Elixinol Wellness Limited (EXL) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to Elixinol Global's Annual General Meeting for the 2019 financial year. My name is Paul Benhaim, and I am the Chairman of the Board. Joining me today is our Executive Director and Group CEO, Oliver Horn; Nonexecutive Director, Helen Wiseman; and our colleagues Ron Dufficy, our CFO; and Teresa Cleary, our General Counsel and Company Secretary. Representing our auditors for the 2019 annual report is Helen Hamilton-James of Deloitte. We will conduct today's AGM in 3 main parts. After this brief introduction, through which I'll share some information on the voting procedure. Following that will be the Chairman's address. I'll then hand over to Oliver, who will provide a business update, and then we'll turn to the formal business of the meeting. Today's meeting is being held online via the Lumi platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Questions can be submitted at any time. [Operator Instructions] Please note that while you can submit questions from now on, we will not address them until the relevant time in the meeting. Also, please note that your questions may be moderated or if we receive multiple questions on one topic, amalgamated together. We do only have an hour for the meeting today. So depending on how many questions we receive, we may not get through every question received or we may run out of time to answer all your questions. If you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with the voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You do have the ability to change your vote up until the time I declare the voting closed. I now declare voting open on all items of the business. The polling icon will soon appear. Please submit your votes at any time, and I'll give you warning before I move to close voting. After Oliver's presentation, I will formally step through the voting resolutions. I would now like to take a few minutes to cover the past year in your company's history. And I'll start by sharing some of my own sentiments about why Elixinol Global was founded and Listed. Hemp. When I started studying hemp in the early '90s, nearly 30 years ago, I became attracted to the plant's low environmental impact, multiple uses and became focused predominantly on its nutritional benefits. Hemp is a truly sustainable plant. It requires a small amount of water to grow, is grown on every continent. And everything -- the root, stem, flowers and seed may be used for many purposes, from clothing, building materials, plastics and food to the various cannabinoids within hemp. The positive changes this plant could make to agriculture, industry, our health and wellbeing of our people as well as our planet seemed too good to be true. In the nearly 30 years since I first started researching hemp, I've read in 9 books on the subject, have elected as an educator and helped many others start successful businesses in the area. The more I learn, the more I realize that all of those uses are truly real and together hold so much potential. I am as passionate about hemp now as when I first started to discover it for a variety of uses. I have focused this passion and our hemp into Elixinol Global Limited, and my position on the Board enables our team to benefit from my passion and knowledge to execute on its growth strategy. What we want to do with our CBD and hemp-based products is help people and the planet by providing the highest-quality healthy options in wellness. For clarification, we use the term CBD to refer to our plant-derived full or broad-spectrum cannabidiol-based products. We are proud to innovate and create these wellness products, be they food, dietary supplements or topicals, all from the one humble and sustainable hemp plant. Now Elixinol Global was formed in 2016 as the holding company for 3 distinct businesses. And what have we done in that time? Well, Hemp Foods Australia, or HFA, is a leading hemp foods brand in Australia. Founded originally in 1999 and based in Northern New South Wales, the company has been manufacturing, marketing and selling high-quality branded products for more than 5 years. In December 2019, the Board decided to divest this business to focus on our Elixinol CBD business. Since that time, after the previously negotiated sale was terminated due to the COVID-19-related factors and following substantially improved performance, the Board was very pleased to announce recently that HFA would stay within the group. With the recent good news, the Australian Therapeutic Goods Administration is also considering rescheduling CBD in Australia. This decision provides us potential to leverage the cost base and skill set in the HFA business to support potential opportunities emerging in the Australian cannabidiol landscape. We are excited about retaining HFA within the group. And then Nunyara, a medical cannabis business. At the time of IPO, the intention was to establish the cultivation, manufacturing and production of medical cannabis products to leverage the IP and know-how we have in the U.S.-based business. As time passed, we recognized that the return on investment was not in the best interest of shareholders. It has been gratifying to find a path to the Australian market by way of our recently announced agreement with PharmaCann. I can't tell you how exciting it is for me to know that our hemp-derived CBD will help Australians under the Therapeutic Goods Administration's Special Access Scheme and without any of the costs or heavy license responsibilities that would have come with Nunyara. Elixinol has been a significant part of the group's focus from the beginning. Elixinol was involved in all parts of the industry, everything from farming to processing and sales of bulk, white label and branded goods. In the past year, we made a strategic decision to move away from farming, bulk and white label to focus on higher-margin Elixinol-branded products. We always wanted to be a branded products company. 5 years ago, there was no quality CBD farmers, manufacturers or processes, let alone innovators, so we became vertically integrated. There are now many people who have jumped into this industry. This has led to an oversupply of raw material and associated price drops. Although most of the product oversupply is low quality, the dumping of these raw materials onto the market disrupted the economics of our bulk and white label markets. All of this low-quality raw material entering the market has led to many new brands entering the CBD space in the last few years, many of which do not have the experience or quality control systems that we are proud of within Elixinol. This prompted Elixinol to focus on what we are best at, producing high-quality, innovative, well-marketed consumer health and wellness products. Despite all the change and turmoil in our industry, we are pleased to have retained the reputation as being one of the most trusted brands in the United States. And we also recognize a need for a global consumer products goods specialists with deep knowledge of the wellness market, which is how we found our group CEO, Oliver Horn. In October of last year, following an operations review, the company established that noncompliant, hemp-derived CBD products were being sold by Elixinol Japan. Elixinol Global takes its compliance with legal and regulatory obligations very seriously and conducted an immediate investigation. As part of that investigation, Elixinol Global assessed if there were any viable commercial alternatives for its Japanese business at that time, and ultimately decided to sell its 50.5% interest in Elixinol Japan. Our hemp food sales to Japan and other markets, meanwhile, continued. This week, we announced that we had entered into a new license agreement that enables us to start a new chapter for Elixinol products in Japan, building upon the strong brand equity created over many years. This is great news for the people of Japan and our global brand, Elixinol. The Board has been acutely aware of the importance of creating a fit-for-purpose business operation, which uses cash wisely. Particularly with the regulatory and COVID-19 environment we're operating in, the company has made a substantial investment into creating the platform to build Elixinol into a globally recognized, high-quality nutraceutical CBD brand. Through our strong intellectual property position in Australia, the U.S. and Europe, we have created a robust global platform to enable our company to sell innovative and industry-leading Elixinol-branded products, building supply and distribution chains, predominantly in the higher-margin direct-to-consumer channels and key strategic partners. As the market changed in the U.S. and a lot of competitors came into the market, I felt strongly that we needed a team with a successful track record and commercial experience in building market-leading consumer brands. The decision was made to review the full Board. This was a necessary yet disruptive process. The result is that I feel we're in a much stronger position from which to rebuild the business moving forward. Many of you will be meeting our new group CEO, Oliver Horn, for the first time today. Having worked very closely with Oliver for the last few months, I feel confident that his leadership and expertise and knowledge of the nutraceuticals market, Elixinol is in good hands. Of course, having a leadership change in this environment is not a small feat. It will be apparent from all of his presentation that he has taken strong and decisive action to put Elixinol in the strongest position. Thank you to new and long-term shareholders for believing in his vision and allowing us the time and space to show you the passion that we have for hemp, the experience and zeal that our new group CEO has for CPG and the overall capability our global team has to deliver. Now let me add that although my intention is to support the business in the long term in the best way I can, I see my position as very much an interim step, and in line with that, the company is running a process to find a new Chair of the Board. The timing of any appointment of a new Chair depends on who we meet, the macro environment and, most importantly, the best timing for Elixinol Global and its shareholders. And we will update the market once the appointment has been made. As has been made clear, we have continued to focus on our commitment to foster in a culture of compliance. Among other initiatives, this led to the highly talented Helen Wiseman being appointed as an Independent Nonexecutive Director. Helen is an Audit Committee specialist with an extensive international experience in food, pharmaceuticals, natural health care and manufacturing industries, among others. As a former partner of KPMG and previously named as one of the 2014 Australian Financial Review & Westpac 100 Women of Influence, Helen brings diversity and seasoned governance skills to the Board. I have personally found her a pleasure to work with, especially in terms of her diligence and her role as Chair of the Audit and Risk Committee. Helen's professionalism and the wisdom she brings to the Board are both exceptional. Together, we move forward with intense focus on advancing the business to a profitable and sustainable position, whilst achieving our vision to bringing healthy products to people and the planet. With that, I would like -- now like to hand you over to our group CEO, Oliver Horn. Thank you, Oliver.

Thank you, Paul, and good morning, ladies and gentlemen. We are truly living in a VUCA world, full of volatility, uncertainty, complexity and a great deal of ambiguity. Never in recent history have societies and economies around the world faced more uncertainty and distress than today. I joined Elixinol Global 3 months ago with a mandate and firm desire to not only to restore value, but also to make a positive contribution to peoples' lives and the planet. And I'm pleased to update you today on the positive steps we've taken and the progress we have made in creating a flourishing and resilient global business. Our vision is to build a global, consumer-led and Elixinol-branded CPG nutraceuticals business. We get up every morning to make a positive contribution to people's health, wellness and the planet through the power of hemp products. We have a very proud history as champions of hemp and have accumulated tremendous global know-how that allows us to bring the highest-quality products to consumers around the world. Being a publicly listed company, consumers can rely on us to maintain quality and compliance focus when we develop and market products backed by science. Our measure of success is to become a truly global consumer brand that is winning in e-commerce and pharmacy. Our priority markets are the U.S., U.K. and Germany, and these are where we are focusing most of our efforts. We're working towards transforming our global business to a profitable business with sound CPG capabilities that delivers growth through continuous innovation, whether through product formulation, technology or process. In the recent 4 months, we've made great progress in transforming Elixinol into a fresh, contemporary and science-led nutraceutical brand. As of June, 7 of our top 10 best-selling products were new, thus demonstrating that our new range is working. This refreshed look and consumer-focused brand positioning has also played a pivotal role in securing new, wide-reaching distribution in Europe and the U.K. We acknowledge that our financial results are not where they ought to be, nor a reflection of our best efforts. COVID-19 impacts have further exacerbated the already challenging U.S. CBD landscape, resulting in revenue through the 30th of June of $7.8 million, which was down 54% versus prior year. Q2 versus Q1 is down minus 24%, driven by our performance in the U.S. We have reacted to this challenging environment with great agility. In May, we've completed a capital raise of $11 million, leaving us with a cash balance of $16.8 million at the end of June, virtually no debt and sufficient inventory to fuel our growth in the U.S. for the next year and beyond. Importantly, we took decisive steps to create a leaner operating model and reduced our operating cash outflow by 47%. Outflows are down from $17.6 million in December 2019 quarter to $9.3 million in the June 2020 quarter. We expect continued improvement moving forward following additional cost-reduction activities undertaken in the June 20 quarter. All in all, I believe we've responded quickly and responsibly to our environment, whilst remaining true to our strategy and using a very challenging market as a positive catalyst for change to create a successful and fit-for-purpose business. We are already starting to see the results of this transformation that is focused on the fundamentals of improving cash flow, premium margins and simplification of our business model. Our young European and U.K. business grew plus 39% in Q2 versus prior period. Hemp Foods Australia grew 25% in the first half versus the same period last year, whilst also improving profitability. As already mentioned, we reduced quarterly cash outflows by 47% or $8.3 million between Q4 2019 and Q2 2020, largely driven by using existing inventories and overhead cost reduction. We now reduced annualized wage and salaries by approximately $7 million since December 2019. Revenue from higher-margin Elixinol-branded channels in the first half of fiscal '20 account for 64% of total revenue compared to 50% in the first half of fiscal '19, which now also includes Hemp Foods Australia. Global e-commerce alone is now 28% of global revenues compared to 22% in the first half of fiscal 2019. And importantly, we've commenced the supply chain optimization drive with the aim of deriving additional margin points from COGS reduction and simplifying our value chain. We are also using the current environment as an opportunity to create a simpler operation that is easier to do business in and with. The U.S. team has made great inroads in improving their customer service model by creating a new outbound and inbound customer service team, rolling out new CRM platform and implementing B2B and affiliate service functions into our e-commerce platform. In the last year, we also made a significant investment in our new and sophisticated Microsoft Dynamics enterprise resource planning system, giving us greater control, better insights and enabling better and faster decision-making. As with every other business around the world, we also had to adapt to a new normal where people's health and well-being needs to be safeguarded more than ever, whilst continuing to run a globally diversified business. We are very glad to say that we have managed to maintain operational continuity throughout and that we've kept all our people safe in the process. As an essential business, our U.S. production and office facilities are operating under the most stringent health measures. We've had no challenges in securing supply and have ample inventory on hand. At the same time, we shifted focus and resources to e-commerce, TV home shopping channels and pharmacy channels as these are the most resilient channels during COVID restrictions. Our in-home TV shopping channels were a major sales driver in the first half of the year and grew by 46% in Q2 versus Q1. In the U.S., our e-commerce site has become the absolute priority channel, accounting for 43% of year-to-date revenues and returning superior margins whilst enjoying an outstanding conversion rate. As the channel is of long-term strategic importance, we've made further investment decisions that will augment our share of voice across digital media channels. We've also been investing in building our U.K. pharmacy route to market, which, being an essential service, continues to operate throughout COVID. And after launching our immune booster and sleep capsules at ideal times this year, Elixinol Europe are now in the final stages of bringing out our new topical skin care range. Importantly, we continue to invest in our brand building, reinvesting 18% of H1 revenue into marketing. The benefits of CBD are more relevant than ever in an environment where people are increasingly having to cope with stress, anxiety and sleeping difficulties. We have adapted our marketing communications to be differentiated and topical in this environment. As mentioned earlier, our fresh and differentiated range proposition is seeing good early success, and we are firmly on course to create a competitive nutraceuticals brand enhanced by the power of CBD. Our innovation efforts have been focused on blending CBD with other actives, such as turmeric, chamomile, ashwagandha and various vitamins to create a wide range of products with clinically proven health benefits. This approach has allowed us to strengthen our consumer communication with proven health claims. Awards and accolades, like being shortlisted for this year's Health & Wellbeing Trade Awards, are a testament to our science-backed approach. The launch of the range has been supported through the development of numerous great advertising campaigns specifically designed for online. For the month of July, for example, we invested in sports, lifestyle, media buy in publications covering health, bike, skating and surfing with creative ads specifically tailored to the audience. In our quest to become ever-more relevant to consumers, we extended our offering with the U.S.A. launch of our new Good Night blended capsules that contain CBD plus melatonin to support a healthy sleep cycle and help improve sleep quality. And over the course of Q3, we will be launching 3 new products, so watch this space. We are also very excited about our new skincare range, which is hot off the production lines and will be ready for distribution shortly. The range has been specifically designed to harness the benefits of CBD in 8 different products. Our team in the U.K., who has led the development for over a year, is in the final stages of preparing for a launch with Boots Island, where our products will be on shelves and on freestanding displays from mid-September onwards. The rollout will be supported by our first 360 consumer marketing campaign covering print, radio, digital and extensive in-store merchandising solutions. The launch with Boots Island represents a culmination of over a year's work and a very strategic breakthrough as we are entering a new high-growth category that is less regulated than digestible CBD products, thereby supporting our strategy to build global distribution more easily. Now understanding and navigating the global regulatory challenges is a prerequisite in building a sustainable business. We're all acutely aware of the short-term challenges in the U.S. CBD market and the regulatory uncertainty in Europe, and Elixinol's heavily engaged in those legislative and rule-making processes. However, this should not distract us from the fact that global CBD markets are expected to show a significantly robust growth rates over the next 5 years, with Brightfield Group's pre-COVID estimate of plus 46% growth across U.S. and Europe. There's no denying that CBD is making its way into the mainstream and that there's an increasing body of evidence supporting its health benefits and optimum safety. While it is, of course, wise to be cautious when science isn't well established, this exciting emerging area of research results in nearly weekly published reports around the world of promising preliminary evidence as to CBD's role in the human body, including the support of immune health. It is these advances in science and research, combined with reputable brands like Elixinol, that will convince more and our lawmakers, regulators and consumers to embrace CBD and bring it to the mainstream. In the U.S., the regulatory environment remains dynamic and varied but with a heightened expectation that the FDA will soon progress its rule-making process to formally allow CBD products to be marketed as dietary supplements. While this FDA rule-making process takes place, Elixinol, like most exemplary CBD industry leaders in America, follows the existing U.S. Code of Federal Regulations governing good manufacturing practices and labeling for dietary supplements and cosmetics, along with CBD and hemp's extra-specific high standards mandated by the U.S. Hemp Authority. The U.S. Hemp Authority has created an independent third-party audited certification program for best practices and transparency in our industry, and Elixinol was among the very first companies to achieve the certification. In Europe, both the European and the U.K. Food Standards Agency announced that those looking to market ingestible CBD products will have to submit an application for novel foods to keep products on shelves beyond March '21. As recently as 2 weeks ago, the EU put the novel foods application process on hold while it evaluates it stands on CBD. This means that the status quo in the EU in which the business is currently operating remains unchanged. The U.K.'s position remains unchanged regarding the Food Standards Agency's novel foods authorization process, so we're in the midst of continuing to manage the U.K. application process whilst awaiting the EU's ruling. Meanwhile, in Australia, the CBD market is rapidly developing, with more than 40,000 prescriptions having been issued to June this year under the TGA's Special Access Scheme. The TGA is now assessing descheduling CBD to schedule 3, effectively making it an over-the-counter pharmacist drug. This descheduling would make CBD products available nationwide. And through our just-announced distribution agreement with PharmaCann, we be in a good position to build our route to market. My experience within the Australian vitamins market will help us greatly in building the Elixinol brand here. There's a very exciting home market opportunity and, as announced 2 weeks ago, we believe that Hemp Foods Australia could play an important role in also marketing our CBD products. Coming to Hemp Foods Australia, we've already commented on its much improved financial performance, growing at 13%, delivering $2 million in revenue in the first half and a loss of $300,000 compared to a loss of $1.8 million for the full year of 2019. During the first half of this year, we reduced EBITDA losses by 63% and down to $300,000 compared to first half of 2019. As our Chairman mentioned earlier, Hemp Foods Australia is recognized as one of the strongest brands in the category, enjoying distribution in more than 1,200 stores around Australia and is well positioned to benefit from a macro consumer health trend for plant-based and healthy nutrition. Our focus now will be to improve profitability by rationalizing our premium portfolio, accelerating our existing e-commerce channels and strengthening our export channels. Considering these very positive dynamics and from a shareholder perspective, the previous sales price of $0.5 million simply undervalues HFA greatly. Importantly, at the time of the sale, the TGA had not announced its consideration to deschedule CBD, and we believe that having domestic sales and marketing capability will be an important factor for successfully launching Elixinol into Australia. Over the course of this year, we will explore all options to make HFA a profitable contributor to Elixinol's Australian strategy. CBD is a very nascent product category globally. At Elixinol, we are fortunate to have built our global presence very early and are now reaping the benefits of an emerging global brand with reach into most continents. Elixinol stands out for its quality reputation, longevity and commitment to safety, and there's not a week that goes by when we are not approached by distributors who are seeking our business. We make very careful choices based on reach, capability and compliance when selecting our global partners. As mentioned previously, our priority markets continue to be the U.S., U.K. and Germany. Elixinol was established in 2014 in America and is considered one of the most trusted brands in the market here. Headquartered in Colorado, we now employ a lean team of 37, primarily focused on sales, marketing, manufacturing and distribution. In Europe, we employ 10 full-time employees who are predominantly based in the U.K. and Spain. They're focused on sales and marketing, and we operate a fully outsourced supply chain. We focus our efforts predominantly on the U.K. and German markets with our channel priorities being national pharmacy, in-home TV shopping and e-commerce. We have built very strong relationships in these markets, underpinned by far-reaching distribution agreements that will offer significant growth opportunities for the remainder of this year. As referenced earlier, we are especially proud of the growth achieved through home TV shopping channels. In the last month, we've also shipped our first order to Alliance Healthcare in the U.K. to accelerate our pharmacy distribution build. All our EU e-commerce sites have now been transitioned to Magento, and we are fully focused on building our European digital sales channels. The EU team also services our licensing partner, Elixinol South Africa, with whom we have a long-standing distribution and licensing arrangement. We are very pleased to confirm that as of Tuesday this week, we have signed a new exclusive trademark and know-how licensing with Elixinol Japan, which will enable us to manufacture and distribute locally made products to meet market-specific regulatory and consumer requirements. This 2 plus 3-year agreement is a new chapter in this key growth market following last year's regulatory challenges, and we are now looking forward to expanding our market leadership position and bringing new products to market. Furthermore, we are also in advanced discussions to launch HFA products onto cross-border e-commerce platforms in China and expecting to realize our first sales in Q3 of this calendar year. Lastly, but importantly, we're now actively building our presence in our home market, Australia. On Monday this week, we announced a major step forward in bringing our Elixinol-branded CBD products to market through our distribution agreement with PharmaCann. PharmaCann has reach in all major Australian pharmacy chains and a services a network of over 1,600 medical practitioners. This agreement will enable us to bring Elixinol product to market under TGA's existing Special Access Scheme as well as in a deschedule environment that's currently being contemplated by the TGA. This opportunity, leveraged with existing sales and marketing capability, will contribute to future growth. I would like to thank you all for your continued support as we are building our brands and presence around the world. While I appreciate that we still have a fair way to go in reclaiming lost ground, I do hope that our good progress in a very difficult environment gives you confidence that we are progressing towards our mission of becoming a global leader in the hemp and CBD market, whilst helping people and our planet. Elixinol continues to be a trusted brand with an expanding global footprint in a high-growth category. Our science-backed new range and unique brand proposition, along with a robust innovation pipeline, will continue to drive growth and underpin our strategy to focus on premium-margin Elixinol-branded products in consumer channels. The imminent launch of our skincare range will also open up entirely new channels for growth. Combine this with our existing cash and inventory balance, a leaner operating model and materially reduced operational costs, we are well on the way to improve cash flow and strengthen our competitive position. We are now looking forward to building our momentum throughout the second half, and we'll keep you updated on our progress against our strategy. I thank you all for your attention and pass you back to Paul for the business of the AGM.

Thank you, Oliver. I'll now open up the floor to any questions from shareholders, noting that there will be an opportunity to ask questions about the specific resolutions when we move to the more formal part of the meeting shortly.

I note that we have received a number of shareholder questions in advance, and we may not have time to get to all of the questions today. So looking at these questions, let's start with this one. What's the impact of COVID-19 on the second half of the business? And maybe I'll get you to answer that one, if you don't mind, Oliver, as quickly as possible.

Sure. Look, we have absolutely no doubt that we will be continuing to operate in a COVID environment throughout the second half. I think -- actually in the first half, we already demonstrated our capability on how we managed the situation. As in the first half, we will manage on what we can control. And our first priority here is really safeguarding the well-being of all of our teams around the world. Then, of course, we will continue to manage cash very, very tightly and focus on driving revenue in more COVID-resilient channels like our in-home shopping channels, pharmacy and e-commerce. And I think we control our controllables, and we will be in the best possible position to navigate a very volatile environment.

That makes sense, Oliver. Thank you. Maybe this question is for Ron. Ron our CFO. When will the company provide a return on investment to their shareholders? We've had a number of similar kinds of questions there.

Thank you, Paul. As we all know, Elixinol operates in a new and emerging industry with an evolving regulatory landscape. And for this reason, historically, we've not provided forecast to the market. And as Oliver mentioned in his opening remarks, we live in uncertain times, and this makes forecasting even more challenging. However, shareholders can be assured that prudent decisions have been made to rightsize the company according to our current trading conditions. And for context, over the course of calendar year 2019, we've doubled the size of our organization. And over the first 6 months of 2020, we've halved the size. So accordingly, our quarterly cash expenditures, our outflows, have halved since the December quarter. So we're moving forward with a much leaner and focused organization, which is much better positioned to reach positive cash flows and profitability.

That's very helpful, Ron. Thank you. Just one more, I think. When will CBD be manufactured in Australia? Oliver, do you mind if I pass that one back to you?

Yes, sure. Look, it's simple to us when it makes sense to do so. But taking a step back, I think in Elixinol, we made significant investment in pursuing and exploring Australia manufacturing via our Nunyara operations. And as Paul alluded earlier on, part of the choice of not pursuing local production was we simply realized that an Australian supply chain was just not economical and competitive versus the supply chain that we have and can access in the U.S. and Europe. And we've been navigating and having that global supply chain, it's well-embedded in our value chain for a long, long time. So there's no doubt as an Australian company, and I would love to manufacture here in Australia and contribute to local economy and communities further. I think that's where we can make a difference. But where the economics at the moment are, there's no cost advantage to be had. And until that changes, we won't be producing and manufacturing in Australia.

Great. Thank you, Oliver. Look, I'm conscious of time, though, if you don't mind, let's move to the business of the meeting. So notice of meeting, I will be -- we'll take that as read. So coming to the more formal matters of the meeting today. The notice of meeting dated 30 June 2020 was circulated to members, and I will take that notice a meeting as being read. I would like to advise that I, as Chairman, intend to vote all undirected proxies in favor of all resolutions. As each resolution is tabled, a slide will show the results of the proxy votes on the screen. Are there any questions related to the procedures of the meeting? Okay. None, I can see. So I will now move to the business of the meeting. Business. Consideration of reports. To receive and consider the financial report, the director's report and the independent auditor's report of the company for the financial year ended 31st of December 2019. A copy of the annual report was made available on the company's website, the ASX platform and was sent to those shareholders who requested it, and we will take the report as read. Are there any questions at this point? Please note, in the interest of time, I will move swiftly on if there are no immediate questions or if questions have been covered elsewhere or we simply don't have time to cover at this AGM. Okay. So we will now move to the resolutions for voting. So Resolution 1 is election of Director, Mr. Oliver Horn. The first resolution of the meeting is to consider and, if thought fit, to pass the following as an ordinary resolution of the company. That Mr. Oliver Horn, who having been appointed by the Board of the company since the last Annual General Meeting, retires in accordance with clause 6.1(e) of the company's constitution and being eligible, offers himself for election as a director of the company. Further details about the resolution are also contained in the explanatory memorandum that accompanied the notice of meeting. The directors, with Mr. Horn abstaining, unanimously recommend shareholders vote in favor of this resolution. Are there any questions? [Operator Instructions] We have no questions for this resolution. So -- and here are the proxies that we have received in relation to this resolution. So if there is no further discussion, I will now put for the meeting on Resolution 1. Thank you. Please now select either for, against or abstain for Resolution 1. [Voting]

Thank you. We'll move to Resolution 2, the election of director, Mrs. Helen Wiseman. I now move to the second resolution, which is to consider and, if thought fit, pass the following as an ordinary resolution of the company. That Mrs. Helen Wiseman, who having been appointed by the Board of the company since the last Annual General Meeting, retires in accordance with clause 6.1(e) of the company's constitution and being eligible, offers herself for election as a director of the company. Further details about this resolution are also contained the explanatory memorandum that accompanied the notice of meeting. The directors, with Mrs. Wiseman abstaining, unanimously recommend shareholders vote in favor of this resolution. The resolution is set out on the screen. So are there any questions? Okay. No questions here. So if there's no further questions, I will put to the meeting Resolution 2, and here are the proxies received in relation to this resolution. Thank you. Now please select either for, against or abstain for resolution 2. [Voting]

Thank you. Moving to Resolution 3, which is to consider and, if thought fit, pass the following as an ordinary resolution of the company. That Mr. Paul Benhaim, who retires in accordance with clause 6.1(f)(i) of the company's constitution and being eligible for election, is reelected as a director of the company. Further details about resolution are also contained in the explanatory memorandum that accompanied the notice of meeting. The directors, with Mr. Benhaim abstaining, unanimously recommend shareholders vote in favor of this resolution. The resolution is set out on the screen. Are there any questions? We have no questions. So if there is no further discussion, I'll now put to the meeting Resolution 3. Here are the proxies received in relation to that resolution. Thank you. Please select either for, against or abstain for Resolution 3. [Voting]

Thank you. The next resolution of the meeting is regarding the Elixinol Global Limited remuneration report. The remuneration report was contained within the 2019 director's report, is available on the company's website and was posted to shareholders on their request. I will take the remuneration report as read. The fourth resolution is to consider and, if thought fit, pass the following nonbinding ordinary resolution of the company that the company's remuneration report for the financial year ended 31st of December 2019 and as set out in the director's report is adopted. Further details about this resolution are also contained in the explanatory memorandum that accompanied the notice of meeting. This vote is advisory only and is not binding on the company. I would like to advise shareholders that Elixinol Global Limited will disregard any votes as stated in the voting exclusion statement related to Resolution 4 as set out in the notice of meeting. In the interest of governance, the Board does not make a recommendation to shareholders in relation to this resolution. The resolution is set out on the screen. Are there any questions? We have no questions for this resolution. So if there's no discussion, I will now put to the meeting Resolution 4. Here are the proxies received in relation to this resolution. So please vote for, against or abstain for Resolution 4. [Voting]