March 16 Quarterly Report - Good and Bad

Hi, guys. I have read the quarterly 4C again and here comes my analysis.

The summary of good things:

1. The management finally started to focus on cost reduction which narrowed the gap between cash receipts and staff costs.

2. The company anticipates highest ever quarterly sales in current 4th quarter.

3. The Cardiocel Sales revenue confirms my previous prediction: Quarterly Cardiocel Sales roughly = total numbers of centres at the end of that quarter (e.g. 145) *10000 = 1.4 million. It makes much easier for us to project Cardiocel revenue in the future.

4. There will be new revenue stream in the coming quarters from the sales of new vascular repair product and Coroneo ring.


The summary of bad things:

1. We still burnt close to 6 million cash during the quarter and our ending cash position will last us for another 2 quarters only.

2. I think this one really hurts if it is true. Unless the company can increase per center usage for Cardiocel, the revenue growth in this area will be moderate and predictable (e.g. total centres*10000 = total quarterly revenue). In another word, we can forget about the possibility of exponential growth for Cardiocel. As mentioned in the report, CardioCel use continues to increase as the Company moves from early commercial launch to stable market expansion and growth. That means we can only expect "stable" growth instead of exponential growth. I think it may become a norm to only add 10-15 new centres per quarter from now on unless it is approved in more new big regions/countries such as Japan or China. That means Cardiocel Revenue may only increase 100-200k every quarter from now on. The company need to build new revenue stream (e.g. new vascular repair product) to maintain high revenue growth rate going forwards.

My Prediction and educated guess

1. I will assume that the June quarterly revenue will reach 3.8+ million. I will break it down for you； 1.5-1.6 mil Cardiocel revenue+0.1 million Coroneo ring +2.1-2.2 million Infusion products = around 3.8 million.

2. The company will cut cash burn/cost by another 0.5 million. It means the new cash outflow this quarter will be around 5 million.

3. The company is negotiating a partnership deal for the Vaccine. The deal needs to be done before we run out of cash and I am sure the management is working on this right now. We can try to ask this question next Tuesday during webinar.

4. New revenue stream will be created in Q3 this calendar year through the launch of new vascular repair product.

5. The management change happened in Feb 16 was pushed by one of the institutional investor - either Sabby or MC management. AF may get involved in this as well.