Ann: Full Year Statutory Accounts, page-2

It is good to see that MXC is making products on the goods it sells - $1.8mil is about 40% profit margin. $1.8mil in cash and $1.9mil in receivables owed to it by its customers.

However, an annual $20mil loss is unsustainable. The auditors report cast some doubts on MXC being a "going concern" unless there is a serious increase in debt or some credit raising. Also notes that th company will be putting forward some additional debt proposals at the next AGM.

The auditors comments are quite interesting - and a bit disturbing.

Financial report prepared on a going concern basis
The financial statements have been prepared on the going concern basis of accounting, which assumes the
continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary
course of business.
At 30 June 2022, the Group had a cash and cash equivalents balance of $1,886,347 (2021: $5,433,241) and had a
net working capital deficit of $1,249,616 (2021: surplus $3,351,280), which included convertible notes with a face
value of $2,100,000 repayable on 24 November 2022 if not converted prior to maturity. The Group incurred a loss
for the year ended 30 June 2022 of $20,767,823 (2021: $15,871,978) and had net cash outflows from operating
and investing activities of $13,269,402 (2021: $11,989,612).
The Group’s cashflow forecast for the 12 months ending 30 September 2023 indicates that the Group will require
additional capital to refinance existing debt and fund ongoing corporate expenditure and working capital
requirements.
At the date of this report, the directors are satisfied there are reasonable grounds to believe that the Group will
be able to continue its planned operations, meet its obligations as and when they fall due and thus continue as a
going concern, for the following reasons:
MGC PHARMACEUTICALS LTD
Annual Report for the year ended 30 June 2022
Notes to the Financial Statements
30
 Subsequent to year end, on 29 July 2022 the Group entered into a new convertible securities finance
agreement (“the second agreement”) with Mercer Street Global Opportunity Fund, LLC (“the investor”)
to provide the Group with a funding facility of up to a total of US$10,000,000. At the date of this report,
convertible note funding of US$2,500,000 has been received under this agreement in three tranches
across August and September 2022.
 Any further drawdown of funds under the second agreement is at the investor’s discretion, and the
Company having sufficient capacity under Chapter 7 of the ASX Listing Rulesto issue the convertible notes,
or shareholder approval being obtained. The Group is seeking shareholder approval at a General Meeting
on 5 October 2022 to issue up to a further US$5,500,000 in convertible notes under the second
agreement.
 The Convertible Securities Finance Agreement (“the first agreement”) entered into with the investor on 8
September 2020 expired on 8 March 2022. At the date of this report, convertible notes with a face value
of US$2,100,000 remain on issue under the first agreement with an extended Maturity Date of 24
November 2022. The investor has the option to convert these convertible notes to ordinary shares on or
prior to the Maturity Date or to demand repayment, at their discretion.
 The Group’s successful history of equity raisings.
The ability of the Group to continue as a going concern is dependent on:
 The Group being able to issue further convertible notes under the second agreement entered into
subsequent to year end, as discussed above, to meet immediate cash flow requirements and settle the
existing $2,100,000 convertible notes issued under the first agreement, maturing on 24 November 2022
(for which the conversion price is currently out of the money for the investor to convert), in the event
that the investor does not elect to convert or extend the Maturity Date further; and
 The Group being able to secure additional debt and/or equity funding as and when required during the
next 12 months to conduct its planned activities and meet its corporate expenditure requirements.
These conditions indicate the existence of a material uncertainty that may cast a significant doubt about the
Group’s ability to continue as a going concern.
Should the Group not be able to continue as a going concern, it may be required to realise its assets and discharge
its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the
financial statements. The financial report does not include any adjustments relating to the recoverability and
classification of recorded asset amounts, nor to the amounts or classification of liabilities that might be necessary
should the Group not be able to continue as a going concern