Ann: Shareholder Newsletter, page-3

Alexium is now one month into the second quarter with the end of June and cash neutrality squarely in our sights. As we remain firmly on track for achieving sustained run-rate cash neutrality by the end of the quarter, I wanted to lay some detail of the parts in motion and how they fit together to get Alexium over the line. Continuing to Drive Increasing Revenue This first and most obvious component of cash neutrality is driving robust revenues with strong margins. As we have discussed, a current highlight of Alexium’s business is in the bedding sector, into which Alexium sells both Alexicool and Alexiflam products. In the month of April, Alexium sold and shipped over six times the amount of chemistry we shipped in the month of January with profit margins exceeding our overall target of 40%. That expansion in the bedding area has driven an increase in the average gross profit margins across all markets by over 15 percentage points since the beginning of 2017 and still trending strongly upwards. Driving this combination of increasing revenue and margin over the next two months is a key component to achieving cash neutrality. Controlling Costs and Managing Supply Chain In addition to continually increasing recurring revenue on a monthly basis, Alexium is also vigorously attempting to keep costs flat as revenue continues to increase. Selling, general and administrative expenses (SGA) have remained flat on a month to month basis since the start of the fiscal year. SGA expenses as a percent of revenue however have improved from almost 60% to 35% over the past half year. Significant operating expense categories such as employee payroll and research and development have also seen declines as a percent of revenue from 40% to approximately 22%. Finally, Selling, general and administrative expenses trended down from the previous quarter by 22% for a total SGA expense of $A336K. Alexium has a strategy for controlling each of these categories to really make a positive impact on monthly expenditures: A NOTE FROM THE DEPUTY CEO Employee expense – Salaries for the individuals who help drive this business forward are naturally a large part of the monthly burn. Over the past several months Alexium has slowed down its staff growth comparative to previous periods as most required skill sets are now in house and fundamental gaps in expertise have been filled. This trend is expected to continue into the future with the only hires being forecasted are sales team members who will directly contribute to capturing more revenue. Research & Development Expense – R&D has been an area of steady but necessary growth as our pipeline of customer opportunities continues to increase and new products are brought to market. Alexium expects this steady growth to continue but decrease as a percentage of revenue as more customers come online in markets where successful products have already gone to market. General & Administrative Expense – Administrative expenses are made up of several smaller expense categories such as travel, marketing, and occupancy costs, which are areas Alexium plans to make the biggest impact moving forward by being diligent in its spending and using each dollar in the most efficient manner possible....

Onya Dirk....

Laters..