Ann: Appendix 4C - quarterly, page-55

Yes, one of the big two mattress companies – Serta Simmons or Tempur Sealy (my guess is the former) – is Alexium’s main mattress customer for AlexiCool, and Pegasus is its major pillow customer. But I’m comfortable with that at this stage.

Alexium’s strategy for commercialization of AlexiCool has been to first target sales to leading players in the mattress and pillow industries. Now, after working with both major customers over the past couple of years, it has solidified those relationships with formal sales agreements. It is possible these agreements include minimum purchase quantity clauses.

With its publicized formal sales agreements with leading industry players, Alexium will have enhanced its recognition and reputation within the industry, which is guaranteed to attract further customers. In fact, in the webcast, Bob Brookins mentioned that new product launches by Pegasus over the past 12 months had attracted attention and caused a “ripple effect” in the industry, drawing enquiries and new customers seeking AlexiCool pillow solutions.

While the company hasn’t stated how many AlexiCool customers it currently has, there were 10 in Q3. It was stated in the May company presentation that the 11 commercialized AlexiCool products of Q3 had already increased to 15 so that certainly indicates a broadening of sales. Also, the company has stated that multiple customers are launching new AlexiCool products at the current Las Vegas market, not just the major mattress company. On the subject of the Las Vegas Market, I also note that Bob mentioned that sales of AlexiCool FM (for foam), which features in a number of the new products being launched at the market, are not yet showing in the 4Q sales.

Something else to consider with respect to US mattress companies, is that supply to one of the big two players will inevitably dominate sales because of these companies' sheer market dominance. Using 2017 figures for illustration, Serta Simmons had $3.3 bn sales (and Tempur Sealy $2.2 bn). If you combine the sales of the next 10 leading mattress companies, together they total ~$1.8bn, just 55% of Serta Simmons’ sales.

Finally, the company also appears to be working diligently towards expanding its sales of AlexiCool through geographical expansion. In the webcast it was mentioned that, as Alexium raises the profile and reputation of AlexiCool in the US bedding market through the strategies discussed previously, it plans to leverage this reputation to propel access to further opportunities in Europe, South-East Asia etc.