain risks in the future, the coverage may not be adequate, and it may face substantial costs and diversion of resources due to operational risks and uncertainties. Additionally, the deployment and operation of OPHV's agricultural growth products, developed in recent years, pose potential challenges, including unforeseen technical and operational issues, which could result in delays, penalties, expenses, and damage to its reputation, significantly impacting its business, financial condition, and results of operations.
• Potential Impact of Defects in OPHV's Agricultural Growth Products: OPHV's agricultural growth products, being complex, might contain defects or performance issues, posing risks to the company's reputation, leading to potential claims, revenue loss, and increased costs. Identifying and rectifying defects could be challenging, incurring substantial expenses and adversely affecting OPHV's operating results, customer relationships, and market expansion.

Conclusion

Opti-Harvest Ventures (OPHV) is an agricultural innovation company that aims to address challenges faced by agribusinesses. They offer a range of products backed by patented technologies, focusing on optimizing crop yield, expediting growth, efficient land, and water use, reducing labor expenses, and minimizing environmental impacts. Key products include the Opti-Filter™ and Opti-View™ precision farming platform, utilizing sunlight as a renewable resource.

In their initial public offering, OPHV plans to issue 1,930,000 units, potentially generating net proceeds of around USD 6.8 million (or USD 7.9 million if the over-allotment option is exercised). The funds will be allocated to inventory purchase, debt repayment, sales, marketing, research, development, and general corporate purposes. Agriculture faces challenges like climate change and resource constraints. The Agtech sector, including precision agriculture technologies, holds promise in boosting productivity and reducing environmental impact. OPHV is dedicated to developing innovative agricultural technologies to optimize sunlight utilization, enhancing sustainability. Financially, OPHV reported increasing revenues primarily from product rentals, reduced net losses, and sufficient cash on hand to sustain operations through May 2023. Potential risks associated with OPHV's investment include uncertainty about its ability to continue as a going concern due to recurring losses, lack of insurance exposing the company to liabilities, and potential defects in their agricultural products affecting reputation and financials.

Hence, given the financial performance of the company, increased revenue and reduced net losses, industry analysis, use of proceeds, and associated risks “Opti-Harvest Inc (OPHV)” IPO seems “Neutral" at the IPO price.

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