Evolva Holding S.A.

Hello, and welcome, everybody. Thanks for participating in our full year 2019 media and analysts call.

We hope that you, your family, friends and colleagues are safe and well, and are taking the necessary precautions to keep it that way. Before we start, I read you the safe harbor statement.

During this call, we'll make forward-looking statements about the event and circumstances that have not yet occurred, including projections of Evolva’s operating activities, our strategic plans, and the anticipated financial impact on our business and financial results in 2020 and beyond. Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors, which may result in a substantial divergence between the actual results, financial situation, the development or performance of the company and those explicitly or implicitly presumed in these statements.

Against the background of these uncertainties, participants in this call should not place undue reliance on forward-looking statements. The company assumes no responsibility to update forward-looking statements or to adapt them to future events or developments.

In today's call, Oliver Walker and André Pennartz will elaborate on the progress achieved in 2019 and will then be available for a Q&A session. Before we begin, I'd like to note that the press release and the presentation are available on the Evolva website and that a replay will be available after the call on the company website as well.

With that, I'll hand it over to Oliver.

Thank you, Barbara. Good morning, good afternoon and welcome also from my side.

Special thanks to all of you for attending this call as we all experience quite extraordinary times, but now let's jump right into our presentation deck starting with Slide 4. In 2019, we have made major progress in both operational execution and building the company that are staying on track to achieve the cash breakeven on an EBITDA level by 2023.

While product related revenues are still small, we start to see a trajectory unfolding of consistent growth and we approach more growth potential as we will enter new markets, such as pest control. Coming back to the numbers, we have achieved a product related revenue growth of roughly 60%, a value that we think to repeat for quite some time.

And as already mentioned, we will add more growth from new markets, new compounds and new product variants. As a function of an almost half EBITDA loss, operating free cash loss almost half too.

By now we have reached an organization structure that we can call both cost optimal and supportive to future growth. The major business building activities included besides operational excellence, driving a focused sustainable innovation approach, which means besides innovation based on nature to only undertake R&D activities that are clearly driving future top line growth or contribute to lower product costs.

Further, we have advanced the registration process with the EPA. While all the required studies have been submitted to EPA by the first quarter of 2019, EPA accepted in the meantime all additionally submitted information and the registration process is continuing.

Third, in order to support future growth, we have expanded our network of contract manufacturers. These will be CMOs with the better equipments match, which will additionally help to lower product costs.

And last but not least, we have made major progress in preparing our new major compound, which we will target – which will target the F&F, as well as the Health Ingredients market for commercial scale production and launch in later 2020. Moving to Slide number 5, looking at our strategy from a financial viewpoint, we delivered progress in all the four dimensions that we measured.

One key value driver is innovation. In this we captured the launch of new compounds and variants of existing product as well as entering new application areas and market segments.

As our idea to market process starts to become more mature, we are delivering innovation in an increasingly constant and predictable manner. Let's go to Slide 6.

This slide captures the three strategic priorities we have worked on as well in 2019. By now we are only investing into innovation project that clearly helped to strengthen our market position drives to top line and support the healthy product margin.

When innovating you and optimizing existing processes to manufacture a compound at lower cost, value engineering approach is at the core when setting up and evaluating project. As we continue to grow significantly and more important topic becomes manufacturing, continuing with our capitalized strategy, we have built a technology organization that integrates the competencies to develop, contract manufacture, cost optimize and to supply products.

Last but not least, growth shall be profitable. This requires by far not only competitive product costs, but as well a customer benefits driven commercial approach and increasing market penetration helps to both strengthen our market position and drives economies of scale.

Let us now switch to our three business segments. First, Flavors & Fragrances, which grew in line with our expectations.

Today, we can count on an international distribution networks covering all relevant geographies and we are well positioned to exploit the growing demand in emerging markets, especially in Asia. In 2019, we have launched three new variants of our nootkatone and valencene product.

These variants have been introduced to meet defined needs of customers in geographies, which has specific regulatory requirements. In the coming years, we expect to launch more innovative products supporting future growth.

Now, how did – and moving to Slide number 8, how did F&F develop over the years since launching our first product nootkatone into this market segment. If you can see out of the left upper corner, we are operating in a nicely growing, however, sale of relative small market.

By launching new product variants, we can expand the addressable market overtime. As we grow significantly above the market, we continue to expand our market share.

Going into 2020, we had experienced the slower start than usual given the issues related to COVID-19 and our strong market position in Asia. However, the underlying market demand for our product is unchanged and continues to grow.

Well, not all the customer demand that you can see on this slide will convert into purchase orders, the sales pipeline is clearly supporting consistent growth as well in 2020. Switching now to our Health Ingredients business shown on Slide 9.

While we are stagnating for some months going into 2019 and new commercial business leadership quickly unlock the major customer potential for our Veri-te resveratrol and achieve solid growth across geographies. We operate the combination of Veri-revenue.

It’s a network approach, inspire customers for new product developments and underpins the benefits of our Veri-te resveratrol with studies. One study completed towards the end of last year called Resveratrol Supporting Healthy Aging in Women, RESHAW and conducted in a two-year clinical trial at University of Newcastle in Australia, showed that subjects taking Veri-te resveratrol experienced enhanced cognitive performance, improved arterial function, increased healthy blood flow, and improved bone mineral density.

The results of this recently concluded study have further raised commercial interest in Veri-te resveratrol. Now let's have a look at the sales developments for Health Ingredients shown on Slide 10.

The global markets for resveratrol is comparably fast growing at the rate of 10% and the amounts according to multiple sources to currently something more than US$50 million. Since later 2019, we are experienced in a fast acceleration of the top line, a lot of its related to customers developing new products.

Year-to-date sales and orders in hand as of now exceed full year sales of last year already. In addition, we experienced additional customer demand shown also on this slide that is both solid and further growing.

Moving to Slide 11, Health Protection business, as you probably remember, we have submitted all required studies to the EPA by Q1 2019, as I have already mentioned and have subsequently received some questions to one of the studies. By September 2019, we have submitted our answers, which have all in the meantime been accepted by the EPA, registration process is continuing.

Upon registration of nootkatone, EPA can start to evaluate end-use products containing our nootkatone. Considering the duration of the registration process for end-use products and related preparative steps beforehand, we target first sales of nootkatone for pest control applications to start in late 2021, so late next year.

Moving to Slide 12, here you can see which will be the next steps in the process to finalize the registration of nootkatone and how long each step usually takes. Moving to Slide 13, other products and to comment on each ones, in late 2019 as you remember, Cargill started its commercial scale production and we experienced since then successful sales across several categories including beverages, sports nutrition, baking and dairy.

Based on this, we are anticipating the royalty income from EverSweet sales to grow over time. Good.

With this let me now handover to André to review through the financial performance in 2019. André, please.

Great. Thanks a lot Oliver.

Good morning also from my side. I would like to take you through the key financials of Evolva of 2019 starting with Page 14.

So you can see the revenues from our R&D activities increased by 12% compared to 2018, mainly supported by this growth by the contract with the BARDA, the U.S. Biomedical Advanced Research and Development Authority in relation of the registration of nootkatone for pest control in the U.S.

Our product related revenue increased by 59% which demonstrate a nice development in the whole portfolio of our products, these two impacts came to a growth of total revenue of 30% where we achieved CHF11.6 million compared to CHF8.9 million in 2018. We were capable to increase our gross profit by CHF3.2 million within these numbers the impact of the BARDA project is reflected.

Furthermore, we also see an impact that Evolva made already progress in improving our manufacturing costs compared to 2018. The total operating expenses decreased by 23% which is a result of the centralization of our corporate functions at the headquarter here in Reinach and the transformation to focus on value and sales generating activities.

All these explanations resulted in the significant improved EBITDA compared to 2018. Our cash position at year-end decreased to CHF39.9 million, here finding the impact from the operating cash flow of CHF14.2 million and in this number we have also reflected the payment of CHF502 million to settle our remaining financial obligation related to the EverSweet agreement.

With this I would like to have – to move to Slide number 15, here we have – this slide will give you an overview on the way how we have streamlined and focused our operating expenses to customer facing activities in comparison to 2018. So as a result we decreased our operating expenses from CHF32.9 millions to CHF25.4 million.

Next slide, Slide number 16, this is the presentation of our cash flow – cash position in 2019 and 2018. So in 2019 we had mainly two extraordinary impacts and therefore we also added a column giving you the effect of 2019 recurring numbers.

Here we had two settlement payment to EverSweet had a negative impact and second payment we have received from BARDA to support our R&D project there. Moving to Slide number 17, this explains our EBITDA development from 2018 to 2019, very significant, improved from minus CHF23.2 million to minus CHF12.3 million.

Here, we also added the column 2019 recurring to neutralize the impact from the BARDA project, reflect how our numbers would look like without this project. Then moving to Slide number 18, this gives you a graph to showing how Evolva is transforming into value and sales generating commercial organization.

Here we are showing the growing contribution from product related revenue as we are still in an early stage commercial organization to growth trends that is impacted by placing commercial products into the market and how the demand is increasing over the year. As already explained by Oliver in the previous slides, we see an increasing demand regarding our products and we'll bring further product into market which would support this trend quite nicely.

With this I end my side and hand over back to Oliver.

Thank you, André. Now let's move to Slide 19, then before we end our prepared notes with the outlook statements for 2020.

Let me show again an update of the current and future addressed markets. You have seen this slide already for the half year reporting 2019.

As you can see, we operate currently in much smaller markets compared to the segments we plan and will open over the foreseeable future. The comparably smaller potential of the market segments addressed currently is consequently somehow limiting the product revenue possible to generate.

However, having said this, we are making solid progress gaining market share in these rather small market segments. And in the case of Health Ingredients we seem to even contribute to a market growth acceleration.

This confirms customer demand for our product their specific characteristics, quality and consistent supply. In order to break into the new markets at a good pace we have amongst other things build the pipeline of customer prospects in pest control and for our new product, a major product we plan to launch in late 2020.

We will be able to leverage existing distribution channels in the market segments we already operate in and therefore already have customer access. So let me wrap up our presentations with our outlook for 2020.

Moving with this to Slide 20. Based on the demand we experience in the business segments we already operate in we expect consistent product related revenue growth as it is also written here as the BARDA project will soon see be finished R&D revenues will significantly reduce.

Now as the profit contribution from the BARDA project, which is financing also internal efforts on the nootkatone on the registration project will be significantly lower in 2020, compared to 2019. We expect the EBITDA to remain broadly at around prior year level.

In the years thereafter the EBITDA will resume to March step by step towards cash breakeven by 2023. Barring unforeseen events and considering the progress achieved, we are confident that the EPA will complete its registration of nootkatone as a novel active ingredient in the next few months.

Cash outflows, we expect to be slightly above prior year levels. This is due to investments related to scale-up of additional production capacities to keep up with increasing customer demand, as already mentioned.

The launch of a major new product in late 2020, I've mentioned too. The building of necessary stock levels for both the growing top line and channel and this new major product.

And last but not least, activities to progress nootkatone into registration process for end use products. Now to finance the future growth until cash breakeven including the investments just mentioned before, we are currently evaluating multiple options including a capital increase.

It is needless to say that this outlook excludes any impact on Evolva’s business from the coronavirus neither positive nor negative, which cannot be estimated at this point in time. With this we conclude our prepared remarks and we can now start with the Q&A.

For this I hand back to Barbara or to the operator from Chorus Call.

Good morning and thank you for taking my questions. So I would have two please.

The first is on the way in which financing is obtained, what sticks against just making use of the existing Yorkville arrangement as opposed to exploring other options given that it's already made and would likely provide you with enough years worth of liquidity. The second question is on the long-term guidance that was given, I believe, about 18 months ago, maybe a touch longer.

Are you still confident of achieving cash flow breakeven by 2022, 20 23 time? And could you give us an idea for like level of sales given the CHF40 million to CHF60 million seems a bit bullish at this stage.

Thank you.

Thanks Sebastian for the questions. First as we mentioned, we are still evaluating various options for the financing.

The most important is that we will be economic in terms of no dilution. While we mentioned the capital increase, we are aware that we don't want to create too much dilution.

This is also clear and, how to say, options including cedar certainly then would be a part of the options that we are evaluating. I think the most important is again, what I just mentioned, that we will be as economic as possible in terms of dilution effect.

Regarding the long-term or the mid-term guidance, as mentioned, and I think that's something we mentioned already on the earlier calls, most important is not the top line actually to achieve, but the top line that is necessary to reach cash breakeven because cash breakeven puts us into a complete different situation, becoming, let's say, more independent certainly, financially at least. And as mentioned, we target still to be cash breakeven by 2023.

We have said 2021 to 2023. I have mentioned on the half year call that it’s probably more in the second half of that period.

And to be sort of taking it yet from another end, we can call it by 2023. Actually we clearly target to be cash breakeven by then.

The other thing is the top line. The sales required to generate this cash breakeven used to be CHF40 to CHF60 million and has now come down actually to CHF35 million plus minus.

So by optimizing our structure, by becoming actually much more efficient, by having this value engineering approach at the core of our R&D activities, and just learning on the way developing our company, we could bring the necessary sales forecast breakeven down to CHF35 million. And I think that's a little bit the rationale actually also for this mid-term guidance because sales is only relevant if it is profitable.

So if it helps to actually cover our structural costs and eventually driving, then the profit margin that is also healthy and appealing actually to investors.

And just as a quick follow-up on the EBITDA being flat in 2020. If you were to assume a similar trajectory of improvement in gross costs, it looks as if the investment that the company is making is about CHF4 million to CHF5 million at the operating costs level in 2020.

Is this approximately right? And what is the money going towards?

Yes. That's absolutely the right estimate, plus minus always, right?

The money is actually going to be invested into the new product, especially, this major new product, and as I have mentioned, also into the registration process of end-use products for nootkatone in pest control applications. This is especially to expedite the process for, let's say, smaller customers but sometimes there are also bigger potential customers that actually would prefer to take and place a formulation from us instead of having to develop their own formulation.

So these are, I would say, the major two reasons for our places of investment of the range of expenses that you were correctly sort of bringing up.

That’s it. Thank you.

Welcome.

Good morning. Two questions from me as well.

In terms of the new product, I appreciate that you probably don't want to give too much detail, but is there any further color that you can give us at all? And secondly, just I guess a more general question in terms of how are you thinking about the conflicting needs of cash flow breakeven, but equally maximizing sales growth in the early stages that generally is quite important in terms of trying to capture the market share because you've mentioned that you're trying to get to this cash flow breakeven in fiscal 2023.

And I guess the question is would you be open to perhaps pushing that back a little bit if you thought that it fits for the longer term health of the business, it was really the best opportunity?

Sara, thanks a lot for also these questions, I think they are both very essential and it's good that you brought them up. So the new product actually and more color on it, you absolutely were right that we have a reason why not to mention it.

It's a little bit of a surprise also, but the additional color, we already mentioned perhaps a little bit. It is a compound that is actually already on the market.

There is a natural source which is not liked and which is not really too sustainable on one end. And on the other end there is a chemical avenue of how to produce the same compound.

And it's a little bit like also with resveratrol, we sit actually nicely in between these two sorts of poles offering a much more natural way of producing actually an ingredient. So – and the application areas will be F&F as well as Health Ingredients.

F&F I would say is especially also a distribution channel to some extent. And eventually there are also some Health Ingredients applications in diet food, that's an example, but also dietary supplements.

As you could see out of the bubble chart Slide 19, it's a major market segment. That is around – the CHF200 million is the natural market piece actually alone.

And that we’re going to address and we think actually that we will have quickly also the necessary competitive cost position to drive positive growth profits. Switching over to your second question, which is also a very fundamental one.

I think by now we have actually sort of found the good balance between investing into future growth, at the same time still making progress on the EBITDA level. There is this one year of flat development of EBITDA because of this switch away from BARDA, but I think which everyone understands easily.

But if you take out this effect that we want to really step by step march towards the cash breakeven by 2023, it's just much more healthy, not only because of being financial independence, but it's also different attitude that you drive as a business if you want to be actually cash breakeven instead of always, how to say, repeat to be an investment case. So I think the underlying question is whether we will – whether we’re giving up some growth potential because of, let's say, our approach to cost to investments, et cetera, and this is not the case.

We have just much more efficient, more focused, more differentiated approach found. So it's a balanced approach between future growth, as you can see and as you’ve heard, and still optimizing actually the results to reach cash breakeven.

Thank you.

Welcome.

Yes. Hi, good morning.

Also from my side I have basically two questions and maybe first on the cash outflow. I think you mentioned it will be above last year level.

So is it correct that the base is around $20 million? And yes, maybe if you could clarify also what will be the key drivers of this cash out I think you mentioned networking capital needs but also kind of a CMO investments, I think a little bit more color on that would be helpful.

And then secondly on EverSweet, I was just wondering if you could provide us maybe a bit more details on the level of the royalty that you collected last year and also what are the expectations here going forward? Thanks.

Very much, welcome. Thanks, Laura for…

Hello, everyone here again...

Laura is disconnected. So let’s wait perhaps a few moments whether – to see whether Laura is dial again or back in.

Otherwise, I’ll make the explanation nevertheless.

Great. Yes, I think I already asked the question, but then there I was connected.

Yes, that’s good.

So I don’t know where we stand right now.

No, no. I actually repeat in full again, sorry.

Obviously our national operator is having its bottlenecks as well, so we sum. So first question – I take the second question first, which was related to EverSweet.

So what I said is the number, let’s say the royalty income we could recognize last year was not that big that we actually, that it was worthwhile to be mentioned not even in words or whatever. The reason is very simple, that was a sample sales to customers plus let’s say early volumes for tests sales in some, let’s say test regions, which were all successful.

So I think Cargill is absolutely building the momentum step by step. Actually, we will see royalty income then also to grow, but it takes just some time.

Cash outflow, you were estimating $20 million. This is a little bit a lot.

We will not go so far. We think at this point in time and coming back, but I leave it up to you for the estimates, because otherwise we certainly give you specific numbers.

The reasons I already mentioned, its – this additional capacity, we have already an existing small network of CMOs from before we started the initiative to move actually to new CMOs quite some time ago, perhaps 12 months ago, we started really, we have – first step is always to evaluate, then it’s about actually engaging with these folks. It is about tech transfer, piloting, perhaps engineering phase, et cetera.

So usually it takes quite long until actually you have a CMO in our industry up and run. The reason why there are some investments in it is that it’s not even equipment.

The equipment part is actually small. But it is some engineering and piloting that you have actually to pay, plus you have let’s say, some inefficiencies at the beginning with the first fermentation rounds, et cetera, that all leads to what we call actually some investments on the CMO end.

In terms of inventory level, I think we – it is, as I mentioned, the top line that is growing. We have to have more safety stock than in the past.

This we also see, we have also in actually our industry an instrument, which is used very often, which is blankets purchase orders. So actually there is a range from pretty low numbers to pretty big numbers that the customer actually is how to say committing to purchase.

And we have on the other end to commit to have products available. They give us guidance then the closer we get to the purchasing date.

But in order to actually how to say support the future growth we need to be necessary stock levels actually to build. And the third but not least, as I mentioned we have the nootkatone registration process for end-use products that I mentioned before, which is important to do, an element is important to do in order to expedite how to say the time to develop a consumer products by the CPGs that we partner with.

So that we get actually on the market with NootkaShield as soon as possible and being able or putting ourselves into a position of generating sales as fast as possible. As I mentioned late 2021, that’s the target.

So it still takes some time until to get there. But I think the most important step anyways, now the registration of the manufacture end-use product, we are confident soon it will take place.

And afterwards, it’s just additional work and additional investments that are related to the registration – for the registration of end-use product until we can start to generate sales with nootkatone in pest control applications. I hope that helps Laura.

Yes, sure. If I may follow-up on the Coronavirus topic.

Yes.

Obviously it’s hard to predict what will – what could happen in the next few months. But obviously I understand also that you have seen the negative impact on, I think resveratrol in Q1.

I think I just would like to ask you if you could maybe give us a little bit of flavor, which particular areas of your business could be affected by extended shut down of lifestyle. So I think, yes…

So actually it was not the Health Ingredients business, but it was Flavors & Fragrances. So valencene and nootkatone for Flavors & Fragrances industry that has been impacted in the first quarter.

To some extent, the reason is simple that we have quite a phonation exposure, which is great because that's a very much growing area. But at the same time, we have few customers that has manufacturing sites shutdown and therefore they didn't actually purchase.

In the meantime, they have started to resume operation and therefore, actually we don't see how to say any sort of reason to believe that it will – how to say continue again. In Asia, we may see some effects perhaps in Flavors & Fragrances, also in Europe or across how to say around the globe.

I mean this is not something that we can estimate that this point in time, that's something that we actually we’re going to see. Important is that, as I said, the underlying demand for our product especially is completely intact and eventually – actually we will see normalizing sales growth happens again.

Health Ingredients, so resveratrol is actually so far positive case. We have some customers that have come back, especially also Asian ones saying that actually consumers are even more aware of health and that supplements help actually to keep you in a healthy shape.

And because of that, actually orders that you could see out also of the corresponding slides, orders were actually hiking up, I would say fueled even by COVID-19. So that's actually positive, on that front we don't expect there to be a negative impact from COVID-19 on the commercial front.

So resveratrol, actually probably will be a solid through these days of COVID-19 as well, that's our assumption as of today. On the supply front, to switch over from sales actually to supply, the supply front, so far it works.

But you never know what actually will going to happen to some of our CMOs manufacturing our products. The good thing is perhaps to some extent that we have not one location, but multiple locations.

So there is to some extent a diversification effect in place, but I mean, again, too early to be sort of calling out any negative effect on that front. So net, so far actually not negative effect on a net basis until the end of the year.

We will go on and see and we will keep you updated through actually the year as we – how to say March through this year.

Okay. That's very helpful.

Thanks.

Welcome.

Hello. Thanks for having my question.

Regarding the new product launch, when you say you launch it this year, will you be able to immediately sell the product or will your customers have to go through a registrational process similar with nootkatone? Yes, that's the first question.

Very good. That's also a very good question that I'm happy to actually answer.

So we will not have to go for the first sales actually through a registration process. There are some application areas in some geographies in Health Ingredients that will require some registration.

But the first demand actually we will easily cover without any registration being needed. And that can generate already quite interesting sales volumes, actually really interesting sales volumes.

So there is no limitation in terms of registration being needed.

And the first application was flavor and fragrances, so I didn't get that, I got the health and dietary supplements part.

Yes. So Flavors & Fragrances, the whole thing about the registration is usually related to claims that are being made, right.

So that you have to prove actually through some studies that the claims are actually valid. That's sort of the reason, also in this situation, for some applications there is a need for registration in some countries, but not everywhere.

And second what's it concerns the F&F industry applications? There is no registration being needed.

Thanks. And you were hinting that the cash out flow will be less than CHF20 million.

Is it then correct to assume that your way to go is more than two years, given the liquidity of almost CHF40 million?

Well that's a conclusion that you draw, absolutely. I mean, I leave it up to you.

I think we have today sufficient wrong way actually still, and on the other end, there are still some undertakings investments as I mentioned, which will require also to have some sufficient safety cash levels to do some last financing. I think we commented on that actually since even having done the last financing and it has come down the amounts also.

So in this respect, to be comfortably walking towards the cash break even, it will be one last round. Perhaps that goes a little bit also into the direction of what Sara was asking about, how to say investing for future growth.

So I would say if there is more offer, I’d say investment needs to accelerate growth then it is perhaps on the CMO front, capacity as an example. It is perhaps sometimes – how to say further optimizing manufacturing processes, requiring some investments and it's not huge, huge, huge, but it adds and that's the reason why actually we are, how to say, not done with today's cash balance only, but we think we should add actually some more cash through financing activity, to be safely actually running until this cash breakeven moment by 2023.

Thanks a lot. And just one, the last, about EverSweet as far as I've understood, you're not giving any concrete guidance for this year's royalties.

You say samples have been handed out, sample sales but are you expecting any major product launches or is it too early to talk about this?

Well, I mean, the product is having been sampled, as we say, by hundreds actually of customers of Cargill and in the meantime also DSM. And some of the customers that depend on the application have started with test sales, some others are still in the perhaps product development stage, which is more of marketing related how to – what kind of marketing speech you come up with, et cetera.

So it's not related to EverSweet anymore itself. And there are different customers at different stages.

We don't really have transparency in terms of how the sales pipeline is building. I think that's also good because even Cargill itself is sometimes uncertain.

Sometimes customers that we see on our Health Ingredients business front as well, sometimes they do yet another iteration round and all of a sudden a new product development takes another three months later before they said it will be launched in two months and all of a sudden actually takes another five months. So in this respect, I think, there are all the necessary, how to say, ingredients in place to use the word ingredients, so meaning we have a great product or they have a great product to commercialize Cargill and DSM, the necessary commercial scale production capacity is in place.

So there is no limitation from that. Then there is positive evaluations by customers that are great first sales being generated recently as just mentioned in some of the application areas I mentioned two beverages, baking, et cetera.

And we will certainly see more to come, but how it exactly ramps up that's something probably not even Cargill knows, even though they have longstanding experience in this industry. Consumer products sometimes are a little bit, how to say, unpredictable or CPG companies are a little bit unpredictable, sometimes with launching such kind of new products.

And unpredictable is not a negative thing but positive because if they think it makes sense to yet do another iteration round they do it and they do it for a good reason. So I think we have all the ingredients to succeed in the end in place and we will see royalty income to grow over time, but we cannot give you any sort of predictions.

Thanks a lot for all this information.

Very much welcome.

Good morning sir. I have just two questions.

Coming maybe you will increase your capital, you haven't decided, can you give us until when you have failed the decision, what kind of options you will take? And the second one, the general assembly meeting really take place or do you physically, or will it be online, or what will you do?

Yes, I think let's do the second first. The HEM, I think there is by now and this is current status, it may change, right.

The government may update, amend their recommendations and instructions on COVID-19, but at this point in time we see that we can have it taking place without participation of shareholders, but asking them to submit their votes certainly to the independent proxy. I think that's also what everyone else is doing.

So in this respect, I think, this is the necessary how to say precautionary measures to be taken to follow the instructions of Swiss government, but it will take place. So which means that you should actually anticipate, as we say sometimes to see that one point in time that you may see the capital, the financing activity evaluation to translate into some specific actions, maybe the invitation, maybe at the later stage, we keep it open at this point in time.

As I said, and even how to say, irrespective of what we write into an invitation to the HEM, I think, the most important principle that we follow is we try to be as economic possible, so not to issue too many shares if not needed. And certainly the market environment is something we take into consideration in this respect too.

So there are always two steps. If it would be a capital increase, right?

If then we will have to ask for authorized capital, which will not mean that we immediately would use it. But again, we want to be economic.

We have to have flexibility. Certainly we have to create flexibility.

Cedar has been mentioned already, which is good. And that's what every company actually needs which is our duty as well.

Make sure if the company is sort of to weather safely through this stormy times. And I think that's probably as much as I can say to these two topics at this point in time.

I hope that helps.

Thank you. Yes, thank you.

Welcome.

Good. So we thank you a lot actually for participating.

Again especially because it's difficult times, please make sure that you stay safe and healthy. And we will go on to hear actually from each other again in the course of 2019 planned actually sometimes in late August.

Yes, August 26.