Ann: Quarterly Activities/Appendix 4C Cash Flow Report, page-21

Hey all, just my pennies worth.

I will try and present a non-biased view for both the bears and the bulls and only rely on the information we have actually got.

Positives –

1.1 Receipts from customers. CANN’s receipts from customers last financial year (20/21) were abysmal totalling $1,378,000, the year before (19/20) $1,721,000. This financial year $6,483,000. A huge increase.

1.2a $1,985,000 spent on research and development this quarter. This is more than was spent overall in FY19/20 & 20/21. This is normally kept below 500k a quarter by CANN, lets hope this expenditure yields some positive results and is not required on an ongoing basis. Knocking 1.5 million of the quarterly expenditure moving forwards straight away.

1.2b Overall reduction in product manufacturing and production costs this FY. Last FY $11,396,000, this FY $9,594,000. Last three quarters have also seen consistent reductions.

1.9 Net cash from / (used in) operating activities – 19/20FY -$16,129,000 / 20/21FY -$18,215,000/ 21/22FY $15,207,000, overall operational cash burn has seen a small reduction due to the significantly increased revenues.

2.1c Only $3,283,000 spent on Mildura this quarter, a significant reduction over previous quarters. I would expect this number to continue to decrease.

This comment – Of particular note, now that Cann has this GMP licence in place it will commence manufacturing of Satipharm capsules containing THC, aiming to have these unique products available for release in early 2023. Call me naïve I didn’t realise the potential of THC products in markets and this is a good thing, I am excited to see what unfolds here and continue to learn more about the THC market.

Negatives –

1.2e Staff costs have increased to $3,488,000, that’s an increase of $1,197,000 over last quarter with only twelve new staff taken on. That works out to $8,312 each a week over the last twelve weeks (someone get me a job). CANN’s staffing costs jump around everywhere there is no consistency if you look back through reports. I am pretty sure at this point they pay their guys every two months and this is what confuses the quarterly’s.

This comment – ‘Satipharm sales have seen slower than expected growth following the announcement in April 2022 from the UK Food Standard Agency that the Satipharm range of Advanced CBD capsules were approved for sale pending their assessment and certification as novel foods’. The Satipharm capsules are quite expensive in the UK and with the current market conditions I am not surprised sales are not as expected. The product has potential (well most of us believe the product has potential), get the pricing right, get the marketing right, get production right and start shifting some units.

8.5 Estimated quarters of funding available – 2.8 – this is concerning; however you look at it. CANN will not be able to continue relying on debt facilities and needs to significantly increase revenues to even survive this financial year. No shareholder likes to take a finger crossed approach. Where are the new contracts, to justify the production capabilities of Mildura? We cannot just assume now Mildura is online the money will start rolling in.