Dear Sir Creso Pharma Limited (ASX: CPH) – Financial condition query We refer to your letter dated 9 May 2023. Creso Pharma Limited (the “Company” or “CPH”) provides the following responses to your questions. 1. Does CPH consider that the financial condition of CPH is sufficient to warrant continued quotation of its securities and its continued listing on ASX as required under Listing Rule 12.2? In answering this question, please also explain the basis for this conclusion. CPH notes that Listing Rule 12.2 does not set out specific metrics that must be met to form the ASX’s view on a Company’s financial condition. Nevertheless, CPH sets out below relevant factors that unequivocally demonstrate that CPH’s financial condition is sufficient to warrant continued quotation of its securities and its continued listing on ASX under Listing Rule 12.2. Relative Size of Liabilities to Assets and Composition of Balance Sheet - As of 31 March 2023, CPH had total assets of ~$38.8 million, compared to total liabilities of ~$17.1 million, a material surplus in favour of assets - When considering only “hard” assets, CPH had cash, inventory, receivables and PP&E of ~$18.8 million, in excess of the total liability figure mentioned above - CPH’s current ratio is ~0.74, however this is skewed by several items being classified as short term debt that the Company intends to resolve imminently: o Remaining Obsidian repayment of ~$500,000, expected to be paid in shares o Secured noteholders of $2.8 million, expected to be paid minimum of 75% in shares o Interest free short term loan from related party of $818,500 for participation in prior placement, to be settled in shares upon shareholder approval o ~$300,000 Loan from Director, Jodi Scott, inherited as part of the SSH transaction, that Jodi Scott has indicated she intends to convert to equity, subject to shareholder approval o Adjusting for these items, CPH’s current ratio would be 0.94 prior to raising any further capital o If CPH used only half of its placement capacity as of 15 May 2023 to raise capital, this would result in a current ratio of 1.30, considered to be very healthy
