Agronomics investment income increased by 506% to £510,635

Agronomics Limited (LON:ANIC), a leading listed investor in alternative proteins with a focus on cellular agriculture and cultivated meat, has announced its unaudited interim results for the six-month period ending 31 December 2020. A copy of these Interim Results is available on the Company’s website www.agronomics.im.

Financial highlights

·      The Company’s investment income, including loan interest and net unrealised gains on investments, increased by 506% to £510,635 (2019: £84,262) during the six-month period

·      Operating expenses were £441,013 (2019: £577,782), a decrease of 24% and mostly comprised of professional fees relating to the investments acquired and the fundraise completed during the period

·      A net loss of £1,447,306 (2019: loss of £493,493), an increase of 193%, was recognised during the period, almost all being foreign exchange revaluation losses of £1,383,665 of the investment portfolio to spot rates

·      Invested assets at fair value increased by 61% to £26,930,310 (30 June 2020: £16,740,656), and cash and cash equivalents stood at £2,506,516 (30 June 2020: £2,789,097)

·      Net assets increased by 43% to £27,754,579 at 31 December 2020 (30 June 2020: £19,416,878). The increase is principally due to a successful fundraise during October 2020, raising total net funds of £9,589,825 and issuing 167,735,814 new ordinary shares

Richard Reed, Chairman of Agronomics, commented: –

“The first half of the financial year has been both busy and very exciting. Our current investment portfolio shows considerable promise for future growth given the scale of opportunity to invest in the nascent alternative foods sector.  We are expecting significant developments in a number of our portfolio companies that should positively impact their valuation in the coming months. The Board will continue to seek new opportunities in line with its Investing Policy.”

Chairman’s statement

Introduction

I am pleased to present the Unaudited Interim Results for Agronomics Limited for the six-month period ending 31 December 2020.

Investment Review – Core Portfolio

The Board made significant progress in building out the portfolio during this half, having made new and follow-on investments in 8 companies. A number of these investments were in recognised leaders of their respective fields covering seafood, pork, leather and dairy proteins.

The Company acquired 1,127 Series A Preferred share in Solar Foods Oy (“Solar Foods”), for a consideration of EUR 3 million. Solar Foods develops a sustainable protein called Solein® a microorganism that grows utilising airborne carbon dioxide and hydrogen via the electrolysis of water.

As part of a US$ 55 million financing lead by Blue Horizon Ventures, the Company invested EUR 1.75 million in Mosa Meats B.V. (“Mosa”), with the financing being split into two tranches. In total, Agronomics has committed to investment EUR 3.5 million into Mosa. Mosa is a cultivated meat company based in the Netherlands, whose founding scientist, Prof. Mark Post, showcased the world’s first cultivated burger in 2013. Mosa is focused initially on cultivated beef products, intending to have products approved in the EU in 2023.

The Company purchased a US$ 5 million Convertible Promissory Note (“CPN”) from BlueNalu Inc (“BlueNalu”), an existing portfolio company focused on cell-based seafood products. Agronomics currently holds 192,005 shares of BlueNalu, comprised of 43,357 Seed Preferred Shares and 148,648 Series A Preferred Shares, with a book value, excluding the CPN investment, of £2,602,456. Assuming the CPN is subscribed in full and a Qualified Financing occurs at a price equal to the agreed valuation cap of the CPN, Agronomics will have an approximate equity interest of 5.85% of issued shares following conversion and would value Agronomics’ position at approximately £13.4 million.

In December 2020, Agronomics completed a subscription of US$ 50,000 in the form of a Simple Agreement for Future Equity (“SAFE”) in CellX Limited (“CellX”). CellX is a China-based cellular agriculture company, focussing on cell-based pork and seafood products initially. CellX was founded in 2020, with the intention of showcasing its first prototypes in 2021.  The SAFE will convert at the valuation cap divided by the company capitalisation at the next equity financing, which should give Agronomics an approximate equity ownership of 1.43%.

Agronomics also made a US$ 2.0 million investment in the form of a SAFE in SuperMeat the Essence of Meat (“SuperMeat”). SuperMeat’s initial focus is on cultivated chicken products, and unveiled its sustainable restaurant experience, The Chicken, in Tel Aviv, Israel, earlier this year, where individuals are invited to taste SuperMeat’s cultivated chicken. The SAFE will convert at a price per share reflecting the lower of the valuation cap or at a 25 percent discount to the share price of SuperMeat’s next equity round. We expect that upon conversion of the SAFE at the completion of SuperMeat’s next equity fundraise and, assuming a pre-money valuation of US$ 150 million, Agronomics will hold approximately 2.22% of SuperMeat’s fully diluted share capital.

The portfolio weightings by Net Asset Value are tabled below:

InvestmentWeighting
BlueNalu, Inc22.67%
Meatable BV11.55%
Other alternative protein investments10.53%
Solar Foods Oy9.71%
Cash balances8.70%
Foods United7.92%
Tropic Biosciences UK Limited7.92%
Vitrolabs Inc6.60%
Mosa Meats B.V.5.67%
Supermeat the Essence of Meat5.28%
Legacy portfolio3.45%
 ────────
Total100.00%

Investment Review – Legacy Portfolio

The legacy portfolio, representing 3.45% of NAV, will remain under review and liquidated opportunistically.

Financing

During the 6 months to 31 December 2020, the Company successfully completed an oversubscribed funding round, raising in total £10,050,474 and issuing 167,735,814 new Ordinary Shares. Following share issue commissions and professional fees, net cash proceeds of £9,589,825 were retained by the Company. Funds were utilised to acquire four new investments, further diversifying the portfolio, and also to complete a follow-on investment into BlueNalu.

Approach to Risk and Corporate Governance

“The Company’s general risk appetite is a moderate, balanced one that allows it to maintain appropriate growth, profitability and scalability, whilst ensuring full corporate compliance.”

The Group’s primary risk drivers include: –

Strategic, Reputational, Credit, Operational, Market, Liquidity, Foreign Exchange, Capital and Funding, Compliance and Conduct.

Our risk appetite has been classified as high under an “impact” matrix defined as Zero, Low, Medium and High. Appropriate steps have been taken and adequate controls implemented to monitor the risks of the Company, and the appropriate committees and reporting structures have been established, which under the Chairmanship of the Chairman, will monitor risks facing the Company. Further details of the Corporate Governance Statement, including the role and responsibilities of the Chairman and an explanation as to how the QCA Code has been applied, will be found on pages 8 to 11 of the audited 30 June 2019 financial statements, which are on the Company’s website at www.agronomics.im.

At the General Meeting of the Company on 16 April 2019, shareholders adopted a new Investing Policy, which includes the following:

”The Company will invest in opportunities within the Life Sciences sector, concentrating on, but not being limited to, environmentally friendly alternatives to the traditional production of meat and plant-based nutrition sources (“Clean Food”). The Company will focus on investments that provide scalable and commercially viable opportunities.”

Under our valuation policy, it is not possible to reflect significant uplifts between valuation events such as a new third party funding, and therefore the Board believes that the stated NAV per share may not fully represent the current intrinsic value of the portfolio companies given their continuing progress and the comparable valuations we see for these types of companies in this rapidly growing sector.

Further details of the new Investing Policy can found on the Company’s website at www.agronomics.im.

Strategy and Outlook

The first half of the financial year has been both busy and very exciting. Our current investment portfolio shows considerable promise for future growth, given the scale of opportunity to invest in the nascent alternative foods sector.  We are expecting significant developments in a number of our portfolio companies [that should positively impact their valuation] in the coming months. The Board continue to seek new opportunities in line with its Investing Policy.

Richard Reed

Chairman

25 January 2021

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