Ann: Appendix 4C - quarterly, page-6

This is not great tbh - I'm a holder and obviously want it to come good, but there's very little in here to like IMO. E.g.

- despite the better conditions in Q3 to Q2 re COVID (eg more people returning to the office which theoretically should increase sales at large retail customers like Zambrero and the sushi outlets they sell to), the food service channel saw a drop-off in revenue. This indicates the half-yearly results were not an aberration, and that we're likely to see another big loss. As others have pointed out, we'll soon be running out of cash and unless things are turned around quickly, the result will be dilution.
- slide 5 of the investor update refers to "500+" TMall orders, which is really rather negligible for a two-month period (while accepting it should get stronger as more reviews are completed, brand awareness is developed, etc) and doesn't indicate this channel is likely to be a significant growth avenue.
- slides 9-15 are absolute fluff seemingly designed to drum up something positive to tell the market, and it reeks of desperation. The "expansion into Asia" story feels desperate given the current climate/relationship with China, and there's very little substance in how they will "expand" into Asia, other than the aforementioned Tmall offering providing negligible sales, and interest from a couple of distributors. There are seven slides on how they plan to grow the business, and all that I can actually discern is: (a) they are paying money to a couple of random influencers called "Jimmy & Tori Rees", (b) Funch has a new website, and (c) they plan to increase the number of products and increase the countries they sell to. The last one is the most significant, but they still don't detail how they want to do that, and I'm not sure it strategically makes sense. This company already has a significant number of products relative to its revenue and could benefit from simplifying, rather than flooding the market with more products. Each extra product you launch requires more time and effort, extra marketing costs and just general complexity. There's a reason even the biggest companies in the country are trending towards simplification.
- getting rid of the Forbidden Foods brand? Tbh, that always felt to me like the brand with the most name recognition of the three, so it's a curious choice, but I appreciate there could potentially be some negative connotations with "forbidden", and I don't have any issues with Sensory Mill as a brand (but have never seen it on a shelf anywhere).

Having said that, what I HOPE should lead to growth are:

- Foodworks, BB and Pharmacy Alliance were all only stocked in March, so very little of that would feed through into these results, so that is one avenue that could potentially have an uptick going forward.
- maybe the COVID situation will turn around somewhat as even more people return to the office (though as noted above, I am surprised it's down on Q2, where virtually nobody was back in the office, at least in Melbourne and Sydney).
- as others have noted, there is growth in the Retail and eCommerce channel (but NB I would be curious as to how much of that growth is actually eCommerce - I suspect it's been conveniently packaged together to fit the 'growth' narrative).

It's a hold for me. As above, I really hope it turns around, and I'm a long-term holder, so no need to throw it out completely over six bad months in a COVID environment, but the 25% fall from IPO listing price is justified. Would buy in around 14.5c perhaps. But at the moment it feels like a couple of inexperienced founders who are a bit flustered and felt the need to give the market an update and as a result ended up looking completely directionless in the face of mounting losses. Also, the pivot from the statements at listing about proposing to grow their market in Australia first towards the "Southeast Asia growth" narrative is a bit worrying and indicates their preferred path to growth in Australia is potentially not turning out as they would have liked.