Moolec Science SA

Good morning and welcome to Mulex Science's third quarter 2024 conference call. My name is Bill Zima of ICR, Strategic Communications and Advisory. During this conference call, all participant lines will be muted until the management's remarks when there will be a question and answer session. Please also note that today's session is being recorded. Today, MULEC announced its third quarter fiscal year 2024 business highlights. The document is now available on the Competence Investor Relations website at ir.mulecscience.com. This morning, you will hear from Gaston Palladini, Chief Executive Officer and co-founder of Mulek Science, together with José López Lecoubet, Chief Financial Officer, and Amit Dhingra, Chief Science Officer. In today's call, we will be referring to a presentation that is available on the company's investor relations website. Moving to slide two, this conference call is mainly for informational purposes, and during this call, the company will be making forward-looking statements regarding future events and results, which are not historical facts and include but are not limited to statements about the company's beliefs and expectations. Forward-looking statements involve inherent risks and uncertainties. Further information regarding these and other risks are included in the company's annual report on Form 20F, followed by the SEC, also available on the company's Investor Relations website. Now, moving to slide three, I would like to turn the call over to MULEX CEO Gaston. Please go ahead.

Thank you, Bill, and good morning to everyone. It's a pleasure to once again provide our latest business update. Today's agenda will address three main topics. First, I will highlight on our outstanding progress on Piggy Soy. Second, Amit Dhingra, Mulek Chief Science Officer, will walk you through our highlights on Safflower Platform. And finally, José López de Cube, our Chief Financial Officer, will present our financial highlights from Q3. Let's move now to the next slide. I want to share with you how proud I am of our team consistent execution on all fronts. Today, I would like to hone in on our news breaking success on the regulatory pathway with our achievement on Biggie Soy. I cannot simply describe how big of an accomplishment it is to be the first company in the industry to obtain regulatory approval of this kind from the USDA APHIS. As I said before in the press release from this particular topic, MULEC is unlocking the power of plants by leveraging science to overcome climate change and global food security concerns. I am very proud of the MULEC team creating value for the shareholders and the planet at the same time, while rewriting the history of biotechnology. With this approval, USDA APHIS RSR has deemed piggy soy unlikely to pose increased plant pest risk related to non-ingenuine soybeans, thus giving MULEC a green light to move and ship our product without individual permits relating to the APHIS regulation. For those new to the story, MULEC developed a unique and patented soybean platform technology under the trademark piggy soy. Our scientific team has achieved a high level of expression of animal meat proteins in soybeans, where the seeds exhibited porcine protein expression level up to 26.6% over total soybean protein. Now turn to the next slide so we can share with you why we understand Piggy Soy is relevant for our planet. In MULAC, we work daily with the mission to create food ingredients that can make a positive impact on the food industry environmental footprint and further strengthen food security. First of all, the industry is already growing soybeans in order to feed pigs that are then slaughtered to produce processed meat products. and cuts of meat. Roughly one acre of traditional soybean can feed 10 pigs used for livestock. To produce this livestock, it is estimated that more than 60,000 liter of water are required and that the process produce around 550 kilogram of CO2 equivalent emissions. Now talking about mullet, in contrast, if we achieve to farm one acre of piggy soy, this acre could potentially produce pork meat proteins equivalent to the same 10 pigs as well, while not requiring any additional water to produce them and will not produce extra CO2 emissions. Is that amazing? Turn with me to the next slide to see what we understand is piggy soy value proposition. I would like to give you one perspective on the attractive value presented by our piggy soy platform and why we are confident it is a market potential going forward. This is currently how the industry works. As highlighted in the previous slide, the industry consumes a significant amount of soybeans used as animal feed to support livestock, later slaughtered for meat. The industry is also using traditional soy protein ingredients. which are genetic soy commodity plants used as meat extender or fillers in the processed meat product, such as sausages, burger, nuggets, meatballs, dumplings, and so on. By the way, these kind of products represent 70% of the trillion dollar global meat market. It's huge, $700 billion. market. These traditional soy protein ingredients contain no meat flavors and other meat properties when compared to meat and need to be mixed with extra ingredients, mostly chemical, colorant, and flavoring in order to provide different functionalities to processed meat products. By the way, I am very well acquainted with this traditional meat industry since I am part of the fourth generation of one of the largest processed meat players in South America, Paladini. So now let's talk about Mule and what Mule will offer. Mule will leverage commodity supply chains, introducing science at the beginning of the value chain as new ingredients for food companies. Remember, we started with seeds. And how we will do this? Well, piggy soy will be a unique product used as a meat replacement, as an ingredient with a higher level of nutrition, could potentially boost the same iron content, flavor and color as true meat. As a result, food processors could replace part or eventually all additives used for coloring and flavoring, as well as real meat from slaughterhouses. Now I leave you with Amit Dhingra, MULEC Chief Science Officer. We will provide an overview of MULEC science and picky soy milestones on top of the subflower platform highlights. Amit, over to you.

Thank you, Gaston, and good morning to everyone. As critical as our regulatory approval milestone is, we continue to work on commercializing our product. I want to emphasize our team's excellent track record of effectively delivering on scientific and product development milestones. From the discovery stage in 2020 to the plan transformation stage, regulatory approval applications and patent applications, we have consistently produced results and continue to build our IP portfolio and file regulatory applications in other territories. With the approval from the USDA office, we started field trials at three different locations in May 2024 with fourth generation seeds. Everything is progressing on schedule and as planned originally. Starting next year, we will strategize the breeding of the selected events and scale up the production in two to four years. The commercialization process will likely begin in 2027, 2028. We look forward to updating you on our progress and implementation of our plans in subsequent business updates. Moving on to the next slide, I would like to highlight our recent achievements for Mulex's staff flower platform. in terms of product development and intellectual property. Moving on to slide 10. I will begin with our team's progress on gamma linoleic acid safflower oil or GLASO. This nutritional oil has many varied applications. such as dietary supplements and functional foods, cosmetic and personal care, pharmaceutical industry, food and beverage, animal nutrition, and others. We are proud to share that our Glasso is now in the pre-commercialization stages. In February of 2024, we started trial production of Glasso at our toll processor facility as we optimized, processed, and produced roughly five tons of material we developed pre-commercial collaborations. We began planting in April and May 2024. We have successfully contracted 600 acres of production with key growers to plant glass of seeds for crushing purposes. We have additionally contracted another 60 acres, which have been planted for seed production. We expect to produce roughly 200 to 400 tons of safflower during this production season. Shortly before the year ends, we plan to harvest, crush, and market our 2024 Glasso seeds as we engage with potential customers and partners. Now to the next slide. I would like to highlight our exciting progress on SPC2 product. Two U.S. patents were granted for SPC2. These patents extend the protection of our technology and processes that were used to increase the expression levels in safflower seeds until 2041. Building up on our intellectual property portfolio is one of the strategic pillars at Moblec. To protect our leading-edge innovations in the coming years, we continue to pursue patents for all technologies and processes across strategic geographies. Now, I'd like to turn the presentation over to my colleague, Jose, for the financial overview. Thank you very much.

Thank you, Amit, and good morning to everyone. It is a pleasure to be providing this business update of MULEC for the third quarter of fiscal year 2024. Today, I would like to review our latest highlights with regards to revenues, expenses, and gas utilizations. In particular, we are introducing year-over-year figures from quarter-over-quarter comparisons as we have completed four quarters reporting as a public company. We are confident that this change in how we report the progress of Mule will provide our stakeholders with a more comprehensive understanding of the evolution of the business, given that year-over-year comparisons offer a more stable view of the company progress. Please keep in mind that all figures mentioned today are in U.S. dollars and audited and based or derived from IFRS unless otherwise stated. Let's move on now to slide 13. During the third quarter, normalized revenues and other income, excluding IIS 29, increased year over year from nil to approximately $1.3 million. This increase was due to the consolidation of the soy protein ingredient business which occurred in April, 2023. Normalized costs of goods sold increased as well on a year over year basis from nil to close to $1 million, resulting in a gross margin of around 18%. On the expenses from this quarter, SG&A and R&D have increased to $2.3 million from $1.4 million in Q3, 2023. This increase in expenses is mainly related to non-cash items such as depreciation, amortization and equity incentives, as well as the consolidation of the soy ingredient business. We continue to be confident in our conservative approach to expenses while delivering significant milestones and supporting company growth. In terms of cash utilization, operational cash flow this quarter was approximately $2.7 million, which includes close to $1.4 million allocated to lower accounts payable mainly related to transaction costs. On a year-over-year basis, operational cash utilization has decreased from $4.2 million in Q3 2023, given that this quarter we have had significantly lower cash payments associated with listing costs. Finally, our cash position of approximately $4.3 million as of Q3 2024 was strengthened by approximately $2 million of additional funding received during the end of April 2024 as a result of the utilization of the equity line of credit in place with Nomura. We are very pleased with how MULE continues to deliver significant milestones such as the USDA APHIS regulatory approval of piggy soil while maintaining an adequate corporate structure and a cost-efficient strategy. I will now turn things over to Bill for the Q&A portion of our call. Thank you.

Thank you, Jose. At this time, our management will be taking questions. You may submit questions through the Q&A chat box by submitting your name and firm in the chat and typing your question. Please be advised that we will ask you to unmute your line to ask your question live. We ask those who would like to participate in the Q&A, if your name and firm is not indicated on your profile, Please submit your name and firm in the Q&A box before asking a question. Again, you may submit questions through the Q&A chat box.

Before we take questions from the live queue, we have received a few questions via email. The first question is as follows. This quarter, you highlighted USDA approval for piggy soy. Can you provide more color on the significance of this achievement? What's next and the opportunity you see?

Well, thank you, William. Hi, everyone. Thank you for joining us today. Pleasure to be here with MULIT team. Paul, it's a very, very good question. We are really happy of being the first molecular farming company by achieving this kind of USDA approval. The US government and the agencies telling us that there's no such a vast risk in implanting our animal proteins in U.S. soil. I'm very happy with that. I think personally that this achievement is beyond MUNEC. I'm quite proud of Amit and Martin Salinas, Hank and Bruce and let's say all the Mulek team to achieve this great milestone. Because I personally believe this, they are writing the history of biotechnology. They are unlocking in some way molecular farming by getting these kind of approvals. So what's next? Well, in terms of operations, field trials, we are planting, as we speak, piggy soy in three different locations in the United States without permits, because now it's approved. That will bring a lot of information in terms of product development, in terms of the next step of regulatory front, that will be FDA. So we have already started conversation with the FDA. So we quite understand how the FDA framework works. I'm quite optimistic about how our regulatory team works. So really looking forward to continue providing information to regulators. um i'm pushing uh this product uh from from from a bunch of seats to through to thompson commercialization so uh thank you for the question and and again i'm very happy and i take this opportunity to congratulate molex team now in this earning call uh for this uh great milestone thank you

Thank you, Gaston. In the business update, you mentioned Glasso was in pre-commercialization stages. Can you talk more about the types of customers and timing of commercialization for Glasso?

Sure, I could do that. Well, yes. GLASSO product is in pre-commercialization stage. The type of customers for GLASSO and GLA oil will be pet food. Dietary supplementation, the companies that provide dietary supplements. Ingredient company that blends nutritional oils, not only omega-6, that's GLA-Glaso, also omega-3 is very complementary to the EPA and DHA, omega-3 oils. And nutritional beverages, that would be another application as well, and some specific food applications. So customers and potential customers are all around this category of products. And this, as you said before, Willie, in the question, I don't know who is asking, but this is true. We are very close to hit the market with Glasso. We are planting around 600 acres in Idaho, US, for commercial purposes. and in active conversation with customers to hit the market, hopefully by the beginning of the first part of the 2025 calendar year. So we are working hard. to deliver. OLEG is a science-based food ingredient company, and this is definitely a scientific product, a science-based product, and a huge market, understanding that the GLA market is around $1.5 billion globally per year. So the opportunity is quite big.

Great. Thank you, Gaston. On Piggy Soy, what can you expect commitments from customers? Have you had feedback from potential customers so far?

Good question. Well, it's hard to say a specific timing of customer commitments. But I can say that we are receiving very good feedback from potential customers and different stakeholders that are very interested in receiving samples of Piggy Soy. Actually, we have already started delivering some samples. But we haven't had too many seeds to crush and deliver samples. So we are actually multiplying seeds, making a seed increase. Actually, this is happening as we speak. As I described before in our field trials, we are also increasing seeds to get more seeds to crush and prepare sample for potential customers. So Mulek is a science-based company, but it's an ingredient company. It's playing in the ingredient business. and that's how they really in business work. You need to deliver samples, co-work with established players, co-work with the R&D departments, and that relationship takes time. This is not just plug and play. You need to co-work in some way with the customers, in the applications. We are in great conversations, but let's go step by step.

Okay, thank you, Gaston. Now we're going to take our first question from the live queue. The first question comes from Thomas McGovern at Maxim Group.

Thomas, at this time, we actually... Sorry, William, to interrupt, but I saw Scott Fortune raising his hand from the beginning of the early call. Sorry, Thomas, but I would prefer to prioritize a Scott question, if you don't mind, William.

Okay, that's fine. We can go. We'll take Thomas next. So we'll go to Scott Fortune at Roth MKM. Scott, please unmute your line and proceed.

Thank you. Thank you for the questions. I appreciate all the color and the progress you've made here, but just provide a little more color on the conversations you're having with, you mentioned ingredient foods and dietary supplements. I know you've given out a number of samples. And delivered to kind of to those different companies, but just a little more color on how those conversations, what's the feedback for, you know, ahead of this glass. Oh, you're still looking to commercialize this in early 2025 here that that'd be that'd be helpful from that standpoint. Thanks.

Sure. Well, good question, Scott. Well, unfortunately, I can't reveal names now about who these potential customers are. But what I can say is that we are in some cases working to close off-tech agreements and some commercial agreements. So that will come for sure. That's part of the commercial conversation and that's definitely the output that Mulek needs to actually progress and move forward with the commercialization of these products. But what I also can say about Piggy Soy is that this interest is coming from multiple ways. So we are focusing on food in case of Piggy Soy. um and that will be the majority of the excitement you know comes from from food applications But we all know that soybean is a very well understood ingredient for feed, for pet foods, and for some other applications as well. Petal food goes hand to hand. So we are also receiving interest from different other industries as well. Again, we are prioritizing food. That's where our focus is. is from now but um let's um as i said before you know it's quite um don't do soon to talk now about uh the soy progress uh glass oh well yes probably we will we will um keep you updated very soon in the following business updates earning calls

I appreciate that. Thanks. And then 1 more question for me, just providing a little color around the, the 1 kind of scale up process here. And timing to arrive at kind of the characterization prototypes to achieve regulatory compliance is kind of an update on that side of the business from your aspect here.

Sorry, I, I, I didn't understand the question. Could you please come again? Scott.

Color around the YEA-1 scale-up. You guys didn't update that, but a little more color on that and achieving regulatory compliance as you move forward. Just a little bit of help from that standpoint.

Sure, sure. Yes. Well, YEA-1 is on track. We use our last business update to talk deeper about YEA-1. We are right now multiplying, no, sorry, this would not be multiplying, it would be scaling up this product with our partner, Grupo ISUD, in Europe. We are using their facilities to scale up this product. And that scale up stage will also bring us samples and information for regulators to in the United States. So quite similar to PD Soy, we are in multiple fronts with regulators, open channels to provide information from both products. This is moving quite nicely, but we need to respect the regulatory pathway and framework, and I'm quite I'm happy on how our regulatory team internally moved with David Heron as an advisor, regulatory advisor of our whole team. handling all the different and multiple regulatory fronts for year one. So this goes in parallel. We probably will expect some results, not talking about regulation, but I'm talking about overall in the products. The yeast could eventually go faster than plants. because it's a controlled environment. In terms of plants, you need to respect the biology times, the campaigns, and the multiplication. It's quite more, I will not say easy, but quite faster to scale up in liters in a controlled environment than in tons in open field. But I will summarize my answer to Yerwan and Piki Soy and moving forward with FDA in parallel with open channels providing information. All the things that we are doing now is to fine tune product development and gather information to provide for the regulators in the event.

Thank you. Congratulations again, the USDA in really moving molecular farming forward for the industry. I'll jump back in the queue. Thanks. Thank you so much, Scott.

Yes.

Thanks. Thanks, Scott. Our next question comes from Thomas McGovern at Maxim Group. Thomas, please unmute your line and proceed. Thank you.

Hey, guys, yeah, so a lot of my high level questions were addressed. So I just wanted to focus now kind of taking a step away from. From Mulek and looking more at Argentina's economy as a whole right now. So in April, for the first time in six months, Argentina achieved a single digit inflation rate on a monthly basis. So I was just wondering how your outlook on the hyperinflationary environment in Argentina has kind of changed in the recent months. And if you expect this trend of declining inflation rates to materially impact Mulek moving throughout the calendar year and then into 2025. Thank you.

Well, thank you, Thomas. And I saw that you skipped the previous question because I have already addressed it. So thank you for that. Well, I will leave the floor to Jose to explain and talk deeply in inflation rates and the Argentinian business. Before that, I can say that Argentinian inflation is going down for sure. So 8.8 should be crazy, but compared with the five month right before this is definitely going down. Our president, I'm saying our, because I'm personally in Argentina, so our president now is in the US, expanding the network for investment in Argentina, so it's a good momentum for the country now. But definitely, the main topic should be inflation and how the economy will recover. So, José, please go ahead and get deeper into Thomas' question.

Sure. Hi, Tom. Thanks for the question. So, look, you know, Bullock has a global operation. with presence in the US, in Europe and in Argentina as well. So that provides MULEC with some exposure to the Argentine effects movement and the inflation as well. So having said that, our business present in Argentina has, for the most part, revenues denominated in U.S. dollars. So from that perspective, you know, inflation movement shouldn't have a large impact on the underlying business. On the cost front, we do have some costs denominated in local currency in Argentine pesos. So from that end, there is some exposure to the inflation that flies through our cost structure. So conceptually, I would say the following. When there is a devaluation of the Argentine peso, that has some positive impact on the cost front for us, given that we have some cost denominated Argentine peso. when there is inflation, when there is high inflation, you know, that kind of raise our cost of emitting Argentine pesos a bit. So it all comes to what is, how devaluation and inflation move along. If devaluation is higher than inflation, then that has some positive impact on our cost. If inflation is higher than devaluation, that kind of, our P&L. But again, our costs denominated in Argentan Peso is a small part of our overall cost structure. Now, looking forward, what can we expect? It's too soon to tell, but what we are seeing is a gradual devaluation of the Argentan Peso at a 3% per month. And a strong decline in inflation from 25% at the beginning of the year, now falling to single digits. So if things continue in this way, you should see a match between inflation and devaluation. So that provides a stable, some stability in real terms for the local currency. Hopefully I answered the question, Tom.

Yeah, thank you for that response. It was very helpful. All right, guys, we'll be back in the queue. Thank you.

Okay. At this time, it appears that there are no further questions. Therefore, I'd like to turn the call back over to Mulek's CEO, Gaston, for some closing remarks.

Well, thank you, Williams. Well, I really want to thank Catalina Jones, our chief of staff and sustainability officer, for handling all this great business update from our side, and also thanks to the ICR team to help us as usual. I also thank you all here, all the audience, for joining us. on today's conference call. Thank you for that. We are very, very happy, as I said before, of this USDA approval. Molec is definitely a flagship in molecular farming. This is a proof of that. um and um i am also happy that um the moolahs are providing uh value not only for the shareholders and all the stakeholders of mulek also for the planet because if we farm uh uh pt soy uh and this definitely could be very beneficial for our planet in terms of uh carbon and water footprint uh compared with livestock and believe me that's where i come from um and my name paladini is one of the um the most famous meat brands in Argentina. I'm very well acquainted with the traditional meat value chain. I'm very proud of my family business, but we need to understand what we need to find alternative solutions to produce the same animal proteins and meat proteins with science and technology to overcome the challenges in the food system. And we need to address carbon and water footprint for sure. So that's what PE does. So going back to the final remarks, I'm happy, as I said, to share with you this solid execution of the Mueller team. And we will continue working hard to step ahead for sure. A big thanks also to our partners, to our investors and the analysts that are following us and for all our supporters and followers. And thanks again for joining us today. We look forward to updating you in the next quarter for sure. Have a wonderful day or wonderful afternoon there in Europe for our European followers. Thanks.

Thank you all. You may now disconnect.