some of the other companies out there we are not carrying massive SG&A lines because we believe that turning a meaningful profit is important to our shareholder base.
To many, cash is king and that includes burn rate and how long before another round of financing rears its head. As at May 31st, OGI has over $150M in cash and near-cash investments. To the degree that you can, what can you advise with respect to your current cash/near-cash position, trendline of burn rate, and the potential receipts should your existing warrants be exercised and the cash preservation if the debentures converted?
Our position has been that we are fully funded for our planned and announced expansions / investments. We expect to be cash-flow positive from operations by the onset of recreational legalization. With over 8 million warrants exercisable at $4.00 prior to June 18, 2019 we also have some expected financing cash come down the pipe. We are also looking at more traditional forms of bank financing. We are in a very strong position from a cash perspective and believe that will persist.
Note 6 (Biological Assets) has become a source of rocket fuel to those who seem to want to profit from creating increasing share price volatility and downticks – the manipulators and short sellers. Readers, please read our brief IAS41 discussion in our last issue and the must read article appearing in this issue by industry leading IAS41 Regan McGrath of Metrics Chartered Professional Accounting.
We remind our readers that Financial Statements of large diverse and complex publicly traded companies are not written with the average person as their target audience. Albeit oversimplified, the standard attempts to assign a value to biological assets that otherwise would not have a value. If they had not value, reporting companies would show exaggerated margins at time of sale because of the zero cost. Another way to look at it would be as traditional inventory where sales, returns, exchanges, rebates, and warranty expenses may be reported months or even years after time of sale. To keep it within this industry, an LP with a dealer license that purchases cannabis would show this cannabis as inventory whereas without IAS41 an LP that is growing and cultivating the same market value of cannabis would not show this asset.
Paolo, without getting into the pros and cons of using IAS41, what advice would you give to your shareholders who get caught up by those on bulletin boards and other platforms who portray using standards such as IAS41 as near apocalyptic?
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