Alexium International Group Ltd

ASX:AJX

Earnings Call Analysis

Earnings Call Transcript 2024-Q3

[Simon Moore, executive]

Good morning. My name is Simon Moore, and I'm the Interim Chairman of Alexium International Group Limited. And this morning, we are hosting a call to discuss the 4C for the March quarter, which was filed earlier this week and also to provide a brief business update from the Chief Executive of the company; Mr. Billy Blackburn; and the Vice President of Finance, Lisa Hubka. Our intention is that Billy will and Lisa will speak and that we will then, through the course of the presentation take questions from the audience via the Q&A function within the presentation. And we will then have those questions answered by Billy, Lisa or myself with Lisa choosing to call which party should be answering the question. Thank you for joining us today. As you are all aware, the company is conducting an entitlement offer at the moment. And that offer will close on the 30 April, Tuesday next week, and we would encourage people to take into account the materials that you've been sent to date as well as the discussion today when making your decision to participate in that particular offer. And with that, I'll hand over the call to Mr. Billy Blackburn, the Chief Executive Officer of Alexium International Group Limited. Thank you.

[William Blackburn, executive]

Thank you, Simon. Hello, everyone. Second, what Simon said, thank you for joining us this evening or in the morning there and anyone in the States this evening. Okay. So we're going to really tonight, just really try to color in some of the detail that we included in the 4C that was released about 5 days ago at the start of the week there in Sydney. And we wanted to give more detail to everyone on the 4C and we're keeping with our cadence of doing business updates every 6 weeks and then also at each quarterly closing in the half year and full year reports. So our plan is to give the investor base a lot more time with us, more business updates and more opportunity to ask questions. So this is along those lines. So our Q3 focus has been to shift business and product development activities to adjacent markets in thermal regulation and also to some other technologies into the bedding market in North America, and I'll be giving more detail on the meeting here today along those lines, and it's going quite well. We also are enjoying some tailwinds in the North American market for flame resistant technologies. The bedding markets have been regulated. They're regulating out fiberglass, halogens and other environmentally hazardous materials out of FR fibers, FR fabrics and FR chemistries. Alexium has formulas, 3 products that are ahead of that regulatory curve and we're having some success getting those pushed into the market and growing some new opportunities out of that. We have made a significant push to globalize our technologies and some recent success coming from the Asia Pacific region and specifically in Australia and New Zealand. And lastly, we've spent the last several lots of recruiting and changing and restructuring the commercial team here at Alexium. And what we're doing there is adding significant skills to basically ready the company to scale up and to reach all the new markets that we're heading into. From a strategic view, some of the updates around our objectives there, again, we're building out the direct sales and business development teams. We've had 2 new executives joined in early Q4. I'm personally very excited that they're joining -- it gives me some significant expertise to wield into the opportunities that we're pushing. Since I've been here, we've been focusing on really getting the company ready to scale up, getting the supply chain ready, making sure the technology is good to go in all the markets that we're pursuing. And now we've rounded out the ticket by adding significant horsepower to the sales and business development team. I'm going to continue to lead the sales effort here until such a time. We hit our financial milestones, and we seek to bring in sales leadership. But I believe we've got the right mix right now to deliver our short-term results. And again, quite excited to have the expertise on the team. Again, I've been here, which is a little over 1.5 years now, we really tried to change the culture of Alexium to be more sales and marketing centric and customer facing. And that has really taken hold. One thing that all the folks at Alexium clearly understand, doesn't matter if they're in finance, if they're scientists and our development groups over there in operations, we all understand we serve the customer, and that is very evident in the culture daily in the operations at Alexium and it started to show up as customers come in and we're exposing really everyone in the business to the customer so they can see the brain [indiscernible] that it being executed at Alexium. Our strategy is very simple on its face, but it's complex behind that, but it's to diversify and growth. And that is diversify and grow in our core markets, which is mostly where we're concentrated in bedding. We're diversifying there by adding more products. So going to 4 different technologies into the bedding space. We're also diversifying by going globally where we were concentrated heavily in North America in the past, starting to break into other continents in other markets now. And then it's also diversifying outside of bedding and growing revenue that way. And we're pushing into some adjacent markets. And what we're doing there is taking existing technologies that are suited for applications in other markets and then moving them into other markets for applications. And I'll speak a little bit more to that today. So we're shifting our focus. When I first got here, we brought some discipline around the business development and product development efforts to put 70% of our effort into our core market which is mostly pending 20% into some of our adjacent markets, which was cooling for tactical gear and law enforcement and also FR military fabrics and then 10% was into some breakthrough areas, packaging, electronics and some other FR applications. We're now transitioning and shipping in '24 and into FY '25 to more of a 40%-20%, 40% of our core market in bedding, 20% in those breakthrough area, excuse me, those adjacent areas and military fabric and tactical and then 40% into the newer markets. And again, those breakthrough markets in that last 40% are really surrounding us moving existing technologies into adjacent markets. So it's not going to be a long development cycle where we're having to generate new technology, do research and development, file the patents, these are products that are already patented, that already proven that have application in other markets. So that should speed up the time line to revenue and drive significant growth. I'd also say some of the markets you'll hear about senior -- the vending market is quite good for Alexium. But when you're in a down market like we have in the last few years, you're in a bit of a famine. So the bedding market can be feast or famine. We believe we will feast again in the bedding market when it recovers. We are well positioned for that. In the meantime, we're going to diversify the mix of the business so that we can take out some of the ups and downs that the bedding market can present and move into some of these adjacent markets and some of those adjacent markets are much larger than the bedding market and present significant growth opportunities for the company. We're focused on year-on-year growth in our core market in bedding, and that's with our PCM products, which is Aexicool, BioCool. We've introduced over the last year, DelCool and Eclipsys into bedding. We've had significant progress in our work with the military on launching the flame-resistant nylon cotton for military fabric military uniforms, commercializes in tactical gear. And now we're changing the way we're selling that to large public offers, large civil agencies, military and law enforcement. And then commercializing PC eclipses fabric and FR into new markets. So we're very active in footwear right now, and we're moving into development work for cold chain packaging and also flame-resistant workwear. Commercial -- getting the company really focused for commercialization and commercial growth is more than just sales and business development. It's also getting the company ready to make those products and have a secure supply chain to support it. So over the last year, we spent a lot of time shoring up the supply chain and in some cases, adding second and tertiary level vendors. We did find under COVID that supply change became very disruptive, and you need to have at least 1, possibly 2 backups anywhere where there could be a break in the supply chain. So we've been diligently working to shore that up and it's going quite well. And in that, we found some efficiencies in cost savings efficiencies with some of our contract manufacturers and cost savings with some of our suppliers. We've also added some textile expertise to the team because that as we've moved to sell the DelCool and Eclipsys products, those are rolled goods where Alexium was traditionally selling performance chemistries in packages, drums, totes, we're now selling rolled goods that are cut on and adhere to a lot of the end-use products from our customers. On the financial front, we've deployed cash and commercial discipline. We've kept our belts very tight over the season with the down market embedding and as we transition to these new markets, we've been quite innovative in leveraging all the folks that are on the team while keeping our head count and our fixed costs low. Lisa has done a very good job of managing the budget and our spending and again, positioning for growth and positioning for markets where there's significant upside. And then on the funding front, most of you have heard, we've recapitalized the business. We went through the EGM in March, had a successful voting there. And Lisa will give an update on that at the end of the presentation today. But we do have the funding in place now to meet our near-term objectives over the next year or 2.In Q3, we made significant progress in these areas in our core, that is phase change materials. We've set out to maintain our core business even in the down market and then grow and penetrate that market further and then move products globally. We've had 3 new BioCool placements with OEM foam mattress producers, and there starts in quarter 4 and also early in half 1 of FY '25. We've moved into the foam space over the last 2 years, where traditionally, our PCMs were on textiles and quilted in spring mattresses. Now we're moving into the foam market, which is the largest growth space for mattresses worldwide. Many of you've probably seen the advertisers or maybe even have a foam mattress or bought a bed the box and the majority of those are foam-based materials.So we've modified our phase change materials for those applications and some of the global opportunities that we're pursuing now are foam applications. We have 2 new BioCool placements also in Europe. So that's moved us into the European market, and we're starting to get more requests there. As recent as this week took orders in Turkey. So we have 2 finishers in Turkey and then request from 2 more coming behind that. Electrical BioCool have been under review with folks down in the Australia, New Zealand, Asia Pacific region, and that is moving along quite well. We are hoping to have some of our first bedding business finally in the Australian market in FY '25. DelCool is our dehumidifier fabric and it was launched last year. When we first launched it, we designed it to be buried in a mattress and mattress construction in several layers. Our first success though came in the form of top of bed and pillows, then we had to quickly pivot to making version 2, and really, what that means is we had to enhance the fabric. We had to come back with a multi stretch fabric that had a much softer hand, that one is white and color that could be included the pillows and mattress toppers. And so we've had a successful launch of Version 2, and we're experiencing nice growth from that now. And some of our larger pipeline opportunities are coming from DelCool and mattresses. That's a longer development cycle, but we're very active in multiple mattress projects right now. We launched in a large department store in late last calendar year. And those sales were flat in Q3 for us, but we do believe there'll be an uptick over the summer here in the States, Q4 into Q1 FY '25. And then there's been additional placements in other large department stores here in the United States. We'll also be on a home shopping network in Q4, and that should lead to some Q1 sales, which would be late summer here in the states. DelCool fabric and bedding. There's development underway for a major bedding brand. That's also going to be a little bit of a slow cycle, but we're well into the development. The testing results have already come back very positive. The customer is very excited about the technology. It's upgrading one of their high-end mattress and giving them some very strong marketing claims. We've given a conservative estimate here, but that could increase revenues by as much as $5 million which would be a significant jump in revenue for us. And again, we're well down the road in that project, and it's looking quite likely to happen in that -- but the difficulty is it's going to launch late next year, and that would be in our FY ‘25.Our sales growth in DelCool though is one of the key parts of our strategy is diversifying the product concentration we had in our core market of bedding. So it adds another significant sales growth vehicle in that core market. And the revenue per unit is much higher in a mattress or pillow than it is for PCM. So we anticipate significant revenue gains from DelCool over the coming 12 to 18 months. For Eclipsys, we've had eclipses placements and bedding and they're underway now. A large brand is also going to be putting another ad on TV, and that will be running in July here in the States. That is a mattress used in Eclipsys for all-night cooling. The testing results were really good. The mattress was shown at the Las Vegas market this past January here in the states. It will be on the Home Shopping Network, a home shopping network this summer. And one of the things that's interesting about that marketing tactic is they use those ad campaigns where they do the television campaigns throughout the night and they will take sales and lots of orders, but they'll sell those out, then they pivot to brick-and-mortar stores after that. And they do the ads scene on TV. Many of you have probably seen that on retail shelves where they have a product, and they point to the TV ads where people would have seen it on TV.This is very similar, but it's going to end up in large big box retail and large discount clubs, and that could be in the States, that's a Sam's or a Costco or a BJ's, Price Club, and they sell a lot of volume of mattresses in those places. There's also Eclipsys being included in the pillar also for those same retail outlets. And we expect that to be pretty large volume in pillows, but the revenue per unit is a little bit lower. There's one out there that could grow to as much as $1.4 million. We're already through all the testing, and it's really just a matter of them selecting to range it on their shelves later this year in the states. And then we have another project coming through from a top 5 mattress brand, and they want an eclipses based mattress to launch a 25 that means we would build the beds in the second half of this calendar year and that mattress would launch at the Vegas show in January. So FR Nyco for military and commercializing Eclipsys in tactical gear. We've had a lot of movement in starts and stops along the way and FR is really in the DNA of Alexium dates back to the founding of the company. The initial projects for this company were around flame-resistant technologies. This past fall, we passed the power, which is the most stringent test for military and FR fabrics in the United States. And essentially, it's a powered mannequin completely engulfed in flames and mannequin sensors all over. They put the uniform on it, and they investor the mannequin with 8 flame throwers from 4 sides. The measurement is get body burns and how well the fabric stands up to that. So does it self-extinguish, does the material stay together, not break in, breakthrough and fall apart. And we had successful results there, which led to the next phase of testing where the military asked us to improve upon the aesthetics of the product. And what we mean by that is they wanted to improve the softness of the fabric, the comfort, how it felt. They wanted us to improve upon the drape, meaning it's more flexible. It moves more freely. It was a little bit stiff but we've gotten over the biggest hurdle, which is the flame resistance piece. And we've already done a lot of the improvement work around the aesthetics. We've sent small samples of that improved fabric to the military and it has been signed off on. And as recent as last week, we got a request for more fabric for more testing that they want to use and run out their testing budget by the end of their fiscal year, which is September 30. So another round of testing coming. What does this mean for Alexium in this project? It means we have a much better chance being included in a large tender, so a large request for proposal request for quote. The testing we're doing right now is what has gotten us on the short list. We know that we're 1 of 3 -- it could be as many as 1 of 5 by the time they put the bidding out for public offers, but that's the highest percent chance that Alexium's had really in the history of the company. And we have a product that has passed the most stringent testing and now being approved for the comfort request. And really at the core of the military's requests for FR Nyco is they wanted a treated fabric to compete or displace some of the inherent fabrics that are out there. And those are Para aramid based fabrics that are very hot, they're very heavy and they're very expensive. There's also no mix that's out there from a large U.S. company that's been out since really late 1970s. Those flame-resistant materials, again, are hot, heavy and expensive and the military wanted a breathable, less expensive and provides the right substrate in the Alexium's chemistry on dial-in cotton gives them the right combination to compete with those inherent fabrics. So that's really what's driving this. We continue to work with them and you guys will be informed as soon as we get a public offering for a bid, we should be in a position to compete well for that business. We're also working with an international brand to perfect the application for our military fabric in mattresses. This is a unique mattress for a metropolitan market in the United States, where they have requirements that are different than the rest of the mattress industry in North America. And it's for institutions such as prisons, hospitals, hotels and universities. We have made it through the second round of that testing. We have a passing burn test. The customer is now asking us to work on different prints for the fabric. We have our textile partner ready to go. And so we're moving to the next phase because we did use Camouflage military fabric in the initial testing and they built test beds that were Camouflage, which became kind of a joke for us here in the United States because we were telling them that they need to start selling mattresses and hunting and fishing stores if they're going to be Camouflage, it's probably not a bad idea. But we expect this project to go, and it could be worth $2 billion in additional revenue. And one of the things we're trying to give you guys in the updates going forward with Alexa is some of the building blocks and revenue from our pipeline that can show you how we're building revenue to the cash positive and into highly profitable results for the company to where we can move to the milestones and really buy the share price. So again, in the numbers we use here are quite conservative. So commercializing phase change materials eclipses the new markets. We've been running that in parallel to our work in our core market. Eclipsys fabric for footwear. We've done a successful testing for a large shoe brand. We gave them the results. They came back and asked us to redesign because we're learning how to place the material in the shoe and collaborating with their product development folks. So we're in the midst of that right now and repositioning the material. And we're also looking for ways to use it in targeted areas in the shoe for cooling. And that keeps the cost of the raw materials at the show down and should pave the way for larger volume placements. We have another shoe project that's launching now, and that's a top 10 worldwide shoe brand. They have the material in their lab now testing, and we're expecting those results this quarter. [indiscernible] materials and Eclipsys, applications and cool change, we've got this table right now, and I'll point back to our focus on really our core market and also taking our technology -- existing technologies into adjacent markets. The cold chain market is a big aspiration for Alexium and it presents an opportunity for significant revenue growth, very large revenue growth for that matter, can change the market cap of the company. However, it's a long development cycle, and our technology is suited for that space, but it's going to require some modification to it. So we have a pause on the cold chain work right now. And as we roll out the FR technologies that I'll speak to in a moment, and have those go commercial, then we will pick back up the cold chain developing and move development and move into that market with full force. PCM Eclipsys fabric and FR into new markets, and that's also a cold chain and workwear. We're working on -- and this is the dovetail from the work we do with the military. We're working on improvements to the wash durability of our FR chemistry so that we can move that into the FR workwear market. But it's not just the AlexiFlam, our Alexi Guard product is also starting to show efficacy in these applications, and we're working on the wash durability of it. To be clear, our materials are wash durable, and the military requirements range from 50 to 100 wash cycles -- and those are your typical traditional laundry machines like you would use at your home with pretty mild detergents. The workwear industry is different. Industrial launders are using harsh chemistries like caustic sodas and other sales on those fabrics to clean them because they're coming out of industrial applications where they may be contaminated with things from steel mills or refineries and other materials that are hard to clean. So we're having to beef up the binding nature of these materials so that will go through the rigors of those chemistries. So it's less about the wash cycles and more about standing up in those chemistries. But we believe all the work we've done in the military is a very good segue for us to move into workwear. But not all workwear has to be that durable. There are less expensive substrates like cotton and polly blends where our FR chemistries work well. So we're now starting to build the work with some textile partners in the Southeast United States to develop these fabrics. And these are companies that are already active in that space, and they're looking to use like the military, lighter weight, less expensive materials and enhance the FR nature of them to open up markets, again, to compete with inherent fabrics that are aramid based or things like Nomex. So more to come on that, but that's one of the areas where it does make sense for us to take an existing technology into an adjacent market. In summary, our technology has proven to be very competitive for use in a lot of different end markets and end products. So that's got us quite confident right now that we can grow the business outside of bedding. But I don't want to make anybody nervous. We are very concentrated on our success in bedding. And I would tell you, our near-term results over the next 18 months included cash positive results and profitability that could self-fund the business really can't come from our coal market in bedding. The items that we're focused on that are adjacent to that are just additive to it and also represent significant growth beyond those milestones. Since I've been here, I've been driving our contract discipline. And just to say in the most basic way, we now open with our terms, and we get our terms on the table early with the customers and vendors. And we've had some success over the last handful of months. We had a new supply agreement with BekaertDeslee, one of our largest customers. Bekaert it's very interesting for Alexium because they're a global textile finisher. They're very well respected. They have very quality -- high-quality operations. And as we push to some of the global textile and foam finishing opportunities, especially in bedding, we're finding that we have Bekaert partners and Bekaert facilities on those continents that can support that work. So that agreement will mean more to us than just bedding in North America. It's going to help us with the global footprint and getting distribution into some far-reaching continents. Also, in the last short period, we basically consolidated our supply agreements with Serta Simmons Bedding. Serta Simmons is one of our largest end-use customers and a lot of the Tier 1 textile and foam customers we work with, the end brand that we're serving with PCM and FR is SSB branded mattresses. So we consolidated our agreement with them. There were some legacy agreements in place that were a little bit hard to follow and manage. So we consolidated everything into a single set of terms and conditions and set up a contract scheme that allowed us to add each new business that we do with SSB or any of their suppliers as the [indiscernible] to that agreement. So it became a much easier way to manage and grow the business with them. And then we showed up all the old terms into more relevant updated terms. We've entered a memorandum of understanding, which is another way of saying a letter of intent with a top 5 world bedding brand. This is for a new FR formula that we've rolled out. It means that we're basically working with them in an exclusive development. And the reason we offer the exclusivity is they challenged us to reformulate one of our FR chemistries to get ahead of another regulatory change that's coming out of the United States that's already been passed in one state and will be promulgated to the other 49 states in due time, probably over the next 12 to 18 months. So we're way ahead of that regulatory change and there were other regulation changes in mattresses where formaldehyde, halogens and fiberglass have been regulated out. Our chemistries are free of any of those materials of concern. We signed the exclusivity deal with this company because they had the volume, and they had the product sales already in the market. They're looking to make a running change on the existing FR fabrics that they're using in those mattresses and they want to start that this calendar year. We're in the late stages of that development work now, and we're treating Fabric with their textile finisher, their primary textile finisher and their secondary textile finisher now. We expect that to go commercial in the next 3 to 6 months, and it should ramp to significant volume from there. In parallel to the development work in the finishing trials, we're working on the supply terms, and we will be regrouping with them the week after next to start framing in what that's going to look like in price over volume. So that will be an agreement that will be announced this year. Back to the team. We've expanded the business team, and we started late last year recruiting and doing research to bring in some new talent and some new skill sets and experience into our sales group. So we hired the 2 new folks that have joined in the last few months. We also set out to recruit someone to help us with marketing, and we're going to be running more marketing campaigns now, and that will also include a lot of the announcements we make to the market, but also announcements about our technology and what's going on in Alexium. So you'll get announcements through the ASX, but we'll also be using our website and social media to do some marketing and to make more announcements.We're also going to be doing straight business-to-business, go-to-market marketing and really Alexium has slow under the radar, most of its existence. So we're going to change that and start putting the brand out there. And really, our brand is we are a performance materials company that can enhance your products. So we'll be marketing to other businesses, not necessarily to consumers, but to other businesses and demonstrating how we can enhance their products and sharing some of the successes we've had. And that's really to get the message out globally and start opening more doors as we push to distribute to other continents. Diversification of our products, customers and markets, that's really the core of our strategy, grow revenue in our core market through diversification, but also diversify our markets and grow revenue through all of our products being pushed into adjacent markets. We're leveraging our significant IP now. Really, the change that's happened since I've been at Alexium is we've gone from being a more inward focused company on developing IP and technologies to now taking those technologies and pushing them into the market and executing a sales and growth strategy.So I'll turn it over to Lisa Hubka from here. She will give you an update on the capital raise, refinancing and the bridge loan that was put in place. From there, we will move into answering any questions. So if you would submit them through the portal, Lisa will get to the her after she updates here. And Simon and I or Lisa will do our very best to address your questions. And there were a few questions that came in actually before the meeting here. So I believe we've captured those and we'll address those as well. Lisa, I'll turn it over to you.

[Lisa Hubka, executive]

All right. Thank you, Billy, and thank you to everyone that is on the call today. We appreciate you joining with us. And we appreciate your support and approve in the capital raise transaction that was approved. You're all well aware of that. And of course, we did receive the first part of those funds in December with the bridging loan from calling to capital. So that is already in place. We have been accruing interest on that bridge loan, and that will be paid off with the funds from the capital raise, but then the bridge loan itself will be converted to shares as common terms commitment on the underwriting agreement. So that will take care of that and then, of course, the debt with the convertible note with Collinson will also be converted to shares. So that will really improve our balance sheet and get us back to positive equity status, reduce a lot of the interest expense and that continues in our P&L. And we'll just be in a much healthier financial position after this, which will be very positive for us. Next slide, Billy, please. Thank you. Looking at our cash flows for the quarter and the year. Bill has already talked about our disciplined approach on the revenue side with making sure we are prioritizing the right opportunities and while still staying on track to try to develop long-term opportunities as well as convert the short-term ones. And so this is a much more disciplined approach than we maybe have applied in the past, and we are applying that same level of discipline to manage an expenses as well with time on raw materials, just expenses in general and then the entire cash conversion cycle. And you can see the evidence of that when you look at our net cash outflows from operating activities, those have decreased by $0.5 million year-to-date this year compared to prior year. So for us, that's a significant improvement in the cash outflows. And so we want you to know that we are trying to be good stewards of the funds than I know the company in general. So some other things that have been going on is that the ops and logistics seems to have been successful in negotiating some cost reductions in some of our raw materials. Some of those are being used in current products that we're making, but there's also been reductions in materials that will help us to meet future sales opportunities. So hopefully, we can be more competitive in our pricing and allow us to take advantage of more of those opportunities. Then if you look at our cash receipts for the period, they are $1.4 million for the quarter. The revenue was $1.6 million. So that's pretty much in line with the prior quarter on the cash receipts. But one I wanted to point out is on the sales side that -- our sales in total have been down and that continued inflationary pressures, interest rates have stayed high. The U.S. does not cut interest rates at all for this fiscal year. But this is the strongest sales quarter that we've had for the fiscal year. So that is a positive indication for us. And we have seen volume improvements at specific customers as well as the new sales opportunities that we've been able to convert on the DelCool products. So those are all positive things. Our operating activity outflows primarily consists of raw materials, manufacturing cost, staffing, corporate admin costs. And we did have an increase in raw material purchases during the quarter. And as the size that we are, that we have either minimum or quantities or pricing tiers that we take advantage of. And so sometimes the raw material purchases coming and some chunks that maybe are always timed perfectly with our sales and cost of goods sold. But we are trying to manage that as much as possible. You see total aggregate payments to related parties is $228,000. And Cash flows from financing activities for the quarter is just the normal activity on the line of credit. But you can see for the year-to-date, that does include the proceeds from the bridging loan from [indiscernible] as part of the overall transaction. The outstand balance on a lot of credit at the end of the period was only $96,000, but we had a total borrowing base of $885,000. So at the end of the quarter, we had eligibility on the line of credit of $789,000. And this is important so that we can manage some of the peaks and valleys during the time period without having to extend all of our available cash. So that helps us to manage that. The line of credit agreement, the original term on it does expire in April effect year, but it has automatic rollovers of 1-year period. So we feel confident we'll be able to keep that funding in place even if we hope to be able to negotiate better terms, but at least as a backup plan that, that is still in place. And because it is asset-based, the higher -- our receivables and inventory increases as we ramp up our sales, then that will continue to increase our borrowing base that's available on that line of credit. And we did have $3 million total if the assets are there to support it. So that is helpful as well. That's it. I don't see any -- there are no Q&A questions that have come through the portal during this call. But Billy, if you want to address some of the ones that you received prior to the call. We can do that.

[Simon Moore, executive]

Look, I think the best.

[William Blackburn, executive]

So yes, there were a few questions that came in in 3. So one is it was mentioned that Alexium is working on improving the aesthetics of the flame -resistant nylon cotton fabric for the military. Could you expand on that? Was it a scene issue? Or was it a problem that impacts other characteristics of the fabric? Do you think this is a difficult compromise?let's see, no, it's not a sheen issue. It's a direct request from the military's textile engineer that we address the softness in the bill of the fabric, the drape, so meaning that it's softer, less stiff basically more comfortable to the wearer. Both have been addressed at the live scale and approved by that engineer. The next validation will be to achieve the same improvements in the production trial fabric that's going to be produced in the coming months. There are competing attributes to these fabrics. So the more FR chemistries you add, the more stiff, you can make it, the more heavy you could make it. We found the right balance. It is a competing attribute scenario, but we have found the right balance. So we believe we've got the right mix in front of them now. And really the next step is to run production scale trials and go ahead and complete the military print, which had the heat signature requirements near infrared and short wave infrared and go ahead and finish out this version of the fabric, which is the same battery we've already passed the Pyroman with, but it will be enhancements to the field and the softness of the fabric. Next question, Alexium is working on improvements to the wash durability of the nylon cotton blended FR fabric. I know this was an issue that we -- that election had grappled with over the past years is, again, also, is it a compromise between durability and FR effectiveness versus comfort or aesthetics or are we really needing to invent a new product? The answer is no. We don't need to invent a new product. We're just fine-tuning an existing formula. We've made significant improvements in that wash durability since the past efforts of Alexium, which would have been years ago, probably 3, 5 years back. And there is some potential for compromise in the FR effect in this versus was durability. The Army, specifically, if we call out one of the specifications out there, they look for washes in the 50 to 100 cycles. The actual deployed soldiers do not wash those uniforms probably more than 25 times in a year. They're deployed with 4 to 5 uniform chiefs. So mathematically, it's really not even a relevant test. So if there was a compromise, it could be that they do lower that from 100 to say 50, which we've hit those criteria before and the new fabric we expect once we run the trial, should meet that as well. We do not plan to compromise on the FR capability because we still know that that's the main attribute. That's the main hurdle to get over. The second is to make sure the acetic are good, so that's still comfortable and the draft is there and it's soft, then wash durability has to go in hand with that. But yes, there is a potential for some compromise and specs for them to get -- and that's part of it. They want a lighter weight fabric that's less expensive. If they wanted a heavier fabric that was more expensive, we can do all kinds of things for them. But these are stringent targets that they're giving us. They present unique challenges, a really good lightweight, comfortable fabric that's really cheap. So as you all know, that's a challenge, but we've hit the target so far, and it's looking quite promising. The last one, what is the difference in FR criteria required for the hospitality industry, should a satisfactory solution be achieved? Is this something that you could foresee automatically flowing onto our existing bedding customers? This is probably confusing 2 topics. The work with the military is actually a different set of FR chemistry than that, that we put into mattresses in the hospitality industry. But in comparison to military FR fabric criteria, the hospitality industry requires -- requirements are very different. As an example, those goods don't have the stringent wash durability requirements of FR military fabric. So that changes the binders and the type of watch durability that we have to achieve. The burn testing requirements and test perimeters are also very different. It's important to note that our technology deployed on FR Nyco for military is Alexiflam. And we're marketing and testing AlexiGuard in the home goods and hospitality industry. So those are 2 different FR technologies from Alexium. AlexiGuard is different in that we have formulas that work will natural fibers like cotton and we also have formulas that work well on synthetic fibers like Poly and rayon. And we're very active in the betting industry right now with multiple companies enhancing their FR rayon and their FR poly materials because now that they've removed fiberglass from a lot of the matches, they're starting to fill bed [indiscernible]. Some of the barrier fabrics they're using are inadequate. They're considered inherently FR, but they're actually -- they still burn to our chemistry has allowed them to self-extinguish and increase the integrity of those barrier fabric so they don't come apart in a burn test. So you'll see a lot of new announcements over the next 6 weeks and coming months, as we move those projects forward and starting to knock down some commercial agreements around those enhancements. But those are 2 disparate developments. So I would keep the Nyco for Alexiflam into the military bucket and the AlexiGaurd and home goods markets into a different channel. But more to come with that, everyone. Okay.

[Lisa Hubka, executive]

Billy, we've had a question come in through the portal. So the question is as much as you can, can you expand a bit on the time lines for the shoe angle and Colt packaging?

[William Blackburn, executive]

Yes. But it's early phase. It's early phase development in the shoe. So we're doing test shoes with folks. We actually hired a cobbler to put together a test show for us so we can do brand testing on our own that's not tied to any specific brand so that we can demonstrate it to a lot of different footwear companies. But it is early stage. So timeline on it. I really can't tell you right now, I would say sometime in the next year, I would expect that we would launching a shoes based on the early results because the results were overwhelmingly positive. It worked quite well. We got double-digit temperature decrease in the foot testing, and that was using the sweater test, which is an ASTM test method. And that's also the mannequin foots that are used at the universities to validate as third-party validation. So we've proven on the data side at the lab that we can deliver a cooling solution in a shoe. Now it's a combination of getting the price to the right point where the customer will adopt it and roll it out into volume. We're learning the shoe market right now. We don't know the timing of their launch cycles. Mattresses historically have been a year to 2-year development cycle. Shoes seem to move faster than that. But I can't give you a specific time line, but I would anticipate that we could have a commercial outcome in the next 12 months being conservative. And what was the other part of the question sorry?

[Lisa Hubka, executive]

Cold chain packaging time line as well.

[William Blackburn, executive]

Yes. Cold chain is a scenario where we're going to have to develop a solution, and that would be using our face change materials first. And as a secondary solution that Eclipsys for heat dissipation. We don't have the product design yet. We do know that what we're after is to design an enhancement in cold chain. So we're not looking to go out and create a new cold chain type of package. We're looking at an enhancement that goes with existing containers that are out there. And these are passive containers that are controlling temperatures over 12 to 24 to 36 hour periods. We're very focused on the medical -- there's a cold chain industry is huge. There's active systems that use power units, refrigerated units. There's large insulated systems that use Starfin and ICE and other types of fibers. Those were large packages. We're going after the smaller package, highly temperature-controlled in the medical space. So you could think human organs, you could think medical tissues that are being basically for transplants. It could be for blood delivery. It could be also for pharmaceuticals that have temperature controls on them that are in small packages that have small payloads. And what we're looking to do there is to take our cooling technology to create a temperature-controlled interunit for those packages. So when they remove the payload from the package, they can get it to the end use. So oftentimes, that's a medical application in the field, if it's a medicine, it may be going to a patient where they leave the container behind with the delivery, and they take the smaller packaging for handing it off. So on the timing of that, we've got that on pause right now to focus on rolling out our FR PCM and bedding growth opportunities right now because we're really laser-focused on financial success in the short term and Alexium being cash positive. Share price increasing and also being self-funding. From that cold chain will come back into our development. We know our technology works there, but it's a matter of us being disciplined and focusing on all the projects that we have in our pipeline right now. So that horizon is probably outside of FY '25, I would guess. I believe we'll have the product developed in FY '25. But I'd be remiss to try and put any budget numbers to that right now.

[Lisa Hubka, executive]

Okay. That's all the questions that we have.

[Simon Moore, executive]

I might jump in if there are any follow-up questions people might have you can submit them maybe in writing to me and the best e-mail address for me is smcolingonCAPITAL.com. And we will do our best to respond to you. Thank you very much, Billy and Lisa for your presentation today. And thank you very much for everybody for attending. This webinar has been recorded, and will be made available on the company's website through a link. Thank you again. I hope you have a great day, and enjoyable weekend.

[William Blackburn, executive]

Thank you, everyone. Take care.