Phoslock Environmental Technologies Limited (PET) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to Phoslock Environmental Technologies First Half 2022 Business Review and Strategic Outlook Webinar. My name is Greg Slade, Investor Relations Consultant to Phoslock. The format of this webinar is shortly I will hand over to CEO, Lachlan McKinnon; and CFO, Matthew Parker, to take you through a company presentation. At the conclusion of the presentation, I will return to ask both Lachie and Matt a series of questions submitted from shareholders as part of the registration process for this webinar. With over 150 people on this webinar this morning, it's not really feasible for individuals to ask questions live. So I have collated all the questions that were submitted, and I'll address the most commonly asked topics in the Q&A session at the end. For those shareholders who are not able to join us live today, a recording of this webinar will be posted to our website within the next 24 hours. Without any further ado, I'd like to hand over to the CEO of Phoslock, Mr. Lachlan McKinnon.

Thanks, Greg. Good morning, ladies and gentlemen, and thank you very much for joining the call. This morning, we have a few things to get through. There's 3 main parts of the presentation that we like to discuss. The first one is obviously the half-year results to 2022. Secondly, I wanted to just touch briefly on some of the legacy issues and the legal positions that we've been dealing with over the past couple of years really, but I wanted to just recap on some of those briefly. And thirdly and most importantly, I wanted to talk to you about the future of the business and the outlook for the company. So I'll start with the main developments for the first half. And obviously, in the first half of 2022, we continued to execute on the strategic growth plan, which we've explained in previous presentations before. Largely, that's around geographic and product expansion and adding resources and investment as we need to do that. We've restructured the U.S. and European commercial operations, which I'll discuss in a bit more detail, and we have significant distributions now in place for both of those regions. We have addressed a new sales model in China, recognizing the risk and -- in that market, and I'll discuss that as well. We've significantly increased our commercial activity here in ANZ with new -- many -- a number of new markets being identified -- or market segments being identified, and we've continued our support for Brazil and significantly made some developments in new markets in South America. On the R&D front, we identified new opportunities in flowing water. With post period, as you would remember, the signing of the Phosflow distribution agreement, which is a significant milestone for the company. We've also identified other partners in areas of water remediation, synergistic opportunities in things like dredging, harvesting, et cetera. We've continued to address the legacy issues associated from the previous management. Obviously, that involves significant time and effort, which has been expanded and continues to be expanded. We've had many and significant ongoing projects across all the key regions throughout the first half. However, we are -- we noticed the COVID impacts and the slow build for water remediation activities, which unfortunately has hampered the revenue growth throughout the first half. We secured the BHZQ settlement, and we secured a court order for the Xingyun Lake Project through a significant milestone for the China and for the business in general. We completed our manufacturing and supply chain review with the investment being approved for improvements in the China facility, and we've identified an expansion site in the U.S. with detailed assessments around that continuing. And of course, we've spent considerable time addressing the issues that will facilitate the relisting of our shares on the ASX. The expectation for relisting is imminent, and we'll discuss that a little bit more as we go. With that, I'll hand over to Matt, who will just walk us through the financial numbers and some commentary around those. Thanks, Matt.

Thank you, Lachie, and good morning, everybody. Revenue for the period was $1.3 million, which was down 5% on the prior corresponding period. Consistent with commentary made at the full year in March 2022, project delays and port disruptions during the half of 2022 resulted in lower-than-expected sales in the period. Gross profit was slightly over $700,000 for the period at a margin of 57%, up from the prior period of 52%. The improved margin resulted from lower freight costs in the period and higher margin sales to our South American distributors. Underlying EBIT for the period was a loss of $5.3 million compared to a loss of $4.2 million this time last year. Lower sales and higher operating expenses in the period all contributed to the loss. Operating expenses were higher in this period, primarily as a result of expenditure on restructuring costs in China. Expenses incurred in manufacturing operations for current and proposed plant expansions endeavors, ongoing legal and consulting expenses and consulting costs relating to R&D activities and specialist advisers in support of our regulatory efforts in Canada. Net profit after tax for the 6 months amounted to a loss of $6.5 million. This compared to a net profit after tax loss of $1.2 million in the prior corresponding period. The prior period recognized a favorable noncash accounting gain of $3.2 million on lease liabilities. That gain did not occur in the current period. As Lachie mentioned, in early July, the company announced that a court order was obtained for the payment of outstanding receivables for the Yuxi City in relation to the Xingyun Lake Project amounting to $6.9 million and interest of AUD 260,000 to be paid by the 18th of October 2022. Notwithstanding the court order, there remains some uncertainty in relation to the recoverability of this outstanding amount, and the impairment provision remained in the accounts of the half. The company is in regular contract with contact with Xingyun Lake officials to secure payments. Should a payment plan be agreed and implemented, we will assess the judgment on the balance of that receivable at that time. Operating cash flow for the 6-month period was a cash outflow of just over $4.5 million, representing $660,000 additional cash outflows from the prior period. The increase in cash outflows relates primarily to higher employee payments and manufacturing-related activities, combined with ongoing legal and consulting expenses as a result of the regulatory activities and consulting costs detailed previously. Spending on new plant equipment and intangibles that Lachie mentioned previously for the 6 months totaled $245,000. This was mainly for the Chinese manufacturing capacity expansion that Lachie previously mentioned. Now back to Lachie. Thank you, Lachie.

Thanks, Matt, and thanks for that update, and we'll talk through some of the major components of that as we go. I wanted to now address or at least just recap on some of the legacy issues that we've been dealing with over the past 2 years. I do not propose to go through every point on this slide, but I do bring it to all our shareholders' and stakeholders' attention of some of the responses we've made to deal with some of the legacy issues that we faced when Matt and I started. So you can read them all there. I don't propose to dwell on them. I did want to mention on the next slide, though, around some legacy issues in relation to inquiries. So the next slide, please. Thank you. Regarding some inquiries and legal proceedings, which we've talked about previously. So just to mention, PET self-reported some suspected fraud and foreign bribery to the AFP. Some time ago, we announced that, and we remained in full cooperation and ongoing engagement with the AFP around those inquiries. We have experienced significant costs so far, and we anticipate about $1.3 million being spent for the calendar year 2022, which is significant but very important as we fully cooperate with the AFP on their inquiries. The AFP has referred some of these matters to ASIC for its consideration. And of course, we will work cooperatively and are working cooperatively with ASIC as well. Shareholders and stakeholders should know that there are potential petties at risk. There are some potential risks with these inquiries in the way of fines and judgments. We do not know when or how or if that will occur. However, you should be aware that is a possibility. We've also said previously, particularly at the AGM, around pursuing legal activities against previous management of the business and directors. And that work has been significant, and the amount of time and resource spend on getting our legal understandings and positions has been well spent, and PET is in a very good position to either defend the company or to pursue perpetrators as required. However, it is important with these regulatory agencies investigating and inquiring around certain matters to deal with the company that we allow those to take their course fully and await the outcome of those before we pursue any claims against the wrongdoers. So I wanted shareholders to note that. And obviously, we'll keep you informed of those developments as they occur in relation to these matters. Thank you. All right. I would like to move on now to the first half and talk through a detailed review, geography by geography, of what happened in the half. So firstly, in the ANZ region, we completed some projects in Western Australia. We've undertaken significant trial work in a number of locations in Australia, particularly in some new segments, which are exciting, like mining and dredging, and that's involved by Phoslock and Phosflow pleasingly. So that's been significant pieces of working in new segments. And for the Auckland project, we've talked about a number of times, that has been delayed from the first half now to the second half of 2022. Largely this latest delay was due to freight and getting the product there and some issues regarding that. However, we expect that to be done soon, and I'll talk about that in a minute. In China, the focus has been on resetting the business, determining the optimum balance between the opportunities that are undoubtedly there in China against the very heavy risks that are also in China. Shareholders will be aware of a number of those risks, particularly around receivables -- or collection and receivables. So that's been a heavy -- a big focus for us in China. I'll talk about that a little bit -- in more detail in a minute. We've completed a number of smaller projects in the first half, and we have a number of projects initiated in China, but the uptake has been slow. And China, of course, is for anyone reading the news and following China would know the impact of COVID, in particular, has been significant on China and has impacted us significantly in the sales opportunities. In Europe, the profile has built very successfully on the back of the Netherlands -- or the Rotterdam project in Kralingse Plas, with several smaller projects secured for the second half on the back of that application, which was November last year. We completed treatments in Scotland and in The Nordics. We have appointed distributors in Spain, Germany and the U.K., and we have a new partnership in the U.K. with a group called SSI, which is part of the South Staffordshire Water Group. So we're very excited about the developments in Europe. In South America, HydroScience, a Brazil licensees and distributor, placed orders for over 400 tonnes of Phoslock during the first half, which was significant, and that's for ongoing work that they have on the number of projects we've talked about before, in the past Pampulha and the drinking water reservoirs, which you know. We approved a distributor in Uruguay with an application due in the second half and we began some development work in Ecuador around shrimp producing, which is an important new segment that started -- that we started to work on in the first half. In North America, we had a complete review of our distribution strategy, as you know. We're appointing new senior roles as we speak. Our distribution agreements have been signed. Good progress has been made with trial work in Florida, a new Army Corp of Engineers, which is very important to growth. A good progress has been made with them -- the U.S. Army Corp of Engineers focused on market development. Targeting local and state and federal agencies has been a big target for us, and we've continued to address the regulatory issues in Canada in the first half. Next slide. Thank you. So if we look now at continuing the geographic summaries. In Canada, we're working through this complex regulatory process. We're looking at it on 2 fronts. So one is the supporting and the lobbying of -- with several of the provinces with the environmental groups like Ducks Unlimited. We're generating significant support through that lobbying effort. So that's to engage with the government in what's needed to treat them -- to treat the lakes and to understand the opportunities that Phosflow and Phoslock can present to them. We're also engaging with several leading scientific experts in this field, and that's about changing the science argument that the regulators are putting to us. So we've engaged with the USEPA people as well as some regulatory people in Canada to help us with that scientific approach, which is very important as we address the regulatory position in Canada. And Canada remains for us a very important market. In the U.S., we continue to -- for the prospective period and into the future, we do expect significant growth to come through the distribution channel that we've set up these agreements with and the strategy that's now in place. We've expanded the reach and resources through some contractual engagement in the U.S. into state and federal managed water bodies, which, again, is very important. Many of our shareholders know that there are a number of lakes that get mentioned as needing phosphorus remediation. So there's a big opportunity in that space. Development work with the U.S. Army Corp and the engineers is -- of engineers is ongoing and very exciting. As any of you know, they're very involved in waterways in the U.S. and a great partner to have, along with some significant trials that are ongoing with the city of Orlando in Florida, which is exciting. Resources are being recruited to improve the sales effort in the U.S. and obviously, -- and is a lot of the strategy for the growth, sales is the big focus across these key regions for us. In Europe, I mentioned the city of Rotterdam, that has developed and is developing strong leads throughout Europe. We have multiple projects on the go in Europe throughout all of the European groups. We've issued -- had issues -- permits issued, I should say, for Denmark and Finland. With contracts now being pursued, that's important. As once those permits are issued, you get a much easier way of attracting the live-like opportunities. Ongoing projects for Germany and the Netherlands in the second half of 2022, and significant opportunities have been identified in The Nordics, which I think we've talked about in the past. Resources are being recruited in Europe as well to expedite sales. So as you'll see throughout all of this, the sales are a key driver for the businesses in the U.S. and Europe in particular, and here in Australia and New Zealand. In South America, I mentioned already the contracted projects are continuing, which is great. There are ongoing projects, as you're aware, Pampulha, Rio de Janeiro and Salvador. Some of them places the [indiscernible] over there. I spoke to him last week, and he said that he has a number of new projects that he's working on. So Brazil remains an exciting opportunity for us. We appointed a distribution partner, as I mentioned, in Uruguay. We expect the first project to be done in this second half of this year in Uruguay. So that's an exciting opportunity as well. In China, I'll talk a little bit more specifically about China in a minute, but there has been a significant change to the sales model on the back of what we will consider poor sales and difficult collection process. So we've made some significant changes, which I'll discuss in a second. We do expect sales out of China to be at a slightly lower margin as a result of these changes, but we consider them to be more secure and safer in terms of collection, in particular. In Australia and New Zealand, as I mentioned, we've contracted further projects in WA. That will be done in the second half, which is terrific. We have secured distribution agreements, but are working on more in the Australia and New Zealand environments. We've seen some promising results from Phosflow, which is really, really exciting. The City of Auckland Project will be done, we anticipate in September. So this next coming month, pending freight issues, but I think those issues are largely resolved as we speak. So that's -- so that should get done. And we have an exciting opportunity later in the year in a lithium mine, which is the first of our mining segment treatment, which is expected later in the year in wet season, which will be an ongoing project and should pave the way for more mining opportunity -- or mining-related opportunities in the future. Thank you. I mentioned China, and I just wanted to touch on the changes there, so everyone is clear. We're changing our go-to-market strategy from direct sales to more of the wholesale by distribution engineering firms and partners type agreement. It better addresses the market risks. It puts the sales efforts in the hands of engineers and water managers and who deal in more total solutions for customers. It significantly reduces the risk for us. It reduces the cost of our direct sales team. And while it might be a slightly lower margin business, we believe this is the best strategy for China at the present time. The restructuring savings will typically or will mostly be deployed in other targeted geographies where we can expedite sales quicker, particularly in the U.S. and Europe. We anticipate that the expected savings or the change in financials will be about $500,000, less cost in China in the future as a result of these changes. Thank you. Each of these presentations, I'd like to give a bit of an update on the 4 pillars of our growth strategy and the key drivers. So first one is commercial -- customer and commercial. And the next slide, thank you. I -- thank you. I wanted to just make sure everyone's clear about how we're delivering on the strategy. We said we'd expand into new segments of the market, and this is all about expanding our market reach. And you can see the diagram on the right-hand side, it's simplistic, but it's meant to show how the direct sales model into large lakes, which has typically been the focus of Phoslock and PET in the past, is now complemented by the distribution type of products on the right-hand side of that diagram. And we call it distribution. We control at many other names, but it allows us to get to multiple new markets. And these markets are repeatable, accessible, reliable and enabled us to put a foundation under the business that really secures and enables us to forecast and predict and be securing the profitability of the business into the future. So that's very important to us, and we're putting this in place in all segments of the market -- for all geographies of the market, I should say. Securing the rights to Phosflow has certainly opened up this opportunity, and a lot of those applicators and distributors are very excited about the Phosflow opportunity. The larger lakes projects will, of course, remain a key target for us. There's many of them, and there's many opportunities, but they are difficult to forecast, particularly from a timing perspective, and you guys would be well aware of that. They're a little unpredictable. Things can change them dramatically, like the environment, like financial budgeting of the various municipalities depending on how they want to resource these type of projects. And we call them lumpy business. So we still think, and we should be involved in all of this, of course, but the distribution part of the sales strategy is going to be a critical component on the way through. And it's very much in line with the strategy we talked about pretty much 2 years ago when we first start in about how we would try and open up new segments of the market. You're aware that we have this type of approach in Brazil. You'd also be aware that Brazil and South America remains very consistent. And an established market for us, somewhat predictable, which is terrific. And it obviously paves the way as a blueprint for how we can look at other markets around the world. And we're obviously reviewing each region as we go through this to understand that we rightsize -- and ensure we rightsize the business with our structure and obviously have the appropriate commercial oversight to this distribution approach. All right. Thank you. To R&D now. Next slide, please. Thank you. So as you know and as we talked about in the strategy as well, we were segment -- we were targeting flowing water solutions. So as you would be aware from July, we announced an agreement with the Water Warriors to distribute. It's an explosive global distribution agreement to distribute a patented product from them, which is effectively removal of phosphorus from fresh water sources, flowing water sources, which opens up a whole new channel to us. And particularly, and I will talk a little more about Phosflow in a minute. But particularly, we can now talk accurately about total water remediation solutions because we look at flowing order and we look at still water with Phoslock. So we're very excited about this opportunity. It's a valuable medium to long term as we have to develop a number of markets, but we're very excited about it. We continue in the R&D space to look at other lanthanum-impregnated substances to see where else we can take this part of the solution. Things like activated carbon are key targets for us. Nitrogen capture is something that we're obviously focusing on. At the same time, we've talked about it in the past, we're enhancing Phoslock, particularly on 2 fronts: one, to make it a more economical product in areas that need that economical -- or need a lower cost option and -- where that might be appropriate. And we're looking at Phoslock Plus, which is really an easier-to-use formulation of the product. So that's also a very important component of the R&D efforts. We're also, through R&D, seeking new alternatives for both Phoslock and Phosflow in dredging, mining, mechanical harvesting, various different water remediation technologies where Phoslock flesh Phosflow, can be a component of that solution. So they're all the efforts that we're putting into R&D. And as you can see, with Phosflow, those efforts are already starting to pay off. Thank you. Just on manufacturing, I don't think we need to dwell on this. We've talked about this in the past. We did complete the manufacturing review during the first half. We have a short-term priority around improving in the China manufacturing facility, which the Board gave approval for early on, which we told the market about that those improvements are being conducted as we speak. The capacity will be around 6,000 tonnes per annum by the time that -- those improvements are completed and is on track to be completed in the second half of this year as we said. In the longer term, we identified an expansion side in Casper, Wyoming. I talked about why Casper, Wyoming, and fundamentally that was where the bentonite is if you -- in simplistic terms. The detailed assessment of that site is ongoing. The commitment has been deferred until the business case justifies that investment. And obviously, we continue to review the business case as we go to work on that investment. And we'll advise shareholders of anything significant in that space when it occurs. Thank you. I just want to divert a little bit because I thought it was worthwhile to talk about the opportunity. And I think you know -- or most of you would know the opportunity that is treating the global phosphorus pollution issue. It is huge. And you can see on the map, it is all over the world. And you can see some of the statistics, and I won't certainly go through them all, but they are substantial with greater than 70% of lakes in U.S. impaired. 83% freshwater habitats in the European Union are classed as unfavorable. They're big numbers. And I think important, and I know most of you know this, but I think it is worth just reiterating some of this. Importantly, on the next slide, please, there are a number of directives and policies that are being put in place. Some of these have older dates, but they're being renewed as we speak, around -- governments around the world saying we won't tolerate this anymore. And as municipal managers of lakes and water bodies in general, will be issuing penalties and fines if they do not treat these excess phosphorus levels. And there's various acts and there's various fines. I will say they're complex to understand. However, it's fair to assume that in most areas of the world that we operate in, there are significant directives and policies that are going to address these issues, either they're coming or they're in place and fines will be issued. So it is a really good space for us to be in, in terms of available market. Obviously, the key is to execute on the strategy to get that market. We understand that. We understand that sales have been disappointing in the past. We believe we have the right strategy to address that and to actually engage and get hold of some of this very significant market we talked about. I just wanted a couple of slides in there to just to refresh everyone on the market environment that we operate in. And of course, it's getting worse. There's no doubt that phosphorus pollution is getting worse around the world and waterways are getting more polluted. So that represents a big opportunity for us to capitalize on. Products. Again, next slide, thank you. If I like, I don't particularly want to go through it all again, other than to say it is a proven and trusted product. We need to capitalize on it. I understand that clearly, but it's not just us that so it's a trusted improvement product, it has been studied by over 120 scientists -- 120 papers around the world. It is a highly studied and highly effective product and recognized as such. Our job, of course, is to make it into the sales and the commercial opportunities that are there. However, it is worth noting how well studied it is. We have work to do in many of the markets around educating the distribution and educating some of the lake managers as to how it can be used. We have issues around funding that we're working with third-party funders to help some of these lake managers to find the funding to treat the lakes that they need to because often the opportunity or the ability for a lake manager to just -- lake managers and just say, "No, I won't do it." And then it goes away is a bit too easy. So we're working on how to address some of those issues, sales being the key focus. And also a Phosflow. Next slide, thank you. Sits in that space as well. But most importantly for us, and I think as you recognize for the company, provides us a position to talk about total water solutions and a provider of total water. We often get challenged by lake managers saying, "Well, that's fine, you can use Phoslock and fix up the in-situ issue, but what about the inflows? What about the phosphorus that continues to come in?" And then we become a little more challenged with Phoslock. Phosflow, of course, addresses that by addressing the flowing water phosphorus capture. It opens up many in many markets in terms of ag run-offs, livestock run-off, waterway restorations, all of those, you can see. There is work to do to develop it. There's no question about that. It's a relatively new product. The trial work in the U.S. has been really exciting and the trial work we've done has been really exciting, but it's going to take some work to grow that market. There is a potential to regenerate it as a slow release fertilizer, which again, is a very important life cycle point to mention. More work does need to be done there and know exactly how that will work. But all in all, the 2 products combined do allow us to have this total water solutions approach to our marketing and to our strategy. The glide and push from academia and industry, you can see it is to reduce 50% of the phosphorus pollution worldwide. That's an extraordinary number if you think about it. We're talking to companies who produce phosphorous fertilizers and trying to help them see the need for a whole of life cycle. We believe that's another good angle for the business of PET. Thank you. Next slide, please. So I just wanted to now finish with a couple of slides on our outlook and the funding position. I hope it's been pretty clear throughout the past few slides that the big focus for us and our key priorities is to execute -- or continue to execute on the sales strategy. Sales, sales, sales, what the directors are rang to me about all the time, and that's absolutely what has to occur. We've not been happy with the current level of sales, but we're happy with the strategy and the implementation of that strategy that will achieve those sales. We have a clear focus on what we're calling winnable sales. I think in the past, there's been a lot of projects that might look good but aren't really winnable. So we're trying to identify those that are winnable and expedite those as quick as we can. Bedding down all the new distribution agreements is a key focus and a key component of the sales strategy. As I mentioned earlier, we're reviewing funding opportunities to develop the projects faster. Funding is often given to us as a reason that the larger lakes and municipalities don't treat is due to funding. There are partners, World Bank, Ducks Unlimited, for example, who have funding to sponsor environmental projects. So that's what we're trying to leverage. That's obviously a 3-way operation, which is a little complex sometimes, but very important. And we're seeking other partnerships with water remediation technologies. And we have a number that we're reviewing -- too premature to talk about them yet, but I've mentioned some of the other water remediation technologies that are used. And in some cases, there is an opportunity for us to even be part of that directly or to be part of how they then reiterate the water before it goes back into the waterways in, for example, our dredging operation. Expediting and executing on the current projects. The key focus, of course, we've got to make sure we deploy our resources appropriately and commensurate with sales levels. That's a big focus for us, hence, the changes in China, as we've talked about. We do need to get relisted, and that's a key priority. It's been a key priority for many, many -- well, for a number of years now, I guess, not quite a number of years, but for a long time. We believe, as I said earlier, that's imminent. We'll continue the implementation of our people and culture strategies as well as the R&D and the manufacturing chain adjustments to be fit for the forecasted demand for the business. We'll continue to address regulatory issues in Canada. As I've said, as we believe the Canadian market is worth fighting for, and we will embed the new sales model in China. So all of that says to me or says that the short- to medium-term will be challenging for us. There's my question. As we bed down this new distribution model, rebuild the sales pipeline and execute on the strategy, while we still incur some ongoing costs with some of the legacy issues. In the remainder of this year, we see opportunities in pretty much all our markets. I've said U.S.A., Europe and ANZ, but South America as well. So we do see opportunities. I've discussed those geographies specifically as we've gone. The focus will be securing minimal projects that positively impact the short-term revenues. That's a key focus. We've recognized revenue and cash flow as critical. So that's very much a focus for us. And we believe Phosflow and some of the other R&D work will complement us a lot in the future and help us provide that total remediation and solution, which we're working towards. So finally, just on funding to close it out before some questions, Greg. The management and the Board are focused on cash flow. We've recognized, we've been -- there's been significant cash out of the business in recent times. We're very focused on turning that around and we'll continue to monitor that and advise shareholders, of course, our progress as well as delivering what will change at the most, which is sales. And there's no allusion around how we turn this cash flow position around, it's around sales. So that's our focus. We will focus on the redeployment of resources to generate that cash the best way we can, and that's part of what I've just talked about now. And we continue to review that, and we continue to review the geographies and the resourcing required in each of the geographies we've talked about. We will see some of the abnormal costs associated with the legacy issues and inquiries [indiscernible] second half, but there will still be costs as we've described. At the end of June 2022, we had cash of around $17.5 million. We expect -- as we've previously forecast, we expect to close the year in around -- in the vicinity of between $13 million and $14 million in cash. We remain debt-free. And I think with that, Greg, I'll hand it back to you, and we can handle some questions and thank you for everyone's attention so far.

Thanks, Lachie, and Matthew. I've been to -- we got a lot of shareholders [ who submitted questions as part of ] the registration process. I've picked out of 7 here, 7 questions, which are most sort of popular topics we get through. We've got about 15 minutes to go.

So the first one, [indiscernible] to getting on the top question topic of discussion is, can you please update shareholders on the current status of existing the company's shares on ASX? September 22 will mark the second anniversary of PET shares being suspended. And if we go past that, and then shares are not reinstated, would the company be delisted?

So let me update everyone to the current position firstly. So we believe as a company, based on information provided to us from the ASX about the requirements that were needed for relisting, we believe we have fulfilled those requirements. We've submitted those requirements and information to the ASX to facilitate that and to answer any questions that they had, which included, by the way, the audited half-year accounts, which was a critical component for that. And that, of course, has been released this morning, along with some days ago, a full submission to the ASX about the various questions they raised and information that they may want us to provide to the wider market. So that's where it is sitting at the moment. We are waiting on the ASX response to that submission, and we will obviously advise shareholders as soon as we have that response. And answer to the second, which we believe shouldn't be long, but we obviously will await that from the ASX. To answer the second point, we are well aware, as I presume the ASX is, of the 2-year anniversary of being voluntarily suspended from trading. And we will be disappointed if we do not have a position prior to that 2-year period. So I don't think that will be an issue to discuss, Greg.

Our next question is what is the status of inquiries into former management's activities in China? What is the involvement of ASIC and the Australian Federal Police in all this?

Okay. So I think we've probably answered that through the presentation. There was specifically a slide on it. So perhaps to that question I can refer to the question back to that slide to look at the slide specifically. But to recap on it, we voluntarily talked to the AFP about potential foreign bribery and fraud, and that has led to some inquiries from the AFP and a full cooperation agreement between ourselves and the AFP around inquiries to what we were concerned about, and those inquiries are ongoing. The AFP has referred some of those inquiries to ASIC who in terms have contacted us, and we are obviously cooperating fully with ASIC as well as we go through their various inquiries and questions that they're asking. That inquiry will take its course, and we'll continue to fully cooperate. And we'll advise obviously, by shareholders, and by stakeholders of any updates to that as and when they occur. So perhaps, it was the first part of the question, I can't remember the order, but to the litigation and legal proceedings, again, addressed on the slide that I -- on the same slide that we just talked about. We have invested considerable money and time into understanding the legal implications of previous management of previous activities of the company, and we remain committed and well that's the word we're satisfied that, that money has been invested well to understand what occurred and to be fully prepared for anything that may occur. In terms of us pursuing or seeking legal litigation against any previous management, as I said earlier, we've deferred that until we understand the updates from the regulators that are also reviewing these types of issues at which point in time, we reserve our judgment and reserve our decisions to do as we see best fit for the shareholders of the company, and that's the current position, Greg.

The next question is how long do you think it will take for the company to return to profitability?

Yes, that's a good question. Obviously, we are confident that we will. We will return to profitability in the near future or in the future as we go forward with the sales strategy. Predicting the time around it, Greg, is a difficult process. I went through some difficult question to answer. I went through some pains to explain around the strategies that we're employing around setting up a foundational base, around the distribution type approach to the business. That is all around putting sustainable foundations in the business to support the growth of the business, while the lake projects tend to be more unpredictable and somewhat lumpy, they're obviously very exciting when they occur, but they're harder to predict. So we have -- we're confident in our strategy. We're confident in the opportunity that the market presents us. And we're confident in our ability to execute it and get that strategy done at which point the company becomes profitable. We don't, and I don't want to get into predicting when or how soon that might occur other than to say we believe we're doing the right things to achieve that.