Alexium International Group Limited (AJX) Earnings Call Transcript & Summary

My name is Simon Moore, and I am the Interim Chairman of your Board and the Chair of this meeting. It is now 10:00 a.m., the time appointed for the meeting. And as we have a quorum, I declare the meeting open. Today's meeting is being held in person-only. However, as you can see, we have made arrangements for online participants to watch the AGM. Please note, online voting will not be facilitated during today's meeting. I would further request as a courtesy to all here today that mobile phones be switched off or set to silent mode. After the formalities of today's meeting, we will hear from your Chief Executive Officer, Billy Blackburn. I would now like to introduce the members of the Board who have joined us remotely: Dr. Paul Stenson; Dr. Bob Brookins; Billy Blackburn, our CEO and Managing Director; and Carl Dennis. I have also the pleasure of welcoming Martyn Strickland and Randy Lane, Non-Executive Directors appointed on the 1st of July 2024. Carl has sent his apologies for today's meeting. I would like to acknowledge the service of Carl Dennis, who resigned as a Non-Executive Director today and thank him for all his efforts in the role as a Director of the Board and also as the Chair of the Nomination and Remuneration Committee. Mr. James Williamson will join the Board of Alexium as an Interim Non-Executive Director effective from the 21st of November. Online today, in addition to Billy Blackburn, we have our Vice President, Finance, Lisa Hubka. Our Company Secretary, Mark Licciardo from Acclime Australia is represented today by Sandra McIntosh, and our auditor, Grant Thornton, is represented today by partner, Matthew Leivesley, who will be able to respond to any questions relating to the 2024 financial year audit. Also in attendance is our share registry, Automic, represented by [ Luke Carson ], who will act as the returning officer. I remind everyone to register with Automic, and if you have not, please do so. Procedural matters, 3.1 voting. All resolutions will be voted on by way of a poll today and will be conducted after all resolutions have been put to the meeting. When you registered at the attendance desk this morning, you should have received a voting card from Automic. Members holding a yellow card can vote and speak at the meeting. Members holding a blue card can speak at the meeting and visitors holding a red card are not eligible to vote or speak at the meeting. If there is anyone present who is eligible to vote but has not received a yellow card, please see a representative of Automic at the registration desk now. I would like to highlight that where undirected proxies have been given in favor of the Chair, I will be voting those proxies in favor of all resolutions being put to the meeting today. As provided for in our constitution, I have determined to conduct a poll on each of the resolutions being put to shareholders. The poll will be held at the end of the meeting with the results of the meeting announced to the ASX as soon as practicable thereafter. 3.2, proxy votes. After discussion of each resolution, the proxy votes will be displayed on the screen for each resolution. Questions. I would remind everyone in attendance that this is a formal meeting of shareholders. While visitors are welcome, only members of the company, proxyholders or appointed representatives are permitted to ask questions. I will address questions as I move through the respective items of business. At the end of the meeting, there will be an opportunity for general questions. Notice of Meeting. The notice convening the meeting has been provided to all registered shareholders and will be taken as read. As announced to the ASX on Friday, 8th November, Resolutions 2 and 11 have been withdrawn from the business of today's meeting. 5, Voting exclusions. Resolutions 1, 5, 6, 7, 8, 9, 10, 12 and 13 are subject to a number of voting exclusions, which are detailed in the Notice of Meeting should anyone wish to review them. Ordinary business, financial statements and reports. The first item of business is to receive and consider the annual financial report of the company for the financial year ended 30 June 2024. Together with the declaration of the directors, the directors' report, the remuneration report and the auditor's report. Are there any questions or comments in relation to the annual financial report? Ladies and gentlemen, if there are no further questions or comments on the annual financial report for the year ended 30 June 2024, I will declare them as received and considered. We will now move to the resolutions on which shareholders, representatives and attorneys of shareholders and proxyholders are being asked to vote. Resolution 1 relates to the adoption of the remuneration report. [Audio Gap] We'll display proxy results for that. Are there any questions or comments in relation to Resolution 1? Thank you. We will now move on to the next resolution. As previously advised, Resolution 2 has been withdrawn. Resolution 3 relates to the election of Director, Martyn Strickland. The results of the proxy voting are shown on the slide now presented to the meeting. Are there any questions or comments in relation to Resolution 3? We will now move on to Resolution 4, which relates to the election of Director, Randall Lane. The results of the proxy voting are shown on the slide now being presented to the meeting. Are there any questions or comments in relation to Resolution 4? We will now move on to the next resolution. Resolution 5 relates to the approval of the Share Appreciation Rights Plan. The results of the proxy voting are shown on the slide now being presented to the meeting. Are there any questions or comments in relation to Resolution 5? We will now move on to the next resolution. Resolution 6 relates to the grant of financial year ending 30 June 2025 Share Appreciation Rights to related party William Billy Blackburn. The results of the proxy voting are as shown on the slide now being presented to the meeting. Are there any questions or comments in relation to Resolution 6? We will now move on to the next resolution. Resolution 7 relates to the grant of financial year ending 30 June 2025 Share Appreciation Rights to related party, Robert Brookins. The results of the proxy voting are as shown on the slide now being presented to the meeting. Are there any questions or comments in relation to Resolution 7? We will now move on to the next resolution. The next 2 resolutions relate to the issue of shares to me. I will therefore ask Mr. Strickland to cover this item of business.

Thanks, Simon. Resolution 8 is for the issue of shares in lieu of the 2023-'24 Interim Chair fees for Simon Moore. The result of the proxy voting is shown on the slide now being presented to the meeting. Are there any questions or comments in relation to Resolution 8? Let's move -- we'll now move on to the next resolution. Resolution 9 is for the issue of shares in lieu of the '24-'25 director fees for Simon Moore. The results of the proxy voting are as shown on the slide now being presented to the meeting. Are there any questions or comments in relation to Resolution 9?

None online, no.

Very good. Thank you. Back to you, Simon.

We will now move on to the next resolution. Resolution 10 relates to the issue of shares in lieu of 2024-'25 director fees for Dr. Paul Stenson. The results of the proxy voting are shown on the slide now being presented to the meeting. Are there any questions or comments in relation to Resolution 10? We will now move on to the next resolution. As previously advised, Resolution 11 has been withdrawn. Resolution 12 relates to the issue of shares in lieu of 2024-'25 directors' fees to Martyn Strickland. The results of the proxy voting are as shown on the slide now being presented to the meeting. Are there any questions or comments in relation to Resolution 12? We will now move on to the next resolution. Resolution 13 relates to the issue of shares in lieu of 2024-'25 director fees for Randall Lane. The results of the proxy voting are as shown on the slide now being presented to the meeting. Are there any questions or comments in relation to Resolution 13? We will now move on to Resolution 14. Resolution 14 relates to the approval of the 10% placement facility. The results of the proxy voting are as shown on the slide now being presented to the meeting. Are there any questions or comments in relation to Resolution 14? We will now move on to our last resolution, Resolution 15, which relates to the renewal of proportional takeover provisions. The results of the proxy voting are as shown on the slide now being presented to the meeting. Are there any questions or comments in relation to Resolution 15? That concludes the formal items of business to be considered at today's meeting. Seven, general business. I note that no shareholder questions have been registered prior to the meeting. Have any other questions been received on the call today?

Simon, can I ask a question? Can you just talk to the issue of why Alexium seems to have changed its strategy almost from going from ancillary businesses like clothing, et cetera, and it's gone back to bedding? What caused that? It seems to have done a full circle.

Yes. Look, I might hand that to Billy. So I don't want to steal his thunder, and he has got quite a presentation to give to people afterwards. But I think in a nutshell, what we'd say is that, the proximity of the opportunities with existing clients that we know well has -- is greater and our ability to get to revenue is faster with those mattress companies that we've known well. What we've developed though is, we've expanded the technologies that we feel that we can sell to the mattress companies, not just in -- by introducing flame retardant technologies to them, which have become much more competitive as a result of regulatory changes. But on the other side, on the PCM side of things, we've been able to work on our PCM product and continue to develop it to the point where it has some different applications, especially almost a partnering with groups that take the PCM and then add other things to it and then go to, again, a broader range of applicants than we have historically. So we sort of took the view that the existing customer base, historically, we had a very narrow offering into the particular segment of their product. But through the advances of our technology and some regulatory changes, we've now got a much broader offering to provide to those parties. And so, we felt that, that was near-term, the fastest way to a significant step-up in revenues, and Billy will talk to that in his presentation. Poll process, that concludes the formal business of the meeting. As there are no items of general business of which notice has been received, we will now move to the conducting of the poll on all resolutions. I will now hand over to Luke from Automic, who will manage the process of the poll. When the voting has been collated, the results will be declared on each resolution and released on the announcements platform of the ASX. Closure. Thank you, ladies and gentlemen. That now concludes the formal part of the meeting, and I hereby declare the meeting closed. Thank you all for your attendance and interest, and we look forward to your continued support in the coming year. Thank you once again for your support. I will now hand over to Billy for his presentation.

Thank you, Simon. [Audio Gap] All right. Well, thank you for all of you online and in the room there. The strategy question is a very good one. We'll get into that in the presentation here today. Hopefully address that. But one point out of the gate I would say is, we haven't done a 180 or a full circle on the strategy in other markets that are adjacent markets. So markets like packaging and shoes. More so, we've delayed the efforts in those markets to focus on the bedding market. As Simon said, there's near-term revenue and us hitting our financial goals are tethered to really strong relationships we had in the bedding market, but also breakthroughs we've had in the products in that space. So that's been a big part of the change there, really focusing on near-term results, leveraging relationships and breakthroughs in the technology. We do plan in due time to move over in our development efforts and our sales efforts into those other spaces and rekindle those efforts, which would be a transition over the next year after we hit the milestones in this market. Hold with me one second. [Audio Gap] Okay. AV, we're having AV challenges. We're remote. We'll take the disclaimer as read. Look, for those of you that are new to Alexium, we're a performance materials company. We leverage proprietary technologies and innovations in thermal regulation, dehumidification and flame retardant. So it's really in the areas of comfort and protection and bedding, furniture. And again, we have aspirations to move these technologies into other industries, athletic gear, protective gear, packaging, transportation and possibly electronics for thermal regulation in the future. But right now, we're really focused on short-term results where the company has been most concentrated really since its inception, which is in bedding. That said, we're a pioneer in microencapsulation. So these phase change materials that you're going to hear a lot about tonight are microencapsulated in shells that melt under the right temperature conditions, deliver heat absorption. Then you take the heat source, which in bedding is the person away and they recrystallize and regenerate for another night of thermal regulation and comfort. But we also have a lot of acumen around microencapsulation. And that's another thing you'll hear as the company grows and as we move through delivering success in bedding and other near-term markets, you'll hear us start to leverage our microencapsulation capabilities to go after other markets and other opportunities. We're focused on advanced research, product development and leveraging our analytical laboratories to quantify the marketing claims that we make and the technology claims that we make. That's one of our values to our customers is that, we can support anything that we tell them the product does with actual analytical data supporting it. 25 global patents in the areas of thermal regulation and flame retardancy. We deliver value through bedding textiles, military fabrics, and soon we'll refocus the efforts to athletic gear, packaging and flame-resistant fabrics. Our products are made in the U.S. and distributed globally. But what I would tell you that could change in the not-so-distant future is that, we may be licensing some folks to be making products for us in other continents globally. And that's to shorten the supply chain and move around some of the import-export challenges that could be in the place for us bringing in materials to those countries. Also to speed to delivery for the customers, there could be significant volumes, especially in the bedding space that come in the near future where production of our products could happen. And as a reminder, we leverage contract manufacturing to make our products. Alexium runs an asset-light model in manufacturing. So we don't have any plans in the near-term to build a manufacturing facility or add manufacturing assets and need to capitalize that. We'll continue to leverage manufacturing partners that are for hire, and that opens the door for us to do that in other countries around the globe, again, shortening the supply chain and allowing us to distribute products around the world. So, as an introduction, FY '24, we didn't get the targeted financial results. But what I'm going to showcase tonight is, we made significant strides in positioning the company for near-term financial results in FY '25. We've been hard at work in my 2 years here at turning the culture from a technology company doing development of novel technologies and products for all these markets into a company that's good at selling those, manufacturing them and accounting for them. So it's more pragmatic culture that we're moving to where the team is more focused on leveraging the technology that was made over the last 5 to 7 years, pushing that in the form of the products into the market. And you're going to hear a step change, another step change in the strategy that we've signaled in the past 4Cs and webinars with investors, but we're moving up the supply chain closer to the actual consumer of our products. So don't think business to actual retail consumer, but think business-to-business consumers. So businesses that consume our technology in the form of components. So that could mean we might be selling a textile with our -- that carries our technology or maybe even a private label product that carries our technology to the brands and the final customers that take those to retail for the ultimate consumers. We've made significant breakthroughs in FR, flame-resistant products over the last year. I'll showcase that. We were recapitalized at the changeover of the year and finalized that in March of 2024. So the company is in a much better position on capital and ready for the growth that's imminent. We've restructured the sales team. We've restructured the entire sales process over this last year, and that's already yielding results. The quality of the activity, the quantity of the activity and the amount of items in our pipeline have grown by dollars and have shortened by shorter lead times to closing to short-term revenue. Also another breakthrough that we're leveraging is, we've made significant improvements in the area of microencapsulated PCM, and that has opened up new opportunities in the market for growth with brands. It's also opened up new opportunities in the market to extend our market by working through other formulators. Look, going all the way back to '23, FY '23, I joined the company in that point. Through 2022 calendar year and 2023, the bedding market has been in a slump after the pinnacle of sales that happened during COVID, and there was a run on bedding around the world as people were home and redecorating their houses and replacing their beds and basically on house arrest, we saw bedding go to the highest sales levels they'd ever seen in 2021. Well, in 2022, that really drove off a cliff and started the 2-year slump that we are looking back on now. So it's been a challenging market in bedding. We've put out reports from ISPA, the International Sleep Products Association. And really, all the market reports have been over that period that it's been in a downward trend. What I would tell everyone is, with some economic turnaround and also the timing of how mattress purchase cycles, which drives a lot of our sales -- current sales, you got to see some recovery in that market coming in the next year or so. We can't tell you exactly when that will happen, but there's a bit of a bullish sentiment, especially in North America around what's going to happen with the economy. You could see that spark some increase in sales. That would return our existing customer base and the sales volumes to where it was because we've seen a decline in sales due to that. But it's not all the market. That's not the only reason. We've been overconcentrated in phase change material sales in North America bedding market. So to thwart that and to correct it, we've pivoted our business and product development strategies. You'll hear a lot about that tonight, and we've expanded our focus to diversify revenue and reduce our market dependence. So what does all that mean? We've pushed more products into our core market in bedding, and that's FR, phase change materials and then some of our woven and nonwoven thermal substrates. And then we've also pushed globally to expand selling those products to other countries around the world. And that's proving successful, and that's really where the second half growth of this year is going to come from that change. So recap in '24 still. Our sales team development, we recruited experienced professionals. That's strengthened the team. And again, through Q4 of FY '24, we saw a significant increase in the amount of sales activity, new opportunities, the size of the opportunities, the speed to closing those opportunities and the quantity of new opportunities in our pipeline. Again, we're expanding internationally. We now have earnest sales in Europe and more opportunities coming. We were very active in development in Australasia, both New Zealand and Australia, active projects, testing in bedding, in mattresses and pillows in that market, also a few novel FR products. Our Board and our advisory has been strengthened over the last year. We added an industry adviser, and we've restructured the Board, adding 2 new directors, and those 2 directors are active advisers in the business as well. Both have been very good partners to me and giving counsel and giving feedback as we work through a complicated strategy to go globally and grow this business. And then lastly, the product enhancements you're going to hear a lot about tonight have been the driver and the change of the strategy that came from the question earlier and also the driver in some short-term revenue opportunities. Also some opportunities for us to move up the supply chain closer to the customer, grabbing more revenue per unit. So the development milestones around our products over the last year, we've improved the PCM manufacturing. We've improved quality and performance. This has opened new markets. Again, I'll go into further detail. We've continued our market penetration of BioCool products in North America and now pushing globally. That supports our ESG goals. BioCool is a sustainable bio-based PCM product. We've expanded our Eclipsys applications in the bedding market, and we've shifted focus away from those adjacent markets. So that actually spurred, I believe, the question we got earlier. So we were pushing Eclipsys for packaging and athletic wear and tactical. We have not abandoned that strategy, more just delayed the efforts going into it to focus on near-term revenue in bedding. So that's not a wholesale change in the strategy, just a shift in the area of focus. We've progressed DelCool pillow and mattress projects, and those are positioned for significant near-term revenue. You'll hear about one of the products we've developed that DelCool is a showcase technology in, showed that tonight or this morning, excuse me, in advance the Alexiflam FR NyCo uniform fabric. We're readying that for submission in federal contracting. I'll give an update around that tonight, but I would tell you, and this has been said in prior webinars with the investors, we are working directly with the military now where previous efforts years ago were through Tier 1 finishers and folks that were looking to break into the military. The folks we're working with now are direct military engineers. They're looking at our technology. They're looking at the fabric. They're active in the testing that we're doing. And our partner on the textile side is one of the largest military apparel fabric producers in the U.S. military. So we're working with an established proven current supplier of these fabrics to upgrade it to an FR offering. So that's a nice change in the strategy around our military work. But I would caution everyone, it's a long cycle in working with the government. There has been a lot of changes in what's going on with the stores and supplies that go to the military personnel. So this has been a slow process. Regardless of the slow process, it could be stepped up by geopolitical issues. It could be stepped up by the new executive and legislative branch in North America, where they look to restore the coffers and spend more money on the military personnel in North America. So those are a few things that could catalyze a faster adoption. Outside of that, we've hit the mark in all of our iterative testing for the military at this point of delivering a lower cost, lighter weight, more breathable fabric that's flame-resistant for warm weather theaters that can be put on all personnel in the military. So when I say the company is closer to success than it's ever been, there's a lot of factual data around that, a lot of movement in our testing, and we're well positioned to be one of the bidders on a large tender should it come out over the next year. We'll be on a short list of 3 to 5 suppliers positioned to win that business. So, again, well positioned. The other thing we have a challenge is, we can only disclose so much about the work we do there. But I can tell you it's progressing quite nicely, and it's moved well along that path since I've been here over the last few years. For FY '25, a quarter into this year already. We're going to execute our Grow and Diversify strategy. You've heard a lot about that in previous presentations. What does that mean? Look, we're going to grow revenue. That's an obvious statement, but we're going to grow it by diversifying our offering. We've had some breakthroughs in the last 6 to 9 months on the technologies that are allowing us to diversify our customer base and our market base, not only in North America, but globally. And then we're going to aggressively increase revenues in those core markets. And again, this is a bit of a shift. The strategy itself hasn't changed. It's a shift in the focus. So the 5 critical focuses for this year are: to maintain those key accounts that our foundational sales in North America bedding. And that's predominantly phase change materials. We want to saturate the North American bedding market. We'll do that by maintaining those sales being in a good position to reap the benefit of when the volumes in those customers restore to historical volumes into a healthier market. And then we're going to diversify our products within that space to grow the revenue. Then the next push is to go global, which we're highly active there in the Asia Pacific already. Now, with one of our new sales team, we are making inroads into Latin America, which is a large consumer base we really haven't tapped into in the past. Many large metropolitan cities with a lot of wealth in Latin America, people willing to spend money on luxury products, which is typically our space for a lot of the carriers of our technology. And as Paul mentioned, we are already active in the European bedding markets with some new opportunities recently with the breakthrough in our technologies. Then we move into adjacent market growth, expanding revenues into using our existing technologies, which would be Eclipsys, DelCool, Alexiflam, which is the military FR solutions, Alexiguard and Alexishield FR solutions. And again, active projects in our pipeline on that. Second half growth that we're projecting right now on the deals that we're looking to close right now are heavily concentrated in phase change materials and FR materials. Lastly, we're developing strategic alliances, and we're in the midst of signing a few agreements right now with key supply chain partners, and that's to co-develop and take markets collaboratively to the market. What we're doing there is, we're working with folks in the textile and foam and apparel materials industry to add our technology, but the change is, we're not trying to just sell them our technology. We're working with them to co-develop the fabrics and the carriers of our technology, and Alexium will be selling those components into the ultimate industries that use them. So you'll hear more about that tonight, but that's driving a speed to market, and it's allowing us to grab more revenue per unit sold. It's also allowing us to control our destiny to the folks that ultimately pull these products through the whole sales chain. Sales priorities for the year, focus on deepening our relationships and increasing sales in North America bedding, diversifying the offerings within that bedding sector, especially DelCool, Eclipsys and our FR technologies. Global expansion, we're going to repeat that same strategy, but it will be PCM plus the new technologies. Again, pushing into Latin America, active in Europe and growing in Australia and New Zealand. And an interesting thing about some of the folks that we're working with in Australia and New Zealand is, that's opening up some new opportunities for us to sell products into the Asia Pacific, not just China, but Indonesia and other Asia Pacific countries that are highly developed and have a certain class that buy certain Western products. And that's a different model than what we see in North America. In North America, we don't sell much into that market. We actually spend more time fighting imports from that market. The brands and folks looking at our components in Australia and New Zealand are actually selling a lot of their volume into Asia, which is -- it's been an interesting development as we develop those relationships that's opening up Asia opportunities for sales for Alexium technology. Our sales team will focus a smaller percentage of their efforts on diversifying into those adjacent markets. And again, this is that strategy change. And then focus on the existing technologies into our core markets. And that's short-term to deliver the short-term results. Look, we've got a smaller team at Alexium. We don't want to add a lot of headcount and a lot of overhead to chase a lot of other markets right now. We want to deliver financial success to our shareholders and any stakeholder in the business before we go after those markets. So that's why we made the change and focus in the strategy. We'll open up the rest of that strategy as we're delivering those financial results and starting to scale the company. We'll move right back into those growth areas. And then lastly, once this team that's in place now hits the first mark, which we believe will be in the second half of FY '25, then we'll add more sales team to go back into the rest of the strategy for adjacent markets and continue to ramp up our efforts globally and to diversify the product mix. Another thing that's coming with the imminent growth and scale in the company is, we've shifted to some operational focus and getting our manufacturing and supply chain teams ready to scale. We're adding new contract manufacturing partners. That's increased our capabilities and capacities. So that means where we're concentrated with 1 manufacturing site, we're adding second and third sites to derisk that supply chain. We're also adding new manufacturing partners that allow us to leverage our technology onto the carrier, oftentimes textile or foam to deliver our thermal regulation products like PCM or FR products that are component level finished goods that go into things like mattresses and beds and apparel. From there, we're striking supplier alliance agreements, and these are agreements for co-development, again, leveraging our technology, allowing faster speed to market and higher revenues per unit sold. And this could be the difference, just to give an example of, if it were a mattress and an FR product, the FR product could be $2 to $5 a mattress. The textiles that carry our FR products that we're having finished and we're now offering could be $15 to $20 per unit sold. So that's a stark increase in the revenue for the deals that we chase and could lead to obviously much higher sales in the near-term. We're working on continuous improvement in our supply chain and our manufacturing processes to grow margins. Look, we're looking at quality, we're looking at capacity, and we're looking at ways to cut costs to increase the margin. It's a high cost to make technological projects like we do, and we need to reap the margins that represent that level of effort. So our company enjoys healthy margins, and you'll see in Lisa's presentation tonight, we're able to maintain that, and we expect it to stay that healthy going forward. Operational priorities for the year with a focus on products. Look, these product initiatives are driving near-term. So, again, if you take away one thing tonight from this annual meeting is, we're focused on near-term success. And the reason is, what we're looking at in our pipeline is, enough for us to hit the mark for what's been budgeted this year and to continue to grow beyond that. And some of the breakthroughs in products, you'll hear more about in a moment, are really driving that. So for AlexiCool, which is our workhorse traditional petroleum-based phase change material, we have a new manufacturing process. It's allowing us to get to higher solids and slurries and to make a dry powder PCM and to make a plus derivative. I'll showcase that tonight, but a plus derivative is an enhanced version of our PCM that has much more cooling capacity and crystallinity than anything we've ever made before and up to 3 to 4x better than any competitive product in the market. BioCool, same thing there. We've -- and that's just the bio-based sister of our AlexiCool, and it makes up the majority of our North American sales right now. We're doing the bio-based version of that, also for slurries, dry powder and also plus derivatives, enhanced cooling. DelCool, we're qualifying international license manufacturing partners for global distribution. What does that mean? That means we make DelCool in North America right now. We have opportunities globally where we're going to license certain textile knitting and finishing operations to make the DelCool in other continents for us to shorten the supply chain. That's leading to some private label opportunities for DelCool in mattresses and pillows. Alexishield is a new FR chemistry developed in FY '24. I'll go into the details of that and what it means. But it's allowed -- that new product has allowed us to ramp production and finalize development of Alexishield FR socks and barrier panels of those sales of textiles that go into mattresses and other bedding products like foundations. And then lastly, Alexiflam, we've made that in 1 site historically as we chase these apparel contracts and military fabrics, and we're qualifying a second manufacturer right now. The second manufacturer is actually local. They're within 30 miles of our facility in South Carolina, which allows us to be hands-on in the development and trial phase. And adding that second manufacturer derisk that supply chain should something happen with the first one, and we were to win a large contract. It also gives a relief valve for the capacity of those volumes that will be required to respond to a military tender. So quite simply, the objectives for the year and the sales team is to double the month-over-month sales volume of $500,000 to $1 million, $1 million being right around the cash positive threshold. Look, that's our forward-facing budget goal. Our strive goals are way higher than that. We won't be satisfied with $1 million a month. We expect to hit that number and then continue growing aggressively beyond that as fast as we can do it. We believe this company can be much bigger than what it is right now and what the market cap says. We want to sustain those sales and get the sales volume above that and retain it as a long-term revenue goal. Again, we want this to be a self-funding business. We want to deliver very high-margin profitable growth for all that have invested and stuck with us for a long time. We're striking long-term supply agreements right now, and those are volume and price base, and that should give steady growth and a foundation for us to continue to pile on the revenue. We expect to be announcing some of those agreements over the coming months. So stay tuned. We're going to continue the cadence that we've had of investor communication, but we want regular updates to the markets in Australia on all of our milestones, and we want to make sure the shareholders have a good line of sight into what we're doing. And so, any time we have anything meaningful and material, we're going to make sure you know about it right away. So the cadence of those announcements will be frequent and our webinar should be just about every 6 weeks. And then reinvestment for growth. We're going to use the momentum and those results to reinvest in the business, and we want to drive maximum earnings and the valuation on share price. Those are the objectives and milestones for this year. The outlook. Q1 was a slow start. We're still in the doldrums of that soft market. We are still overly concentrated in North America. We're still overly concentrated in phase change materials. And those sales are still overly concentrated with 1 major end user pulling it through. However, that is changing very rapidly right now. And again, we're at the precipice of breaking that concentration quickly through everything you're going to hear tonight, diversifying the product mix, diversifying the customer mix and moving globally. And the announcements you'll hear in the second half of the year are all to that point. Several promising opportunities in the pipeline are expected to close in Q2 and early Q3, and those are expected to ramp to full rates by the end of the year. Revenue and growth outlook, potential revenue from those opportunities will help the company meet or exceed our budget. They will achieve cash positive results and they'll set the stage for growth beyond. The strategy refinement is just adjustments to the strategy, not a wholesale change to it. And again, a refocus on PCM and FR sales in our core market of bedding, and that's driving the short-term positive outlook. The team here really works hard. They remain dedicated to delivering these results. And look, it's the best team we've had in place since I've been here, and we're poised to build on that core group of folks. Growth drivers for the year. I won't spend a lot of time here for those that have been with us, you've seen this, but this is really our scorecard as we talk about what we've done in the past fiscal year, where we are in the current fiscal year and where we're looking at beyond that. But it's a heavy focus on building a sales structure and a business development structure at Alexium. Again, we have good technology. It creates a very good value to our customer. We just have to be better at selling it. We have to sharply increase the activity, which we've done over recent periods, and that's the way to get results. Then as you heard, the focus on operational readiness and scaling up the supply chain and manufacturing is imminent. Those 2 will lead to the short-term results. We want the culture of the company and the culture really has become a more sales and marketing-centric culture. And I don't mean that in any way to diminish the prior team that was in place here because the prior team that was in place developed wonderful technologies and positioned us to be able to go out and become a sales and marketing-centric company that sells those technologies. So it's really been an evolution. If you see the ratio on the growth there, that's the 40-20-40 focus, and that's really the change in our strategy. We're shifting from focusing only on PCM and only in North America and only in a really narrow channel with bedding to a more diversified approach with also spreading some of our efforts, even though it's a smaller percentage into adjacent markets so that we can keep those opportunities in the pipeline and developing. They're just not getting the level of energy and hours focused on that our core market is in bedding right now. Looking for year-on-year growth in bedding with those products. We are progressing our NyCo efforts for the military, also FR barriers for textiles and bedding. And that's a natural evolution for us to work to getting into the workwear space as we have the resources to do that and after we deliver results in our core market. Commercializing Eclipsys for tactical gear, we tabled that effort as we built out the new sales team. We're going to start that focus in the new year, second half of our fiscal year to start revitalizing the efforts there. We've had excellent feedback and results on that. We just haven't cracked the code for how to grow the volumes there. And we believe for that, it's really -- you got to have pull-through from large population bases that wear the tactical gear. So it's going to be large agencies like the U.S. Border Patrol, large metropolitan police forces, federal prison systems and large military populations. So we're changing the tactic of how we sell that, and we're now going to reinvigorate that sales effort with the addition of our new sales team. And then lastly, commercializing Eclipsys and DelCool and FR into new markets. And again, that's been a lesser effort, and we've tabled some of that effort, but that's in shoes, medical space, cold chain and workwear. You just heard about operations and then the financial goal of cash flow positive and growing beyond that. So that's where we are. We're right in the midst of that. I won't get into FY '26 and '27 yet because, again, the focus is on the near-term. And you'll hear us update that as we move towards FY '26 in the second half of this fiscal year. The strategic plan and the growth drivers, maintain our PCM sales in bedding, grow and diversify our revenue in the bedding market, grow and diversify our revenue to markets adjacent to the bedding market. It's really that simple. That 3-pronged approach and the strategy will get to diversified revenue growth and then cash positive results, which funds significant growth beyond that and allows us to open up the markets that we're going after. So it's really a combination of the same strategy. We've only shifted focus recently. In the product portfolio, we have AlexiCool and BioCool and our microencapsulated phase change materials. This is -- these are comfort technologies targeted at thermal regulation and cooling. AlexiCool is our traditional workhorse product based on petroleum-based materials and BioCool is our phase change material that's plant-derived. The same building block chemistries, one comes from petro and one comes from plant-derived carbon. Both are effective on textiles and foam, both absorb heat for sustained comfort. Both have specific formulations for different applications in foam and textiles. And both now we're rolling out plus and plus derivatives that -- where we've made breakthroughs in the chemistry and formulation of each to deliver exponentially more cooling. And that's what I was referencing earlier where we're getting to 3 to 4x the cooling of competitive products. And that's based on recent testing by outside laboratories and customers. So AlexiCool and BioCool have been our historical revenue drivers. They're going to drive short-term revenue as well, but there is some diversification coming in our core market with FR, but we've made breakthroughs there. In the PCM area, we've brought in some of our production, and we've made technological advancements for that in-house production. And what this really means is, in the past, we were making our bio-based microcapsules in-house. We were using a produced petroleum-based microcapsule to make the AlexiCool products. We're now manufacturing both forms of microcapsules. So we've gone down our supply chain and vertically integrated our manufacturing to no longer use microcapsules from others to make those 2 products and all the formulations that come off of them. And that's generated quite a bit of efficiency in our manufacturing. It's allowed us to get a better handle on quality, cost and performance enhancements. And shifting here in this production, we've also been able to open up a market where we weren't selling in the past to folks that compete with our formulations. So AlexiCool and BioCool all have -- both have multiple derivatives, which we call formulations. These formulations could be for different types of applications on textiles, different types of textiles, different performance attributes. They could have lots of additives in them, and there are different formulas for different customers. So we're a formulator on top of our microencapsulated PCM production. Where we weren't pushing is selling formulations to other formulators. Now that we're producing all the microcapsules in-house, it's opened up a large piece of that market for us to supply microcapsules to other formulators that may have a more competitive position in an international market or with a certain large customer or they may have a product that pairs with that, where they're able to pull it through. That's created -- that's extended our PCM market, basically doubling our opportunity near-term. It's also increased our speed into that market, and it's allowing us to push into some spaces where we weren't really getting past the front door. So that's going to drive some of the near-term results that you're going to hear about. We've launched BioCool+ already. It's a derivative of PCM+ product line. That is an enhanced PCM where we're seeing 3 to 4x the cooling capacity of competitive products and some of our legacy products. Beyond that, we'll be rolling out AlexiCool Plus in the new year. And taking that to the market into the formulators. And again, we already have development efforts around it going on in the background. For flame retardant technologies, we have 3 products that we take to market. That's Alexiflam, Alexiguard and Alexishield. Alexiflam is a customized solution designed for use in FR markets for clothing, personal protective equipment, military fabrics, transportation, furniture and carpet. Really, the key is, Alexiflam is formulated to be extremely wash durable. In the military efforts, we've gotten out beyond 50 industrial launderings, which is a very difficult standard to meet. We've met it and also maintaining color fastness for the uniforms, whether it's camouflage uniforms for the military or dodge uniforms and workwear. We've been able to solve for color fastness. Many FRs will diminish the color fastness of certain products. So that's a key attribute. And again, we're moving that forward with the military with designs of taking that into the workwear space once we hit the results we need in that first market. Alexiguard is our traditional workhorse. It's used as a component in Alexiflam, but it's also formulated for polyester materials and other poly substrates. It's nontoxic, free of halogens, antimony, formaldehyde, polyfluorinated materials like PFAS, fiberglass. Effective on woven and nonwoven textiles and it's formulated for a lot of different application methods like pad, [ knife ], coating, foaming. We will showcase tonight Alexishield. Alexishield has been rolled out in the last 12 months. We had a breakthrough in the chemistry in FY '24. It was built off of everything we knew about Alexiguard, and it's the flame retardant emulsion on synthetic and natural fibers. So it works on all sorts of synthetic woven and nonwoven materials and cotton and natural fibers. It is nontoxic just like Alexiguard, but it's gone step further due to some new bans coming out, and it's also free of organophosphorus. Effective on the same materials, also effective on foam, which is a breakthrough and it's formulated for a number of different application methods. I want to do a showcase on Alexishield since it's new. It's our latest innovation in flame retardant coatings. It's an advanced formulation. It's free of all the banned substances I just mentioned. But the real one to target is organophosphorus. We had to make a regulatory response in the products to make sure we kept the market open for growth in bedding. There has been swift bans that have come down in bedding since fiberglass has been removed from mattresses in North America. That exposed that a lot of the other materials being used in mattresses were highly combustible, and it created a whole new wave of flame-resistant challenges for bedding producers. So we fast-tracked the development of Alexishield in FY '24, again, to make an FR solution for the bedding and furniture and home goods space that was free of organophosphorus. That ban had been proposed by California and still sits on the docket in California. But then New York entered the picture and fast tracked legislation banning it from the use in the state of New York. In short, what that means is, when you have 2 large states in the United States that are 2 of the highest populated states in the free market in America, banning materials, that means the rest of the country and the Fed will soon follow because the folks that sell products into those spaces aren't going to carve out the tens of millions of people that sit in California and New York and try to sell differentiated products just because of state-level bans. So we expect that to be promulgated through all the states and the federal level in the states in the coming few years. So we're ahead of that regulatory curve, which has opened up a lot of new opportunities. And then based on our previous successes under Alexiguard and how that works, we created Alexishield, and again, in creating that formula, we opened up new applications where it worked quite well on cotton. It works well on rayon, polyester and foam. We've been through several production trials at this point, and we've passed successful burn tests on those materials. And again, that's a big part outside of our PCM changes. A big part of the growth in the second half of this fiscal year is going to come from these FR breakthroughs. We're working with our textile supply chain to offer Alexishield-treated fabrics for use as FR barriers. This can go into bedding and furniture. So we're actually going to be selling the textile that's treated with Alexishield as an Alexishield-branded textile brand level component that goes into, it could be in furniture, it could be in mattresses. All of our active projects right now are in mattresses. And again, the pipeline is full of new opportunities for FR. Beyond that, we would like to get those projects closed and then start moving these materials and the substrates that carry on into the transportation and home furnishing sectors because it can also go into things like public transportation, trains, buses, also passenger aircraft and automobiles. Thermal regulation materials, DelCool and Eclipsys. DelCool is our dehumidification textile. It's a tri-layer fabric that provides all night comfort in bedding, and it does that by reduction of humidity in the sleeping space and reduction of heat index. So you're going to hear about some products that we're rolling out that are finished goods coming up. So I'll save that, not go too deep there. And Eclipsys is our heat dissipation composite. It's a nonwoven. It's a very advanced material. And we're active in Eclipsys in bedding right now in mattresses in a few projects in North America and a few projects globally. And as those close, we'll announce them to everyone. Eclipsys is one of our unique technologies really that can open up those adjacent markets, tactical gear, athletic gear, shoes, headwear. It has applications that can work in electronics and packaging. So it is one of those products. When we hit our financial goals with our core market, we're going to be putting a heavy focus on diversifying Eclipsys markets and making a big sales push to get it out to the market beyond that. But we have limited resources. We're controlling costs. And again, the focus is in our core market right now. So one more product development highlight and a showcase around the Alexium pillow. In marketing our DelCool product, we made some prototype pillows for folks to try the product. From there, we actually decided we needed a nice cover fabric to go on it. So we chose one of our premium cooling products in Alexium's PCM with AlexiCool. From there, we were building prototypes to show to customers so they could try it, sleep on it, and we could use it to demonstrate the technologies with the end goal of them making pillows and buying these products from us, also using it as the pillows as a demonstration of the technology for the larger prize, which is mattresses. What we found in building those prototypes is that, we had a readily available supply chain that had ample capacity to ramp up production, and they were hungry for innovation, and they were hungry for partners that could take that innovation to market with them. So we shifted the strategy there to move to a private label product. So we've developed 2 forms of an Alexium pillow, both incorporate DelCool and AlexiCool. One is the fiber fill pillow and the other is an advanced foam fill pillow. And the advanced foam fill pillow has an advanced foam in it that's highly breathable. And we've tested these in our labs, and we've tested them in outside labs at this point, and we're getting results like no other pillow in the market. So we've been showing it globally. I was in Australia recently and New Zealand, we showed it to a number of brands and marketers in that space. We've gotten overwhelmingly positive feedback. We're leveraging our supply chain to be ready for an adoption literally right now, we could make and start to scale production of this pillow. So this is not speculative or aspirational. It's something we're actively marketing now. Our commercial strategy is to offer it as a private label pillow. We don't want to brand it to the market under Alexium, but we do want to move it to the brands and the marketers and allow them to brand it, but deliver the finished goods to them under their brand. And this moves us closer to the end customers, and it's cut out a lot of middleman steps. And what we've learned in this process is the middleman, we're really harvesting a lot of the value that our technology offers. There's a lot of pillows in the market, everyone, but there's very few pillows that do this. And we were given the value away by letting folks take that and leverage it in the market. So we've changed the strategy, and we're leveraging our supply chain and our ability to sell the technology to get to a much higher revenue per unit and a much faster adoption cycle. The testing has shown that the pillows with the technology, both foam cores and fiber fill are up to 19 degrees cooler than products made with similar materials without our technology. So that is -- there's nothing out there that does that. Feedback so far have been very positive. We have a number of active projects with one already moving quickly for a branding and merchandising plan launch in 2025 in the calendar year. And we'll keep you updated. Those are pictures of the actual pillow. We are getting the prototypes out to customers. And we've sent those to a few Board members as well. We're getting the testimonials back now. And again, it's been very positive. Okay. I'm going to shift this to Ms. Lisa at this point. She's going to give a brief financial review. And then I'll say some closing comments, and we'll hand it back to Mr. Simon Moore.

If you could share that back, that would be great. Just want to say good morning to everybody. Thank you again for being here with us and for your continued support. I hope you've had a chance to review our annual report. And so, that's been out for a little bit. So we just want to cover a few key points from the annual report. First of all, for revenue, we did finish our revenue at $5.9 million in 2024, which is down $1.3 million from 2023. And Billy has already discussed some reasons for that decline, as well as the strength of our pipeline and what we think we're going to be able to accomplish in the coming months. And it is a very strong pipeline, and we do have some very viable short-term revenue opportunities that we expect to close in the second half of this fiscal year. Our gross margin remained strong at 44.8%, which is an increase from the prior year of 5.7 percentage points. That's due to both reduced manufacturing costs and a change in our customer and product mix. But the main thing to point out here is, with the gross margin this strong that we just need the volume to really be successful, and we really think we can do that. Operating expenses management is very cost conscious, and we controlled operating expenses at $4.3 million, which is down $0.1 million from the prior year. And that's in spite of inflationary pressures and a very tight labor market. EBITDA, that's a measure we typically use in the U.S., it's earnings before interest, taxes, depreciation and amortization, was a loss of $1.6 million, which is $0.1 million worse than the prior year. However, in light of the decrease in sales of $1.3 million, we feel like that's a pretty strong accomplishment to not have any further decline in our EBITDA with our increased margins and our control of our operating expenses. For interest costs, one thing to note there is, with the elimination of our debt as part of the capital raise and refinancing transaction earlier this year that, that will decrease significantly as well. It was over $1 million in FY '24 and is significantly less than that currently. We're at a run rate of under $100,000 currently. Our cash increased by $1.5 million from the prior year with a $0.2 million increase in our line of credit balance. And that's due to the -- again, to the funds raised in the capital raise and refinancing transaction. One thing on our line of credit is that, we were able to renegotiate the terms on the line of credit after our fiscal year-end ended and we're able to reduce the fixed cost and the interest rate spread on that agreement. So that again helps us moving forward. And you'll note, too, our equity is positive now. It was -- it had previously gone negative. And, of course, our borrowings were eliminated as part of that transaction as well. So much better position to be in at the close of fiscal year '24 and ready to move forward. I'll turn it back over to Simon.

Yes. Thank you, Lisa.

Thank you very much, Billy, and thank you, Lisa, for the update. From my perspective as the Chair, I'd just like to make the final comment along the lines that, as Billy flagged in his presentation, the FY '24 year was a difficult one from an operating cash flow perspective and an operations perspective. From an underlying business and establishing the foundations for the company going forward, it was a significant year of progress. The business is making strong steps forward, and we hope to return and expect to return in the second half with a far more optimistic report for people. Billy and -- was here in October visiting with customers. He will be back again in February, again, visiting customers and with investors. And we will have another update at that point in time. I think we may well have not a traditional shareholders' meeting, but a half year results meeting where people wish to come in and engage with Billy, which will involve also external investors to run through a comprehensive update again on where we've progressed to at that point in time. We're on the cusp of a number of important steps forward with the business on the commercial side, and we will be making announcements as we make that progress over the course of the next 6 months. And with that, I'd like to thank everybody for their attendance today. And thank you again for participating and voting and for your support. Alexium has been a long journey, but we do feel we are now starting to gain some real traction commercially and making a commercial list of what we think is great technology that the company has developed and is yet to fully exploit. But thank you again for your time. Thanks, everybody, online. Take care.

Thank you, everyone.

Thank you.

Thank you all.