In the interest of fairness, page-76

Many opinions have been expressed on the AJX forum over the last week or so about the relationship between share price movements and the content of announcements, so I thought I might as well add mine to the mix.

At the risk of reiterating some points made in other posts, with a market cap of $280M Alexium is valued similar to a company with stable current earnings of $14M p.a. if a P/E ratio of 20 is applied. A profit margin of say 25% then would require current annual revenue to be $56M to justify that value. In that case changes in cash flow figures reported every 3 or 6 months would be of significance to that company’s share price.

For Alexium however, current cash flows, because of their small size, have little significance. Rather the net present value reflected in its MC is based solely on the expectation of annual revenues much higher than $56M when they are suitably discounted to allow for the risk of them not eventuating.

Changes in relatively small figures currently reported from one 4C to the next therefore have little meaning at this stage, and there is little reason for them to affect the share price. A 217% cash flow increase from $0.139M to $0.441M does not imply any meaningful increase in the future $56M+ p.a. revenue figure that the MC requires. Had a 619% increase to $1.0M been reported, for example, this would have been of equal (in)significance.** It could have indicated solely a difference in the timing of cash receipts.

The same cannot be said about the significance of the report of the DoD award, and similar announcements, since they indicate the opportunity for meaningful increases in those future earnings. The lack of a market reaction to that announcement indicates to me that the award was well flagged and already factored into the share price. Success in the product’s final testing stage may see a different reaction.

To me the latest 4C simply gives quantitative confirmation of the content of Nick’s comments and the contract announcements that the Company has made over the past few months, and provides confidence in their veracity. As Nick said, shareholders should be very pleased with the report. The report’s content also makes the recent comments of some obvious trolls look stupid.

As only a recent AJX investor I very much appreciate the invaluable information that some posters have generously chosen to share on this forum. Further, I very much look forward to the time when the cash flows reported in the 4Cs become sufficiently significant to be a determinant of the Company’s share price. That time I expect is not very far away. Alexium I believe provides an unusual and safe opportunity for shareholders to create sizeable wealth over the coming years, both for myself and for fellow AJX travellers.

Cheers

** Quarterly revenue of $1 million, at 25% profit margin, would represent less than 2% of the annual revenue required to justify the current market cap.