Ann: Appendix 4C - quarterly, page-24

Grim it is, but there are some good signs that things are moving in the right direction. May not be quick enough to stop a cap raise but may be enough to make us not look like a money pit to Instos (or at least less so!)

Below I have done a quick comparison of our most recent quarterly to the quarterly prior.

• We have had a step change in staff costs, with (a bit more) to come out next quarter as the rest of the Exec pay cut flows through
• 2 of our significant cost increases are 'good costs' in that they reflect value producing areas of the business
• Sales are up and it seems reasonable to assume that this could be higher in the next quarterly

The burn for the quarter decreased by 47%. HOWEVER, the one off tax credit was a big part of that. Once that is excluded, you see that the burn has decreased by 30%. If you exclude the increase in R&D (good cost) then that number comes way back up - though that doesn't help us given cash is definitely king right now.

Right now we all just need to prey that things continue to move in the right direction.

Questions to group:

• Does anyone know how to figure out what a 1 month reduction in Director and Exec salaries is worth? We can expect that to come off our cash burn in the next quarterly.
• Anyone have any clues as to whether R&D costs might have increased as a one off last quarter? I am really hoping that the company has front loaded its costs so it could increase its tax rebate and therefore the R&D expense will drop next quarter. If so - things could be looking quiet a bit rosier
  

	Consolidated statement of cash flows	Current quarter $A'000	Year to date (6 months) $A'000	Previous Quarter	Improvement Q on Q	Comments
1	1.Cash flows from operating activities
2	1.1Receipts from customers	2,036	3,780	1,744	292	17% sales increase! Realistic that this will improve further in the next quarterly
3	1.2Payments for
4	(a)research and development	(1,472)	(2,215)	(743)	(729)	'Good cost' - drives future value (if invested well)
5	(b)product manufacturing and operating costs	-608	-1120	-512	-96	'Good cost' - indicates sales are increasing
6	(c)advertising and marketing	-77	-365	-288	211
7	(d)leased assets	0	0	0	0
8	(e)staff costs	(2,358)	(6,985)	(4,627)	2,269	Great outcome. Will reduce further as Exec pay cuts only effective from May (1 month into quarter)
9	(f)administration and corporate costs	(1,686)	(3,228)	(1,542)	(144)	'Bad cost' - one to watch, really hope this stablises
10	1.3Dividends received (see note 3)	0	0	0	0
11	1.4Interest received	75	95	20	55	One off
12	1.5Interest and other costs of finance paid	(58)	(112)	(54)	(4)	One off
13	1.6Income taxes paid	0	0	0	0
14	1.7Govemment grants and tax incentives	785	785	0	785	One off
15	1.8Other (gain on derivative contract)	154	154	0	154
16	1.9Net cash from / (used in) operating activities	(3,209)	(9,211)	(6,002)	2,793	47% reduction in burn
17
18	Total Excluding Governement grants and one offs	-4,165	-10,133	-5,968	1,803	30% reduction in ongoing burn
19	Total Excluding Governement grants, one offs and R&D	-2,693	-7,918	-5,225	2,532	48% reduction in ongoing burn