BioHarvest Sciences Inc.

Good morning, and welcome to the BioHarvest Sciences First Quarter 2026 Financial Results Conference Call. As a reminder, all participants are in listen-only mode. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. As a reminder, this conference is being recorded. I will now hand the call over to Dori Kurowski of LifeSci Advisors. Please go ahead.

Greetings and welcome to the BioHarvest Sciences First Quarter 2026 Financial Results Conference Call. With us on the call this morning are Dr. Zaki Rakib, Chief Executive Officer, Bart Dichter, Chief Financial Officer, and Nilan Sobel, Director of the Board and Co-Founder. Before we begin, I'd like to remind you that management will be making projections and forward-looking statements on the call today regarding future events. Any statements that are not historical facts are forward-looking statements. These statements are made pursuant to and within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. We encourage you to review BioHarvest Sciences SEC filings, including the company's most recent Form 6K, which identify risks and uncertainties that may cause future actual results or events to differ materially. These filings can be found on the company website, as well as the SEC's website at www.sec.gov. Please note that the forward-looking statements made during today's call speak only to the date they are made, and BioHarvest Sciences undertakes no obligation to update them. And with that, I would like to turn the call over to Dr. Zakir Raqib, Chief Executive Officer of BioHarvest Sciences.

Thank you, Dori, and thank you all for joining us this morning. BioHarvest Sciences is an industrial plant cell culture biotech company and a leader in botanical synthesis, which is a patented non-GMO platform technology that industrializes what nature otherwise does slowly and produces high-value plant-derived compounds and botanical compositions without growing the plant itself. Using proprietary plant cell biology, elicitation technologies, AI-driven development and industrial-scale bioreactors, BioHarvest creates highly consistent, bioavailable, and patent-protected precision botanics, or compounds possessing enhanced potency and purity compared to the original plant, along with the characteristics for commercial scalability. The platform has already demonstrated significant commercial validation through Vinia, BioHarvest's flagship blood flow health product, while also serving as the foundation of the company's rapidly expanding CDMO business across pharmaceutical, nutraceutical, nutrition, cosmetic, and fragrance markets. With more than $100 million invested in its platform technology, 15 patents, multidisciplinary scientific capabilities, as demonstrated in various clinical publications and proven industrial-scale manufacturing, BioHarvest has two businesses representing its dual growth engines. The D2C business that has already generated cumulative vineyard-based sales of close to $100 million, and the CDMO business that is well positioned as a strategic partner for next-generation plant-based innovation across the nutraceutical, pharmaceutical, cosmeceutical, and nutrition industries. These two businesses have different operating models that have compelled the operating changes we have recently communicated. The Two Lens framework for managing the company is designed to optimize performance, capital allocation and growth execution. As such, and as announced last quarter, we will be reporting revenues and operations with this Two Lens approach. With this, Bar will provide a more detailed summary of our numbers for this quarter. Bar?

Thank you, Zaki, and good morning, everyone. I will provide you with a succinct review of our financial results. A full breakdown is available in our SEC filings and in the press release that crossed the wire before market opened today. Please note that all figures are in U.S. dollars unless stated otherwise. Revenues for the first quarter of 2026 increased 8% year-over-year to $8.5 million, from $7.9 million in the same year-ago quarter. Cost of revenue was $3.5 million compared to $3.3 million for the same period last year. Gross profit in the first quarter of 2026 is $5 million, or 59% of total revenue, as compared to $4.6 million, or 58% of total revenue, in the same year-ago quarter. Sales and marketing expenses totaled 4.1 million for the first quarter of 2026, compared to 3.7 million for the same period last year. General and administrative expenses totaled $1.4 million for the first quarter of 2026, aligned with the same period last year, but reduced on a percentage of revenue basis to 16% as compared to 18% in the same year-ago quarter. Total operating expenses for the first quarter were $6.9 million, compared to $6.3 million for the same quarter last year. The increase in operating expenses was primarily due to increased marketing spend and higher expenses for the CDMO Services Division. Net losses for the first quarter of 2026 totaled 2.6 million, or 11 cents per basic and diluted share, compared to a net loss of 2.3 million, or 13 cents per basic and diluted share, for the same period last year. Adjusted EBITDA loss and non-IFRS measure totaled $1.2 million, aligned with previous period last year. Under the two-lance approach, the adjusted EBITDA loss for the CDMO services division is $904,000 and $286,000 for the products division for the first quarter of 2026, compared to $953,000 and $235,000 in the same year growth quarter, respectively. Cash and cash equivalents, together with bank deposit as of March 31st, 2026, totaled $20.2 million compared to $3.4 million as of March 31st, 2025. I would like now to pass the call back to Zaki.

Thank you, Boar. As we announced on April 29th, in accordance with our new two lens approach, a leadership transition was put in place to optimize the performance of the two businesses. This transition reflects BioHarvest's strategy of maximizing the value and efficiencies of its botanical synthesis platform. Prior to the transition, I was able to convert the R and D group from a 1 project at a time set up. To a simultaneous multi project development organization. The successes announced recently in all of our 4 projects. That have been advancing in parallel are the fruits born by this conversion. The consolidation of manufacturing, quality control, quality assurance and regulatory affairs under a unified leadership as part of this transition will allow for the future production of multiple compounds simultaneously in the new facility scheduled to operate in the second half of 2027. The need for that has become even clearer with the completion of stage 1 and now with the stage 2 contracts that we announced for both the Fragrance and Saffron projects. In my new role as CEO, I plan to utilize my decades of executive leadership experience and proven track record of growth performance to enable high shareholder value creation. Elon's focus as co-founder and a member of the company's board of directors is on growing the D2C business. With his decades of experience in the fast-moving consumer goods or FMCG sector, he will guide the implementation of high-yield marketing initiatives as well as entering the retail sphere for augmenting the online sales. Turning now to the CDMO business. This past quarter in March, we announced completion of what we believe to be the first ever successful stable cell culture development of a rare scent producing plant used in the global fragrance industry as part of the multi-stage development program. This phase of the process is considered stage one, where a stable cell bank of a unique cell culture based composition containing rare molecules was successfully produced. Notably, this particular scent is widely regarded as one of the most valuable fragrance raw materials in the world, with premium grades commanding prices exceeding tens of thousands of dollars per kilogram and demand growing across the Middle East, Asia, and luxury Western perfume markets. On Tuesday, we announced that our CDMO division signed a $1.2 million Stage 2 contract as part of this development program. Importantly, these milestones collectively bring BioHarvest closer to entering the growing premium fragrance segment estimated to represent a $23 billion market opportunity within the global $58.9 billion scents and fragrances industry. Stage two means that we have crossed the tallest technological hurdle of this development. It also means that we can be ready for production in the second half of 2027 in tandem with the manufacturing capacity increase due to the commissioning of the second factor. Importantly, under the terms of the Stage 2 agreement, BioHarvest retains 20% ownership of the compositions developed, creating a long-term royalty stream. The major principal of the partner firm, which is a prominent United Arab Emirates-based investment group, has said that they will be soon initiating a commercialization program to bring the product to market in the second half of 2027. We expect this contract to serve as a catalyst for engaging additional potential customers in other future fragrance programs using bioharvest botanical synthesis platforms. We believe that the unique scalable capability of our technology significantly expands the addressable market opportunity for our CDMO division and further strengthens our long-term royalty-driven growth strategy. Like our fragrance program, our collaboration with Safran Tech is a prime example of our botanical synthesis platform can redefine the economics and accessibility of high-value compounds we call precision botanics that I explained earlier. Safran Tech is a company pioneering advanced cultivation methods for saffron, one of the world's most valuable and health-promoting botanicals. As you may know, it's among the most researched of plants with multiple health attributes to its active components, such as crossings, picrocrossin, and saffronol. We have partnered with them to develop and commercialize saffron derived botanical compounds using bio harvest patented botanical synthesis platform. Yesterday, we announced the completion of stage one of a multi stage development program with Saffron Tech. As a result of the successful completion of stage one, bio harvest has subsequently moved to stage two under this development agreement to generate enough material expected to support future sustainable pre-commercial testing of saffron. The successful completion of stage one, the most crucial stage for advancing the program, resulted in the creation of a stable saffron cell bank using BioHarvest's proprietary botanical synthesis platform. This means that the cell cultures we developed demonstrated the molecular profile of the key active ingredients naturally found in saffron that I just mentioned, including crocin, picrocrocin, and saffronel, compounds widely associated with saffron sensory characteristics as well as its scientifically researched health attributes. This is yet another important validation of the power and versatility of our botanical synthesis platform to create sustainable cell banks from scarce botanicals. There are multiple programs we're excited about, as well as new prospects and additional advancement being made with other existing programs that we will be able to provide an update about in the coming months. The combination of existing projects and new ones expected to be added before the end of the year will generate a total revenue as previously guided between $4 million and $6 million. So, despite quarterly fluctuations in CDMO revenue, total CDMO revenue is expected to remain as guided previously. Total CDMO 2026 revenue, including intercompany revenue, Vinya production is expected to be between $12 million and $14 million. Total adjusted EBITDA loss for the year as previously guided is expected to be between $4 million and $5 million. Now, turning your attention to the D2C business. Today, we have more than 90,000 active users of the Vinya brand. supported by recognition from a myriad of medical experts on the importance of arterial health and blood flow. We believe that we have a best-in-class dilation and blood flow delivery, nutraceutical, which has the capacity to positively impact the health and wellness of millions of consumers. As you know, We have recently made great strides with our Vinya Blood Flow Hydration product, which has experienced rapid consumer adoption and high customer satisfaction ratings, which are the top in its category. To date, Vinya Blood Flow Hydration remains the number two contributor to incremental new customer sales with 20% of new customer revenue year-to-date on Vinya.com and Amazon, ahead of all categories except for capsules. With more than 100 consumer reviews on Vinya.com and more than 60 reviews on Amazon for our key variety pack package, Vinya blood flow hydration product has achieved an average rating of 4.7 out of 5, living up to its promise to consumers of delivering superior science, superior efficacy, and superior taste. Importantly as well, Vimeo blood flow hydration is gaining positive traction in new key scaling channels of TikTok and our Health Pros channel. In Q1, we started implementing significant changes in our marketing and sales approach, aiming at improving the profitability of the D2C business. While it has created a 1 time decline in revenue in Q1, 2026 compared to Q4, 2025. We expect for the remainder of the year, a quarter of a quarter revenue growth. With improved metrics, such as the ratio of the lifetime value of the consumer or over customer acquisition costs. Or revenue guidance for 2026. for the D2C business remains ranging from $38 million to $42 million with adjusted EBITDA profit of $0.5 million to $2 million. I'd like now to turn the call over to Ilan to provide additional elaboration on Q1 outcomes related to our D2C business and the 2026 marketing programs that are influencing our outlook for healthy revenue growth in this division over the next few quarters. Ilan?

Thank you, Zaki. Vinaya delivered modest year-over-year revenue growth in the first quarter. Whilst we are not satisfied with the level of growth delivered in the quarter, we believe that the quarter must be understood in the context of the deliberate steps we took to begin resetting and optimizing our direct-to-consumer growth engine. Q1 was a deliberate period in which we took important actions to better understand, refine, and optimize our marketing engine for stronger and more efficient growth over the balance of the year. In January and February, we undertook a comprehensive review of our marketing mix with a clear objective, reduce customer acquisition cost, improve conversion, and better understand the true incremental contribution of our core acquisition channels, including TV, Meta, and YouTube. To do this properly, we needed to test channel performance in a disciplined way, including reducing or pausing spend across specific channels during defined time periods. As expected, this significantly reduced overall marketing investment in the first two months of the quarter, which directly impacted near-term revenue growth. In March, we began scaling investment again behind a revised marketing mix. This included a strategic reduction in our reliance on TV and a greater shift toward digital channels, which better align with where we are taking the Vinya portfolio, particularly with the launch and scaling of Vinya blood flow hydration, our electrolyte product designed to reach a broader and younger consumer base. Q2 will be an important quarter of continued testing, learning, and refinement as we continue to aggressively optimize every element of the marketing mix, including channel allocation, creative performance, funnel conversion, our offer structure, media efficiency, and our customer retention strategy. our focus is not simply to spend more but to spend better as well as to build a more scalable more diversified customer acquisition engine as a result we expect q2 results to improve versus q1 However, we believe the full impact of these actions, including the refined marketing mix, new product launches, channel expansion initiatives, and positive impact of vineyard blood flow hydration seasonality will be most meaningfully reflected in the second half of the year. On a personal level, as I move into my new role within the company, I remain fully focused on working closely with our highly talented marketing and sales team to deliver the guidance we have provided, while also architecting the next phase of the Vinya growth blueprint, one that we believe can accelerate the brand towards $100 million in annual revenue over the next three years. So, in summary, Q1 was a reset quarter for Vinya. Q2 will be an important quarter of further testing and optimization, and we expect to see improved results versus Q1. However, we believe the full benefit of the actions we described will be felt in the second half of the year. We believe the actions we are taking are the right ones, and that they position Vinya for stronger, more efficient, and more diversified growth going forward. while forming the foundation for our ambition to build Vinia into a $100 million revenue brand over the next three years. Now, I'll turn the call back over to Zaki.

Thank you, Ilan. Before turning to Q&A, I just want to add how invigorated I am after returning from the Vida Foods Europe Conference in Barcelona. This conference brought together approximately 1,800 exhibitors spanning functional foods, nutraceuticals, ingredient suppliers, finished product companies, and CDMOs. Our participation was strategically important since it provided direct access to many of the world's leading nutraceutical, functional ingredient, and consumer health companies actively seeking next-generation innovation partners. At the conference, we conducted approximately 30 highly meaningful meetings over three days with prospective partners and customers. The consistent message we heard and what was visibly evident across the exhibition floor was that much of the industry is currently offering highly similar products and formulations. resulting in an increasing urgency among companies to find genuine innovation and meaningful differentiation. In that context, BioHarvest's proprietary botanical synthesis platform and CDMO business model were repeatedly viewed as a highly differentiated and compelling proposition capable of introducing entirely new plant-based compositions improved efficacy profiles, sustainability advantages, and defensible innovation into the marketplace. Overall, the conference significantly reinforced our confidence in the growth potential and strategic positioning of BioHarvest CDMO business. At Vita Foods, I had the pleasure of having with me our new head of business development, Mrs. Nadira Salzman-Frankel, who started with us in March. We're very excited to have her with us and want to stress that her appointment underscores our efforts to support BioHarvest as a true strategic partner in collaborative development versus simply a service provider. We plan to participate in similar subsequent events like the upcoming Bio-US Convention being held in San Diego in June. In summary, I'm excited about the growth opportunities that lie ahead with BioHarvest striving for optimum execution in both businesses for the creation of significant shareholder value. With that, I'd like to open the floor to questions. Operator,

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Samir Joshi with H.C. Wainwright. Your line is open. Please go ahead.

Thank you. Hey, good morning, good afternoon, Zaki, Bar, and Ilan. Thanks for taking my questions. Zaki, congratulations on your new role, and I'm sure Ilan will be around. My first question is about... the size of the market that the saffron opportunity affords you. It seems like it is a multi-billion dollar market. And I just wanted to see what kind of entry you are going to get. What is the actual addressable market that you can supply? Just metrics on the market would be good.

Thanks, Sameer. Josh, actually, right? Maybe I'll take the opportunity to share something with everyone on the call and I'll address your questions directly. You know, a couple of days ago, I had the opportunity to smell success and see success. I smelled the fragrance that we are developing and for which we've made the announcement. And I also saw the saffron with a beautiful color of that substance. And really, I was very encouraged. And I just want to talk about it today. And your question is really enabling me to discuss the saffron in particular, because Like you said, it's a multibillion dollars market. The initial focus would be on the dietary supplement segment, basically addressing health related indications from a nutraceutical perspective, which is, as you know, is a foster to market. The arrangement we have with Safran Tech would allow for us to be actually becoming an integral part of bringing it to market. So in a way, we would have more control over the speed at which we bring it or the regulatory approach to it, as well as targeting which indication we should go after initially. Because one of the things about Safran, as you know, is really addresses a lot of areas. cognition, ADHD, PTSD, among other things. So what we're doing now is as we analyze the results, we're looking for the possibility of having multiple compositions, meaning because, as you know, there are and I mentioned that in in my speech earlier about the three major ingredients. Interesting enough, the ratio between these ingredients may target depends on which ratio you could target one indication better than the other so we're going to put everything into our ai models to try to come up with which combination we think fits better to which market In terms of time to market and efforts, we expect to soon be done with the stage two so that we can have enough samples so we start doing some possible trials. My goal is to start manufacturing the product the second half of next year in tandem with the factory that we're building, as you probably know. And as such, we think towards the end of next year, we should be starting marketing and selling the product as a dietary supplement, most likely to be in the form of a capsule. You may have heard Ilan and he may echo that as well. that we're looking at possibly also the combination of saffron and vineyard because vineyard, it's kind of an adjuvant basically to every, to every dietary supplement you can think of because of its ability to conduct better the substance into your bloodstream. So that's kind of the approach we have and the timeframe that we have in mind. And I, I, We'll probably need another quarter before I can tell you which indication we're likely to be focusing on.

Understood. No, this was helpful. And the saffron target is really a well-chosen target. Congrats on that. Thank you. On the CDMO pipeline, so to speak, I know you gave an outlook of around 12 to 14 million and there will be some of it, a meaningful portion from intercompany Vinaya. The rest of that outlook, does it include two or three or four additional sort of relationships that you would be announcing between now and the end of the year?

The answer is yes. So we on purpose segregate between the a third party call it, or revenue, which is service for 2026. It's all service, all development, right? And then the production, which is internally right now, and hopefully in 2027, we're going to produce not just vinaigrette, but other substances. So in 2026, we guided for $4 to $6 million, stemming from some of the projects as we advance them, and then we can recognize more revenue related to the products that we have. And you know that we're doing four molecules right now simultaneously, and at least three to four additional products projects allow me to call them projects and these will be across the next three quarters including this quarter and of course we'll announce them as soon as we sign the appropriate agreement but our pipeline now calls for a minimum of three to four new projects that will go in interesting enough Some of them might be from an existing substance. You know, we are part of the assets of the CDMO and I think I would probably need to do better work to clarify it. There are molecules that we are owned by the CDMO part of the business that are in a more advanced stage. So basically, more of a de-risking as you know stage one in our development with the botanical synthesis process is a stage with a little riskier so by bringing to the market or bringing to the customers something that has already been de-risked we can command higher prices to start with and of course time to market would be shorter i mean hopefully in 2028 i should be able to produce at least four different substances in our new factory

Sounds really good. Thanks for that, Kalazati. Just one more question on DTC, actually. Ilan, maybe you can remind us what is in the pipeline of new product development and should we expect anything over the next 12 to 18 months to hit the market?

Thank you, Samir. When it comes to the DTC business and from a new product perspective, I first want to just talk about Alvinio. blood flow hydration product, which is still a new product. And we've seen really significant success. We're getting onto delivering a million dollars in sales of the product since we launched the product in late November. And I think that's, you know, quite a significant achievement. We should get to that by the end of May. It's always good to have your first million dollars of a product and that's pretty quick. And the ramp up's going really well. The consumer feedback is, is really overwhelming. The reviews are 4.7 out of five from now close to 160, 170 verified reviews. Feedback on a consumer level regarding the efficacy and regarding the taste is super strong. And we're very, very bullish on about blood flow hydration and we continue to put more spend behind it and broadening the channels of distribution. We've opened up TikTok. Again, great feedback from TikTok and we're ramping up quickly in TikTok. Our Amazon business is also ramping up. It's a significant, you know, we're talking multi-billion dollar category just on Amazon. Our rankings are improving day by day on Amazon. And what's amazing about this product, which we don't have in the rest of our business is there's a seasonality curve. And as we now are moving into May, June, July, August, September, this is when it starts to obviously get extremely hot in the US and we literally see significant benefits that we will be able to enjoy as we have the growth of the brand plus the seasonality impact, which is going to significantly drive the second half of the year for us. So very, very encouraging on blood flow hydration. And I think it's all anchored in the fact that we have the best nutrient delivery system available. as a result of our veneer, blood flow, dilation and delivery system. And I say that very, very purposefully, we're now coining literally the machine that veneer puts inside your body, the veneer blood flow dilation and delivery system. Ultimately, by dilating your arteries, more blood flow, where in the case of our electrolytes product, we're delivering the electrolytes and fluids faster and deeper to all of your cells. And that's why we're getting the feedback from consumers to say, wow, efficacy, this is amazing. And obviously, we always are very focused on delivering superior results. which is anchored in all the consumer research we do before bringing products to market. As we look at new products coming to the marketplace, we will, again, double down and focus on blood flow hydration. Secondly, we will be bringing an additional chew product to the marketplace. We have our 2X. double chew in the market, targeting elite athletes, which is going very, very well. And now we're bringing a single chew into the marketplace. I'm sure you've seen the chew category is growing significantly as its fair share representation increases of the total supplements pie. And that we will bring into the marketplace in the third quarter. And as I said in the last earnings call, You know, we are targeting a number of, you know, multi-billion dollar categories that we will leverage our Vinya blood flow dilation and delivery system on to be able to really deliver superior efficacy and superior taste in these categories. I talked about some of those categories on the last earnings call. We're now doing a lot of product development and towards the back end of the year or early next year,

we will be bringing uh one of one of these you know breakthrough products to the marketplace understood thanks for that color elan and and as zaki also highlighted uh the vinaigre is a is a is an adjuvant and can be combined with uh even saffron when uh when that product comes online so that looking forward to that uh may i squeeze one more on the financial I think you have hired a new business development person or team for CDMO. Should we expect the H&A or marketing expenses to slightly increase as the next three quarters unfold? The answer is no.

No, that's a very modest increase as a result of hiring. In fact, I did have last year, it's actually a replacement of someone that I had last year. So it's actually not even a new additional person overall in the budget. No, and for the purpose of what we're trying to do this year, there will be no increase in the marketing costs for the CDMO.

Understood. Thanks for taking my questions. Congratulations on all the progress. Thank you so much. Thank you.

Your next question comes from the line of Nicholas Sherwood with Maxim Group. Your line is open. Please go ahead.

Thank you for answering my question. You're kind of looking at the CMO business. How are you evaluating your pipeline of opportunities on CMO? you want to add you know i know right now it's like you have an agreement with a food ingredients company with tayton lyle there's a pharmaceutical company there's a saffron and then there's the um the fragrance company are you looking for you know trying to keep things broad and you know make sure that you're not putting everything into one basket you know looking at these pipeline of opportunities you know what how should we think about your thought process

It's a great question and thank you for asking, because I mean, one of the advantages of bio-harvest technology, fundamentally the botanical synthesis, it's agnostic to which industry really. We can serve pharma, nutraceutical, cosmeceutical, fragrances, as well as nutrition. Each one has its own characteristics. So for example, nutrition would be the one with the largest volume, lower margins. We don't expect to be active too much in the nutrition space just because capacity constraints until the next factory coming to be commissioned. We're happy with what we do now with Kate and Lyle. you know, in terms of the molecule we're developing, in terms of where it is right now in the development stage and when we can bring it to market and build volume. I'd say our sweetest spots are, are in the nutraceutical and the area of fragrances. Really, this breakthrough in fragrance is going to create and increase the pipeline in that area. And those are interesting because on the nutraceutical, it's kind of mid-volume, really good margins and speed to market. cycles of regulatory approvals to bring to market so that shrinks once we're crossing stage two trials can be conducted so the cycle is shorter and then the fragrances is even shorter from a regulatory and they bring in great margins so we have Those are the spots where I believe the pipeline is converging faster. And also, we are a little more selective. We're trying to gravitate our attention to those two markets. And then on pharma, there is a lot of interest. We are... trying to be very selective just because, again, where we are in terms of capacity and development, as well as where we think the pharma opportunities in terms of manufacturing. We're not saying no to pharma, but we're a little bit more selective in timing of bringing them in. So what you will see more likely in the next few quarters would be more nutraceutical and call it cosmetics in general. And then progress that we would be making in the area of nutrition would take a while. You'll be hearing more about it in the next couple of quarters.

Okay. And kind of a follow-up question on the cosmetics agreement here. Now, do you think you would be doing more of these through your current partner and then they would potentially be, you know, along with you selling the product on to, you know, whether it be a house or or do you think it'll be you'll be kind of going directly to some of these larger brands that are creating, you know, whether it be like a perfume or, you know, a scent and a lotion? Like, how should we kind of think about that?

So the current fragrance that we're talking about has multiple applications. It's a very big market. I think we've sized it in one of those news releases in billions of dollars. Some of it is serving as an incense. That's billions of dollars in that market, as well as ingredients for the fragrance market. So it's really not just what people buy in the store in terms of spray or perfume. So it's more than perfume. And so the partner that we have has an approach of more likely B2B and then, you know, some lined up companies that would be buying what we produce. And as you know, we're at 80-20, so 80% is owned by the partner, 20% is owned by us. stream of revenue. I believe that this fragrance can start getting into the market in the second half of next year. I don't think we're going to have a lot of capacity initially, a requirement to support that effort because in the sampling in the market, etc. But you see a mix of businesses that will be taking the raw material that we provide and then integrate it, either selling it directly for incense purpose or as an ingredient into the fragrance stream, like creating an oil out of what we produce to serve the fragrance industry top brands that are looking into this particular fragrance ingredient and they are naming it and they're all looking into that particular source. Unfortunately, I'm not at liberty yet to disclose the name of that ingredient, but it's a well-soaked ingredient and it's part of the luxury fragrance and hitting the Western market recently with many designers, major designers, basically adding it to the line of fragrance products.

Understood. Thank you for the detail. My last question is, I know that it was presented as a very long-term opportunity a couple of years out, but what sort of interest have you seen in the plant-based exosome extraction breakthrough that you announced last year? And just kind of give us as many details as you can on how that's developed.

Great question. It's actually not so much of long term. This is part of the CDMO assets. And so we are in the midst of testing now quantitatively the exosomes that we have. So we do produce exosome. Not only do we produce exosomes, but we produce them at commercial quantities in our bioreactors. And now we're in the process of characterization of the content of those exosomes to decide which markets they best serve. Exosomes are not, you know, as we study better what they can do. And by the way, I mean, for plant-based exosomes, we need to call them something different. It's called extracellular vesicles. So those extracellular vesicles and the content that they will have may target even dietary supplements. So then we can decide for the case of veneer, do we want to double down and have additional dietary supplements that are based on red grape but with various ingredients? I think we did talk about veniferin. as one of the ingredients that is very interesting and or to go after the topical markets with those exosomes because you know exosomes have the advantage of better penetration of the skin just because of their size about 1 over 100 of the cell size so we were weighing our opportunity based on the results and hopefully in the next quarter, by this time that we do our earning release, I'll be able to expand on the, on, um, on the exosomes from a quantitative market. We're also looking at immediate, we're now already, uh, looking at the, because it's the downstream processes, you know, our exosomes are kind of a, a benefit. We're getting them as a, as gravy out of the, um, uh, the, um, media, right? When we dry our material, we have a lot of media left that normally we throw. Now we can use it further downstream. So for an industrial process, we need to do some additional downstream work that we're assessing now. But we certainly will be able to speak about it next quarter. more from a quantitative standpoint of what does it mean, what would one milligram of that material contain in terms of monitoring and then talk more about when can we bring this to market and what would be the best vehicle to do that?

I would just add that it's a very important asset that the CDMO has, because now when we engage with customers in this area who are starting a project with us, they have ability to be able to develop a unique molecule at a cellular level And with that, they also have the potential of developing one of these extracellular vesicles in addition. So it's like a one plus one, which makes our CDMO proposition to customers extremely compelling when you think about the initial stage one costs and the ability to really drive significant value for our customers.

Yeah, I'm looking forward to hearing more and thank you for answering all my questions. I'll return to the queue.

Your next question comes from the line of Matt Hewitt with Craig Hallam Capital Group. Matt, your line is open. Please go ahead.

Good morning and thanks for the update. Regarding the Barcelona conference, it sounds like you had some really active dialogue. How quickly would it be before you start to see some contracts come out of that type of an event? I'm just trying to think. Obviously, you've got three to four more potential CDMO contracts before the end of the year. Is that Barcelona conference, does that create maybe a second tier for early next year? I'm just not sure how quickly those types of conversations turn into actual business.

Actually, in terms of... So there are two elements to take into consideration here. My capacity of development, although I have increased it dramatically, but still not, I can't run 20 projects simultaneously yet. But so I now have the ability to select which projects in this quarter, next quarter, and the one after, right? So if we look at three to four, which I had in the pocket, let's say for the remainder of the year, I may reorder them in a way where one of the three to four would be the one from Barcelona. Actually, you'd be surprised that there is a faster conversion through the Barcelona meetings as the urgency of people want to differentiate themselves And I would say probably one of those Barcelona opportunities would be with one of the already pre-developed molecules that we have. As you know, we have a series of molecules that we've already had developed, and that would be a faster process. And that's why I can sign those deals a little faster because I have de-risked, especially the first stage, which is the cell bank. So I would say Barcelona contributes one out of the those four and the rest are part of the pipeline that exists. The others from Barcelona can be put into the pipeline that can start creating more projects into 2027 and beyond.

Got it. And then maybe a question regarding the new marketing strategy. Given that, you know, January, February, you were kind of making some of their tweaking some of the the go-to-market strategy there. March, you kind of initiated the new strategy. What are some of the initial feedbacks or metrics that you were tracking in March, and how does that shape up for the rest of the year? Thank you.

Yeah, sure. Thanks, Matt. So when we looked and we stepped back and we looked at what the mission was for the team, we were very, very focused on driving the metric of cost of acquisition as a ratio to lifetime value. This is really a critical metric that is so important in the business. If you look at the recent acquisition of Groons by Unilever for $1.2 billion, happened in the last four weeks, you have a ratio of lifetime value to cost of acquisition of three to one. This is like the sweet spot. And we're doing pretty good as it relates to this, but we've got a little bit to go to be able to get into the zone where we want to be best in class. And so the work that we're really trying to do now is all anchored in this mission of getting that ratio right and ultimately moving our business to a best-in-class business as a way to move from 90,000 customers to half a million customers and from, let's say, $35 million of revenue with the ambition to get north of $100 million. But, Matt, not to do it, you know, actually... Two days ago, so today's Thursday, so on Tuesday was our five-year anniversary of entering into the U.S. business. And in the five years, you know, we built a significant business, number one resveratrol polyphenol brand in the U.S. But we don't want to take for the next milestone, which is that $100 million. We don't want it to take another five years. No ways. And that's part of me stepping into this role to build the architecture and the blueprint to be able to go from $35 million to $100 million fast. Really, really fast. So... That really is the ultimate key metric. In doing that, obviously, we're working on improving our cost of acquisition, which is based on a number of critical areas from really focusing on specific personas, which we believe are the hero personas, that are most relevant to our brand. It's also we're working on improving our product messaging, which translates into better creative. You're going to see us coming out with a much stronger offer in the marketplace to improve conversion and then improving the critical flows of email signups, post-purchase flows, and really optimizing our our broader ability to retain customers. We have a very high retention levels, but we want to do better. And so we're unleashing now. We did some great test and learn in January, February. We saw encouraging results as we moved into March and April. And now we're getting ready for phase two, which will be implemented in the first of June. where there will be even more fundamental changes that we're making, not just in the marketing mix, but actually in what hits the consumer, which I'm really excited about. And we believe will have significant impact on our overall conversion.

Got it. Thank you.

Your next question comes from the line of Sean McGowan with Roth Capital Partners. Your line is open. Please go ahead.

Thank you. Hello, everybody. A couple of financial questions. Can you talk a little bit about or remind us of the financial impact of the shift from Stage 1 to Stage 2 for not just Saffron, but for any of those businesses? So what happens financially in Saffron?

So phase one normally is in the vicinity in terms of contract size of half a million dollars. Entering phase two is normally a contract between one and one half million dollars, depends on the molecule. And then there's another one to one half million dollars in stage three. Overall, and we're doing our best to try to shrink development within 24 months from zero to ready to go into into production so that's how the way you should be looking at it and phase two one to one and a half million dollars phase three one to one and a half million dollars and what happens to expenses during that transition uh so when when we completing phase two meaning i have biomass that um let the customer do whatever trials, perception trials, clinical trials, whatever pre-commercial trials, that would be yet one more big step towards de-risking the proposition. And normally stage one is the riskiest stage two, if you have stage one, if you cross stage one, then you're on, you can do stage two. But then you have the final, end of stage two, you know what the final product is. You know exactly what the COAs is going to be, you know what the cost structure is, and you know the efficacy because you can start sampling, testing, et cetera. We're looking at the difference between having milligrams, And then really once the customer at stage two, and normally people start having, making their mind about the move from, so for example, you see that between completion and stage one and signing an agreement on stage two, sometimes it's a matter of a few weeks. I expect between stage two and stage three, maybe a little longer, maybe a month or two, or maybe even three months lag between the two. What the good news is we're able, before the end of the stage, we're able to provide some material so people can start doing some tests and not necessarily waiting until the end because what we optimally is we want to make sure that people can move as fast as possible between one stage and another.

Thank you. That's very helpful. Shifting gears for a second, can you give us an update on the status of the development of a new plant, both from an operational standpoint as well as a financial standpoint.

The new manufacturing facility you're talking about, Sean?

Yes. So we're looking at starting to produce in the second half of next year, which means that I still will run in parallel the two facilities. Ultimately, the goal is down the road because the new facilities are more efficient facility. Hopefully, you're going to see that in terms of gross margin, et cetera. So sometime in 2028, We're looking at reducing capacity in the first facility in favor of increasing capacity in the second facility. But we're starting to add capacity in the second half above what we have in the first one in the second half of next year.

Okay. And in terms of cash flow and investment, I thought there'd be more investment reflected in the future as well.

We're looking at what we have in our coffers and we believe we have sufficient funds. We're doing some prioritization and trying to live within what we currently have. So we're optimizing a few areas and so that what we have can suffice to be to start producing. Now, we may want to do additional things down the road that may require more capital, and then we'll see where we are in terms of earnings that we produce and the speed at which we need more capacity. My feeling is that the CDMO may actually be the contributor to try to get additional capital towards the second half of next year because of the required, the faster requirement for capacity. And that would, to me, would be good news. And that would be something that we would be able to finance in different ways. Because remember, CDMO manufacturing would be done under contracts. It's not a D2C situation, but it would be done under contract.

Yeah, Sean, I just wanted to add that The focus of the team now, and this is something that Zaki's spending a lot of time getting into, is we're now finalizing the detailed engineering design drawings. I mean, you can imagine it's a very serious undertaking that we are working through here to build this facility. This is the next generation of our technology. We're looking to really bring in a lot of engineers and new layers of technology. So the engineering work and the technical design, detailed technical design work is paramount. We need to get it right. And that's why you're not seeing yet any of the long lead items from a CapEx perspective, because we're now working through making some of those tough decisions as it relates to final technologies, final suppliers for specific technologies. There's a lot of testing that's going on across the world with different types of technology that we're looking at bringing into the facility from a harvesting perspective, as well as drying, et cetera. But you should start to see that capex build in the second quarter and third quarter of this year.

Okay. Thank you. That's very helpful. And my final quick question maybe for Barr is when will the SEC filing hit? Because I don't see it yet in the –

It should be out very soon.

Okay. Thank you very much. Best of luck. Thank you. Thank you, Sean.

There are no further questions at this time. I will now turn the call back to Dr. Zaki Rakib for closing remarks.

So I'm going to say what I said earlier in the call. I felt success. I saw success and I I hope I was able to speak about success. I'm really feeling strong confidence, high confidence in the prospects of the business on both segments. The latest success in CDMO have not only technological meanings, but financial meanings. Hopefully we'll roll those soon with models that we'll be able to explain to you guys and to the market what they mean and when manufacturing starts kicking in, et cetera. So once again, I want to thank everyone here and looking forward for our next earning in August, I guess.

Yeah, August 14th. Yeah.

Thanks, everyone.

Enjoy the rest of the day. Thank you for attending. You may now disconnect.