Ann: Half Year Accounts and Appendix 4D, page-21

West Coast

Lets park your abuse for a moment.

You mention it's all there to see. When I receive results on one of my holdings, I have a spreadsheet ready with at least two or three prior sets of results already prepared. Most of my monitoring centres on the income statement, both for the Revenue and Expense side of the equation. On receiving the results before the market opened, I plugged in the numbers, some of the numbers up on the previous half and some down. Next step trying to associate and interpret the shifts. Then the penny dropped.

Lets take 'Advertising & Mktg' as a good example. In the previous half (H2 2016), the annual spend was reported as $ 9 m. So give or take $ 1.5 m per month. Now they report $ 5.8 m for H 1 2017. So effectively down by $ 3.2 m which fits with Chris's announcement on reducing spend. So going into the now half, is the spend on Adv/ Mktg down to $ 530 k per month. The answer is almost certainly no. They did not cut the spend in July of last year nor probably August and September. So if the spend in these three months was the same as in the previous period ( $ 1.5 m per month, then the spend over Oct, Nov & Dec is theoretically only $ 1.3 m or $ 433 k / month.

The above differentiation in spend pre and post the problem applies to virtually every expense item. On the surface, Employee costs looks an exception only because the spend has gone up from $ 6.3 m to $ 7.2 m. Are the 120 professionsls still working at MBE ? It would appear so. The total expenses in MBE is high relative to Revenue, accentuated even further with the recent decline in Revenue. I'd argue that given the above, nobody knows this unless you are in the Company. Furthermore, I cannot start to assess whether MBE is likely to show a profit for the full year.

On the subject of funding, I genuinely believe they are on a knife edge. With respect, you conveniently draw a comparison of cash balance with H1 2015. Please go to the FYear results 2016 and look at the balance as at 30 June. Now do your comparison and you will see a $ 10 m decline in cash in six months, or maybe it all happened in Nov & Dec, after all everything was fine before that ?

Finally, I always look for the subtleties in any report. Change in reporting of metrics ? The detail provided in the Note borrowings is IMO a first. Did you know that part of the AUS $ 8 loan facility announced way back when had 4 x Bp 1 m components for future draw down ? Was this fixed when the BP was still at 1.60 ish ? Have they included this for the benefit of the bankers or us as investor. Has this recently been renegotiated ? Red flags abound for me but maybe you see it different.

Omitted to mention the possible cash accrual through the differential of Receivables vs Payables and elected not to speculate on the litigation.

You have a great afternoon.

Rokewa