Ann: Appendix 4C - quarterly, page-6

Thanks for the graph.

I suppose that it would have been record receipts if the payments for QVC sales were not to come in as late as the current quarter. Having said that, any improved sales in this current quarter will be topped off with the aforementioned QVC sales receipts from December.

"... A significant proportion of the payments in relation to these sales, particularly those made in December through shopping channel QVC, will be received in the third quarter of FY2018"

In other words, can we expect record receipts next quarter? I would hope so.

It seems to me that Cellmid is about a 30% increase in sales receipts away from break-even, assuming that the estimated cash outflows are realistic and remain stable around the $1.7m-$1.8m mark. What I am a bit surprised about, however, is that overall expenses came in at $3 million this quarter. It is good to see that estimated outflow for next quarter is significantly lower again, at $1.73m.

Questions I have currently:

a) How significant are the figures for customer receipts for QVC's December sales that will come in next quarter? 10%? 25%? 50%? $150,000? $300,000? Even more? I would like to see a figure released instead of leaving us with guesswork.

b) One thing puzzles me. Why the significant increase in product manufacturing cost? This looks a bit like a move to be able to handle future demand. Is that a hint to future deals? Are they stocking up to supply the US and China further? Is it in anticipation and preparation of the in-store roll-out in the US? Or just a general measure to increase available stock? Estimated cost for that position is $150k for next quarterly, compared to $820k for the December quarterly. This is a lot even compared to the previous quarterlies (around $300k-$400k). I do assume that the majority of this position goes into product manufacturing, but I would love to see this position broken down into product manufacturing and operating cost in future reports.

c) Will we see the next distribution deal soon? I am hoping for ULTA (and potentially Sephora at some point) in particular.

I am satisfied with the result, although I am not opening the champagne just yet. We need customer receipts to remain stable at the very least. And to achieve the break-even point, about 30% increased receipts. That should be achievable within the next few quarters.

I expect the cash balance to remain at least stable for the next quarterly report given the information that we have at this point. The June quarter will be really interesting when roll-out in stores will show in the quarterly result.