Ann: Business Update and Appendix 4C, page-2

Hmm ... Clear up one issues but get stuck with another one. Contract Sales were disappointing, however they have a history of lumpy sales and I believe in the continued growth in the sector. The risk is are those sales going somewhere else other than Cogstate. At this point I am prepared to give them the benefit of the doubt.

On the positive side you can clearly see on a cashflow basis how they will be profitable going forward. The reset gross cash outlay going forward is US$ 5.75 million per quarter or US$ 23 million on a runrate basis. Lets use US$ 24 milliom, assuming they are able to keep contract sales steady they should be able to do US$ 28 million in revenue next year. That gives us FCF (at an operating level) of US$ 4 million over the next 12 months. Based on a current market cap of US$ 42 million that is @ 10x operating cashflow that is before you deduct the US$ 8.7 million in net cash and receivables.

Subject to the longer term sales trajectory remaining constant (the last 3 quarters do not inspire confidence) then you would expect sales to grow @ 10% a year that is @ US 3million. at 50% margins that should drop another US$ 1.5 million to the operating free cash flow . So US$ 4 million over next 12 months, US$ 6.5 million 12-24 months and US$ 8 million 24-36 months.   That is US$ 18 million in operating cashflow over the next 3 years add to the @US$9 million in cash and receivables for a total cash position of  US$ 27 million, 3 years out.  very very cheap if the sales hold.   So now it is all about the sales .. fingers crossed.  One other thing that would be disappointing to see would be the board going option crazy .... they have had a habit of spraying them around at crazy values. They will have the cash now to pay better bonuses so should stop acting like a venture cap start up and start acting like a mature company.