Hi Winsonliang, on my assessment of the MarQ quarterly results,...

Hi Winsonliang, on my assessment of the MarQ quarterly results, I have the following comments which ultimately point to ending June cash of somewhere between $3.0M and $2.4M.

As for MarQ, there was a drop of $988K in cash over the quarter.

Closing balance was $4.05M.

Operating cash was -ve $557K. In DecQ it was -$719K and in SepQ, it was -$126K. Overall, in 9M, it was -$1.402M.

Overall, cash in the 9 months to Mar18 has dropped (ignoring any financing activities, so including only operating and investing activities) by $2.466M.

The bigger concern is that forward operating estimates still far exceed the quarterly customer receipts. For example, the JunQ operating estimate is $5.471M - but call it $5.5M.

The H1 customer receipts averaged $6.25M per quarter, but the MarQ was $4.238M (call it, $4.25M). That's a $2.0M dip from the first half quarterly performance. I cannot therefore see JunQ customer receipts climbing appreciably by any amount and certainly, not by an amount that would render comfort for a JunQ forward outflow estimate of $5.5M. I therefore still see a -ve JunQ outcome (short of the operating expenditure being heavily over estimated at this time). Hence why ending cash will again fall significantly to what I would think could well be a sub-$3.0M figure (and this is before their upcoming CAPEX commitment of Apr18 is spent, and before consideration is given to (very likely) Sep18 and Dec18 (at a minimum) -ve quarters plus further pressure on financial and investing components. The current cash therefore will not likely last beyond year end. That's my present view.

MarQ comparisons

	Column 1	Column 2	Column 3	Column 4	Column 5
0	Item	MarQ est @31/1/18	MarQ act	Variance	JunQ est @30/4/18
1	Research & Development				-
2	Product manufacturing & operating costs	5258	3522	-1736	4177
3	Advertising & marketing	15	6	-9	10
4	Leased assets	4	4	-	4
5	Staff costs	803	879	+76	897
6	Admin & corporate	360	277	-83	270
7	Other (net 5 for interest)	109	107	-2	113
8	Total operating costs	6549	4795	-1754
9	Customer receipts		4238
10	Operating cash		-557

Performance to Actual (YTD – based on forward estimates provided each successive quarter)

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6
0	Item	SepQ est	DecQ est	MarQ est	JunQ est	FY Est
1	Research & Development	-	-	-	-	-
2	Product manufacturing & operating costs	4367	4710	5258	4177	18,512
3	Advertising & marketing	9	10	15	10	44
4	Leased assets	4	4	4	4	16
5	Staff costs	1061	905	803	897	3,666
6	Admin & corporate	140	240	360	270	1,010
7	Other (net 5 for interest)	121	109	109	113	452
8	Total operating costs	5702	5978	6549	5471	23,700
9
10

YTD actuals + JunQ est

	Column 1	Column 2	Column 3	Column 4
0	Item	Mar 9M	JunQ est	FY Est
1	Research & Development	-	-	-
2	Product manufacturing & operating costs	13,984	4177	18,161
3	Advertising & marketing	34	10	44
4	Leased assets	12	4	16
5	Staff costs	2590	897	3,487
6	Admin & corporate	1197	270	1,467
7	Other (net 5 for interest)	328	113	441
8	Total operating costs	18,145	5471	23,616

Customer Receipts Profile

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7
0	Item	SepQ	DecQ	MarQ	(9M Mar31)	JunQ – up only	FY (est on 9M Mar18)
1	F18 (uplift only)	6,150	6,355	4,238	16,473	4,776 (est)	21,249
2	F17	7,779	7,277	5,167	20,223	5,824	26,047
3	Variance	-1,629	-922	-929	-3,750	-1,048	-4,798
4	Delta	-21%	-12.7%	-18%	-18.5%	-18%	-18.4%

1. JunQ customer receipts estimate based on uplift between MarQ17 and JuneQ17 repeating itself in JunQ18.
2. If however this were then adjusted for the 18.5% YTD drop in receipts (but set at 2/3 of that rate – ie: 12.33%) otherwise, the potential result turns to $3.9M. Adjusting at the 2/3 rate changes the potential result to $4.187M. The arguable range therefore is between $3.9M - $4.2M. The 2/3 midpoint here is $4.1M. This is about the best that is possible here.

Even if the deterioration here is only 2/3 of the 18% variance (ie: $5.125M), then the FY change is – receipts (16,473 + 5,125 =) $21.598M, so still down 17% YoY (or by $4.449M).

This tends to reinforce the view then that CDC operating capacity (which is having to be buoyed up by the farms) is, in real terms, at or below 40% and loss making (ie: below breakeven).

This also suggests that on the most optimistic estimate (ie: receipts of $4.776M) that JunQ will return (assuming accuracy of the expenses forecast for the quarter), a -ve operating result of ~$700,000.

On the less optimistic estimate ($4.10M) however, the JunQ (same conditions) could well return a -ve operating result of ~$1.4M.

Regardless of estimate though, or how this is indeed arranged, based on their forecast of JuneQ operating expenditures, the operating cashflow will again be -ve for the JunQ, with a range of somewhere between -$700K to -$1.4M, absent the operating expenses’ estimates having been grossly over-estimated at this time (ie: one month into the JunQ).

So, ending JunQ cash which is already down to $4.05M is now likely to end up somewhere between $3.05M ($700K operating reduction, + a further $300K investing /financing outflow, at best) and $2.35M ($1.4M operating reduction, + a further $300K investing /financing outflow, set at best).

Ending June cash therefore is likely to deteriorate further to somewhere between (rounded) $3.0M and $2.4M. And this is before the CAPEX commitments of early April are to be given effect to, as well as ongoing operating weakness through Sep and Dec upcoming quarters, at a minimum.