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Evolutionary Genomics, Inc. – ‘10-Q’ for 9/30/19

On:  Thursday, 10/17/19, at 1:05pm ET   ·   For:  9/30/19   ·   Accession #:  1553350-19-1065   ·   File #:  0-54129

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

10/17/19  Evolutionary Genomics, Inc.       10-Q        9/30/19   52:2.4M                                   Edgar Filing LLC/FA

Quarterly Report   —   Form 10-Q   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    355K 
 2: EX-31.1     Certifications                                      HTML     20K 
 3: EX-31.1     Certifications                                      HTML     20K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     17K 
46: R1          Document and Entity Information                     HTML     48K 
31: R2          Condensed and Consolidated Balance Sheets           HTML     91K 
15: R3          Condensed and Consolidated Balance Sheets           HTML     41K 
                (Parenthetical)                                                  
41: R4          Condensed and Consolidated Statements of            HTML     58K 
                Operations                                                       
45: R5          Condensed and Consolidated Statement of             HTML     46K 
                Stockholders' Equity                                             
30: R6          Condensed and Consolidated Statements of Cash       HTML     63K 
                Flows                                                            
14: R7          Business Activity                                   HTML     23K 
40: R8          Summary of Significant Accounting Policies          HTML     32K 
47: R9          New Accounting Standards                            HTML     22K 
18: R10         Fair Value Measurements                             HTML     39K 
25: R11         Property and Equipment                              HTML     28K 
52: R12         Intangible Assets                                   HTML     27K 
36: R13         Stockholders' Equity and Warrants                   HTML     43K 
17: R14         Stock-Based Compensation                            HTML     60K 
24: R15         Commitments and Contingencies                       HTML     23K 
51: R16         Related Parties and Transactions                    HTML     19K 
35: R17         Concentrations                                      HTML     19K 
19: R18         Liquidity and Going Concern                         HTML     23K 
23: R19         Summary of Significant Accounting Policies          HTML     73K 
                (Policies)                                                       
44: R20         Fair Value Measurements (Tables)                    HTML     35K 
38: R21         Property and Equipment (Tables)                     HTML     27K 
13: R22         Intangible Assets (Tables)                          HTML     25K 
29: R23         Stockholders' Equity and Warrants (Tables)          HTML     38K 
43: R24         Stock-Based Compensation (Tables)                   HTML     59K 
37: R25         Business Activity (Details)                         HTML     18K 
11: R26         Summary of Significant Accounting Policies (Other)  HTML     24K 
                (Details)                                                        
28: R27         Summary of Significant Accounting Policies          HTML     21K 
                (Property and Equipment) (Details)                               
42: R28         Summary of Significant Accounting Policies          HTML     20K 
                (Intangible Assets) (Details)                                    
39: R29         Summary of Significant Accounting Policies (Net     HTML     26K 
                Loss Per Common Share) (Details)                                 
33: R30         Fair Value Measurements (Details)                   HTML     29K 
48: R31         Property and Equipment (Details)                    HTML     36K 
26: R32         Intangible Assets (Details)                         HTML     48K 
20: R33         Stockholders' Equity and Warrants (Narrative)       HTML     43K 
                (Details)                                                        
34: R34         Stockholders' Equity and Warrants (Summary of       HTML     41K 
                Warrants Activity) (Details)                                     
49: R35         Stock-Based Compensation (Narrative) (Details)      HTML     32K 
27: R36         Stock-Based Compensation (Summary of Stock Options  HTML     57K 
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21: R37         Commitments and Contingencies (Details)             HTML     28K 
32: R38         Related Parties and Transactions (Details)          HTML     21K 
50: R39         Liquidity and Going Concern (Details)               HTML     42K 
22: XML         IDEA XML File -- Filing Summary                      XML     90K 
16: EXCEL       IDEA Workbook of Financial Reports                  XLSX     42K 
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 7: EX-101.CAL  XBRL Calculations -- fnam-20190930_cal               XML    101K 
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 6: EX-101.SCH  XBRL Schema -- fnam-20190930                         XSD     84K 
12: ZIP         XBRL Zipped Folder -- 0001553350-19-001065-xbrl      Zip     66K 


‘10-Q’   —   Quarterly Report
Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Item 1
"Balance Sheets
"Statements of Operations
"Statements of Stockholders' Equity
"Statements of Cash Flows
"Notes to Condensed and Consolidated Financial Statements
"Item 2
"Item 3
"Item 4
"Item 1A
"Item 5
"Item 6

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

(Mark One)

þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019


OR


¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________

Commission File Number: 000-54129

——————————

EVOLUTIONARY GENOMICS, INC.

(Exact name of registrant as specified in its charter)

Nevada

 

26-4369698

(State of other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

1026 Anaconda Drive, Castle Rock, CO

 

80108

(Address of principal executive offices)

 

(Zip Code)


(720) 900-8666

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class

Trading Symbol(s)

Name of each exchange on which registered

N/A

N/A

N/A


Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No ¨


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ  No ¨


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ¨

 

Accelerated filer ¨

Non-accelerated filer þ

 

Smaller reporting company þ

 

 

Emerging growth company ¨


If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨


Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨  No þ


As of September 30, 2019, the Registrant had 5,881,898 shares of common stock, $.001 par value, 577,063 shares of Series A-1 preferred stock, $.001 par value and 102,860 shares of Series A-2 preferred stock, $.001 par value outstanding.  The Registrant’s common stock trades on the OTC Markets under the trading symbol “FNAM”.

 

 







EVOLUTIONARY GENOMICS, INC.

INDEX

 

Page
Number

 

 

PART I.  FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements

1

 

 

Condensed and Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018

2

 

 

Condensed and Consolidated Statements of Operations, Three Months and Nine Months ended September 30, 2019 and 2018 (unaudited)

3

 

 

Condensed and Consolidated Statements of Stockholders’ Equity for the Year to Date Quarterly Periods Ended September 30, 2019 and 2018 (unaudited)

4

 

 

Condensed and Consolidated Statements of Cash Flows, Nine Months ended September 30, 2019 and 2018 (unaudited)

5

 

 

Notes to Condensed and Consolidated Financial Statements

6

 

 

Item 2.

Management's Discussion and Analysis of Financial Conditions and Results of Operations

14

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

20

 

 

Item 4.

Controls and Procedures

21

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

22

 

 

Item 1A.

Risk Factors

22

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

22

 

 

Item 3.

Defaults Upon Senior Securities

22

 

 

Item 4.

Mine Safety Disclosures.

22

 

 

Item 5.

Other Information

22

 

 

Item 6.

Exhibits

22








PART I. FINANCIAL STATEMENTS

ITEM 1.

FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by Evolutionary Genomics, Inc., without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position of the Company as of September 30, 2019 and for the quarterly and nine month periods ended September 30, 2019 have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2018 audited financial statements. The results of operations for these interim periods are not necessarily indicative of the results for the entire year.




1



Evolutionary Genomics, Inc. and Subsidiary

Condensed and Consolidated Balance Sheets


 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash

 

$

218,164

 

 

$

131,406

 

Accounts receivable

 

 

32,722

 

 

 

40,439

 

Investments

 

 

35,844

 

 

 

28,200

 

Prepaid expenses

 

 

10,144

 

 

 

23,372

 

Total current assets

 

 

296,874

 

 

 

223,417

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

98,412

 

 

 

127,001

 

Intangible assets, net

 

 

4,036,242

 

 

 

4,038,194

 

Total non-current assets

 

 

4,134,654

 

 

 

4,165,195

 

Total assets

 

$

4,431,528

 

 

$

4,388,612

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

19,523

 

 

$

 

Total current liabilities

 

 

19,523

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

Deferred tax liability

 

 

955,446

 

 

 

955,446

 

Total liabilities

 

 

974,969

 

 

 

955,446

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Preferred Stock subject to possible redemption, $0.001 par value,

 

 

 

 

 

 

 

 

20,000,000 authorized at September 30, 2019 and December 31, 2018

 

 

 

 

 

 

 

 

Series A-1 Convertible Preferred Stock, $0.001 par value; 600,000

 

 

 

 

 

 

 

 

shares authorized, 577,063 shares issued and outstanding at

 

 

 

 

 

 

 

 

September 30, 2019 and December 31, 2018; liquidation

 

 

 

 

 

 

 

 

preference at September 30, 2019 of $3,908,849

 

 

3,029,579

 

 

 

3,029,579

 

Series A-2 Convertible Preferred Stock, $0.001 par value; 200,000

 

 

 

 

 

 

 

 

shares authorized, 102,860 shares issued and outstanding at September 30,

 

 

 

 

 

 

 

 

2019 and no shares as of December 31, 2018; liquidation

 

 

 

 

 

 

 

 

preference at September 30, 2019 of $556,229

 

 

540,015

 

 

 

 

Total preferred stock subject to possible redemption

 

 

3,569,594

 

 

 

3,029,579

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred Stock

 

 

879,269

 

 

 

681,282

 

Common Stock, $0.001 par value; 780,000,000 shares authorized,

 

 

 

 

 

 

 

 

5,881,898 shares issued and outstanding at September 30, 2019

 

 

5,882

 

 

 

5,882

 

and December 31, 2018

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

12,118,806

 

 

 

12,294,952

 

Accumulated deficit

 

 

(13,116,992

)

 

 

(12,578,529

)

Total stockholders' (deficit) equity

 

 

(113,035

)

 

 

403,587

 

Total liabilities and stockholders' (deficit) equity

 

$

4,431,528

 

 

$

4,388,612

 





The accompanying notes are an integral part of the consolidated financial statements.

2



Evolutionary Genomics, Inc. and Subsidiary

Condensed and Consolidated Statements of Operations

(unaudited)


 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service and grant revenue

 

$

32,722

 

 

$

76,375

 

 

$

115,841

 

 

$

76,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

115,771

 

 

 

114,693

 

 

 

361,113

 

 

 

374,933

 

Salaries and benefits

 

 

37,500

 

 

 

62,144

 

 

 

134,341

 

 

 

186,432

 

General and administrative

 

 

41,962

 

 

 

44,173

 

 

 

166,576

 

 

 

174,657

 

Total operating expenses

 

 

195,233

 

 

 

221,010

 

 

 

662,030

 

 

 

736,022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss)

 

 

(162,511

)

 

 

(144,635

)

 

 

(546,189

)

 

 

(659,647

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

 

46

 

 

 

193

 

 

 

82

 

 

 

663

 

Unrealized gain (loss) on investments

 

 

6,144

 

 

 

(120,857

)

 

 

7,644

 

 

 

(254,427

)

Total other income (expenses)

 

 

6,190

 

 

 

(120,664

)

 

 

7,726

 

 

 

(253,764

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(156,321

)

 

 

(265,299

)

 

 

(538,463

)

 

 

(913,411

)

Preferred stock dividend

 

 

(71,392

)

 

 

(60,591

)

 

 

(197,987

)

 

 

(181,775

)

Net loss attributable to common stockholders

 

$

(227,713

)

 

$

(325,890

)

 

$

(736,450

)

 

$

(1,095,186

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

 

$

(0.04

)

 

$

(0.06

)

 

$

(0.13

)

 

$

(0.19

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic and diluted

 

 

5,881,898

 

 

 

5,881,898

 

 

 

5,881,898

 

 

 

5,881,898

 





The accompanying notes are an integral part of the consolidated financial statements.

3



Evolutionary Genomics, Inc. and Subsidiary

Condensed and Consolidated Statement of Stockholders' Equity


 

 

Nine Months Ended September 30, 2019

 

 

 

Common Stock

 

 

Preferred

 

 

Additional

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Dividend

 

 

Paid-In Capital

 

 

Deficit

 

 

(Deficit) Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

 

5,881,898

 

 

$

5,882

 

 

$

681,282

 

 

$

12,294,952

 

 

$

(12,578,529

)

 

$

403,587

 

Stock compensation

 

 

 

 

 

 

 

 

 

 

 

17,278

 

 

 

 

 

 

17,278

 

Preferred stock dividends

 

 

 

 

 

 

 

 

60,591

 

 

 

(60,591

)

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(200,397

)

 

 

(200,397

)

Balance, March 31, 2019

 

 

5,881,898

 

 

$

5,882

 

 

$

741,873

 

 

$

12,251,639

 

 

$

(12,778,926

)

 

$

220,468

 

Stock compensation

 

 

 

 

 

 

 

 

 

 

 

4,563

 

 

 

 

 

 

4,563

 

Preferred stock dividends

 

 

 

 

 

 

 

 

66,004

 

 

 

(66,004

)

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(181,745

)

 

 

(181,745

)

Balance, June 30, 2019

 

 

5,881,898

 

 

$

5,882

 

 

$

807,877

 

 

$

12,190,198

 

 

$

(12,960,671

)

 

$

43,286

 

Preferred stock dividends

 

 

 

 

 

 

 

 

71,392

 

 

 

(71,392

)

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(156,321

)

 

 

(156,321

)

Balance, September 30, 2019

 

 

5,881,898

 

 

$

5,882

 

 

$

879,269

 

 

$

12,118,806

 

 

$

(13,116,992

)

 

$

(113,035

)


 

 

Nine Months Ended September 30, 2018

 

 

 

Common Stock

 

 

Preferred

 

 

Additional

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Dividend

 

 

Paid-In Capital

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

 

5,881,898

 

 

$

5,882

 

 

$

438,915

 

 

$

12,438,742

 

 

$

(11,479,908

)

 

$

1,403,631

 

Stock compensation

 

 

 

 

 

 

 

 

 

 

 

24,644

 

 

 

 

 

 

24,644

 

Preferred stock dividends

 

 

 

 

 

 

 

 

60,592

 

 

 

(60,592

)

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(290,071

)

 

 

(290,071

)

Balance, March 31, 2018

 

 

5,881,898

 

 

$

5,882

 

 

$

499,507

 

 

$

12,402,794

 

 

$

(11,769,979

)

 

$

1,138,204

 

Stock compensation

 

 

 

 

 

 

 

 

 

 

 

24,644

 

 

 

 

 

 

24,644

 

Preferred stock dividends

 

 

 

 

 

 

 

 

60,592

 

 

 

(60,592

)

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(358,041

)

 

 

(358,041

)

Balance, June 30, 2018

 

 

5,881,898

 

 

$

5,882

 

 

$

560,099

 

 

$

12,366,846

 

 

$

(12,128,020

)

 

$

804,807

 

Stock compensation

 

 

 

 

 

 

 

 

 

 

 

24,642

 

 

 

 

 

 

24,642

 

Preferred stock dividends

 

 

 

 

 

 

 

 

60,591

 

 

 

(60,591

)

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(265,299

)

 

 

(265,299

)

Balance, September 30, 2018

 

 

5,881,898

 

 

$

5,882

 

 

$

620,690

 

 

$

12,330,897

 

 

$

(12,393,319

)

 

$

564,150

 




The accompanying notes are an integral part of the consolidated financial statements.

4



Evolutionary Genomics, Inc. and Subsidiary

Condensed and Consolidated Statements of Cash Flows

(unaudited)


 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(538,463

)

 

$

(913,411

)

Adjustments to reconcile net loss to net cash flows from operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

30,541

 

 

 

30,808

 

Stock-based compensation

 

 

21,841

 

 

 

73,934

 

Unrealized (gain) loss on investments

 

 

(7,644

)

 

 

254,427

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

7,717

 

 

 

(51,375

)

Prepaid expenses

 

 

13,228

 

 

 

13,103

 

Accounts payable and accrued expenses

 

 

19,523

 

 

 

(9,255

)

Cash flows from operating activities

 

 

(453,257

)

 

 

(601,769

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of preferred stock

 

 

540,015

 

 

 

 

Cash flows from financing activities

 

 

540,015

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in cash

 

 

86,758

 

 

 

(601,769

)

 

 

 

 

 

 

 

 

 

Cash, beginning of period

 

 

131,406

 

 

 

880,243

 

 

 

 

 

 

 

 

 

 

Cash, end of period

 

$

218,164

 

 

$

278,474

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Preferred stock dividend accrual

 

$

197,987

 

 

$

181,775

 





The accompanying notes are an integral part of the consolidated financial statements.

5



 


EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 (Unaudited)

Note 1: Business Activity


Evolutionary Genomics, Inc. (the “Company,” “We,” or “Our”) has developed a technology platform, the Adapted Traits Platform (“ATP”), to identify commercially valuable genes that control important traits in animals and plants. We are using the ATP to identify genes to improve crop plant traits such as yield, sugar content, biomass, drought tolerance, and pest/disease resistance. Our platform identifies key genes that have changed successfully to impart new or improved traits.


The Company performs its research on behalf of governmental organizations, non-profit foundations, and commercial entities and receives revenue from grants and commercial research contracts. These grants/contracts contain fixed-fee arrangements and may also have licensing provisions upon effective commercialization of research results. Successful commercialization may take many years to produce license royalty payments. Ownership of intellectual property developed in research projects varies from the Company retaining no rights to intellectual property, to joint ownership, to the Company retaining all rights.


During 2014, the Company purchased 75.16% of the outstanding stock of Fona, Inc., (“Fona”) a public shell company. Since Fona was a public shell company which did not constitute a business and the purchase was done in contemplation of a reverse merger, the Company accounted for the payment as a distribution to Fona shareholders. The Company also entered into an Agreement and Plan of Merger (the “Merger”), which was consummated on October 19, 2015. As a result of the Merger, Evolutionary Genomics, Inc. became a wholly owned subsidiary of Fona. For accounting purposes, the merger was treated as a reverse acquisition with Evolutionary Genomics, Inc. as the acquirer and Fona as the acquired party. Subsequent to the Merger, Fona was renamed Evolutionary Genomics, Inc. and our subsidiary was renamed from Evolutionary Genomics, Inc. to EG Crop Science, Inc.


Note 2: Summary of Significant Accounting Policies


Principals of Consolidation: These consolidated financial statements include the accounts of Evolutionary Genomics, Inc. and its wholly owned subsidiary. All material intercompany transactions and balances have been eliminated.


Use of Estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.


Cash: The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less when purchased to be cash.  


Investments: The Company’s short-term investments are comprised of equity securities and are carried at their fair value based on the quoted market prices of the securities at September 30, 2019 and December 31, 2018. Net realized and unrealized gains and losses on investments are included in net earnings. For purposes of determining realized gains and losses, the cost of securities sold is based on specific identification.


Property and Equipment: Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided for by the straight-line method over three- to seven-year estimated useful lives of software, furniture and fixtures and equipment. Maintenance and repairs are expensed as incurred; major renewals and betterments that extend the useful lives of property and equipment are capitalized. When property and equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized.


Long-Lived Assets: The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. An impairment is considered to exist if the total estimated undiscounted cash flows are less than the carrying amount of the asset. An impairment loss is measured and recorded to the extent that the carrying amount of the asset exceeds its estimated fair value. No asset impairment was recorded during the nine months ended September 30, 2019 and 2018.




6



 EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 (Unaudited)



Intangible Assets: Intangible assets include acquired research in progress and patents on the Company’s core technology for gene identification. Patents are amortized over their expected useful life of 20 years using the straight-line method. Acquired research in progress is an indefinite-lived intangible asset until the development is complete at which time the useful life of the asset will be assigned. Costs incurred to renew intangible assets are expensed in the period incurred, while costs incurred to extend the lives of patents are capitalized and amortized over the remaining useful life of the asset. Intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any intangible assets may be impaired, an evaluation of recoverability is performed. An impairment is considered to exist if the total estimated undiscounted cash flows are less than the carrying amount of the asset. No impairment was recorded during the nine months ended September 30, 2019 and 2018. Realization of this asset is dependent upon the successful completion of the Company’s research and development efforts.


Revenue Recognition: In May 2014, the FASB issued new guidance related to revenue recognition, which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new guidance requires a company to recognize revenue as control of goods or services transfers to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. It defines a five-step approach for recognizing revenue, which may require a company to use more judgment and make more estimates than under the current guidance. The Company adopted this standard on January 1, 2018 using the modified-retrospective method and it did not have a material impact on the consolidated financial statements.


Grant revenue, which is not within the scope of Topic 606, consists of funding under cost reimbursement programs primarily from federal and non-profit foundation sources for qualified research and development activities performed by us, and as such, are not based on estimates that are susceptible to change. Such amounts are invoiced and recorded as revenue as grant-funded activities are performed.


Income Taxes: Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Management regularly assesses the likelihood that deferred tax assets will be recovered from future taxable income, and to the extent management believes that it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is established. When a valuation allowance is established, increased or decreased, an income tax charge or benefit is included in the consolidated financial statements and net deferred tax assets are adjusted accordingly. As of September 30, 2019 and December 31, 2018, a full valuation allowance has been established on the deferred tax asset.


Under the Income Tax topic of the ASC, in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon resolution of the benefit. The Company has no accruals for uncertain tax benefits.


Stock-Based Compensation: The Company accounts for stock option awards in accordance with ASC 718. The estimated grant-date fair value of stock-based awards is expensed over the requisite service period, which is typically equivalent to the vesting term of the award.  


The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services received follows the provisions of ASC Topic 718. Accordingly, the measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.


Research and Development: Research and development costs are expensed as incurred. In instances where we enter into agreements with third parties for research and development activities, we may prepay for services at the initiation of the contract. We record the prepayment as a prepaid asset and amortize the asset into research and development expense over the period of time the contracted research and development services are performed.




7



 EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 (Unaudited)



Net Loss Per Common Share: Basic net (loss) income per common share excludes any dilutive effects of equity instruments.  We compute basic net (loss) income per common share using the weighted average number of common shares outstanding during the period.  We compute diluted net (loss) income per common share using the weighted average number of common shares and common stock equivalents outstanding during the period. For the nine months ended September 30, 2019, common stock equivalents including 679,923 shares of convertible preferred stock, options for 566,667 shares of common stock and warrants for 110,884 shares of common stock were excluded because their effect was anti-dilutive. For the nine months ended September 30, 2018, common stock equivalents including 577,063 shares of convertible preferred stock, options for 566,667 shares of common stock and warrants for 110,884 shares of common stock were excluded because their effect was anti-dilutive.


Subsequent Events: The Company has evaluated all subsequent events through the date of this filing.  


Note 3: New Accounting Standards


Recently Adopted Accounting Standards


In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company adopted this standard on January 1, 2019 using the modified-retrospective method and it did not have a material impact on the condensed consolidated financial statements.


In June, 2018, the FASB issued an Accounting Standards Update No. 2018-07, Compensation – Stock Compensation (Topic 718):  Improvements to Nonemployee Share-Based Payment Accounting. The new standard intends to reduce cost and complexity and to improve financial reporting for share-based payments issued to nonemployees (for example, service providers, external legal counsel, suppliers, etc.).  The update expands the scope of Topic 718, Compensation—Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to nonemployees for goods and services.  The Company adopted this standard on January 1, 2019 using the modified-retrospective method and it did not have a material impact on the condensed consolidated financial statements.


Recently Issued Accounting Standards


In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments,” which requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The updated guidance also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted. The Company is in the process of evaluating the potential impacts of this new guidance on the Company’s consolidated financial statements and related disclosures.


Note 4: Fair Value Measurements


The Company complies with the provisions of ASC 820, in measuring fair value and in disclosing fair value measurements at the measurement date. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements required under other accounting pronouncements. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements also reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model.




8



 EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 (Unaudited)



ASC 820 provides three levels of the fair value hierarchy as described below:


Level 1 Inputs – Quoted prices (unadjusted) in active markets for identical assets or liabilities.


Level 2 Inputs – Observable market-based inputs, other than quoted prices in active markets for identical assets or liabilities.


Level 3 Inputs – Unobservable inputs that are supported by little or no market activity.


When determining the fair value measurements for assets or liabilities required or permitted to be recorded at and/or marked to fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.


The following summarizes the valuation technique for assets and liabilities measured and recorded at fair value:


 

 

 

Total

 

 

Quoted Prices in Active Markets for Identical Items
(Level 1)

 

 

Significant Other Observable Inputs
(Level 2)

 

 

Significant Unobservable Inputs
(Level 3)

 

Balance at December 31, 2018

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

$

28,200

 

 

$

28,200

 

 

$

 

 

$

 

 

 

 

$

28,200

 

 

$

28,200

 

 

$

 

 

$

 

Balance at September 30, 2019

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

$

35,844

 

 

$

35,844

 

 

$

 

 

$

 

 

 

 

$

35,844

 

 

$

35,844

 

 

$

 

 

$

 


For the Company’s Level 1 measures, which represent common stock in publicly traded companies, fair value is based on the last closing trade occurring on, or closest to, the respective period end date. The carrying value of financial instruments, including cash, receivables, accounts payable and accrued expenses, approximates their fair value at September 30, 2019 and December 31, 2018 due to the relatively short-term nature of these instruments.


Note 5: Property and Equipment


Property and equipment is comprised of the following:


 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Equipment

 

$

432,499

 

 

$

432,499

 

Software

 

 

63,179

 

 

 

63,179

 

Furniture and fixtures

 

 

7,987

 

 

 

7,987

 

 

 

 

503,665

 

 

 

503,665

 

Accumulated depreciation

 

 

(405,253

)

 

 

(376,664

)

Property and equipment, net

 

$

98,412

 

 

$

127,001

 


Depreciation expense for the nine months ended September 30, 2019 and 2018 was $28,589 and $28,856, respectively.





9



 EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 (Unaudited)



Note 6: Intangible Assets


Intangible assets are comprised of the following:


 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Acquired research in progress - indefinite lived

 

$

4,016,596

 

 

$

4,016,596

 

Patents

 

 

52,045

 

 

 

52,045

 

Accumulated amortization

 

 

(32,399

)

 

 

(30,447

)

Intangible assets, net

 

$

4,036,242

 

 

$

4,038,194

 


The Company expects to recognize $2,602 of amortization expense related to its patents during each of the next five years and the remaining $6,636 thereafter. Amortization expense for the patents during the nine months ended September 30, 2019 and 2018 was $1,952 and $1,952, respectively.


In its merger completed on October 19, 2015, the Company acquired research in progress. The value of the acquired research in progress was based upon several factors including, evaluation of other intangible assets, the purchase price, estimated future cash flows, and the amounts expended on the research to date. Acquired research in progress is an indefinite lived intangible asset until the development phase is complete, at which time a useful life of the asset will be determined. The research in progress was the identification and validation of genes to provide pest and disease resistance to soybean plants performed by EG I. The research had been in process since November 2010 and the Company expects to complete the research and place this asset in service in the first quarter of 2020. Additional costs to complete the research are expected to be approximately $144,000, which will be expensed as incurred. The timing and cost of additional research may vary from these estimates as the success of the research is subject to many factors outside of the Company’s control. If this research is not completed within a reasonable timeframe or within estimated costs, future licensing revenue and the financial condition of the Company could be significantly impacted.


Note 7: Stockholders’ Equity and Warrants


The Amended and Restated Certificate of Incorporation of the Company dated October 19, 2015 authorized the issuance of 800,000,000 shares of all classes of stock including 780,000,000 shares of Common Stock having a par value of $0.001 per share and 20,000,000 shares of Preferred Stock having a par value of $0.001 per share, 600,000 of which were designated as Series A-1 Convertible Preferred Stock (“Series A-1”).  Effective May 1, 2019, the Company filed a Certificate of Designation which designated 200,000 shares of Preferred Stock as Series A-2 Convertible Preferred Stock (“Series A-2”) that are pari passu with and have identical provisions as the Series A-1.  The Board of Directors, without a vote of the shareholders, is authorized to issue additional shares of Preferred Stock in series and to establish the characteristics thereof.


Liquidation: Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of the Series A-1 and Series A-2 shall be entitled to receive out of the assets of the Company for each share of Series A-1 and Series A-2 an amount equal to its stated value, $5.25 per share as of September 30, 2019 and December 31, 2018, plus any accrued but unpaid dividends before any distribution or payment shall be made to the holders of any other class or series of stock of the Company that ranks junior to the Series A-1 and Series A-2.  The holders shall be entitled to convert their shares of Series A-1 and Series A-2 into Common Stock at any time prior to the consummation of a Liquidation.  


Conversion: The holders of Series A-1 and Series A-2 may convert their shares into shares of Common Stock, at the option of the holder, on a one-share-for-one-share basis and shall be subject to certain adjustments at any time.




10



 EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 (Unaudited)



Optional Redemption; Sinking Fund Account:  The Company may elect to redeem some or all of the then outstanding shares of Series A-1 and Series A-2, (i) for cash in an amount equal to the liquidation preference per share, $5.25 per share as of September 30, 2019, subject to adjustment and (ii) by issuing one share, subject to adjustment, of Common Stock for each share of Series A-1 and Series A-2 outstanding being redeemed.  50% of all licensing fees received by the Company will be deposited into a separate sinking fund for use in an optional redemption.  In the event the sinking fund account exceeds the Liquidation Preference, the Company must redeem all then outstanding Series A-1 and Series A-2 Preferred Stock. As of September 30, 2019, no licensing revenue has been received under these provisions and no sinking fund account has been established. This provision is considered to be a contingent redemption feature, and thus the Series A-1 and Series A-2 Preferred Stock is required to be presented in the mezzanine section of the balance sheet.


Dividends: The Company shall pay to the holders of the Series A-1 and Series A-2 dividends at the rate of 8% per annum. The dividend amount shall accrue and shall be payable in shares of Common Stock upon the conversion of the Series A-1 and Series A-2, or upon the redemption of the Series A-1 and Series A-2.  No dividends shall be paid on any Common Stock of the Company or any capital stock of the Company that ranks junior to the Series A-1 and Series A-2 until dividends of Series A-1 and Series A-2 been paid.  As of September 30, 2019, there were $879,269 in accrued stock dividends.


Voting: The holders of the Series A-1 and Series A-2 are entitled to vote on all matters submitted to the stockholders for a vote on an as-if-converted to Common Stock basis, with all stockholders voting as a single class.   


Warrants: As of September 30, 2019 and December 31, 2018, the Company had outstanding warrants to purchase 110,884 and 110,884 shares, respectively of the Company’s Common Stock. The following table summarizes the status of the Company’s aggregate warrants outstanding:


 

 

 

Number of Warrants

 

 

Weighted Average Exercise Price

 

 

Weighted Average Remaining Term(Years)

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2018

 

 

 

110,884

 

 

$

6.60

 

 

 

2.87

 

Granted

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

 

 

110,884

 

 

$

6.60

 

 

 

1.87

 

Granted

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2019

 

 

 

110,884

 

 

$

6.60

 

 

 

1.12

 


Note 8: Stock-Based Compensation


The Company grants stock-based instruments under the 2015 Stock Incentive Plan (“Plan”) for which 1,400,000 shares of the Company’s Common Stock has been reserved. The Plan allows for the issuance of incentive stock options and non-qualified stock options with a maximum contractual term of 10 years. Shares and options that are cancelled are available for reissuance under the Plan. For the nine months ended September 30, 2019 and 2018, the Company recorded compensation costs for stock options of $21,841 and $73,934, respectively. Stock options are generally issued with an exercise price at or above the estimated per-share value of the Company’s Common Stock. The Company granted no options during the nine months ended September 30, 2019 and 2018.




11



 EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 (Unaudited)



The following table summarizes the status of the Company’s aggregate stock options granted:


 

 

 

Number of Options

 

 

Weighted Average Exercise Price

 

 

Weighted Average Remaining Term(Years)

 

 

Total Intrinsic Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2018

 

 

 

566,667

 

 

$

2.33

 

 

 

6.95

 

 

 

 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

 

 

566,667

 

 

$

2.33

 

 

 

5.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at December 31, 2018

 

 

 

450,000

 

 

$

2.10

 

 

 

5.62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2019

 

 

 

566,667

 

 

$

2.33

 

 

 

5.95

 

 

 

 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2019

 

 

 

566,667

 

 

$

2.33

 

 

 

5.20

 

 

$

177,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at September 30, 2019

 

 

 

566,667

 

 

$

2.33

 

 

 

5.20

 

 

$

177,334

 


During the nine months ended September 30, 2019 and 2018, options for 116,667 and 116,666 shares vested, respectively. As of September 30, 2019, there was no unrecognized compensation cost related to share-based compensation arrangements.


Note 9: Commitments and Contingencies


Officer Indemnification: Under the Company’s organizational documents, the Company’s officers, employees, and directors are indemnified against certain liabilities arising out of the performance of their duties. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the Company expects any risk of loss to be remote. The Company also has an insurance policy for its directors and officers to insure them against liabilities arising from their performance in their positions with the Company.


Lease Commitments: The Company leases its operating facility and pays its rent in monthly installments.  The lease was renewed in June 2016 for a period of twelve months and monthly rentals for the period of July 1, 2016 through September 30, 2019 are $2,378 per month which continues on a month-to-month basis. There is no minimum lease commitment as of September 30, 2019.  Renewals after June 30, 2017 are by mutual agreement. The Company’s rent expense for the nine months ended September 30, 2019 and 2018 was $21,401 and $19,023, respectively.


Royalty: Effective March 1, 2012, the Company entered into an Agreement for Contract Services with SmithBucklin Corporation (the “Contractor”) on behalf of the United Soybean Board. The contract includes the payment of certain royalties, as defined in the Agreement.


The Company is obligated to pay royalties to the United Soybean Board of 10% of the sale of products derived from the soybean genes that were the subject of the research performed by the Contractor or from royalties received by the Company from the sale of products by a third party not to exceed 150% of the total amount paid to the Contractor under this Agreement. The Company has recognized to date grant revenue from the contract of $262,400 as of September 30, 2019, thus limiting any future royalties as of September 30, 2019 to a total of $393,600. The Company has not accrued or paid any royalties under the terms of the Agreement as of and during the nine months ended September 30, 2019 and 2018 because it has not received any revenue from the sale of products to date.



12



 EVOLUTIONARY GENOMICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 (Unaudited)



Note 10: Related Parties and Transactions


Steve B. Warnecke: Mr. Warnecke is the Company’s Chief Executive Officer and Chairman of the Board and owns, directly or indirectly, 1,932,088 shares or 29.9% of the Common Stock outstanding as of September 30, 2019.  


Note 11: Concentrations


Considerations of Credit Risk: Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains its cash balances at high-credit, quality financial institutions. The balances, at times, may exceed federally insured limits. The Company routinely monitors the credit quality of its customers.


Note 12: Liquidity and Going Concern


Sources of funding to meet prospective cash requirements include the Company’s existing cash balances, accounts receivable and investments along with grant funds and revenue from research contracts and licensing.  In June 2018, the State of Colorado awarded the Company a $250,000 grant to further our research and we expect to receive the remaining $19,345 in the quarter ending December 31, 2019.  As of September 30, 2019, the Company had $218,164 of cash, $32,722 of accounts receivable and $35,844 of investments.  The Company forecasts using approximately $394,000 of cash for net operating expenses for the twelve months ending September 30, 2020, excluding any costs and expenses associated with new projects such as a banana gene validation project.


Effective May 1, 2019, the Company filed a Certificate of Designation which designated 200,000 shares of Preferred Stock as Series A-2 Convertible Preferred Stock that are pari passu with and have identical provisions as the Series A-1.  As of September 30, 2019, the Company had received $540,015 in proceeds from the sale of 102,860 shares of Series A-2 Convertible Preferred Stock.


The Company is engaged in advanced discussions with two of the largest banana companies in the world regarding a relationship to further develop our banana genes through transformation and validation.  We expect to reach an agreement within the next ninety days that we expect will include initial payments (in recognition of work completed to date) to the Company sufficient to fund the cash flow for the next twelve months.  We also expect to incur significant expenses for the transformation and validation of our banana genes over the next twenty-four months which we expect to be funded in full by this agreement.  There can be no assurance that we will reach such an agreement or that the funding will be available.


Without additional revenue, we believe that our current resources will not be sufficient to sustain our operations for a period greater than one year. The ability of the Company to continue its operations is dependent on Management's plans, which may include continuing to raise capital through equity or debt based financings and marketing the Company’s genes to obtain licensing revenue. There can be no assurances that such capital will be available to us on acceptable terms, or at all or that we will be successful in our marketing efforts.


The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.






13



  


ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Caution Regarding Forward-Looking Information

 

This report includes “forward-looking statements” that are subject to risks, uncertainties and other factors.  All statements other than statements of historical fact are statements that could be deemed forward-looking statements including continued compliance with government regulations, changing legislation or regulatory environments; any statements of expectation or belief and any statements of assumptions underlying any of the foregoing. These risks, uncertainties and other factors, and the general risks associated with the businesses of the Company described in the reports and other documents filed with the SEC, could cause actual results to differ materially from those referred to in the forward-looking statements.  The Company cautions readers not to rely on these forward-looking statements.  All forward-looking statements are based on information currently available to the Company and are qualified in their entirety by this cautionary statement.  The Company anticipates that subsequent events and developments may cause its views to change.  The information contained in this report speaks as of the date hereof and the Company has or undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise unless required by law.


Company Overview


Evolutionary Genomics, Inc. (the "registrant" or "Company") was incorporated under the laws of the state of Minnesota in November 1990 under the name Fonahome Corporation. On March 24, 2009, the Company reincorporated in the state of Nevada and merged with its wholly-owned subsidiary, Fona, Inc., adopting the surviving company’s name, Fona, Inc. The Company was originally formed to develop and market an interactive information and advertising service.


From December 1999 through October 2015, the Company had no significant business operations. On March 3, 2009, the Company held a shareholder meeting approving the Stock Purchase Agreement and an Agreement and Plan of Merger effectively changing the name of the Company to Fona, Inc., a Nevada corporation (“Re-incorporation Merger”) and simultaneously adopting the capital structure of Fona, Inc., which includes total authorized capital stock of 800,000,000 shares, of which 780,000,000 are common stock and 20,000,000 are blank check preferred stock. The preferred stock may be issued from time to time in one or more series with such designations, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, as shall be stated in the resolutions adopted by the Corporation’s Board providing for the issuance of such preferred stock or series thereof. On March 24, 2009, the Articles of Merger of Fonahome Corporation, a Minnesota Corporation, into Fona, Inc., a Nevada Corporation, were filed with the Nevada Secretary of State.


On June 6, 2014, Evolutionary Genomics, Inc., a Delaware corporation (“EG”), EG I, LLC (“EG I”) and Fona, Inc., a Nevada corporation (“Fona”), Fona Merger Sub, Inc., a Delaware corporation (“Sub”) and Fona Merger Sub, LLC, a Colorado limited liability company (“Sub LLC”), entered into an Agreement and Plan of Merger as amended by the Amended and Restated Agreement and Plan of Merger dated March 2, 2015 (the “Merger Agreement”), pursuant to which, on October 19, 2015 Sub merged with EG and Sub LLC merged with EG I, with each EG and EG I surviving as wholly owned subsidiaries of Fona. For accounting purposes, the merger was treated as a reverse acquisition with Evolutionary Genomics, Inc. as the acquirer and Fona as the acquired party. Subsequent to the Merger, Fona, Inc. was renamed Evolutionary Genomics, Inc. and our subsidiary was renamed from Evolutionary Genomics, Inc. to EG Crop Science, Inc. On May 9, 2016, we formed ICAM Therapeutics, Inc. (a Delaware corporation) as a wholly owned subsidiary of Evolutionary Genomics, Inc. We have not incurred any transactions in this company nor have we established any business plan for the future.


The Company maintains headquarters at the office of its Chief Executive Officer. The Company maintains a website at www.evolgen.com. The Company is not required to deliver an annual report to security holders and at this time does not anticipate the distribution of such a report. The Company will file reports with the SEC.


On August 14, 2000, the Company was issued patent number 6274319, titled “Methods to identify evolutionarily significant changes in polynucleotide and polypeptide sequences in domestic plants and animals”. On June 1, 2004, the Company was issued patent number 6743580, titled “Methods for producing transgenic plants containing evolutionarily significant polynucleotides”. These patents are for the core Adapted Traits Platform that we use for the discovery of genes in humans, animals and commercial crops. The Company has applied the Adapted Traits Platform in research projects including identifying genes believed to be responsible for increases in yield in corn, increases in yield in rice, salt tolerance and sugar content in tomatoes and pest/disease resistance in soybeans and multiple other crops.




14



  


In the past century, agriculture has been characterized by enhanced productivity, the use of synthetic fertilizers and pesticides, selective breeding, mechanization, water contamination, and farm subsidies. Proponents of organic farming such as Sir Albert Howard argued in the early 20th century that the overuse of pesticides and synthetic fertilizers damages the long-term fertility of the soil. While this feeling lay dormant for decades, as environmental awareness has increased in the 21st century there has been a movement towards sustainable agriculture by some farmers, consumers, and policymakers.


Advances in genetic research and modification of crop species have led to increased yield, drought tolerance and disease/pest resistance. These advances have also led to an increased concentration within the providers of seed to the industry. The top seed companies control much of the implementation of new seed varieties through patents and licensing agreements. Genetic traits providers, like Evolutionary Genomics, identify and develop genes that impact traits of interest to the industry and market those genes to these seed companies.


Evolutionary Genomics’ soybean pest resistance project is an illustration of the evolution of a project from concept through marketing to seed companies. The project has yielded identified genes for pest resistance in soybeans with partial validation complete and full validation results expected in early 2020. Evolutionary Genomics has had discussions with seed companies to commercialize the genes and intends to return to those discussions in the first quarter of 2020 with two generation, whole plant validation results. The Company has extended this pest resistance research to other crops including beans, tomatoes, cotton and maize.


On August 6, 2015, the Company was awarded an Advanced Industries Accelerator Grant by the State of Colorado in the amount of $250,000 to fund further research in the development of pest resistance genes in soybeans and other crops and sweetness genes in tomatoes. Through December 31, 2017, the Company recognized all of the revenue from the contract. On June 26, 2018, the Company was awarded an Advanced Industries Accelerator Grant by the State of Colorado in the amount of $250,000 to identify and validate pathogen resistance genes in bananas and complete validation and marketing tomato and corn genes. The Company maintains ownership of all intellectual property developed from the use of grant funds.  To date, the Company has recognized $230,655 in revenue from this grant.


During 2013 and 2014 EG performed research on two projects for the Bill and Melinda Gates Foundation. On November 1, 2012 Evolutionary Genomics entered into a Master Services Agreement and Work Order #1 under that agreement with the Bill and Melinda Gates Foundation for the validation of EG 261 orthologs in beans and cowpeas. That validation work was completed in 2016. The market for beans and cowpeas is considerably smaller than for soybeans and we do not intend to market them to the seed companies for commercialization. Evolutionary Genomics has recognized the full $762,000 it is entitled to under that work order.


Evolutionary Genomics intends to continue to pursue grant funding from governmental agencies, industry associations and grant making foundations. These sources of funding are often subject to limitations in available funds, funding priorities in areas other than our area of focus, political uncertainties, long approval processes and competition with other research proposals. If such funding is not available, Evolutionary Genomics may incur the costs of these projects with the prospect of revenue uncertain and likely many years in the future.


On April 29, 2014, the United States Patent and Trademark Office issued patent 8,710,300 titled EXPRESSION OF DIRIGENT GENE EG261 AND ITS ORTHOLOGS AND PARALOGS ENHANCES PATHOGEN RESISTANCE IN PLANTS. On December 5, 2017, the United States Patent and Trademark Office issued patent 9,834,783 which extended the previous patent to include additional variations of the gene. During 2017, the Company was issued similar patents in Canada, Brazil and China and has additional patents pending in Argentina and India. On January 11, 2019, the Company filed a patent application on its second soybean pest/disease resistance gene, EG19 and has included that gene in its ongoing two generation, whole plant validation research with the University of Missouri and with the Wisconsin Crop Innovation Center. Evolutionary Genomics engaged in discussions with seed companies regarding further validation of the effectiveness of EG261. Based on information received in those discussions, Evolutionary Genomics has engaged in a whole plant validation trial of EG261 and EG19 at the University of Missouri and the Wisconsin Crop Innovation Center. Results of this validation trial are expected in the first quarter of 2020. The Company has also discovered additional candidate genes that may impact pathogen resistance. There can be no assurance that any of these genes will be proven effective in validation testing or lead to licensing agreements or revenue.




15



  


The single most valuable step in the process of crop improvement is the identification of the key genes among the 30,000 in the genome that has the desired impact. EG set out to find genes in soybeans that impact pest and disease resistance. We identified two that showed promise and, in hairy root assays on one of these genes, EG261, at the University of Wisconsin – Madison, proved that EG261 impacted resistance. When we discussed these results with the larger seed companies, they indicated interest but wanted to see two generation, whole plant testing results before entering licensing negotiations. We have engaged the University of Missouri and the Wisconsin Crop Innovation Center to independently perform these validation studies for us.


As a small company restricted by our limited resources, we cannot afford to generate vast numbers of events. Moderate success is important enough to indicate that further optimization can lead to significantly improved results. We must prove that there is enough evidence to warrant additional trials by companies with vastly more resources to build on our success but the single most valuable step in this process is the identification of the gene that has the desired impact and we have identified two of these genes, EG261 and EG19.


With transgenic change to plants, we use multiple tools to try to land the gene in the right spot in the genome but it is still an imperfect artform. We need to generate enough events in which the gene lands in the right place and is then inherited into the next generation with the right expression level. A low percentage of all attempts result in a testable event and, even then, you cannot be sure that the gene falls into the perfect spot or is expressed at the optimal level. We must generate enough events so that we have a few that genuinely show the impact of the gene. False negatives are the rule and we cannot be discouraged by them. A small number of successes can greatly outweigh a large number of false negatives.


Over the last three years, Dr. Zhang’s lab at the University of Missouri has been attempting to create transgenic events with eleven constructs of EG261 and EG19 along with controls which are tested to confirm that the gene landed in the genome and was inherited into the next generation. Heritable events are then grown to seed and the seeds are tested to see if they are homozygous and are tested to see how many copies of the gene are inherited. The seeds from these homozygous plants are the T2 generation that is tested for resistance impact. Promising T2 lines are grown to seed to generate T3 plants for further resistance testing. When enough data is accumulated, we will present our results to seed companies.


On December 3, 2014, Evolutionary Genomics entered into a Fee for Service Agreement with The Curators of the University of Missouri for the development of transgenic soybean plants with candidate genes for Soybean Cyst Nematode (SCN) resistance with total contract payments, including amendments, totaling $357,310 of which $214,386 has been paid through September 30, 2019. On May 2, 2018, the Company notified the University of Missouri that the performance under this contract did not appear to meet certain guaranteed minimum requirements. The Company has entered into a termination agreement with The Curators of the University of Missouri stipulating that no further amounts will be due under this contract.


A critical element of the research with the University of Missouri was to generate a large enough number of heritable single copy events to facilitate the next stage of resistance testing with Dr. Nguyen’s lab at the University of Missouri. There have been a small number of events indicating of the impact of both EG261 and EG19 but not nearly enough events were produced to create robust data sets. We continue to process the small number of viable events at the University of Missouri to test for Soybean Cyst Nematode (“SCN”) resistance.


It is critical to note that the soybean transformation project difficulties at the University of Missouri do not reflect on the efficacy of our genes but, instead, are a reflection of their process not creating enough transgenic events.


We need to generate additional viable events at another institution and have entered into a Service Agreement with Wisconsin Crop Innovation Center (“WCIC”) under which they have transformed soybeans using our genes. WCIC guarantees a minimum number of successful events, have helped to establish the right combinations to achieve a range of expression and will test to assure us of successful events. WCIC has events from seven constructs of EG261 and EG19 growing in their greenhouses. These plants have been harvested and seeds from selected lines will be planted to produce the next generation of seeds that will be harvested in October-November 2019 for generation T2. Plants will be tested to determine homozygosity and copy number prior to selection for further processing. Generation T2 will be planted starting in November 2019 and seedlings will be tested for SCN resistance starting in December 2019 through early 2020. If these tests are positive, it is our intention to market the genes to the industry in early 2020.




16



  


If results from the whole plant validation trials confirm the findings of the University of Wisconsin-Madison for EG261 and the effectiveness of the new genes, the Company will enter negotiations for a long-term research collaboration and licensing agreement with seed companies. This type of agreement will likely have an upfront payment, milestone payments during their testing and a licensing royalty stream once the genes are incorporated into commercial seed lines. The testing phase includes field trials which may proceed for several years prior to generating licensing revenue. There are many risks in this process including some that are outside of Evolutionary Genomics’ control and there can be no guarantee that we will ever generate any revenue from these potential agreements. If Evolutionary Genomics receives product royalties from the soybean genes, it is required to pay the United Soybean Board a ten percent royalty stream not to exceed 150% of the grant amount of $262,400.


The Company has identified pest/disease resistance genes in other commercially valuable crops. The Company is currently engaged with the University of Missouri to perform two generation, whole plant testing of genes in tomatoes and corn that may lead to increased pest/disease resistance. If successful, we intend to market them to the seed industry. This strategy will require Evolutionary Genomics to incur significant research costs prior to any confirmation of commercial viability and there can be no guarantee that the desired results can be achieved or that commercialization can be reached.


Evolutionary Genomics has identified a gene in tomatoes that impacts the plant’s ability to tolerate salt and a gene that appears to control sweetness. On January 9, 2018, the United States Patent and Trademark Office issued patent 9,862,962 titled IDENTIFICATION AND USE OF TOMATO GENES CONTROLLING SALT/DROUGHT TOLERANCE AND FRUIT SWEETNESS. Despite discussions with seed companies, the Company has not been able to reach any agreement to license these genes and there can be no assurance that we will ever realize any revenue from these genes.


In 2014, the Company began a project to identify genes in cotton that may impact traits of commercial interest. In particular, we intend to focus on pest resistance and fiber length. We have used our Adapted Traits Platform to identify positively selected candidate genes and intend to further research these genes to confirm that they were positively selected. If any of these genes remain promising, we intend to contract with an independent lab to validate the effectiveness of those genes. These studies can be very costly and there can be no assurance that we will be successful with this project.


During the 1950s, the global banana industry was devastated by a disease (caused by Fusarium fungus) that effectively wiped out the predominate variety of commercial bananas known as Gros Michel.  This led to the development of the Cavendish banana, which makes up the vast majority of the commercial banana market today. Cavendish was resistant to the strain of Fusarium that wiped out the Gros Michel variety but, in recent years, is being challenged by a new race of Fusarium that threatens to once again devastate the global banana industry.


In 2018, the Company began a project to identify genes in wild banana relatives that are resistant to this new race of Fusarium. We have previously used our technology to identify genes in common beans and, in our project for the Bill and Melinda Gates Foundation in common beans, proved that these genes provided increased resistance to Fusarium fungus. We have applied the same methods, have identified a candidate gene in bananas for resistance to Fusarium and have filed patent applications to protect the intellectual property.  


We have contacted the largest global banana companies and have begun discussions with them regarding research funding and licensing arrangements.  Based on previous experience and common practice in the agriculture industry, we believe that potential agreements with these companies may include some combination of upfront payments for research completed to date, partial or full funding of validation trials, lumpsum milestone payments and/or long term royalty payments upon their use of our gene in production.  The Company is engaged in advanced discussions with two of these banana companies regarding a relationship to further develop our banana genes through transformation and validation.  We expect to reach an agreement within the next ninety days which we expect will include initial payments to the Company sufficient to fund the cash flow for the next twelve months and beyond.  We also expect to incur significant expenses for the transformation and validation of our banana genes over the next twenty-four months which we expect to be funded in full by this agreement.  There can be no assurance that we will reach such an agreement or that the funding will be available.


If we are able to successfully transform and validate our banana genes, which will likely take approximately twenty-four months, we hope to enter into a long term royalty contract with one or more banana producers based on banana revenue, banana plants produced or acres planted with plants with our gene.  There are many risks associated with achieving these desired results including but not limited to:


-

We may not reach agreement with one of the banana companies for funding of the transformation and validation research;



17



  


-

We may not be able to adequately establish patent protection for our intellectual property or others may have competing claims;

-

Others may develop competitive approaches to compete with our genes;

-

Our transformation academic labs may fail to develop enough events for testing;

-

Our genes may cause unforeseen and undesirable changes beyond the pest resistance such as yield degradation;

-

Our genes may fail to deliver the desired results of resistance to Fusarium;

-

Globally regulations and/or consumer preference may prevent the successful commercial launch of bananas with genetics changed using our methods.

-

We will be dependent on other companies for the successful production and marketing of bananas with our genes and many factors will be outside of our control.


These and other risk factors are discussed in more detail in our 10-K filing dated April 1, 2019.


Evolutionary Genomics has no registered trademarks. The Company had two full time employees and one part-time employee as of September 30, 2019 and leases its operating facility on a month-to-month basis after June 30, 2017. Evolutionary Genomics is not currently involved in or aware of any threatened or actual legal proceedings.


Unaudited Results of Operations


 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

Amount

 

 

Percent of Revenue

 

 

Amount

 

 

Percent of Revenue

 

 

Amount

 

 

Percent of Revenue

 

 

Amount

 

 

Percent of Revenue

 

Service and grant revenue

 

$

32,722

 

 

 

100.0

%

 

$

76,375

 

 

 

100.0

%

 

$

115,841

 

 

 

100.0

%

 

$

76,375

 

 

 

100.0

%

Research and development

 

 

115,771

 

 

 

353.8

%

 

 

114,693

 

 

 

150.2

%

 

 

361,113

 

 

 

311.7

%

 

 

374,933

 

 

 

490.9

%

Salaries and benefits

 

 

37,500

 

 

 

114.6

%

 

 

62,144

 

 

 

81.4

%

 

 

134,341

 

 

 

116.0

%

 

 

186,432

 

 

 

244.1

%

General and administrative

 

 

41,962

 

 

 

128.2

%

 

 

44,173

 

 

 

57.8

%

 

 

166,576

 

 

 

143.8

%

 

 

174,657

 

 

 

228.7

%

Total operating expenses

 

 

195,233

 

 

 

596.6

%

 

 

221,010

 

 

 

289.4

%

 

 

662,030

 

 

 

571.5

%

 

 

736,022

 

 

 

963.7

%

Operating (loss)

 

 

(162,511

)

 

 

-496.6

%

 

 

(144,635

)

 

 

-189.4

%

 

 

(546,189

)

 

 

-471.5

%

 

 

(659,647

)

 

 

-863.7

%

Other income and (expenses)

 

 

6,190

 

 

 

18.9

%

 

 

(120,664

)

 

 

-158.0

%

 

 

7,726

 

 

 

6.7

%

 

 

(253,764

)

 

 

-332.3

%

Net loss

 

$

(156,321

)

 

 

-477.7

%

 

$

(265,299

)

 

 

-347.4

%

 

$

(538,463

)

 

 

-464.8

%

 

$

(913,411

)

 

 

-1196.0

%

Preferred stock dividend

 

 

(71,392

)

 

 

-218.2

%

 

 

(60,591

)

 

 

-79.3

%

 

 

(197,987

)

 

 

-170.9

%

 

 

(181,775

)

 

 

-238.0

%

Net loss attributable to common stockholders

 

$

(227,713

)

 

 

-695.9

%

 

$

(325,890

)

 

 

-426.7

%

 

$

(736,450

)

 

 

-635.7

%

 

$

(1,095,186

)

 

 

-1434.0

%


Service and Grant Revenue


Service revenue increased $39,466 to $115,841 for the nine months ended September 30, 2019 from $76,375 for the nine months ended September 30, 2018. The increase was due to additional revenue recognized from the State of Colorado grant.


Service revenue decreased $43,653 to $32,722 for the three months ended September 30, 2019 from $76,375 for the three months ended September 30, 2018. The decrease was due to reduced activity and therefor reduced revenue recognized from the State of Colorado grant.


Operating Expenses


Operating expenses decreased $73,992 to $662,030 for the nine months ended September 30, 2019 from $736,022 for the nine months ended September 30, 2018.


Operating expenses decreased $25,777 to $195,233 for the three months ended September 30, 2019 from $221,010 for the three months ended September 30, 2018. Operating expenses consist of research and development expense, salaries and benefits and general and administrative expense. Changes in these items are described below.



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Research and Development


Research and development decreased $13,820 to $361,113 for the nine months ended September 30, 2019 from $374,933 for the nine months ended September 30, 2018. The decrease was primarily due to decreased costs for our pest resistance projects.


Research and development increased $1,078 to $115,771 for the three months ended September 30, 2019 from $114,693 for the three months ended September 30, 2018. The increase was primarily due to increased costs for our pest resistance projects.


Salaries and Benefits


Salaries and benefits decreased $52,091 to $134,341 for the nine months ended September 30, 2019 from $186,432 for the nine months ended September 30, 2018. The decrease was primarily due to decreased stock compensation costs.  


Salaries and benefits decreased $24,644 to $37,500 for the three months ended September 30, 2019 from $62,144 for the three months ended September 30, 2018. The decrease was primarily due to decreased stock compensation costs.  


General and Administrative


General and administrative expenses decreased $8,081 to $166,576 for the nine months ended September 30, 2019 from $174,657 for the nine months ended September 30, 2018. The decrease was primarily due to decreased professional fees.


General and administrative expenses decreased $2,211 to $41,962 for the three months ended September 30, 2019 from $44,173 for the three months ended September 30, 2018. The decrease was primarily due decreased professional fees.


Other Income and (Expenses)


Total net other income increased $261,490 to $7,726 of income for the nine months ended September 30, 2019 from ($253,764) of expense for the nine months ended September 30, 2018. The increase was primarily due to changes in the market price of marketable securities.


Total net other expense decreased $126,854 to $6,190 of expense for the three months ended September 30, 2019 from ($120,664) of expense for the three months ended September 30, 2018. The increase was primarily due to changes in the market price of marketable securities.


Net (Loss)


Net (loss) decreased $374,948 to $539,463 for the nine months ended September 30, 2019 from $913,411 for the nine months ended September 30, 2018. The decrease was primarily due to increased revenue from the State of Colorado grant, decreased stock compensation costs, decreased costs on our pest resistance projects and increased unrealized gains on marketable securities.


Net (loss) decreased $108,978 to $156,321 for the three months ended September 30, 2019 from $265,299 for the three months ended September 30, 2018. The decrease was primarily due to decreased stock compensation costs and increased unrealized gains on marketable securities partially offset by a decrease in revenue from the State of Colorado grant.


Financial Condition


The Company’s working capital increased $53,934 to $277,351 as of September 30, 2019 from $223,417 as of December 31, 2018 primarily due proceeds from the issuance of preferred stock partially offset by the net loss from operations.


Liquidity and Going Concern


Sources of funding to meet prospective cash requirements include the Company’s existing cash balances, accounts receivable and investments along with grant funds and revenue from research contracts and licensing.  In June 2018, the State of Colorado awarded the Company a $250,000 grant to further our research and we expect to receive the remaining $19,345 in the quarter ending December 31, 2019.  As of September 30, 2019, the Company had $218,164 of cash, $32,722 of accounts receivable and $35,844 of investments.  The Company forecasts using approximately $394,000 of cash for net operating expenses for the twelve months ending September 30, 2020, excluding any costs and expenses associated with new projects such as a banana gene validation project.



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Effective May 1, 2019, the Company filed a Certificate of Designation which designated 200,000 shares of Preferred Stock as Series A-2 Convertible Preferred Stock that are pari passu with and have identical provisions as the Series A-1.  As of September 30, 2019, the Company had received $540,015 in proceeds from the sale of 102,860 shares of Series A-2 Convertible Preferred Stock.


The Company is engaged in advanced discussions with two of the largest banana companies in the world regarding a relationship to further develop our banana genes through transformation and validation.  We expect to reach an agreement within the next ninety days that we expect will include initial payments to the Company sufficient to fund the cash flow for the next twelve months.  We also expect to incur significant expenses for the transformation and validation of our banana genes over the next twenty-four months which we expect to be funded in full by this agreement.  There can be no assurance that we will reach such an agreement or that the funding will be available.


Without additional revenue, we believe that our current resources will not be sufficient to sustain our operations for a period greater than one year. The ability of the Company to continue its operations is dependent on Management's plans, which may include continuing to raise capital through equity or debt based financings and marketing the Company’s genes to obtain licensing revenue. There can be no assurances that such capital will be available to us on acceptable terms, or at all or that we will be successful in our marketing efforts.


The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.


Off-Balance Sheet Arrangements


The Company has no off-balance sheet arrangements that have a material current effect, or that are reasonably likely to have a material future effect, on its financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.


Contractual Obligations


The Company leases its operating facility and pays its rent in monthly installments.  The lease was renewed in June 2016 for a period of twelve months and monthly rentals for the period of July 1, 2016 through September 30, 2019 are $2,378 per month which continues on a month-to-month basis. There is no minimum lease commitment as of September 30, 2019.  Renewals after June 30, 2017 are by mutual agreement. The Company’s rent expense for the nine months ended September 30, 2019 and 2018 was $21,401 and $19,023, respectively.


On February 21, 2015, Evolutionary Genomics entered into a Sponsored Research Contract with The Curators of the University of Missouri for phenotyping transgenic soybean plants.  As amended the contract calls for payments to be made on a per plant basis with no minimum future payments.  We expect to continue this contract and will likely have additional amounts payable but the amount is indeterminable.


On August 1, 2016, Evolutionary Genomics entered into an Industry-Sponsored Project Agreement with The Curators of the University of Missouri for the development of transgenic maize and tomatoes with total contract payments, including amendments, totaling $356,506 of which $213,904 has been paid through September 30, 2019.  The contract calls for a minimum number of successful events to be produced and it is unclear whether these minimums will be met.


On May 3, 2018, Evolutionary Genomics entered into a Service Agreement with Wisconsin Crop Innovation Center for the development of transgenic soybean plants with total contract payments, including amendments of $141,631 of which $72,790 has been paid to date.  We expect to pay the remaining $68,841 prior to March 31, 2020.


ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not required by smaller reporting companies.




20



  


ITEM 4.

CONTROLS AND PROCEDURES


(a) Evaluation of disclosure controls and procedures.


Under the supervision and with the participation of the Company’s management, including the principal executive officer and principal financial officer, as of the end of the period covered by this report, the Company conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be included in the Company’s reports to the Commission is recorded, processed, summarized and reported within the time periods specified in Commission rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of the period covered by this report, our disclosure controls and procedures are not effective at these reasonable assurance levels for the reasons stated below.


Specifically, management identified the following control deficiencies: (1) the Company has not properly segregated duties as one or two individuals initiate, authorize, and complete all transactions. The Company has not implemented measures that would prevent the individuals from overriding the internal control system. The Company does not believe that this control deficiency has resulted in deficient financial reporting because the Chief Financial Officer is aware of his responsibilities under the SEC’s reporting requirements and personally certifies the financial reports. (2) The Company has installed accounting software that does not prevent erroneous or unauthorized changes to previous reporting periods and does not provide an adequate audit trail of entries made in the accounting software.  (3) Due to the size of the Company and limited personnel, the Company has not hired an individual with technical accounting expertise within the accounting function.


Our internal control system is designed to provide reasonable cost-effective assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. There is no assurance that our disclosure controls or our internal controls over financial reporting can prevent all errors. An internal control system, no matter how well designed and operated, has inherent limitations, including the possibility of human error. Because of the inherent limitations in a cost-effective control system, misstatements due to error may occur and not be detected. We monitor our disclosure controls and internal controls and make modifications as we believe appropriate given our financial resources and limited level of activities. Our intent in this regard is that our disclosure controls and our internal controls will improve as systems change and conditions warrant.


(b) Changes in internal controls.


Our Certifying Officers have indicated that there were no changes in our internal controls over financial reporting or other factors during the nine months ended September 30, 2019, that could significantly affect such controls subsequent to the date of their evaluation, and there were no such control actions with regard to significant deficiencies and material weaknesses.



21



  


PART II. OTHER INFORMATION


ITEM 1.

LEGAL PROCEEDINGS


None.


ITEM 1A.

RISK FACTORS


Not required by smaller reporting companies.


ITEM 2.

UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS


During the nine months ended September 30, 2019, the Company issued 102,860 shares of Series A-2 Convertible Preferred Stock at a price per share of $5.25 and received an aggregate of $540,015 of proceeds in May 2019.  These securities are unregistered securities pursuant to Rule 506(b).


ITEM 3.

DEFAULTS UPON SENIOR SECURITIES


None.


ITEM 4.

MINE SAFETY DISCLOSURES


Not applicable.


ITEM 5.

OTHER INFORMATION


None.


ITEM 6.

EXHIBITS


31.1

 

Rule 13a-14(a)/15d-14(a) Certification

 

 

 

31.2

 

Rule 13a-14(a)/15d-14(a) Certification

 

 

 

32.1

 

Section 1350 Certification

 

 

 

101

 

XBRL Interactive Data File








22



  


SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized.


 

EVOLUTIONARY GENOMICS, INC.

 

 

 

 

BY:  

/s/ Steve B Warnecke

 

Steve B Warnecke

 

Chief Executive Officer and Chief Financial Officer

 

 

 

October 17, 2019

 

 









23


 C: 

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
9/30/20
3/31/2010-Q
12/31/1910-K,  10-K/A
12/15/19
Filed on:10/17/19
For Period end:9/30/19
6/30/1910-Q
5/1/19
4/1/1910-K
3/31/1910-Q
1/11/19
1/1/19
12/31/1810-K
9/30/1810-Q
6/30/1810-Q
6/26/18
5/3/18
5/2/18
3/31/1810-Q
1/9/18
1/1/18
12/31/1710-K
12/5/17
6/30/1710-Q
8/1/16
7/1/16
5/9/16
10/19/153,  8-K
8/6/15
3/2/15
2/21/15
12/3/14
6/6/148-K
4/29/14
11/1/12
3/1/12
3/24/09
3/3/09
6/1/04
8/14/00
 List all Filings 
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