Elixinol Wellness Limited (EXL) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to Elixinol Wellness' Annual General Meeting for the 2021 financial year. I'm Helen Wiseman, and I'm Chair of the Elixinol Wellness Board. And joining me today is our interim Global CEO, Ron Dufficy, Non-Executive Directors, all of whom you can see on the screen, are Dave Fenlon, Paul Benhaim and Oliver Horn; our Global Chief Financial Officer, Joe Lorenz, Josephine Lorenz; and our General Counsel and Company Secretary, Teresa Cleary. And representing our auditors for the 2021 annual report is Leah Russell of BDO. And moderating today's proceedings, we have Jane Lowe and Cherie Hartley from IR department. And before we begin, I'd like to acknowledge the traditional owners of the lands from where many of our team are gathered today and pay my respects to elders past, present and emerging. Today's meeting is being held online via the Automic platform and all attendees can watch a live webcast of the meeting, if you're not already. In addition, shareholders and proxies have the ability to ask questions and to submit votes. We will conduct today's AGM in three main parts after this brief introduction where I'll explain the voting procedure. So firstly, I'll give the Chair's address. I'll then hand over to Ron, who will provide the business update as our CEO, and then we will turn to the formal business of the meeting. Questions can be submitted at any time. Now depending on how many questions we receive, we may not get to all of them in the hour of this meeting, but we will take note of them all and make an appropriate response. So in relation to the process to this meeting, I highlight that there's a voting guide on the AGM page of the Elixinol Wellness website, so you can refer to that if you should encounter any issues during the meeting. So I now declare poll voting open on all the items of business, and please submit your votes at any time. I'll give you a warning before I move to close voting. And after Ron's presentation, I will formally step through the voting resolutions. So I'd now like to take a moment to comment on the year that has past and what lies ahead for the company. In FY '20, '21, Elixinol Wellness continued to transform itself into being a leaner, digitally led, consumer health and wellness business. We have improved profitability across the group and reduced our operating costs. We've also been focusing on leveraging our brand equity in the Australian and the U.S. markets by focusing on e-commerce growth, new product innovation, and new distribution and/or licensing agreements in many parts of the world. And we've achieved this despite another challenging period for the CBD industry. There have been a number of factors at the macro level that have impacted growth. The COVID-19 pandemic and its impacts on the global retail environment has certainly played a role as has continued lack of regulatory clarity in many of the major CBD markets. The saturation of the industry from the previous years also resulted in an oversupply of product and therefore, a reduction in pricing. And given the continuation of these unstable market conditions, well, we focused on the things that we can control because there's been a lot that's out of our control. And I'm pleased to say that we have relentlessly, and I mean relentless, maintained our strategic focus on transforming Elixinol Wellness to a lower cost, higher margin, consumer-led wellness company that's reflective of the current realities today. And we really believe that the strength of our brands and our reputation for quality will drive the recovery of the business into the future. And so from this perspective, we welcome the consolidation that is incurring across the industry because by holding on to the things that provide us with our unique competitive positioning, we believe that we are well prepared to take advantage when the market improves. In parallel, we also ensured that we are making considered and selective investment decisions to support brand buildings, product innovation and across the vital e-commerce infrastructure. And as industry pioneers, who are truly passionate about hemp, we believe it is this continued commitment to product development and innovation that differentiates Elixinol Wellness from our competitors. So delving into the highlights of FY 2021 in a little more detail, there were some important changes made on significant milestones achieved. Firstly, in the U.S. We transformed our business model by fully outsourcing our supply chain and shifting our focus to being a leaner, e-commerce driven company. Outside of the U.S., we transitioned our global strategy by closing our European operations and establishing licensing agreements with market-leading partners in the region. And at this point, it's worth touching on our decision to withdraw from the proposed acquisition of CannaCare Health that was the subject of our AGM last year, that was a German-based acquisition. Now suffice it to say that it was a very carefully considered decision based on a well-founded view that moving ahead with the deal was not in the best interest of our shareholders. And this has proven to be a wise decision given how quickly the German market dynamics shifted in the second half of last year. And then closer to home, despite the challenging conditions, Hemp Foods Australia posted successive quarters of revenue growth throughout the year. However, in the first quarter of FY 2022, did see a slowdown of its growth trajectory. And this is due to the impact of a new wave of COVID, the Omicron that rip through early in part of the year. And of course, a devastating floods in New South Wales, where our operations and a number of our staff are based. With improving market conditions, we are focused on wider national distribution for Hemp Foods Australia products, resulting from deals with Woolworths and Costco. Again, we're focusing on our e-commerce strategy and new product innovation in the Hemp Foods Australia space. And while we are pleased with our transformation in FY 2021, recognizing those headwinds, our primary focus is on accelerating our path to profitability and maximizing shareholder value by making sure that we become a well-funded and leaner consumer wellness business. And so with this in mind, towards the beginning of the year, we decided to undertake a strategic review of the company, and this is ongoing. But the preliminary findings from strategic review resulted in bringing forward additional cost reductions, which are expected to reduce annualized operating costs by around $3.2 million. And additional strategic review opportunities continue to be actively explored, including the potential sale or merger of all or parts of the Elixinol Wellness Group. So in line with the changes at the corporate level, the Board accepted the resignation of Oliver Horn from the role of Global CEO and Executive Director. Now Oliver played a major role in leading the company through the significant transformation that we've experienced over the last few years and relentlessly focused sums up Oliver whilst preserving a culture of wellness and passion for what we do. He has made the hard calls with a soft heart, and we are, therefore, very pleased to retain his leadership within the business as a Non-Executive Director. Now succession planning is a very important topic for every Board. We were pleased that Ron Dufficy agreed to move from his role as Global CFO into the position of Interim Global CEO. And Ron has been with the company for the past 5 years and has been a major asset to the organization. He has extensive senior leadership and strategic experience, and he was a natural appointment to lead this transition period while the strategic review of the company is completed. Now this orderly succession also meant that we could seamlessly elevate Josephine Lorenz, Elixinol's former Group Financial Controller, into Ron's previous role of Global CFO. She's a highly valued leader in the company who has been steeped into the businesses and culture of Elixinol Wellness. And then on the Elixinol board itself, we secured Dave Fenlon as an independent Non-Executive Director. This is a real coup for the company as David has over 30 years of experience in the FMCG and consumer sectors, and he brings sharp insights. So looking ahead, with these changes now in place, we continue to be focused on driving our performance in the Australian and U.S. markets, where we have a strong competitive position. We will continue to accelerate our e-commerce growth and bring innovative new products to consumers while continuing to improve profitability and reduce our operating costs. And I believe Elixinol Wellness is well positioned with strong brand equity in an industry where despite the challenges of the last couple of years, which have been significant, the longer-term global outlook for the industry still remains very positive. And in closing, I'd like to thank the management team for their continued commitment and dedication to the company, and special recognition also needs to go to our employees around the globe who have shown resilience in very challenging times and have also been willing to champion change within the organization, and they really are a special group of people. And finally, I'd like to take the opportunity to thank you, our shareholders, for your ongoing support as we continue to navigate the transformation of the business. Delivering shareholder value remains our absolute priority. I mentioned the word relentlessly focused. It's at the forefront of the decisions that we're making. With that, I'd like to hand over to Ron for the CEO update, and he will delve into more of the detail. Ron?

Thank you, Helen, and good morning to you all. As Helen just highlighted, Elixinol Wellness is continuing to emerge and transform itself towards a leaner, digitally led consumer health and wellness business. We've continued to make progress in transforming the business throughout FY '21, and it is my pleasure to update you in more detail today. The company's vision has always been to make a positive contribution to people and the planet by harnessing the best of nature. And for us, that is hemp. Hemp is not only a super food with unique health properties, it's also a material that can be used in fabrics, plastics and building. Furthermore, it is one of the most eco-friendly plants in the world, thanks to its ability to capture CO2 from the atmosphere, regenerate the soil and support sustainable farming. In a time where many investors are considering ESG, we are proud to be a business based on natural and sustainable wellness solutions. Over the past 12 months, we have continued to focus on simplifying our business model, setting low-value activities whilst reducing our cost base by 35%. This included our transformation of Elixinol Americas to being a capital-light e-commerce-led business. As part of this, we moved to a more consumer-friendly, lower cost and better performing Shopify e-commerce platform. The new online platform loads over 140% faster, is mobile optimized and now includes a loyalty reward points program for our customers. In the U.S., the regulatory environment also evolved favorably during the year, with Assembly Bill 45 being signed into law on 6th of October 2021. This has established a comprehensive regulatory framework for the manufacture and retail sale of products in California containing hemp-derived CBD, including dietary supplements, topicals, over-the-counter and pet products, among others. As one of our largest markets, this is a very positive development for Elixinol and is indicative of potential regulatory progression that could be expected across the United States. We focused on growth through innovation and launched our CBD pet collection. The range is specifically designed for dogs and allows us to access new growth in the $432 million pet CBD market. This product innovation continued locally with Hemp Foods Australia who launched a new Hemp Paste for the food services industry, and a new look Hemp Protein Shakes. We also secured important new distribution deals with Woolworths and Costco, ensuring widespread availability of Hemp Foods Australia products. As Helen mentioned earlier, another important strategic decision in FY '21 was the move to close our European operations and focus on our licensing model with partners in key regions. This resulted in a 3-year exclusive trademark and knowhow licensing agreement with U.K.'s largest CBD manufacturer and distributor, British Cannabis. The deal enables British Cannabis to manufacture, market and sell Elixinol-branded CBD products across the U.K., ensuring the Elixinol brand continues to be distributed in this market while realizing significant cost savings to the group. In other markets outside of the U.S. and Europe, we were pleased to sign licensing and distribution agreements in Mexico, Malaysia and South Africa. These are enabling Elixinol to create a foothold in emerging CBD markets that have a positive regulatory outlook. In Japan, we are seeing the benefits of our license agreement with Elixinol Japan, having recently began to receive royalty payments under this arrangement. Japan is one of Asia's largest CBD markets, and Elixinol Japan is firmly focused on being the market leader. That is why we were very pleased to announce to the market last month that we have renewed our agreement with Elixinol Japan for a further 5 years. With the global pandemic has continued to have an impact, and the regulatory environment is still unclear in many markets, we have managed to evolve and transform with industry-leading brands, funds in the bank and a dedicated Board and management team, we are positive about the year ahead. However, our 2021 financial accounts showcase the results of our efforts made. Whilst revenues did decline by 38% largely due to COVID impacts in our retail business, we worked hard to reduce our cost base by 35% and we improved our adjusted EBITDA outcome by 50% compared to FY '20. Our strategy to focus on branded products and e-commerce channels drove significant improvement in margins, which finished the period at 52% up from 45% on the prior year. We're in a strong cash position, having ended FY '21 with funding of $14.7 million and a reduced capital expenditure requirements due to our simplified capital-light business model. Now let's delve a bit more into our operational initiatives and highlights. As a result of the large-scale business transformation and restructuring efforts that I already touched on, we managed to achieve $11.3 million in OpEx savings with further optimization initiatives underway. The margin accretion strategy we pursued enhanced our margins by 7 points to 52%. We believe there are further opportunities throughout FY '22 as low European business margins fall away. I'm pleased to report that despite the challenging market context and continued investment in the brand and new product innovation, Elixinol Americas delivered the largest EBITDA improvement. Margins were a record high of 71% with our new e-commerce platform creating significant momentum. Hemp Foods Australia strategy has been to focus on profitability and optimization of the range, which has included investment in new product development in order to remain competitive. However, Hemp Foods Australia still managed to improve EBITDA by 33% and accounted for 44% of the group's total revenue. And the final point I'd like to touch on is a 30% reduction in our corporate costs, which were down from $4.9 million in prior year to $3.4 million in FY '21, with further optimization or debt opportunities identified. I'd now like to take the opportunity to touch on our performance in the first quarter of FY '22. I'm pleased to report that despite seasonal and Omicron softness impacting our revenues in Q1, we have maintained our trajectory to drive EBITDA improvement. Unaudited EBITDA for the quarter was broadly in line with Q4 and represented a 33% improvement on Q1 FY '21. Through our continued focus on cost reduction initiatives, including cutting corporate costs, further rightsizing the Elixinol Americas operations, we also recently announced additional annualized operating cost savings of approximately $3.2 million. Our e-commerce channel in the U.S. have also returned to growth with monthly revenues increasing sequentially from $140,000 -- $143,000 in January to $187,000 in April. In Australia, we witnessed a 63% growth in category revenue contribution compared to the prior corresponding period from Hem Foods Australia. This was on the back of a very successful relaunch and product expansion of our protein range. There were also some positive regulatory developments this past quarter with Elixinol products receiving approval on the U.K. FSA novel foods list meaning they can continue to be sold in the U.K. through our British Cannabis licensing partnership. In addition, Hemp Foods Australia received preliminary approval from the Therapeutic Goods Administration for the exclusive use of Hemp Seed Oil as a permissible ingredient in listed medicines. So there's been a solid start to FY '22, we remain well funded and we are confident that we'll continue to drive EBITDA improvement across all areas of our business in the coming quarters. The company's transformation to being digitally first and our investment in e-commerce continues to be rewarded with 39% of revenue in FY '21 being derived from e-commerce. This was up from 33% in FY '20. As previously mentioned, Elixinol Americas successfully transitioned to the Shopify e-commerce platform as it offers a better user experience while yielding significant cost savings. Since launch last October, the e-commerce site has demonstrated strong performance improvements with 72% growth in user sessions and 25% transaction growth versus the prior quarter. The e-commerce platform accounted for 63% of segment revenues, and we believe it will provide strong growth in FY '22. Hemp Foods Australia also realized significant improvements in online sales during FY '21, no doubt benefiting from COVID lockdowns and the subsequent consumer shift to online shopping. Hemp Foods Australia also increased its focus on marketing activities to drive online shopping as a result. Both e-commerce revenue and the number of transactions were up 47%. This accounted for 12% of segment revenues. Moving ahead, we'll continue to focus on attracting new consumers online and improving the user experience. We've already discussed the growing trend for plant-based food and nutraceuticals, so I won't spend too much time on this slide. However, what I'd like to reiterate is that we are witnessing a considerable shift in Australia towards plant-based foods as more and more people are reducing their meat intake. And with one of the leading hemp brands in the country, Hemp Foods Australia, we are perfectly positioned to reap the benefits of this consumer shift. In the U.S., CBD sales are expected to reach $12 billion by 2026 according to the latest report from Brightfield. This is being accelerated -- this is driven by accelerated growth in ingestibles and mainstream retail adoption of CBD products. On top of this, the regulatory environment is developing positively with California legalizing CBD as a dietary supplement, and new congressional bills such as SAFE Banking receiving bi-partisan support. Furthermore, prices appear to be stabilizing as the industry consolidation continues and the oversupply of product eases. So looking ahead, our business strategy is pretty simple. It's about continuing to optimize the business, drive revenue and improve profitability. We will focus our investments on our most established markets in the U.S. and Australia, where we have a strong competitive position while maintaining a watching brief in Europe and the United Kingdom pending positive regulatory developments. We will implement targeted campaigns to drive growth in our e-commerce channels, including influencer outreach and pay-per-click investment, while in tandem, further optimizing the user experience and activating a B2B function. Extending our retail distribution network will also remain a focus in the U.S. and Australia and we'll -- our ongoing investment in product innovations and product portfolio expansion. As the demand continues to grow, we must ensure we are delivering on the latest consumer trends and expectations. The other area of significant investment during FY '21 was the new product development. Our R&D and innovation team focused on developing next-generation nutraceuticals and health food products, launching a number of new products that are already driving revenue growth. These include Elixinol sleep gummies and the Elixinol CBD pet range as well Hemp Food, Australia's Hemp paste, a refreshed -- tender refreshed and expanded protein range. Over the coming months, we will further consolidate our position as a leading innovator in the sector with a comprehensive new product pipeline that we'll continue to roll out during FY '22. Examples include Elixinol functional gummies, tinctures and capsules and a complete nutrition shake. I hope that today has given you a clear understanding of the transformation journey we've been driving and confidence that the company is now well positioned to capitalize on the growing consumer trend for natural wellness and more favorable market conditions. Through our strategic review process, our core fundamentals have materially improved, and we'll continue to focus on our product innovation pipeline to drive entry into new product categories and thereby drive revenue growth. The newly configured Board and management team are committed to seeking opportunities to grow and accelerating our pathway to profitability. As we continue with our strategic review process, we will evaluate opportunities to create value for shareholders. Whatever the outcome, the outlook for the CBD industry globally remains strong. With our notable Elixinol brand equity and establish relationships with distribution and/or licensing agreements in many parts of the world, we are very well placed to capitalize on the opportunities in the global market. In closing, I'd like to thank you all for your ongoing support and belief in Elixinol Wellness, and I look forward to keeping you updated on our progress. With that, I'll hand back to Helen to conduct the official business of the meeting. Thank you.

Thanks, Ron. I mean that was a very comprehensive update and just gives you a flavor for just the sheer amount of work that's gone in over the last 12 months. So I'd like to open up the floor to any questions from shareholders. And noting that there will be an opportunity to ask questions about specific resolutions when we move to the more formal part of the meeting shortly. Now we have -- I believe, Jane, we've received some questions in advance, I'll try from the Q&A. Do we have anything there?

Nothing through the Q&A, Helen, but you're right, I had a couple on advance. So perhaps we can cover those now. The first one related to the strategic review process. So -- and the question is, have you had any bids on the business? And could you please provide a general update on how that's moving?

No, no. It's a very good question. And you can imagine just in terms of continuous disclosure rules, I'm limited of what it is that we can say. The strategic review is a very wide-ranging process. And one of the preliminary results of that which I mentioned earlier was significant cost savings that have been identified just off our own team. We have had a number of exploratory conversations with interested parties. And some of those conversations do remain ongoing, but they are very preliminary in nature. And look, we're also focused on running the business. We are well funded. We continue to be in a strong position moving forward as a business and what we want more than anything else is to accelerate our path to profitability and drive shareholder value. I'm very conscious that by shareholders and indeed the team at Elixinol would like some clarity on the outcome of the strategic review. And we'll definitely keep shareholders and our people informed as soon as we have further news to provide.

Thanks, Helen. I've got one other question and it's related. What might the deal look like?

Yes. I suppose, nothing is off the table. So it could involve the sale of a business. We've got 2 principal businesses Hemp Foods Australia and Elixinol in the U.S., could be the sale of part of the business, could be a sale of the company as a whole merger that drive significant synergies. It really is we're open to whatever form that we believe is going to deliver greater value for shareholders. So still very open.

Thank you.

Good to move on. Okay. So I'd like to move to the business of the meeting. Now the Notice of Meeting dated the 22nd of April '22 was circulated to members, and I'll take the Notice of Meeting as being read. I'd like to advise that I as Chair intend to vote all of the 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 in relation to the procedures of the meeting? Just give a moment for any questions to be asked.

No questions at this time. Thanks, Helen.

Thanks Jane. So I'll now move to the business of the meeting. So the first formal agenda item is to receive and consider the financial report, the Director's report and the independent Auditor's reports of the company for the financial year ended 31st December 2021 and a copy of the annual report was made available on the company's website. It's on the ASX platform and was sent to those shareholders who requested it, and I'll take these reports as read. Again, just a pause for any questions in relation to those reports.

No questions at the moment.

Okay. Thank you. So we'll now move to the resolutions for voting. So the first resolution of the meeting is to consider and, if appropriate, pass the following as an ordinary resolution of the company that Mr. Oliver Horn, who retires in accordance with Clause 6.1 (f) (i) of the company's constitution and being eligible for reelection, be reelected as a Director of the company. And the Directors be Mr. Horn abstaining unanimously recommend shareholders vote in favor of this resolution. And again, if you have a question, please click on the ask question button. I think hopefully we're all familiar with Zoom by now after 2 years of the pandemic. But please type your question and click Submit.

There's nothing in the Q&A at the time. Thank you so much.

Okay. So here are the proxies in relation to this resolution. If there's no discussion, I now put to the meeting resolution 1. So please would you select either for, against or abstain for resolution 1. I'll now move to resolution 2, which is to consider and if appropriate, pass the following as an ordinary resolution of the company that Mr. David Fenlon, 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 reelection as a Director of the company. And the directors unanimously recommend shareholders vote in favor of this resolution. And please feel free to ask a question using the procedure I've just outlined.

No questions. Thanks so much.

Okay. So up on the screen, you should see the proxies received in relation to this resolution. This is no discussion on that particular meeting resolution 2. So please would you select either for, against or abstain for resolution 2. I'll now move to resolution #3, which concerns the Elixinol Wellness Limited remuneration report. And this was contained within the 2021 annual report, which is available on the company's website and posted to shareholders on request. And I'll take the remuneration report for 2021 as read. So please note that in accordance with Section 250R(3) of the Corporations Act, the vote on this resolution is advisory only and does not bind the Directors or the company. The resolution reads as follows: that the company's remuneration report for the financial year ended 31st December 2021, as set out in the Directors' report be adopted. I'd like to advise shareholders that Elixinol Wellness Limited will disregard any votes as stated in the voting exclusion statement related to Resolution 3 as set out in the Notice of Meeting. And what it's really saying is in the interest of governance, the Board does not make a recommendation to shareholders in relation to this resolution and indeed, as direct as we're excluded. We can see that resolution is set out on the screen, and I'm happy to take any questions.

No questions at this time. Thanks, Helen.

Okay. So I now put to the meeting resolution 3, and here are the proxies that have been received in relation to this resolution. So again, please would you select either for, against or abstain for resolution 3. Okay. For our fourth resolution, which concerns myself conflicted, I'd like to hand over to recently appointed Independent Non-Executive Director, David Fenlon to conduct proceedings.

Thank you, Helen. Much appreciated. The fourth resolution is to consider and if thought fit, pass the following ordinary resolution for the company. That for the purposes of ASX Listing Rule 10.14 and for all other purposes, the issue of 981,153 Performance Shares to Ms. Helen Wiseman under the Elixinol Wellness Limited Equity Plan on the terms described in the Explanatory Memorandum which forms part of this notice of meeting is approved. The resolution is set out as on the screen. Jane, could I ask if there's any questions?

No questions at this time. Thanks Dave.

If there are no further questions or points of discussion, I now put to the meeting resolution 4. And here are the proxies in relation to this resolution. If I can now ask you to select either for, against or abstain for resolution 4. At the conclusion of this resolution, I now hand back over to Helen to continue with the remaining resolutions.

Thanks, David. So the fifth resolution is to consider and, if appropriate, pass of following as an ordinary resolution of the company. That, for the purposes of ASX Listing Rule 10.14 and for all other purposes, the issue of 652,566 Performance Share Rights to Mr. Paul Benhaim under the Elixinol Wellness Limited Equity Plan and on the terms described in the Explanatory Memorandum forming part of the notice of the meeting is approved. Thankfully, that resolution is set out on the screen, not easy to say. Questions Jane?

Nothing on the Q&A. Thanks, Helen.

All right. Thank you. So I will now put to the meeting resolution 5. And here are the proxies, they're coming, received in relation to this resolution. So again, please would you select either for, against or abstain for resolution 5. So let's turn to resolution #6. And that's to consider and if appropriate, to pass the following as an ordinary resolution of the company. That, for the purposes of ASX -- and you're also going to flow this up. Now for the purposes of ASX Listing Rule 10.14 and for all other purposes, the issue of 144,689 Performance Share Rights Mr. Oliver Horn under the Elixinol Wellness Limited Equity Plan on the terms described in the Explanatory Memorandum forming part of the Notice of the Meeting is approved. And the resolution you can see in front of you. Again, any questions, Jane?

No questions. Thanks, Helen.

And here are the proxies in relation to this resolution. So please now select either for, against or abstain for resolution #6. Okay. Resolution #7 is to consider, and if appropriate, to pass the following as an ordinary resolution of the company. That, for the purposes of ASX Listing Rule 10.14 and for all other purposes, the issue of 465,753 Performance Share Rights to Mr. Dave Fenlon, under Elixinol Wellness Limited Equity Plan on the terms described in the Explanatory Memorandum, the full part of the notice of the meeting be approved. Again, the resolution is in front of you. Any questions, Jane?

No. Thanks, Helen.

Okay. Thank you very much, everyone. So I now put to the meeting resolution #7. And again, you can see the proxies there in relation to this resolution. And so please, can you select either for, again or abstain for resolution #7. So now we move to resolution #8, which is to consider, and if appropriate, to pass the following as an ordinary resolution of the company. That, for the purpose of Section 200(B) (1) and 200E of the Corporation Act and for all other purposes, the giving of a benefit to Mr. Ron Dufficy in connection with him ceasing to hold a management or executive office in the company, be approved on the terms set out in the Explanatory Memorandum. And then you can see the resolution on the screen. Questions Jane?

No questions. Thanks, Helen.

Okay. So again, we have the proxies. Please, would you now select for, against or abstain for resolution #8. So Resolution #9 is to consider, and if appropriate, to pass the following as an ordinary resolution of the company. That, for the purposes of our ASX Listing Rule 7.2, Exception 13 and for all other purposes, the Elixinol Wellness Limited Equity Plan as described in the explanatory memorandum accompanying forming part of the Notice of the Meeting be approved for the issue of securities under the plan. Are there any questions, Jane?

No questions. Thanks, Helen.

Okay. So I now put to the meeting Resolution #9 and the proxies that are up there on the screen in front of you. Please would you now select either for, against or abstain for resolution #9. We now come to our final resolution, which is resolution #10, and this is to consider and, if appropriate, to pass the following as a special resolution of the company. That, pursuant to and in accordance with ASX Listing Rule 7.1A and for all other purposes, shareholders approve the issue of equity securities up to 10% of the issued capital of the company at the time of issue, calculated in accordance with the formula prescribed in ASX Listing Rule 7.1A.2 and on the terms and conditions described in the Explanatory Memorandum. Again, you can see the resolution there. Questions, Jane?

No questions. Thanks, Helen.

Okay. Here are the proxies that have been received in relation to this resolution. Please would you now select either for, against or abstain for resolution #10. So that was the final resolution. But before closing the voting system, I'd just like to take a few minutes to answer any further questions that may be forthcoming.

We do have one that's come through the Q&A, which relates to company performance. So why has Elixinol been the worst performer during the pandemic? We lost more than 80% of value during this 2-year period. What are the chances of recovering in retirement age, and we've invested over $600,000. We are worried.

Yes. It's been very disappointing. There's no doubt about that. I can well understand the frustration that, that would bring. The CBD industry itself, one of the things that we do is that we track the share prices of our peers in the sector. And indeed, all of them have declined in the last 12 months. In fact, our share price has declined slightly less, but that, of course, is cold comfort. As I said, we are relentlessly focused on transforming the company, positioning the company for when the industry does recover and we really believe it will recover while at the same time being very alive to other opportunities through the strategic review to enhance shareholder value. Ron, is there anything that you want to add to this really important question?

Yes. Thanks, Helen. I agree with your comments. I think Elixinol's traded broadly in line with the cannabis sector and our CBD over the last 12 months. And there's clearly an overhang of the sector, predominantly driven from the regulatory ambiguity that's in the U.S. And I think there is -- a general expectation there will be positive developments. There's more progressive thinking, but it's something we can't control, and that's why we've just relentlessly focused on cost control and optimizing our business to be in a position to take advantage of opportunities as they present themselves. There's clearly an overhang on Elixinol that -- which is sort of clouding the view on the opportunities that our Hemp Foods Australia business has as the leading brand in Australia in a fast-growing segment. So we're also looking at opportunities to bring that to life, create consumer awareness, working with influencers to share the good story everything about our hemp foods business. So we're working hard to do that.

I say it's important to -- sorry, if you don't mind because this is an important question. But there is a substantial base of people who regularly take CBD as part of their lifestyle, I'm certainly one of them. And one of the things that they're on, one is consistent quality delivered by brands that they trust. And so this is partly the reason why we certainly back our quality, but why we welcome the consolidation that's going on in the industry. Meanwhile, there are consumers who are new to CBD and who are waiting for that regulatory certainty. And we only wish that, that regulatory certainty would come sooner rather than later. And what that represents is potentially significant upside, whilst the current market oversupplies issues have been worked through, as Ron has outlined. Again, we believe that we are well placed to survive the route for one of a better expression and be in a position to capitalize using our funding base.

Thanks, Helen, and Ron. A couple of questions that we received prior to the meeting that I'll just add in here as well. So one here, looking for when we can expect an update on the strategic review outcomes.

Well, I mean, again, because of continuous disclosure rules and given the exploratory nature of the conversations, which are occurring at the moment, I can't say when we'll be able to give an update on that, as soon as we have news to share, we will be providing that news. But I think it's also important to recognize that the key aspects of the strategic review has been looking within our own house, putting in place our own efficiencies and the cost savings and we've made significant progress on that. And as I emphasized the strategic of our own sort of internal focus on growing our own business continues, whilst we still engage with potential opportunities outside of the company.

Perhaps a final question here because I think you've dealt with the others I've received. If the company doesn't reach a deal, will you need to do another capital raise?

I might take that one, Jane. So the company does not have any immediate plans to seek a capital raise. As we mentioned, we relentlessly focus on our cost control and optimizing the business to trade in the current environment. So regardless of the outcome of the strategic review, we're running the business as lean as possible and that ensures that we have maximize our runway to take advantage of opportunities as they present themselves in the future.

Thank you. Okay. Well, actually, I mean, you sort of partially covered this Helen but, perhaps just want to finish with on the outlook for the CBD market. So perhaps you can just share your view on what the outlook looks like from here.

We're actually -- I hope -- Ron, I might throw over to you because in amongst the presentation, you had nice little chart from the Brightfield report. Maybe if you can explain a little bit about what that is and then what the trajectory used.

Thank you, Helen. Yes, Brightfield -- it's very hard to get good market data on industry outlook, but Brightfield is one of the credible organizations that does comprehensive research in the space. And there's clearly an expectation of considerable growth as in the outlook. So the outlook is incredibly bright. But as I mentioned, there's some clearly -- there's some regulatory progress that's weighing on the sector that's holding back that growth. And I think the general expectation is that there'll be progressive regulatory progress that will unlock that growth. So I think there's clearly significant opportunities for reputable companies that have strong brands. And that's what we're focused on is protecting our Elixinol brand equity as being a brand that's associated with integrity and quality to capitalize on those opportunities.

Thanks, Ron. In the absence of any extra Q&A, there are all the questions that I had, Helen, so I might pass back to you to make any final remarks.

Okay. Thank you. And thanks to all of you who are asking those questions and expressing those concerns as well. So this concludes our discussion on the formal items of business. And in a couple of minutes, I will close the voting system. So please ensure that you have cast your vote on all the resolutions. And I'll just pause to allow a little bit of time to finalize those votes. Well, I've got a question for you whilst we're just pausing. You're wondering what my question is going to be. When are we going to issue pineapple flavored gummies?

Thanks, Helen. That's a really interesting flavor that I think the team has considered. And I wouldn't rule it out. It's not in our immediate pipeline, but it definitely has some appeal. So we'll take it into our discussions.

Remember when I said, when I was a kid just loving pineapple chunks from the sweet shops with sugar coated. Anyway, I think that I've given you all enough time to cast your votes. So I will now declare the voting is closed. And the results of the poll will be released to the Australian Securities Exchange later today. So this concludes the 2022 AGM of Elixinol Wellness Limited. Thank you for joining us today, and thank you for being shareholders of the company, engaging with us, challenging us. We are very open. We want to share our story, and we're looking forward positively to success. Thank you very much. indeed, ladies and gentlemen.