Ann: AGM Presentation, page-13

Hi Everyone,

I hope you’re all faring OK on what is a pretty bitter day for LT shareholders. About the only good thing to come out of today for me was the chance to meet Hottod at the AGM. I’ve always valued her extremely well considered and researched posts so it was great to put a face to the name at last. She, I and a few others tended our wounds and tried to read the tea leaves after the meeting – but no great wisdom befell us, I’m afraid.

@poorinvestor’s summary of the AGM is pretty much as I saw it. However, there are a few things I picked up that are worth mentioning.

I think the timing of this (which is about as bad as it can be for LT holders if the EBITDA positive story from Q2 comes true) was forced by the auditors and ASX queries. It wasn’t discussed per se, however, it was clear management would have preferred to handle things differently, if possible.

Bob and his related parties will be chipping in A$500k of the at least A$600k from directors – so say what you like but he is prepared to put his money where his mouth is.

I gathered that the TH is in place pending the release of the prospectus for the rights issue.

They have a number of strategies to keep things going depending on how the Rights issue (I’ll just call it a CR) goes. They need to pay down a certain amount of the debt (they wouldn’t say how much – but not an unreasonable figure) in order to be able to extend the loan facility. So that’s the first target. Any extra funds raised beyond that amount can be used to either retire more debt or put towards working capital – management will decide this depending on the outcome. The debt currently costs us $140k per month – so the more we can pay down the more it will help the balance sheet / 4Cs going forwards. Ideally they would like to retire it completely, but the outcome of the CR will determine what can be done for now. They also say there are a lot of interested parties wanting to invest but the debt is a blocking point – so this is another reason to want to retire as much of it as possible. It’s been made clear to them that the debt is seen by instos as the key reason the share price can’t get traction. They are discussing underwriting part of all of the issue with various instos – they will inform us if things develop. They insist that almost all the top 40 (that’s 50% of the registry) are on board to participate (although they didn’t say if they all intend to take up their full rights). They also say there are a number of parties / new investors interested to pick up shortfall from the CR. So perhaps they have a chance of raising a decent amount. More on that later.

Regarding Pine Belt, they are actually investing in plant to integrate Alexium into their production process – so they are committed to the partnership / putting money on the table. The phasing out of Pyrethrum is not a problem. Pine Belt developed and own the rights to the replacement insecticide so their position will only strengthen. Combined with Alexium FR, Pine Belt will have the rights to the only insecticide and FR treatments for military uniforms – Bob held this up as demonstrating both Pine Belt’s technical innovation capabilities and also their commercial acumen. Alexium is in bed with the right player in this space.

Regarding bedding, the ramp-up for the Las Vegas show in Jan will see us EBITDA positive for Q2 (Dec quarter) we are tracking well through October. We have 35% of conventional bedding PCM with a possibility to grow this a bit. We expect to get a similar amount of the foam mattress market. The big emerging opportunity (although it’s been talked about for a while) is the FR sock to go around foam mattress where we have a compelling cost and health advantage with NF on cotton socks at about $12 vs the current $18 for fibreglass socks that have health issues. They think they can claim a very large % of this market relatively quickly. Perhaps the need to get NF through regulatory approvals has held this back and it can now happen? It is something we can do ourselves (not through ICL).

The ICL relationship is now being handled in stages because it was too slow and complicated to do all at once. Alexium believe they can get a distribution deal in place quite quickly as it’s a pretty standard type of arrangement and not complicated to do. Apparently, ICL have wanted to start distributing already but Bob and the executive team want a formal arrangement in place first.

Regarding the $45m pipeline, roughly half of this is in the late stages of closing already and that will be ongoing business. That alone can see us profitable with considerable scope for continued growth.

Coming back to the debt, once we become EDITDA positive for a couple of quarters, we enter an entirely different lending bracket. We will then be able to refinance at much more favourable terms (if required). So being able to extend the current loan and buy some time working capital to get us to this stage is key, even if the CR can’t retire the debt fully.

There’s not much more to say. You either believe that they have really turned the corner and you have the readies to participate, or you don’t. Personally, I don’t know what to believe. I don’t have the money to participate, so it’s dilution city for me. This is particularly bitter if we have turned the corner – and highlights the terrible timing of this CR for LT holders.

But, it’s not the end of the line for Alexium yet if they can raise a decent amount. If most of their predictions for 2020 come true and the debt issue is put (at least somewhat) to bed, there is a chance this company can finally start to do what we all hoped it could - it’s just that those of us that can’t participate will make a whole lot less from our investment. IF.

Best wishes to all,

AlHotCop9