Ann: Quarterly Update and Appendix 4C, page-4

Hi P3C,

SOME OBSERVATIONS - OPINION ONLY
I have been in the industry and watched how fast many of these players came off the blocks trying to get first mover advantage with much gusto and excitement and then see the sector flop mid-2019. Many didn't have experience or do their homework, watching out for the private players who were entering the market alongside them. This has created a bloated competitive market now, just like Canada and the US. So Australia too, I think, will also have to go through a painful culling and reduction of players before we see some good profit results come in for some of these guys.

Cannabis had been in an 80-year prohibition period, and even the Canadian and American players struggled with it, starting 5 years earlier. Aussies, from my observations and discussions with the industry, regarding hemp, didn't really do their homework on soil agronomics here or understand historical evidence of rotational crop planting and preparing the soil for this thirsty and highly aromatic plant. Joseph Banks detailed the problems with mainland soil. It took the industry nearly 2 years to realise that Tasmania was the best place to grow hemp. By late 2019 the shine had come off many of the big players, and as you can see, in my spreadsheet, growing medicinal Cannabis indoors is very expensive still.

I think we will still see more pain ahead for the industry over the next 2 years as legislation (driving drug laws) seems to be digging its heels in over THC readings. THC, of course, is a Cannabis metabolite. It is fat-soluble, which means it binds to fat molecules in your body. As a result, it can take some time for it to leave your system, particularly if you have more fat molecules in your body.

I am finally glad that EXL has put the breaks on with his expenditure. Is it enough? Time will tell for the new CEO to turn this around.

I believe many of these companies if they are to survive in this industry, will need their own niche products and also may need to look at diversification outside of Cannabis/Hemp to ensure longevity , survival and an eventual return of investor confidence. Unfortunately, we still may see more casualties and possible mergers for those struggling in the next couple of years.

Those companies that, IMO, can bite the bullet now, shave back admin costs, and expenditures, improve fin. ratios, watch their marketing, can build their stories well, and work on getting back investor confidence may have a brighter future.

Some general thoughts and observations. People are welcome to agree or disagree.