Corporate Governance, page-6

I don’t share your concerns, Lev.

Any advantage of a discounted price for shareholders by participating in a SPP is imaginary. The market price will immediately fall until it reaches the announced discounted price as holdings are sold off in order to fund participation in the SPP. This not only discourages participation but, and as King says, the opportunity to buy on market then arises anyway.

Meanwhile a SPP prospectus would be required for non-SIs and eventually it becomes necessary for the company to try to sell that part of the issue not taken up to complete the raising. The whole process is self-defeating. None of this happens if the funds are raised quickly during a trading halt.

Directors can’t participate in a discounted placement. A company cannot issue shares to its directors, including in a placement, without approval being obtained at a meeting of shareholders. So no Governance issues arise. Directors however are entitled to participate as fellow shareholders in a SPP on a pro rata basis according to their holdings.

Both recent placements, in July 2015 and October 2016, were timed such that the 4C reports were released concurrently with the respective trading halt, so nothing unusual this time.

I expect the reason for this CR is to meet the manufacturing costs of sufficient product to support the projected rapid expansion in evolis distribution, as was outlined in the recent update. At a 70% gross margin this means that every $1.00 spent for this purpose generates $3.33 in sales revenue. I’m all for that, particularly if someone else is going to come up with the $1.00. I don’t need a SPP.

Cheers