Q2 INTERIM REPORT

Q2 INTERIM REPORT JANUARY –JUNE 2016 NICOCCINO HOLDING AB (publ) org.nr 556942-1604. ... help support this work. • In June, a campaign was conducted o...

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Q2 INTERIM REPORT JANUARY – JUNE 2016 NICOCCINO HOLDING AB (publ) org.nr 556942-1604

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

Nicoccino Holding Development SECOND QUARTER SUMMARY APRIL – JUNE 2016

PERIOD SUMMARY JANUARY – JUNE 2016



Net sales for the second quarter amounted to 53 TSEK (397 TSEK).



Net sales amounted to 235 TSEK (522 TSEK).



Net income amounted to -4.9 MSEK (-7.4 MSEK) or -0.35 SEK per share (-0.56 SEK).



Net income amounted to -13.9 MSEK (-16.2 MSEK) or -1.01 SEK per share (-1.33 SEK).



Cash flow from operating activities amounted to 1.2 MSEK (-7.4 MSEK) or 0.08 SEK per share (-0.56 SEK).



Cash flow from operating activities amounted to -8.1 MSEK (-15.2 MSEK) or -0.59 SEK per share (-1.25 SEK).



Liquid assets amounted to 28.1 MSEK (50.0 MSEK) by the end of the period.



The Company continues its strategy of achieving a drug classification of the nicotine film and is focused to find a suitable partner to help support this work.



In June, a campaign was conducted online where the Company sold out products with short shelf life to a discounted price. The customers answered well to the campaign and a majority of the stock was sold out.

2/19

EVENTS AFTER THE END OF THE REPORTING PERIOD • No significant events after the end of the period.

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

Comments from CEO The Company’s focus

Production and Development

In line with our strategy, we continue the journey towards a drug classification of Nicoccino™ and focus our resources towards this goal. As mentioned in previous report, the company has undergone an organizational change this spring by having closed down the London office, and this change proceeds in the form of reduced costs for the company. This allows us greater opportunities to make active choices instead of forced decisions.

During the spring, the Company was in contact with several producers having GMP standard. We are in close contact with manufacturers both in Europe and US, however most important is to continue with a producer having significant experience in producing pharmaceuticals and especially products with our characteristics. We are hopeful to start producing nicotine strips according to pharmaceutical standards later this year, and then move into the clinical study.

Sales

Future expectations

The physical sales instore were closed down during the first quarter this year, however the online sales is still ongoing. We will continue with the online sales as long as we have goods in stock and it is my assessment that we will cover the consumer needs throughout the year.

Our plan is to initiate the clinical study during the first quarter of 2017 and until then put all resources in producing nicotine strips according to pharmaceutical standards. The preparations for a clinical study are numerous and contain massive documentation and technical work where equipment test runs and laboratory work are performed. When completed, we produce a clinical batch for which the study is based on.

Sales during the second quarter was dominated by a campaign where products with short shelf life were sold out. It was a successful campaign and almost the entire stock where completed. It is encouraging to see such a strong interest among existing users.

The purpose of classifying the nicotine strip as a drug is obvious, to increase shareholder value and to add value into the company. A drug classification will create a clear regulatory resident, making the product more attractive for other global players active in the field of future smoking cessation products.

Johan Cram, CEO, Nicoccino Holding AB

3/19

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

About Nicoccino and our product ABOUT THE COMPANY

ABOUT THE PRODUCT

Nicoccino has developed an innovative and patented nicotine product that after completion of a clinical study will be classified as a medicine for smoking cessation (Nicotine Replacement Therapy – NRT). With a clear classification, regulatory uncertainty will be reduced and new markets will open up that would otherwise not be accessible. Sales to consumers will be managed indirectly through a license model with international partners who are more financially equipped to reach out globally.

Nicoccino has developed a patented, innovative and discrete strip that through its unique delivery method instantly provides the user with nicotine without the detrimental side effects of smoking.

In 2014/2015 a commercial test launch was conducted in the UK where Nicoccino™ was sold as a consumer product online, and in retail. This introduction confirmed that the concept works and that there is a great potential for this new type of nicotine product. In early 2016 a new strategy was formed with an increased focus on creating a product platform that can be used by partners who wish to establish themselves in the market of Nicotine Replacement Therapy (NRT) or want to expand their existing product portfolio. This new strategy has resulted in the prioritization of achieving a drugs classification for when entering partnerships. Nicoccino has its office located in Täby, outside of Stockholm. The company's shares are listed on Nasdaq Stockholm First North since June 2014 and can be found under the abbreviation NICO. Remium Nordic AB is the Nicoccino’s certified adviser. For more information: www.nicoccino.se/en

4/19

The product is designed to offer smokers an attractive alternative when they want to quit smoking. After a pharmaceutical approval, the product will be sold as a smoking cessation drug (Nicotine Replacement Therapy – NRT). Once the strip is placed under the lip and onto the gum, it delivers a quick and potent nicotine effect. Within a couple of minutes the nicotine has been expended and the film dissolves without leaving any residue in your mouth. The platform is formulated in Sweden and is the result of over ten years of research and development. The strip itself is leaf thin and alginate based, about half the size of a stamp. Each dose contains 1 mg of medically classified nicotine, an alginate base (extracted from brown seaweed), as well as natural flavorings and aromas. All additional substances are medically approved.

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

Vision, Mission and Strategic Goals VISION To offer a unique and attractive nicotine product that is the most effective on the market.

MISSION Offer consumers a pure nicotine experience and an effective aid to quit smoking.

STRATEGIC GOALS 1.

Secure a new pharmaceutical manufacturer.

2.

Carry out test, validation and clinical production.

3.

Completion of a clinical study.

4.

Receive a pharmaceutical approval from the Medical Products Agency [MPA].

TIME LINE 6-10 månader Secure a new manufacturer

8-10 Test &månader Validation production

Clinical study

Handling by MPA

8-10 months

8-10 months

6-8 months

14 months

5/19

6-8 månader

14 månader

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

Business Idea and Business Model BUSINESS IDEA Nicoccino will, through its patented product platform, offer an attractive Nicotine Replacement Therapy product which is the most effective on the market.

BUSINESS MODEL The business model is based on introducing the product platform to international partners that wish to establish themselves in the market of Nicotine Replacement Therepy (NRT) alternative nicotine products or want to expand their existing product portfolio, and to launch the product themselves globally or in different regions. The licensing model could mean that the strategy is adapted to the conditions for each respective geographical market. Partnerships can also be established at earlier stages of the clinical approval process. The business model can also mean selling of patent and licensing of patents. Production and logistics are outsourced to external partners.

6/19

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

Patent and Intellectual Property Rights PLATFORM PATENT

TRADEMARK

Nicoccino is licensing the platform patent from Uppsalagruppen Medical AB.

NicoccinoTM is a trademark owned by Nicoccino AB, with approval in all EU member states. Logotype, symbols and graphic design was approved in October 2014. NicoccinoTM has been approved in the United States, Canada, China, Switzerland, Norway, Kazakhstan, Monaco, Russia, South Korea and Turkey. Approval for Israel is pending.

The Platform patent aims to protect the production of a strip that dissolves in the mouth when attached to a mucous membrane, releasing an active substance into the bloodstream via the membrane in the process. The patent is exclusive and licensed to the Company during the patent’s period of validity for products containing nicotine. This is a royalty free lifetime license agreement and The Company will cover any costs related to retaining the patent. The Patent Application (PCT-application) is so far approved and protected by twelve countries (Sweden, USA, China, Russia, Japan, Australia, New Zealand, South Africa, Israel, South Korea and Canada and Mexico) until 2026.

NICOTINE PATENT The he Nicotine patent is owned by Nicoccino. The Nicotine patent aims to protect the capability of quickly supplying nicotine via mucous membranes in the mouth using a product that can be stored in room temperature without breaking down the nicotine. Singapore is the first market to approve the nicotine patent (in March 2016) which enhances and extends the protection of the platform until 2033. The Patent application is filed in additionally fifteen countries as well as the EU.

7/19

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

Operations second quarter SALES AND MARKETING •

Although Nicoccino has completed the marketing activities in UK, the sales online to consumers has been stable.



In June, an online campaign was conducted where the Company sold out products with a short shelf life.



The products now available for sales has a shelf life until January 2017. Thereafter all sales activities of Nicoccino™ in its current form – a consumer product – will end. Instead, the nicotine strip can be sold as a NRT (Nicotine Replacement Therapy) after completed study and approval from the MPA (Medical Products Agency).

8/19

MANUFACTURING AND DEVELOPMENT •

As the Company is focused on developing a licensed drug, Nicoccino has sought new collaborations to secure an optimal production partner that fulfils all regulatory requirements but also has the flexibility and capacity suitable for the Company’s new business model.



Nicoccino is in discussions with several manufacturers that has extensive industrial experience.



In order to manage the drug registration in best possible way, Nicoccino has hired consultant companies that are experts in this area and are responsible for both study and communication with the MPA.

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

Sales and Net Income SECOND QUARTER APRIL – JUNE 2016

SIX MONTH PERIOD JANUARY – JUNE 2016





Net sales for the for the six month period amounted to 235 TSEK (522 TSEK).



The cost development has been stable for the period, and has decreased some during the last two months thanks to personnel turnover.



Cash flow from operating activities amounted to -8.1 MSEK (-15.2 MSEK) or -0.59 SEK per share (-1.25 SEK).



Earnings before interest and taxes (EBIT) amounted to -12.2 MSEK (-15.7 MSEK).



Financial expenses equaled to -1.7 MSEK (0.5 MSEK) and earning before taxes (EBT) amounted to -13.9 MSEK (-16.2 MSEK).



Net income for the period amounted to -13.9 MSEK (-16.2 MSEK).



Net revenue for the second quarter of 2016 decreased to 53 TSEK (397 TSEK) compared to the previous quarter of 182 TSEK. Since Nicoccino ended the physical sales in stores during the first quarter, the Company had to settle returns from some of the distributers within the second quarter. There are no more upcoming returns that will affect the turn over going forward. Cash flow from operating activities amounted to 1.2 MSEK (-7.4 MSEK) or 0.08 SEK per share (-0.56 SEK). The cash flow for the quarter was positive thanks to a repayment of a previously made pre-payment regarding production.



Earnings before interest and taxes (EBIT) amounted to -4.1 MSEK (-6.9 MSEK).



Financial expenses equaled -711 TSEK (-14) and is mainly related to currency losses on intercompany trade receivables.



Net income for the quarter amounted to -4.9 MSEK (-7.4 MSEK).

9/19

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

Financial Overview and Cash Flow Nicoccino Holding's balance sheet total amounted to 139 MSEK compared to 166 MSEK at the end of the second quarter 2015. Equity amounted to 135.8 MSEK compared to 163.3 MSEK in the corresponding period previous year which presents us with an equity/asset ratio of 98 % (98) at the end of the second quarter. Cash flow from operating activities equaled -8.1 MSEK (-15.2 MSEK) for the period. Current cash amounted to 28.1 MSEK at the end of the second quarter, compared to 50,0 MSEK in the corresponding period previous year.

EMPLOYEES Average amount of employees in the company was calculated to 3 (10).

INVESTMENTS AND DEPRECIATIONS Investments for the period amounted to 9 TSEK (21 TSEK). Depreciation reached -537 TSEK (-537 TSEK).

TAXES The company has paid 0 SEK in taxes for the period, due to existing tax loss carryforwards. For further information, please find the Annual Report for 2015, note 8, page 27.

TRANSACTIONS WITH ASSOCIATES No transactions have occurred between Nicoccino AB and associates that has substantially affected its position or income.

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PARENT COMPANY The parent company Nicoccino Holdings net income amounted to -39 TSEK (-583 TSEK) for the second quarter. The parent companies liquid assets at the end of the period equaled 22.2 MSEK (49,2 MSEK).

SHARE CAPITAL AND THE STOCK The share capital at the end of the period amounted to 0.69 MSEK divided into 13.830.000 shares. There are 4,513 registered share holders in Nicoccino Holding AB by June 30, 2016. Remium Nordic AB is Certified Adviser.

SHARE OPTION PLAN Nicoccino Holding currently has two stock option schemes in place. The first scheme contains 637,661 share options with strike price 14.51 SEK per share, to be converted into shares no later than October 15, 2016. The second scheme contains 500,000 share options where each option holder is entitled to subscribe to a new share in Nicoccino Holding at strike price 36 SEK per share. Out of the second scheme, 150,000 shares have been issued to management in the company and the remaining options are in the possession of one of the group´s subsidiaries.

RISKS AND INSECURITIES Nicoccino is through its operations exposed to risk and uncertainties. Information about the company risks and uncertainties can be found on pages 7-9 in the 2015 Annual Report, which is available on the webpage (www.nicoccino.se/en).

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

Accounting principles and Notes This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting, the Swedish Annual Accounts Act and IFRS, endorsed by EU. The parent company applies the Swedish Annual Accounts Act and RFR2, Reporting For Legal Entities.

Definitions and Key Performance Indicators Earnings per share Net income divided with average amount of shares. Average amount of shares The average amount of shares in Nicoccino Holding AB are calculated based on the weighted historical amount of outstanding shares in Nicoccino Holding AB after every new share issue, multiplied with the number of days the shares been outstanding. Equity/Asset Ratio Equity in relation the company's assets. Return on Equity Earnings before taxes (EBT) in relation to equity. Return on capital employed Earnings before taxes in relation to employed capital Capital Employed Equity plus loans which are not subject to interest Equity per share Equity divided by number of share on the closing date. Cash flow from operating activities per share Cash flow from operating activities divided with average amount of shares Cash flow per share The cash flow at the end of the period divided with average amount of shares.

FINANCIAL CALENDER

CONTACT

Oct 28th, 2016 Interim report Jan - Sept 2016 Feb 24th, 2017 Year-end report Jan - Dec 2016

CEO Johan Cram Mobile: +46 708 980 418 Email: [email protected]

This report has not been reviewed by the company auditor. The information Nicoccino Holding AB (publ) (org.nr 556942-1604) releases is provided according to financial regulations for the stock market and/or the law for trade with financial instruments. The information is prepared to be published on 26th Aug 2016, 08:00 am. The report has to be communicated in Swedish and English. If differences between the versions exist, the Swedish version is pertained.

11/19

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

AS

Financial summary in brief GROUP in thousands (unless otherwise specified) Operating income Operating expenses Earnings before interest and taxes Earnings before taxes Net income Cash flow from operating activities Liquid assets end of period Key performance indicators Return on equity, % Return on capital employed, % Equity/asset ratio Investments in financial assets

Employees at end of period Earning per share, before dilution, SEK Earning per share, after dilution, SEK Equity per share, SEK Cash flow from operating activities per share, SEK

12/19

Apr-Jun 2016

Apr-Jun 2015

Jan-Jun 2016

Jan-Jun 2015

Full Year 2015

53 -4 197 -4 144 -4 855 -4 855 1 171 28 124

397 -7 299 -6 902 -7 370 -7 370 -7 406 49 955

235 -12 461 -12 226 -13 907 -13 907 -8 147 28 124

522 -16 225 -15 703 -16 185 -16 185 -15 211 49 955

868 -32 368 -29 981 -31 237 -31 237 -28 838 36 285

neg neg 98%

neg neg 98%

neg neg 98% -9

neg neg 98% -21

neg neg 96% -39 -

3 -0,35 -0,35 9,82 0,08

-24 609 10 -0,56 -0,56 11,81 -0,56

3 -1,01 -1,01 9,82 -0,59

-24 609 10 -1,33 -1,33 11,81 -1,25

9 -2,41 -2,41 10,74 -2,22

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

AS

Consolidated Statement of Comprehensive income GROUP

Apr-Jun 2016

Apr-Jun 2015

Jan-Jun 2016

Jan-Jun 2015

Full Year 2015

53

397

235

522

53

397

235

522

868 1 519 2 387

OPERATING EXPENSES Purchased goods External expenses Personnel expenses Depreciation and revaluations Total expenses

-100 -2 569 -1 260 -268 -4 197

-195 -5 015 -1 821 -268 -7 299

-222 -7 321 -4 381 -537 -12 461

-295 -11 009 -4 384 -537 -16 225

-625 -19 036 -11 628 -1 079 -32 368

Earning before interest and tax (EBIT)

-4 144

-6 902

-12 226

-15 703

-29 981

FINANCIAL INCOME AND EXPENSES Financial net Earnings before tax (EBT)

-711 -4 855

-468 -7 370

-1 681 -13 907

-482 -16 185

-1 256 -31 237

Income tax Net income

-4 855

-7 370

-13 907

-16 185

-31 237

Attributable to shareholders of the parent company Minority interest

-4 855 -

-7 370 -

-13 907 -

-16 185 -

-31 237 -

Average amount of shares, before dilution Average amount of shares, after dilution The number of shares on closing date

13 830 14 728 13 830

13 194 13 942 13 830

13 830 14 728 13 830

12 153 12 901 13 830

12 986 13 779 13 830

-0,35

-0,56

-1,01

-1,33

-2,41

OTHER COMPREHENSIVE INCOME Net income Other comprehensive income, before taxes Total comprehensive income

-4 855 1 143 -3 712

-7 370 43 -7 327

-13 907 1 186 -12 721

-16 185 43 -16 142

-31 237 470 -30 767

Attributable to shareholders

-3 712

-7 327

-12 721

-16 142

-30 767

in thousands (unless otherwise specified) OPERATING SALES Net sales Other revenues Total revenues

Earnings per share, SEK

13/19

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

AS

Consolidated Statement of Financial Position GROUP in thousands (unless otherwise specified) ASSETS Non-current assets Tangible assets Machinery & equipment Installations in properties Intangible Assets Development funding Goodwill & Intangible property rights Financial Assests Total non-current assets Current Assets Inventories Accounts receivable Cash and bank Total current assets TOTAL ASSETS Equity and liabilities Total equity Liabilities Current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

14/19

Jun 30 2016

Jun 30 2015

Dec 31 2015

67 143

59 186

66 165

3 377 105 100

3 859 105 127

108 687

4 342 105 154 24 609 134 350

1 539 643 28 124 30 306 138 993

5 409 1 085 25 346 31 840 166 190

5 670 2 916 36 285 44 871 154 088

135 821

163 334

148 541

3 172 3 172 138 993

2 856 2 856 166 190

5 547 5 547 154 088

109 217

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

AS

Consolidated Statement of Changes in Equity Other

Translation

Share capital

capital contributions

reserves

Opening balance 2015-01-01 Total changes in equity Income for the period Total comprehensive income for the period translation gain/losses Transactions with shareholders Issue of shares Closing balance 2015-12-31

556

145 158

136 692

51 062 196 220

Opening balance 2016-01-01 Total changes in equity Income for the period Total comprehensive income for the period translation gain/losses Transactions with shareholders Issue of shares Closing balance 2016-06-30

692

196 220

GROUP in thousands (unless otherwise specified)

-174

Retained earnings

-17 428

128 112

-31 237

-31 237 470

296

-2 -48 667

51 196 148 541

296

-48 667

148 541

1 186

-13 907 1

-13 907 1 187

1 482

-62 573

135 821

470

692

15/19

196 220

Total shareholder's equity

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

AS

Consolidated Statement of Cash Flow GROUP

Apr-Jun 2016

Apr-Jun 2015

Jan-Jun 2016

Jan-Jun 2015

Full Year 2015

OPERATING ACTIVITIES Income after financial items Depreciation Other non-cash items Cash flow from operating activites before change in working capital

-4 879 268 1 681 -2 930

-7 370 268

-16 185 537

-31 237 1 079

-7 102

-13 907 537 1 681 -11 689

-15 648

-30 158

Change in working capital Cash flow from operating activites

4 101 1 171

-304 -7 406

3 542 -8 147

437 -15 211

1 320 -28 838

-21

in thousands (unless otherwise specified)

INVESTMENT ACTIVITIES Investments in intangible fixed assets Investments in tangible fixed assets Investments in financial assets Cash flow from investing activites

-24 609 -24 609

-9

-24 609 -24 630

-39 -39

-32 015

-8 156

-39 841

-28 877

51 226 51 226

51 196 51 196

-9

Cash flow after net investment

1 171

FINANCING ACTIVITIES Contributed equity Cash flow from financing activites

51 226 51 226

CASH FLOW FOR THE PERIOD Liquid assets beginning of period Exchange rate differences in liquid assets Liquid assets at end of period

1 171

19 211

-8 156

11 385

22 319

26 953

6 140 5 25 346

36 285 5 28 124

13 966 5 25 346

13 966 36 285

28 124

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NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

AS

Parent Company Income Statement PARENT COMPANY

Apr-Jun 2016

Apr-Jun 2015

Jan-Jun 2016

Jan-Jun 2015

Full Year 2015

750

750

1 500

1 500

3 000

-361 -427

-438 -505

-892 -1 526

-710 -979

-788

-943

-2 418

-1 689

-1 474 -4 674 -6 148

Earning before interest and tax (EBIT)

-38

-193

-918

-189

-3 148

FINANCIAL INCOME AND EXPENSES Financial net Earnings before tax (EBT)

-1 -39

-390 -583

-1 -919

-390 -579

-746 -3 894

Income tax Net income

-39

-583

-919

-579

-3 894

in thousands (unless otherwise specified) OPERATING SALES Net sales Revenues OPERATING EXPENSES External expenses Personnel expenses Depreciation and revaluations Total expenses

17/19

NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

AS

Parent Company Balance Sheet PARENT COMPANY in thousands (unless otherwise specified)

Jun 30

Jun 30

Dec 31

2016

2015

2015

163 099

118 099

163 099

ASSETS Non-current assets Financial assets Shares in subsidiaries Financial assets

24 609

Total non-current assets

163 099

142 708

163 099

7 489 80

29 523 109

94

Cash and bank

22 211

24 610

34 962

Total current assets

29 780

54 242

35 056

192 879

196 950

198 155

692

681

692

Nonrestricted equity

190 845

195 118

191 764

Total equity

191 537

195 799

192 456

Current assets intercompany receivables Accounts receivable

TOTAL ASSETS EQUITY AND LIABILITIES Equity Restricted equity

Liabilities Intercompany payables

2 652

Current liabilites

1 342

1 151

3 047

Total liabilities

1 342

1 151

5 699

192 879

196 950

198 155

TOTAL EQUITY AND LIABILITES

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NICOCCINO HOLDING AB (publ) INTERIM REPORT JANUARY – JUNE 2016

The Group management and the CEO certify that the interim financial report gives a fair view of the performance of the business, position and income of Nicoccino Holding AB. It aims to describe the principal risks and uncertainties that the company and its subsidiaries face.

Stockholm, Aug 26th 2016 The Board of Directors and the CEO for NICOCCINO HOLDING AB (publ)

Jonas Nordquist Chairman of Board

Johan Thorell Director of Board

Johan Cram CEO

Erik Nerpin Director of Board

19/19