The half yearly is delayed, what do the numbers mean?

While we are waiting for the half yearly, thought it might be a good idea if a number of us run a tape measure over these numbers.

The income lift for medicinal cannabis does seem positive on first look. My understanding is that in 2020 Epsilon only had 1 month of Tetra income (and 250k cash outlay to buy it in the reporting period), versus 6 months of income reported in 2021. Clarity on the breakdown of the income numbers when the auditors report comes out might help a bit here, but does indicate medicinal cannabis now has income around $1.3 million for the half.

Epsilon has declared that Canada revenue has dropped as a proportion of total revenue, and outlined supply chain disruptions as a main reason. If all non-medicinal cannabis continuing operations revenue comes from Canada (59%), this gives and income around $1,916,647 or a 46% drop on the 2020 number of $3,248,003. As inventory has dropped only around $74k in the period, maybe Epsilon can give more information on how supply chain disruptions are causing significant drops in income, or what else is going on.

Good honesty in recognising the R&D income in the notes. One way to look at its effect is taking the Other Income line away from both years, so that there is not any effect of the R&D rebate. This leads to a loss before income tax in 2020 of $5,934,862, and a 2021 loss of $6,055,932.

One issue going forward is that you need to spend money this year to get back R&D money next year. In 2020 there must have been a lot of spend on development to get back $1.66 million in 2021. In 2021 there was the benefit of the rebate, what was the equivalent spend on building the business? Maybe Epsilon can give some indication.

Money spent on people might have actually gone up. If you add together Employee Benefits Expense, General and Administration Expenses and Share Based Payments, you get $3,181,554 in 2020 and $3,911,887 in 2021. On the face of it this does not appear to match with the announced savings over the past year.

Looking forward the Cash and Cash Equivalents number is $3,101,642. My add up of cash outlays outside COGS for 2021 is $5,919,427, or $2,959,713 per quarter. This is reduced to $2,392,739 if you include gross profit (I have kept out the Other Income line deliberately as there will be no more R&D rebate this year).

On this basis Epsilon had 1.3 quarters of cash in the bank at the end of June. If spend in Q3 continues at the rate calculated above this requires around a $4 million raise in the next 4 weeks to have 2 quarters of cash in the bank at 30 September. Even if Epsilon could raise money at the last closing price of 14c, this would require 29 million shares and by my calculation the 10% capacity just approved is around 20 million shares. Epsilon might want to update its shareholders on whether there is any issue along these lines.

And also an update on the $3.5 million, is it correct this is repayable in October?