Steakholder Foods Ltd.

Greetings and welcome to Stakeholder Foods Limited Business Update Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. John Mills with ICR. Thank you. You may begin.

Great. Thank you, Melissa. Good day, everyone. and thank you for participating on today's business update call for Stakeholder Foods. Today's call is being recorded, and joining us today is Stakeholder Food co-founder and CEO, Ari Kaufman, and Stakeholder Foods VP of Finance, Moran Attar. Certain comments made on the call include forward-looking statements which are subject to safe harbor provisions of the Private Security Litigation Reform Act of 1985. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to a number of assumptions, risks, and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to the company's filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any of the forward-looking statements made today. Following our prepared remarks, management will take questions from the investment community. Now, I will turn the call over to the CEO of Stakeholder Foods, Mr. Kaufman. Please go ahead, sir.

Thank you very much, John. Hello, everyone, and welcome to today's call. As part of our ongoing commitment to transparency, we continue to hold these semiannual investor calls to keep the investment community apprised of our activities. We value this regular opportunity to provide you with insights, into our progress and strategic direction. In the first half of 2024, we've made significant progress in executing our business model shift that began a year ago. Our new approach focuses on two key revenue streams, selling our 3D printers and association services and selling our meat and fish premix blends to businesses in food service industry. This pivot towards the B2B approach has yielded impressive results. We are proud in the first half of the year to have successfully aimed our first recurring revenue strategic agreement, a milestone that was swiftly followed by three similar agreements. Importantly, we achieved these agreements by reducing our operating expenses by more than 50%, largely due to the completion of the major phase of our R&D work. This rapid succession of deals, coupled with a reduction in expenses as we moved from development to commercialization not only validates our new business direction, but also establishes a solid foundation for sustainable, profitable growth. Now I'd like to highlight the four commercialization agreements we've secured to date. These agreements represent significant milestones in our growth strategy and demonstrate the market's receptiveness to our innovative solutions. While it's still early in the implementation phase, we're excited about the potential of these agreements Based on our projections and the scale of our partners' operations, we believe these deals have the potential to drive substantial recurring revenue growth beginning in 2025. Moreover, they serve as powerful proof points that we can leverage to attract additional partners and expand our market presence. Let's begin with our first agreement, which we link with Viola Farms, leading alternative protein producer and premier tofu manufacturer in Israel. This multi-million dollar agreement, initially signed in February, has since evolved and expanded. In May this year, we signed our first commercial cooperation agreement with VitaFarm, marking our official transition from the R&D stage to the commercialization stage. VitaFarm will manufacture alternative proteins on a commercial scale using our stakeholder food beef pre-mix blend and proprietary know-how, paying us royalties on sales, and they will manage the production process to ensure product quality and the integration of our advanced production technologies while leveraging their market influence to make the products available at a wide range of sale points. Production of these new plant-based products is set to begin in the coming months, with initial commercial revenue expected by the end of this year, early next year. Looking ahead. We're in active negotiations for a follow-on deal for Viola Farms to produce plant-based 3D printed meat products utilizing our proprietary 3D printing technology and premixed blends, including production of our flagship printed marbled beef steak products. Our second key agreement was with Industrial Technology Research Institute, E3, a world-leading applied technology research institute based in Taiwan. This partnership agreement marks a significant step in our global expansion strategy and showcases the versatility of our technology. The core of the agreement is to develop and commercialize a range of food products, specifically tailored for the Taiwanese cuisine, utilizing our advanced 3D printing technology and plant-based premixes. To accelerate expansion across Taiwan, we're focusing on commercializing our products through collaborations with leading food companies in the region. A key part of this strategy involves the sale of our commercial-scale 3D printers and pre-mixers to these commercial partners. Importantly, this partnership underscores our strategy of collaborating with partners with strong R&D capabilities. By leveraging E3's research powers, we can continue to innovate while maintaining a lean operational structure. By combining our pioneering 3D printing technology with each of its regional consumer insights and local operations, we're well positioned to introduce alternative meats as a sustainable and a locally sourced protein option for the Taiwanese consumers. This partnership not only validates our technology, but also demonstrates our ability to adapt to diverse culinary traditions and consumer preferences while maintaining a cost-effective approach to innovation and growth. Building on the momentum from our partnerships with Viola Funds in Italy. I'm excited to discuss our third significant agreement, which we secured back in June with Cherry Herring, a gourmet fish delicatessen brand. We signed an MOU to establish a strategic partnership with Cherry Herring to unveil a new line of vegan fish salads developed with the company's proprietary stakeholder foods, SH fish pre-mixed blends. The collaboration will leverage Sherry Herring's regional expertise and brand recognition to expand our geographical footprint and consumer base and further bolster our growing product portfolio. Capitalizing on Sherry Herring's well-established distribution network spanning delis and restaurants, this new vegan fish salad line will roll out to Sherry Herring's current channel as well as new locations. And lastly, our last agreement in August this year with PrimaZone, a renewed frozen food manufacturer, and institutional distributor. Through this partnership, Premazone will integrate our innovative SH fish pre-mix blend into a new plant-based white fish kebab line to be made commercially available through Premazone's manufacturing capabilities and distribution network. Premazone currently produces and distributes its products across Israel, selling it to hotels, restaurants, catering services, and other food services establishments. This strategic partnership will leverage Amazon's established distribution network, introducing a new line of plant-based white fish kebabs to these diverse channels in the Israeli market. Shifting to the financial front, I'm pleased to report progress in receiving funds for the $1 million grant awarded to us last year by the Singaporean-Israeli Industrial R&D Foundation. In March of this year, we received our first payment of $220,000. This infusion of non-diluted capital not only strengthens our financial position, but plays an important role in supporting our innovative work in the alternative protein space and helps us to maintain our trajectory of growth. As we turn the corner into the latter half of this year, our sites are set on three key objectives, clinching more commercial deals to broaden our market footprint, supporting our current clients in rolling out the first products to the market, and rolling out an expanded suite of product applications. The groundwork we've laid to date through strategic agreements and technological breakthroughs serve as a springboard for our future expansion and market penetration. As we progress through the initial phases of our commercial operations and product rollouts, we anticipate modest revenue generation to commence in late 2024 or early 2025. Looking forward ahead, we project accelerated revenue growth in 2025. This anticipated uptick is supported by our progress towards finalizing a global commercial agreement, which we hope to announce by early 2025, as well as the continued expansion of our commercial activities and full implementation. I'm now going to turn it over to our VP Finance, Moran Atar.

Thank you, Arik. As Eric said, with the recent signing of the commercial cooperating agreement with Weiler Fund, E3, Sherry Herring, and Primazone, we expect to generate our first commercial revenue in late 2024 or early 2025. I am pleased to report significant shifts in our financial profile, reflecting the successful completion of our major R&D initiative. For the first half of this year, our R&D costs were $1.6 million, compared to $3.6 million in the same period last year. This represents a 54% year-over-year reduction as we have now transitioned to a safe focus on promoting, optimizing, and diversifying our newly developed technologies. This not only demonstrates the fruition of our innovation efforts, but also allows us to operate efficiently. Moving forward, we anticipate RMB expenses to stabilize at this lower level as we focus on refining our supporting and supporting our existing technologies infrastructure. Additionally, our marketing and general and administrative expenses were also reduced for the first half of 2024 compared to the prior year period. Marketing expenses was $700,000 in the first half of 2024, a reduction of 56% from $1.6 million in the per year period. The reduction was primarily due to a lower public relation and manpower costs. General and administrative expenses decreased 9% from $2.2 million in the per year period to $2 million in the first half of 2024. Our net loss decreased by 54% to $4.4 million or $1.10 per ordinary share, compared to $9.5 million or $5 per ordinary share in the first half of 2023. The decrease was primarily driven by reduction in R&D and marketing expenses. Our cash management was strong. with net cash used in operating activities decreasing to $4.4 million for the first half of 2024 from $7.5 million in the prior year period. We entered the first half of 2024 with $5.4 million in cash and equivalents compared to $4.2 million at the end of 2023. Now I will return the call back to Eric for closing remarks.

Thank you, Moran. The company remains committed to executing its growth strategy with a clear focus on securing additional commercial deals and promoting current deals, expanding market reach, and launching new product applications. We're pleased to report that our momentum is building as we approach a pivotal phase in our company's trajectory. Production is set to commence shortly, bringing our products to market and providing tangible proof of our concept. We expect this real-world validation to act as a catalyst for securing additional deals and agreements. Furthermore, we're making good progress towards finalizing a global commercial agreement, which we hope to announce in early 2025. These developments collectively strengthen our position and our look for future growth. And with that, I would like to open it up to any questions.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. You may also ask questions via the webcast. Please type your question on the platform and click enter to submit.

One moment please while we poll for questions.

Once again, if you'd like to ask a question via the telephone, please be sure to press star 1. Or if you would like to type your question in the web platform, please do so now.

Mr. Mills, at the moment, I'm seeing no phone questions.

That's correct, operator. I'm not seeing any questions on the webcast as well.

Thank you. At this time, we'll conclude our question and answer session. And Mr. Kaufman, I'll turn the floor back to you for any final comments.

Thank you very much. So first of all, I don't know how many people attended this call, but thank you for each one of you that have attended this call. I just wanted to emphasize the fact that, as I said in the past, the last years were challenging not only to us, I think, but to each individual. a growth startup out there. But I think that we are beginning to see positive signs. Also like at Stakeholder Foods, also like on a global level. So hopefully once we will initiate production and our products will begin to be out there, we will attract more customers. Maybe we'll be able to secure more global deals. As I said, we are aiming to secure our first one by the beginning of next year. I just wanted to emphasize that we are doing everything that is possible to make this company succeed. So thank you very much for joining this call, and have a great day.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.