Evogene(EVGN) - 2024 Q2 - Quarterly Report

Consolidated Interim Statements of Financial Position Financial Position Overview Total assets decreased to $40,968 thousand by June 30, 2024, from $51,101 thousand, mainly due to lower cash and property Consolidated Interim Statements of Financial Position (U.S. dollars in thousands) | Item | June 30, 2024 (Unaudited) | December 31, 2023 | | :---------------------------- | :------------------------ | :---------------- | | CURRENT ASSETS: | | | | Cash and cash equivalents | $ 9,484 | $ 20,772 | | Short-term bank deposits | 11,424 | 10,291 | | Trade receivables | 376 | 357 | | Other receivables and prepaid | 3,696 | 2,973 | | Inventories | 794 | 76 | | Total Current Assets | 25,774 | 34,469 | | LONG-TERM ASSETS: | | | | Long-term deposits and other | 30 | 28 | | Investment accounted for | 100 | - | | Right-of-use-assets | 729 | 980 | | Property, plant and equipment | 1,650 | 2,455 | | Intangible assets, net | 12,685 | 13,169 | | Total Long-Term Assets | 15,194 | 16,632 | | TOTAL ASSETS | $ 40,968 | $ 51,101 | | CURRENT LIABILITIES: | | |\ | Trade payables | $ 957 | $ 1,785 | | Employees and payroll accruals| 2,333 | 2,537 | | Lease liability | 558 | 853 |\ | Liabilities in respect of | 681 | 388 | | Deferred revenues and other | 548 | 362 | | Convertible SAFE | 10,392 | - | | Other payables | 816 | 1,019 | | Total Current Liabilities | 16,285 | 6,944 | | LONG-TERM LIABILITIES: | | |\ | Lease liability | 252 | 285 | | Liabilities in respect of | 4,247 | 4,426 | | Deferred revenues and other | 244 | 393 | | Convertible SAFE | - | 10,368 | | Total Long-Term Liabilities| 4,743 | 15,472 | | SHAREHOLDERS' EQUITY: | | |\ | Ordinary shares | 287 | 286 | | Share premium and other | 269,648 | 269,353 | | Accumulated deficit | (266,868) | (257,586) | | Equity attributable to equity | 3,067 | 12,053 | | Non-controlling interests | 16,873 | 16,632 | | Total Equity | 19,940 | 28,685 | | TOTAL LIABILITIES AND EQUITY| $ 40,968 | $ 51,101 | Consolidated Interim Statements of Profit or Loss Profit or Loss Overview Revenues increased to $5,104 thousand for six months ended June 30, 2024, narrowing operating loss to $(10,188) thousand Consolidated Interim Statements of Profit or Loss (U.S. dollars in thousands) | Item | Six months June 30, 2024 (Unaudited) | Six months June 30, 2023 (Unaudited) | | :---------------------------------------------------------------- | :----------------------------------- | :----------------------------------- | | Revenues | $ 5,104 | $ 1,295 | | Cost of revenues | 847 | 783 | | Gross profit | 4,257 | 512 | | Operating expenses: | | | | Research and development, net | 8,817 | 10,169 | | Sales and marketing | 1,920 | 1,728 | | General and administrative | 3,184 | 3,312 | | Other expenses | 524 | - | | Total operating expenses, net | 14,445 | 15,209 | | Operating loss | (10,188) | (14,697) | | Financing income | 667 | 699 | | Financing expenses | (288) | (785) | | Financing income (expenses), net | 379 | (86) | | Share of loss of an associate | (20) | - | | Loss before taxes on income | (9,829) | (14,783) | | Taxes on income (tax benefit) | 1 | (24) | | Loss | $ (9,830) | $ (14,759) | | Attributable to: | | | | Equity holders of the Company | $ (9,282) | $ (13,294) | | Non-controlling interests | (548) | (1,465) | | Total Loss | $ (9,830) | $ (14,759) | | Basic and diluted loss per share, attributable to equity holders | $ (1.82) | $ (3.18) | | Weighted average number of ordinary shares used in computing loss | 5,087,029 | 4,177,554 | Consolidated Interim Statements of Changes in Equity Equity Changes Overview Total equity decreased to $19,940 thousand by June 30, 2024, from $28,685 thousand, primarily due to a net loss Consolidated Interim Statements of Changes in Equity (U.S. dollars in thousands) - Six months ended June 30, 2024 | Item | Share capital | Share premium and other capital reserves | Accumulated deficit | Total (Equity holders) | Non-controlling interests | Total equity | | :---------------------------------------------------------------- | :------------ | :--------------------------------------- | :------------------ | :--------------------- | :------------------------ | :----------- | | Balance as of January 1, 2024 | $ 286 | $ 269,353 | $ (257,586) | $ 12,053 | $ 16,632 | $ 28,685 | | Loss | - | - | (9,282) | (9,282) | (548) | (9,830) | | Issuance of ordinary shares, net of issuance expenses | 1 | 85 | - | 86 | - | 86 | | Forfeiture of non-controlling interests regarding share-based comp| - | 22 | - | 22 | (22) | - | | Share-based compensation and RSUs | - | 188 | - | 188 | 811 | 999 | | Balance as of June 30, 2024 | $ 287 | $ 269,648 | $ (266,868) | $ 3,067 | $ 16,873 | $ 19,940 | Consolidated Interim Statements of Changes in Equity (U.S. dollars in thousands) - Six months ended June 30, 2023 | Item | Share capital | Share premium and other capital reserves | Accumulated deficit | Total (Equity holders) | Non-controlling interests | Total equity | | :---------------------------------------------------------------- | :------------ | :--------------------------------------- | :------------------ | :--------------------- | :------------------------ | :----------- | | Balance as of January 1, 2023 | $ 235 | $ 261,402 | $ (233,707) | $ 27,930 | $ 6,860 | $ 34,790 | | Loss | - | - | (13,294) | (13,294) | (1,465) | (14,759) | | Issuance of ordinary shares, net of issuance expenses | 2 | 334 | - | 336 | - | 336 | | Forfeiture of non-controlling interests regarding share-based comp| - | 69 | - | 69 | (69) | - | | Issuance of a subsidiary ordinary shares to the Company | - | (809) | - | (809) | 809 | - | | Issuance of a subsidiary preferred shares to non-controlling interests| - | (238) | - | (238) | 9,761 | 9,523 | | Share-based compensation and RSUs | - | 294 | - | 294 | 925 | 1,219 | | Balance as of June 30, 2023 | $ 237 | $ 261,052 | $ (247,001) | $ 14,288 | $ 16,821 | $ 31,109 | Consolidated Interim Statements of Cash Flows Cash Flow Overview Net cash used in operating activities decreased to $(9,565) thousand, with financing activities shifting to a net cash use Consolidated Interim Statements of Cash Flows (U.S. dollars in thousands) | Cash Flow Activity | Six months June 30, 2024 (Unaudited) | Six months June 30, 2023 (Unaudited) | | :---------------------------------------------------------------- | :----------------------------------- | :----------------------------------- | | Cash flows from operating activities: | | | | Loss | $ (9,830) | $ (14,759) | | Adjustments to reconcile loss to net cash used in operating activities: | | | | Depreciation | 800 | 807 | | Amortization of intangible assets | 484 | 481 | | Share-based compensation | 999 | 1,219 | | Revaluation of convertible SAFE | 24 | 220 | | Net financing expenses (income) | (222) | 6 | | Loss (gain) from sale of property, plant and equipment | 524 | (26) | | Share of loss of an associate | 20 | - | | Taxes on income (tax benefit) | 1 | (24) | | Changes in asset and liability items: | | | | Decrease (increase) in trade receivables | (19) | 170 | | Decrease (increase) in other receivables | (725) | 84 | | Decrease (increase) in inventories | (718) | 317 | | Increase (decrease) in trade payables | (762) | 26 | | Increase (decrease) in employees and payroll accruals | (204) | 172 | | Decrease in other payables | (214) | (162) | | Decrease in deferred revenues and other advances | (84) | (73) | | Interest received | 402 | 283 | | Interest paid | (41) | (66) | | Taxes paid | - | (10) | | Net cash used in operating activities | $ (9,565) | $ (11,335) | | Cash flows from investing activities: | | | | Purchase of property, plant and equipment | (172) | (483) | | Proceeds from sale of marketable securities | - | 6,924 | | Purchase of marketable securities | - | (503) | | Proceeds from sale of property, plant and equipment | 10 | 26 | | Investment in short term bank deposits, net | (990) | (13,560) | | Net cash used in investing activities | $ (1,152) | $ (7,596) | | Cash flows from financing activities: | | | | Issuance of a subsidiary preferred shares to non-controlling interests | - | 9,523 | | Proceeds from issuance of ordinary shares, net of issuance expenses | 86 | 336 | | Repayment of lease liability | (462) | (413) | | Proceeds from government and other grants | - | 1,089 | | Repayment of government grants | (142) | (35) | | Net cash provided by (used in) financing activities | (518) | 10,500 | | Exchange rate differences - cash and cash equivalent balances | (53) | (316) | | Decrease in cash and cash equivalents | (11,288) | (8,747) | | Cash and cash equivalents, beginning of the period | 20,772 | 28,980 | | Cash and cash equivalents, end of the period | $ 9,484 | $ 20,233 | Notes to Consolidated Interim Financial Statements NOTE 1: - GENERAL Evogene is an AI-driven computational biology company with operating losses, seeking to finance operations through capital raising - Evogene is a computational biology company utilizing AI-driven tech-engines (MicroBoost AI, ChemPass AI, GeneRator AI) to develop life-science products, focusing on microbes, small molecules, and genetic elements[14] - The company incurred operating losses of $10,188 thousand and $14,697 thousand for the six months ended June 30, 2024 and 2023, respectively, and plans to finance operations through capital raising and collaborations[16] - Evogene established Finally Foods Ltd., an AI-driven company specializing in molecular farming for sustainable alternative proteins, holding approximately 40% of its share capital[15] - Casterra Ag Ltd. received orders totaling $9,100 thousand and $2,200 thousand in June 2023, and an additional $440 thousand order in June 2024, for the sale of castor varieties for biofuel production[23] - The company engaged in several equity financing activities: issued 320 ordinary shares for $3 thousand in January 2024 via ATM offering, sold 850,000 ordinary shares for $8,500 thousand in a July 2023 registered direct offering, and issued 10,000 ordinary shares for $85 thousand in May 2024 through a new ATM agreement[26][27][28] - Evogene's operations are segmented into Agriculture (Evogene, Lavie Bio, AgPlenus), Human (Biomica, Canonic), and Industrial (Casterra Ag)[28] NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES Interim financial statements follow IAS 34 and IFRS, with IFRS 18 introducing new presentation rules effective January 1, 2027 - Interim consolidated financial statements are prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' and International Financial Reporting Standards ('IFRS') as issued by the IASB[30][31] - IFRS 18, 'Presentation and disclosure in Financial Statements,' was issued in April 2024, replacing IAS 1, and introduces new requirements for presentation within the statement of profit or loss and disclosure of management-defined performance measures, effective January 1, 2027[33] NOTE 3: - REVENUE FROM CONTRACTS WITH CUSTOMERS Total revenues for six months ended June 30, 2024, increased to $5,104 thousand, mostly recognized at a point in time Disaggregation of Revenue (U.S. dollars in thousands) | Timing of Revenue Recognition | Six months June 30, 2024 (Unaudited) | Six months June 30, 2023 (Unaudited) | | :---------------------------- | :----------------------------------- | :----------------------------------- | | Revenue recognized at a point in time | $ 3,849 | $ 496 | | Revenue recognized over time | 1,255 | 799 | | Total Revenues | $ 5,104 | $ 1,295 | NOTE 4: - OTHER RECEIVABLES AND PREPAID EXPENSES Other receivables and prepaid expenses increased to $3,696 thousand by June 30, 2024, due to higher suppliers' advances Other Receivables and Prepaid Expenses (U.S. dollars in thousands) | Item | June 30, 2024 | December 31, 2023 | | :------------------------ | :------------ | :---------------- | | Government authorities | $ 236 | $ 226 | | Grant receivables | - | 88 | | Prepaid expenses | 851 | 909 | | Suppliers advances (*) | 2,294 | 1,617 | | Other | 315 | 133 | | Total | $ 3,696 | $ 2,973 | - Suppliers' advances, primarily for castor seed growing services for Casterra Ag Ltd., increased from $1,617 thousand at December 31, 2023, to $2,294 thousand at June 30, 2024 The estimation of potentially non-recoverable advances considers factors like geographic location, age of balance, supplier financial condition, and past experience[36] NOTE 5: - LIABILITIES IN RESPECT OF GOVERNMENT GRANTS Government grant liabilities increased to $4,928 thousand by June 30, 2024, with significant accumulated grants and repayments Liabilities in Respect of Government Grants (U.S. dollars in thousands) | Item | June 30, 2024 (Unaudited) | December 31, 2023 (Audited) | | :--------------------------------- | :------------------------ | :-------------------------- | | Balance at January 1, | $ 4,814 | $ 4,744 | | Grants received or to be received | 74 | 66 | | Royalties paid | (142) | (73) | | Amounts recorded in profit or loss | 182 | 77 | | Balance at June 30 / December 31 | $ 4,928 | $ 4,814 | - The Company received research and development grants from the Israel Innovation Authority ('IIA') and is obligated to pay royalties of 3%-4% of revenues derived from financed projects, up to 100% of grants received As of June 30, 2024, accumulated grants amounted to $9,223 thousand, with $3,741 thousand repaid[37] NOTE 6: - FINANCIAL INSTRUMENTS Short-term financial instruments' fair values approximate carrying amounts; SAFE agreement uses Level 3 fair value hierarchy - The carrying amounts of cash and cash equivalents, short-term investments, other receivables, trade payables, and other payables approximate their fair values due to their short-term maturities[38] - The fair value of liabilities in respect of government grants and lease liabilities is measured using a discount rate that reflects the applicable market rate of interest at the date the grants are received or the IBR of interest at the contract date, respectively[38] - The fair value measurement of the SAFE agreement is based on the weighted average value of various scenarios regarding Lavie Bio Ltd.'s estimated enterprise value, using the income approach, and is considered to be Level 3 fair value hierarchy[39] NOTE 7: - SHARE- BASED COMPENSATION Total share-based compensation expense was $999 thousand for six months ended June 30, 2024, for equity holders and non-controlling interests Share-Based Compensation Expenses (U.S. dollars in thousands) | Item | Six months June 30, 2024 (Unaudited) | Six months June 30, 2023 (Unaudited) | | :--------------------------------------------------- | :----------------------------------- | :----------------------------------- | | Share-based compensation - Attributable to equity holders | $ 188 | $ 294 | | Share-based compensation - Attributable to non-controlling interests | 811 | 925 | | Total | $ 999 | $ 1,219 | Evogene Share Options Activity | Item | 2024 Number of options | 2024 Weighted average exercise prices ($) | 2023 Number of options | 2023 Weighted average exercise prices ($) | | :------------------------ | :--------------------- | :---------------------------------------- | :--------------------- | :---------------------------------------- | | Outstanding on January 1, | 397,452 | 28.8 | 403,602 | 41.7 | | Granted | 13,300 | 7.0 | 47,100 | 7.1 | | Exercised | - | - | - | - | | Forfeited/Expired | (2,938) | 121.1 | (36,211) | 42.4 | | Outstanding on June 30, | 407,814 | 26.5 | 414,491 | 35.7 | | Exercisable at June 30, | 314,648 | 30.7 | 275,770 | 46.8 | Evogene RSUs Activity | Item | 2024 Number of RSUs | 2024 Weighted average grant date fair value | 2023 Number of RSUs | 2023 Weighted average grant date fair value | | :------------------------ | :------------------ | :------------------------------------------ | :------------------ | :------------------------------------------ |\ | Outstanding on January 1, | 41,420 | 12.4 | 19,658 | 25.5 | | Granted | 1,300 | 9.7 | 33,260 | 7.5 | | Vested | (7,127) | 14.8 | (3,153) | 26.1 | | Forfeited/Expired | (112) | 7.5 | (1,200) | 30.4 | | Outstanding on June 30, | 35,481 | 11.8 | 48,565 | 13.0 | Subsidiaries' Share Options Activity | Item | 2024 Number of options | 2024 Weighted average exercise prices ($) | 2023 Number of options | 2023 Weighted average exercise prices ($) | | :------------------------ | :--------------------- | :---------------------------------------- | :--------------------- | :---------------------------------------- | | Outstanding on January 1, | 2,531,134 | 1.63 | 2,273,489 | 1.72 | | Granted | 138,500 | 1.46 | 546,839 | 1.87 | | Exercised | (5,000) | 0.19 | - | - | | Forfeited/Expired | (748,576) | 0.21 | (473,932) | 3.15 | | Outstanding on June 30, | 1,916,058 | 2.17 | 2,346,396 | 1.46 | | Exercisable at June 30, | 1,037,638 | 2.01 | 1,390,561 | 0.94 | Total Compensation Cost by Expense Category (U.S. dollars in thousands) | Expense Category | Six months June 30, 2024 (Unaudited) | Six months June 30, 2023 (Unaudited) | | :---------------------------- | :----------------------------------- | :----------------------------------- | | Cost of revenues | $ 15 | $ - | | Research and development, net | 232 | 469 | | Sales and marketing | 345 | 297 | | General and administrative | 407 | 453 | | Total | $ 999 | $ 1,219 | NOTE 8: - OPERATING SEGMENTS Evogene operates in Agriculture, Human, and Industrial segments, with Agriculture generating the highest revenue - Evogene operates in three segments: Agriculture (seed traits, ag-chemical, ag-biological products), Industry (improved castor bean seeds), and Human (human microbiome-based therapeutics, cannabis activity)[51] Revenues and Operating Loss by Segments (U.S. dollars in thousands) - Six months ended June 30, 2024 | Segment | Revenues | Operating loss | | :------------ | :------- | :------------- | | Agriculture | $ 4,648 | $ (3,104) | | Industry | 196 | (1,225) | | Human | 77 | (4,000) | | Unallocated | 183 | (1,859) | | Total | $ 5,104| $ (10,188) | Revenues and Operating Loss by Segments (U.S. dollars in thousands) - Six months ended June 30, 2023 | Segment | Revenues | Operating loss | | :------------ | :------- | :------------- | | Agriculture | $ 819 | $ (5,751) | | Industry | 28 | (156) | | Human | 300 | (4,795) | | Unallocated | 148 | (3,995) | | Total | $ 1,295| $ (14,697) | Revenues from Major Customers (Share of Total Revenues) | Customer | Six months June 30, 2024 (Unaudited) | Six months June 30, 2023 (Unaudited) | | :--------- | :----------------------------------- | :----------------------------------- | | Customer A | 58% | 49% | | Customer B | - | 22% | | Customer C | - | 12% | | Customer D | 26% | - | - Major contracts include Lavie Bio Ltd.'s licensing agreement with Corteva for bio-fungicides, which generated an initial payment of $5,000 thousand (received in two installments, $2,500 thousand in March 2024), and AgPlenus Ltd.'s Licensing and Collaboration Agreement with Bayer AG for a new weed control solution, entitling AgPlenus to license payments, research funding, milestones, and royalties[57][58] Geographical Revenue Distribution | Region | Six months June 30, 2024 (Unaudited) | Six months June 30, 2023 (Unaudited) | | :------------ | :----------------------------------- | :----------------------------------- | | United States | 64% | 62% | | Europe | 27% | - | | Israel | 6% | 36% | | Africa | 3% | 2% | | Total | 100% | 100% | NOTE 9: - SUBSEQUENT EVENTS Evogene implemented a 1-for-10 reverse share split on July 24, 2024, and raised $5.5 million in an August 2024 offering - On July 23, 2024, Evogene announced and implemented a 1-for-10 reverse share split of its ordinary shares, effective July 24, 2024, with proportionate adjustments to outstanding options and RSUs[61] - On August 26, 2024, Evogene issued and sold 265,000 ordinary shares and pre-funded warrants to purchase up to 1,427,308 ordinary shares in a registered direct offering, along with unregistered Series A and Series B ordinary warrants, generating approximately $5.5 million in gross proceeds[62]