NGS’s Revised Q2 Report Shows $574k Cash Outflow, But Profitability Looms

Context of the Revisions

Nutritional Growth Solutions Ltd (ASX, NGS) recently addressed ASX queries concerning notable discrepancies between its original and revised quarterly activity and cash flow reports for the quarter ended 30 June 2025. The company explained that the revisions primarily stemmed from timing differences in recording receipts and payments, as well as reclassification of certain expenses. These adjustments led to higher reported cash receipts from customers and increased product manufacturing and operating costs, reflecting payments of prior invoices and a strategic inventory build-up valued at approximately USD 300,000 to support future sales.

Governance and Reporting Processes

NGS detailed its internal process for preparing and reviewing quarterly reports, which involves consolidating US operations into the group’s Israeli financials, followed by multiple layers of review including the accounting team, CFO, CEO, and the Board of Directors. Importantly, the Board received formal CEO and CFO declarations affirming that the reports complied with accounting standards, presented a true and fair view, and were based on effective risk management and internal controls. To enhance future reporting accuracy, NGS has engaged an Israeli accounting firm to assist with Appendix 4C preparation.

Financial Position and Outlook

Despite the revised report showing a significant increase in net cash used in operating activities, US$574,000 compared to the initially reported US$54,000, NGS emphasized its ongoing efforts to strengthen liquidity. The company highlighted cost-saving measures, expanded retail distribution (notably the commencement of CVS in-store sales), and a recent share placement raising AU$760,000 as key factors supporting its financial position. Preliminary figures suggest NGS achieved profitability in July 2025, signaling a potential turnaround in operating cash flows.

Liquidity and Going Concern Considerations

NGS acknowledged a working capital deficiency and a negative equity position as of December 2024, with the independent auditor noting material uncertainty related to going concern. However, the Directors expressed confidence in the company’s ability to meet its debts as they fall due, citing strategic inventory management, improved cash flow outlook, cost management initiatives, and strong shareholder support. The company currently holds approximately US$40,572 in its US bank account and 40,000 NIS in Israel, with the revised cash balance at quarter-end corrected to US$99,000 to reflect funds in transit.

Compliance and Market Disclosure

NGS confirmed full compliance with ASX Listing Rules and continuous disclosure obligations. The Board authorized the responses to ASX’s queries, reinforcing the company’s commitment to transparency and governance standards. The company also clarified that the revised disclosures were material and could reasonably affect the valuation of its securities, particularly regarding cash receipts, manufacturing costs, administrative expenses, and cash outflows.