RLG’s Quarterly - The Big Reveal, page-3

Thanks for your post. Inventory has been mentioned a few times in recent posts (as well as in the 4C), but I've been wondering how inventory actually works in the RLG business model.

In the half year financial report (the last time "Inventory" values were provided), the inventory number was $376,778 (up from $100,271 six months earlier), although this is still a very low figure.

In the 4C the statement is made to connect receivables and inventory into a bucket of $4.6m (90% expected to convert to and be received as cash in 4Q). It's an interesting choice of words, because the "convert" is talking about inventory (although it also needs to be 'received' subsequently), and the "receive" is obviously talking directly about receivables, which is what inventory becomes after it's sold. If we are expecting to receive cash associated with 90% of the above, surely the inventory component is quite low, or this is a very bullish estimate (which would be unlike Roolife to make).

Since we are a digital business, I'm not sure how the 'holding of inventory' works. I suspect (although happy to be proven wrong), that we have 'exclusive rights to sell into China', but that the Inventory on our balance sheet is not the stockpile of store inventory on Tmall stores - it can't be or this creates a significant risk to the business due to things like obsolescence, etc. Therefore, I'm going to add this to my list of "must see" items when we get final accounts for 2021.

The other connected question here - when consumers purchase products from our Tmall stores, is the inventory held in China? If it is, then I suspect it's through a 3P warehouse, but unclear whether this is held on our balance sheet, or the supplier balance sheet. I'm very interested in understanding this. Hopefully we are just clipping the ticket (and at most taking flash title to inventory) and not carrying the inventory burden itself.