Grace Breeding provides summary update on progress related to its leading programs for the first half of the year

Grace Breeding Ltd. (the "Company" or "Grace Breeding") (TASE: GRAC), a forward-thinking AgClimateTech company developing sustainable biological-based products to improve crop yield and vigor, has announced summary update of developments related to its two lead product candidates for the first half of 2023.

″This first half of the year has been one filled with equal momentum for both of our lead programs. Notably we received three product registration approvals – the first for Maoz™ in Brazil, then Addir™ in Austria, and ClimAid in Germany,″ said Assaf Dotan, Chief Executive Officer of Grace Breeding. Between receipt of our product registration approvals and reporting positive results from field trials of both our climate stress tolerance solution and bio-fertilizer, as well as forming collaborative partnerships, we are in a great position prior to our first commercialization of our Maoz bio-fertilizer in the key region of Brazil.″

Mr. Dotan continued, ″We continue to be in discussions with many agricultural leaders in the related to our bio-fertilizer, which will allow farmers to significantly reduce their dependence on synthetic fertilizer and consequently lower carbon emissions, the latter which is crucial for slowing damage to the environment. In addition, using our bio-fertilizer, we have shown there are cost savings benefits to farmers in multiple areas, as well as the potential for additional income - both in terms of yield and obtaining carbon credits. This poses a win-win situation for both farmers and the environment. We are now coming upon sowing season and look forward to conducting our next key field trials with our bio-fertilizer, and reporting those results as they become available.″

Summary of program developments for the first half of 2023

On August 8th, the Company announced that it received product registration approval in Germany by the German Federal Office of Consumer Protection and Food Safety (BVL) for its innovative WDS (″Wide Defense System″) climate stress tolerance solution, to be marketed as an adjuvant in combination with bacteria-based products in the Bacillus subtilis family for soil application use in open field and greenhouse vegetables under the global brand name ″ClimAid™″. This represents the Company’s first product registration approval for its WDS in the European Union (EU) and facilitates Grace Breeding’s registration process in other EU countries.

On July 17th the Company announced results from field trials of its innovative NFT bio-fertilizer in Brazil (globally branded as Maoz™), validating previous results and showing marked proposed benefits to farmers in terms of reduced amount of fertilizer used and reduced operational measures, that in turn produced higher crop yield compared to traditional, synthetic agricultural fertilization methods. The field trial was conducted by Eurofins Group, a global leader in contract research services, as well as development collaborator, Gaia AgroSolutions. Specifically, the field trials showed that yields were increased while using half the amount of synthetic nitrogen fertilizer containing urea.

On June 29th, the Company announced that it received product registration approval in Austria by the Austrian Federal Office for Food Safety (BAES) for its innovative NFT bio-fertilizer, to be marketed as a ″soil improver″ product, for use in wheat and corn under the brand name ″Addir™″ in the European Union. This represents the Company’s first product registration approval in the European Union (EU) and enables Grace Breeding to obtain rapid Mutual Recognition registrations in other EU countries, including Belgium, the Czech Republic, Germany, Greece, Portugal, Slovakia, and Spain.

On June 20th, the Company announced the results from trials of its climate stress tolerance solution, ProMagen™ (formerly known as ″WDS″), in soybean plants, conducted in the field under a research and development collaboration with its partners at the State University of Londrina (UEL), based in Paraná State, Brazil. Results showed that using Grace Breeding’s ProMagen™ in soybean plants there was both higher resilience and tolerance as well as higher yield produced.

On June 5th, the Company announced results from trials of its NFT Bio-fertilizer, (now globally branded as Maoz™),in corn (maize) plants, conducted in the field under a research and development collaboration with its partners at the University of Londrina (UEL), based in Paraná State, Brazil. The encouraging results that confirm the preliminary results from studies in the greenhouse that were previously announced in January, showed that using Grace Breeding’s NFT Bio-fertilizer and a reduced use of nitrogen, there was greater efficiency in the use of nitrogen and water and greater absorption of carbon in the corn plants. These results support the use of Grace Breeding’s NFT Bio-fertilizer as a promising solution for both robust corn plant growth and reduced carbon emission. The Brazilian maize growing season in particular tends to be characterized by reduced water availability, which makes the use of NFT especially valuable in corn in those areas.   

On May 24th, the Company announced that it received the first approval for Maoz registration in Brazil, the largest user of bio-based fertilizers and a leading agricultural exporter.

On March 6th, the Company announced the formation of a partnership to support the development of a bio-fertilizer alternative to replace chemical nitrogen crop fertilizers. Under the terms of the partnership, the companies will collaborate to create an agricultural solution that combines Grace Breeding’s proprietary, groundbreaking NFT bio-fertilizer with Evolva’s precision-fermentation platform to create a streamlined process for producing the proprietary Bio-fertilizer.

On January 25th, the Company announced positive results from a study of its proprietary bio-fertilizer, ″NFT″, an environmentally friendly alternative to urea, the typical component in synthetic fertilizer, conducted under a research and development collaboration with the University of Londrina (UEL), based in Paraná State, Brazil. The findings from this study are important since Grace Breeding’s NFT would allow farmers to significantly reduce their dependence on synthetic fertilizer that is harmful to the environment, as well as provide them with an alternative that is more economically viable.

2023 Upcoming Goals and Milestones

• Form additional potential local collaborations that will be additive to the biofertilizer value chain

• Establish a foundation to run different field trials in additional key markets throughout North America, Europe and Israel for prospective market expansion for the Company’s biofertilizers and climate stress tolerance solution

• Form additional potential local collaborations that will be additive to the biofertilizer value chain

• Promote the biofertilizer approvals in Brazil and the E.U. and the climate stress tolerance solution approval in the E.U.

• Refine strategic and marketing content that will help the company in the Brazilian market

• Set prices in the market and start promoting the launch of the biofertilizer and climate stress tolerance solution products

Mid-Year 2023 Financial Results

Revenues for the six months ended June 30, 2023, were $ 18 thousand, compared to $ 60 thousand for the six months ended June 30, 2022. The decrease resulted primarily from the termination of sales of the WDS climate stress tolerance solution product to a customer abroad.

The profit from fair value adjustments of biological assets, net, in the six months that ended on June 30, 2023, was $ 44 thousand, compared to $0 in the six months that ended on June 30, 2022. The increase in profit from fair value adjustments of biological assets, net, is due to the growing of sage seeds that the company has carried out since November 2022 and is expected to end in September 2023. As sage cultivation progresses, its value increases.

Gross profit for the six months ended June 30, 2023, was $ 55 thousand, compared to gross profit of $ 24 thousand for the six months ended June 30, 2022. The increase resulted primarily from fair value adjustments of biological assets, net (also as a result of the growing of sage seeds, as mentioned above), which were partially offset by the decrease in gross profit from WDS climate stress tolerance solution product sales.

Research and Development (R&D) expenses for the six months ended June 30, 2023, were $ 431 thousand, compared to $ 648 thousand for the six months ended June 30, 2022. The decrease in R&D expenses was primarily due to a decrease in payroll and related stock-based compensation, patents and consultants’ expenses which were partially offset by the increase in product development expenses, field trials, licenses and registration expenses.

Sales, General and Administrative (SG&A) expenses for the six months ended June 30, 2023, were $ 888 thousand, compared to $ 753 thousand for the six months ended June 30, 2022. The increase in SG&A expenses resulted primarily from increased public relations, investor relations and consultants' fees, which were partially offset by the decrease in stock-based compensation and management fees previously paid to the Company shareholders.

Operating loss for the six months ended June 30, 2023, was $ 1,264 thousand, compared to $ 1,376 thousand for the six months ended June 30, 2022. The decrease in Research and Development expenses was offset by the increase in SG&A expenses, and therefore, the decrease in operating loss resulted primarily from the increase in the exchange rate difference between USD and ILS forms of currency.

Net loss for the six months ended June 30, 2023, was $ 1,268 thousand, compared to a net loss of $ 1,617 thousand for the six months ended June 30, 2022. The decrease resulted primarily from the decrease in financing expenses, net, and the increase in the exchange rate difference between the USD and ILS.

• The Company's cash and cash equivalents balance and short-term deposits as of June 30, 2023 amounted to $ 749 thousand, compared to $ 2,099 thousand as of December 31, 2022.

• As of June 30, 2023, the Company has a debt of $ 109 thousand for a loan converted into shares, which will be repaid in one payment, including the accrued interest, no later than December 31, 2023.