Avax One Technology Ltd. (AVX) Earnings Call Transcript & Summary

Good day, and welcome to the Second Annual Winter Wonderland Best Ideas Conference. The next presenting company is AgriFORCE Growing Systems. [Operator Instructions] I'd now like to turn the floor over to today's host, Mauro Pennella, President and Chief Growth Officer of AgriFORCE Growing Systems. Sir, the floor is yours.

Thank you, Matthew, and good afternoon, and thank you for the opportunity to speak about AgriFORCE. I will try to drive, I mean, a certain quick overview of the company and the key salient points. But I wanted to start, first, as a backdrop to our business as quickly review what drives our vision. And I'm sure you all know, I mean, a clear and present pressure in the agricultural world. I mean the fact that cultivators are challenged to achieve, I mean, consistent high-quality and environmentally-friendly product. The consumers that are driving the narrative of what they're looking for. And as well, I mean, due to the high impact of legacy farming that is in terms of major water usage and also impact, I mean, from a carbon footprint, governments are increasingly looking at it and potentially driving some more legislation. At AgriFORCE, our purpose is to positively transform farmer, food and family every day, everywhere. And our vision is really to become a world leader in delivering next-generation foods and plant product through advanced AgTech solution. And when I say advanced is because everything we do is based on know-how and IP, that's the real driving goal, I mean, of AgriFORCE to drive. I mean, premiumness as well as value in food and plant systems through IP and something that is very clearly a commodity market. Our business is developed in 2 different slides -- excuse me, for moving the slides around. And it's a true integrated AgTech business from [indiscernible]. AgriFORCE solution is there to deliver sustainable, efficient and healthier crop. And I will explain a little bit about it as well as AgriFORCE Brands then developed and commercialized those ingredients and products to consumers and businesses. With the acquisition in process of a consulting company on the AgriFORCE solutions side, what we're really trying to do is change the game in that deck, drawing inspiration. I mean, from other successful organizations in sectors in other sectors of that high integrated approach were set to build a platform from a global consulting side in agriculture and horticulture that we then augment with facility solutions and cross-selling of AgTech platforms underneath. The consulting firm is probably the foremost consulting in agriculture and horticulture in the world is based, in Holland, has got revenues of over $30 million and EBITDA of $3 million. Operations in Europe, Asia, Africa and parts of Latin America with an opportunity to really drive the expansion in the U.S. and -- in the U.S. market as well as increased penetration in China and Japan. They're really at the forefront of knowledge, IP development and research. Both from the knowledge development, implementation as well as through innovation centers that are basically large greenhouses for which customers come in to test together with the consultant, new cultivation, crop optimization or automation, AI as well as lighting and channel control opportunities. They really drive, I mean, most of the revenue only through consulting at the moment and therefore, have opportunities to expand and broadening products and services and the needs for cross-selling. And the important element is that it really is a Trojan horse. I mean, in understanding where the next knowledge implements -- implementation and opportunities lie in AgTech as well as helping identify potential companies for the M&A strategy. At the core of AgriFORCE was also the facility in disruption that we were -- that we're trying to drive, which is the next generation of agriculture facility design. No one has optimized the data solution to achieve the plan through genetic potential. That's because 90% of the plants' ability of which the genetic potential is determined by the environment. But most of the solutions are really on the other 10%, which is lightning or nutrition. And our facilities really is different in the sense that it has, first and foremost, the unique building envelope. That unique building envelope, which is a tent-sized structure, it's like a big tent that we basically put over the building. It doesn't have any beams and poles, which means that we also capture over 30% additional growing area within the same comparable surface than others. Secondly, distance structure is made out of a proprietary transparent material, kind of a light material that allows basically all the life spectrum as well as all the UV spectrum needed for the plants to grow inside, as opposed to other greenhouses that have got plants that let 70% of that light spectrum and none of the good UVs as well as plastic. I mean most of the greenhouses are built like this, that only lets 50% of the life spectrum and other UV. The second element is that due to the fact that it's a tent-sized structure, it's basically to tents on top of each other with about 30 inches of cavity for which we fill with a proprietary water-based foam that for every inch allows to achieve an R1 insulation value. So we can go up to our R13 insulation value. Most houses and buildings in the world are R22 that allows us to basically operate in very hot or very cold climate by utilizing a fraction of the energy needed for them. So those are some of the core differences of what our facilities really provide. Finally, it allows us to be a low-cost producer for very high-end crops. I mean medical plants as well as nutraceuticals and plant-based environment. It also has a disrupting profit margin model in what it really drives, I mean, both from the building and as for the listing of the building as well as the different IP licensing and the management services and SOP captures, for example, in medical plants, about 85% of the production value of it. And those facilities are usually over a -- contracts -- and we use cultivators of 15 years minimum that allows basically a sustained EBITDA and revenue over the lifetime of the contract. We currently have one contract signed for the Barbados for a medical cannabis operation as well as we are resigning and reworking the contract that we had originally in F1 that we basically have to change to be more as really compliant, and we are now about during those phases, for a total of 4%. In the future, what we're seeing is that we have not only the profitability that I spoke about, we are in discussion, I mean, with another facility in the Barbados driven to food as well as we have California campus that will be able to upgrade the facility. And we're also in discussion with some of our cultivators for facilities up to 3 of them in the Eastern U.S., at which point we will then go further into Europe and the Middle East. A key element of our strategy, as I explained to try to create a consolidated integrated AgTech of the company is to really, I mean, drive also the M&A strategy. Over the past 1.5 years, I mean, we've been present in Rotterdam and in Holland and have really scouted and created relationship and driven very advanced decisions with a lot of privately-owned, family-owned companies that have been in those 4 pillars of AgTech, lighting and design of climate control, automation, fertilization or plant macro-propagation. And some -- are those set of leaders in those pillars, but actually working a style and the opportunities to really bring them under a family of integrated company that allows to really build on each other to drive more solutions, better integrated AgTech platforms as well as really cross-selling to their base of customers. The second part of the business is AgriFORCE Brands. And it really is about developing and commercializing some of the products and solutions, i.e., the plant and the crop, but at the same time, bringing IP to really commercialize and develop new plant-based ingredients and products that deliver helping more nutrition solutions. And the first thing in growth in this side is actually the commercialization of an IP that we acquired 3 months ago, Manna NG, which allows really to naturally convert grain, pulses and root vegetables. And what it does is that, for example, on the wheat side, I mean, when you take wheat grain, is that we end up, I mean, naturally to convert the wheat berry into a flour that is very high fiber, very high-end proteins, but does have only 20% of the starch. So that allows to have the same taste that you would expect from an all-purpose flour. It works in the same type of baked goods and breads and flour, but it is complete different game changing in terms of nutrition. We decided while we can do that into many other grains and as well as pulses as well as we root vegetables to focus on the wheat. The reason for that is that it's first and in a large market and very ubiquitous market, I mean, in terms of nutrition. It is also 20% with the worldwide caloric consumption today. And it is where this compared to the conventional flour, our flour with a very clear nutritional value advantage. Over the next 6 to 8 months, I mean, we are finalizing basically the qualification as well as the small scaling up of production for this flour on the wheat plant. We're also about to unveil a brand, all those things that will be driven both to consumers as well as the premium branded ingredient and of the unthinking side. Because the business model that we will advance is not only to expose it to consumers and start, I mean, really driving the claims as well as the digitalization, but actually really expand through partnerships with manufacturing as a branded flour ingredient for that. The other opportunities from an R&D standpoint is that we're working in developing same matches, for example, for buns, I mean, in developing a bun, that basically tastes and perform the same way as you would expect in a bun in the fast food that actually would become the most nutrition part -- nutritious part of the sandwich as well as we are identifying how to utilize one outcome of the flour production, which is a liquid, and that liquid has got very high nutrition element. And those liquids can be utilized not only as a basis for flavored waters or other sweets -- other smoothies and nutrition drinks. But actually it has very strong baking, enhancing opportunities, meaning that if you add it to the bread dough making or pizza dough making, it can speed up, I mean, the whole process from 2 hours to 15 minutes. So potentially a very interesting opportunity for the bread makers and other pizza makers to actually liberate capacity as we did in operation. Over the next 6 months, we will finalize this and then start a pilot testing in a market in the U.S. to basically expose it to consumers as well as some B2B collaborations, like bakeries and small manufacturers, with the idea to drive into 2023 by slowly, but surely driving and ramping up the national launch. Finally, the company really is rooted in sustainability. I mean we really believe it positively transforming both farmers and their families. We do that through 4 pillars. Market-enabled farming, where the consulting, the knowledge on agriculture and horticulture will really drive that and the appeal facilities also versus sufficient operations where our facilities compare in comparable base will be utilizing up to 30% less energy as well as have much higher space for yield on a square footage base. And then smart and good plans as un(Think)platform where we're really be driving as well as driving communities, which is where true studies, I mean, these medical research partners and institute, we will see over time the impact of the flours on potentially obesity and diabetes. And then also finally, our facilities allowed to operate in very hot and very cold climate, so bringing also those facilities and food and other plant-based crops to communities that could have it today. So really, as a summary, I mean, I'd like to leave you with a few points -- sorry, the slide [indiscernible] -- to build, I mean, first, that we're trying to create a disruptive business model, an integrated business model for AgTech 2.0, a little bit about the mini expansion for AgTech. It is rooted on IP and knowledge as a catalyst, was for that facility, which has 21 areas of inventiveness that will drive patterns as well as our services and AgTech solutions as well as food. It's about unlocking value, both in food and plant system, and it will start with organic growth plan that we accelerate through an M&A model. Thank you very much, and we can open it to questions.

Let's move to questions. Our first question is, can you provide an update on the planned acquisition announced in January?

Yes. We are finalizing the due diligence. We are, right now, in finalization of definitive agreement. So we should be able to drive some news on that over the next week.

Great. Our next question is, what is the status of the Coachella project? And how far along are you?

So Coachella project, we have identified the land are working on project financing and finalizing the contracts. I mean the rework of the contracts with the cultivators. So that is also something that we expect to fine tune over the next month.

Great. Our next question, you recently hired a Director of Marketing and Communications. Can you elaborate on your marketing efforts and strategy moving forward?

Absolutely. I mean part of that was to have really a key partner in communication, both from a PR standpoint. I mean, to really drive, I mean, crystallize this message, as we build those catalysts and integrate those M&A opportunities into really an integrated AgTech method and really consulting, driving and the knowledge, both the services to horticultures and agricultures to then drive, I mean, the integration with facility solutions and other AgTech platforms that we will drive as well as starting to build the base of how the unseen brands get, I mean, within the overall arching umbrella, and then start helping the team of unchanged to basically drive the messaging, both on the B2C and B2B.

Our next question, do you have plans to raise capital for future acquisitions?

Yes. But I won't be able to tell you the specifics, that would probably a question for Ingo or the CFO.

Okay. Next question is, when do you expect to realize revenue from the California facility?

Early 2022.

And when do you expect to see revenue contribution from MNG wheat?

We will start seeing first revenue in the second half of this year, and then we'll ramp up in 2023. So it will be first revenue from a pilot plant and some B2B collaboration and then private into the next level with more national launch and more manufacturing relationships.

Next question is what will be the investment be to launch on un(Think)food.

Sorry, the investment, what?

So how quickly will you be able to launch on un(Think)food?

Yes. We plan to expose it in the pilot test market in the second half of say, Q3 of this year, and then start ramping up, I mean, as of 2023. So we'll see the brand. We'll see the brand products for consumers as well as some bakeries driven in the market, or 2, in the second half of this year.

Great. Can you comment on your current cash position? And what is your cash burn?

Current cash position is $7.5 million. Current cash burn is about USD $650 million per month.

Great. That looks like all of the questions at this time. So I'll turn it back to you for closing remarks.

No. Thank you very much for the opportunity to speak here. I hope every one -- we will probably see some of you, I mean, in some one-on-one coming later this week and happy to really drive more questions. We will also look forward to get additional questions from you if you have any. Thank you very much, and thanks for your opportunity.

Ladies and gentlemen, that does conclude the AgriFORCE Growing Systems presentation. The next session will begin shortly. [Operator Instructions] You may now disconnect.