Ann: Notice of Extraordinary General Meeting/Proxy Form, page-2

Independent Expert’s Report
Shareholders should carefully consider the report prepared by the Independent Expert for the purposes of the approval sought by Resolution 2 under section 611, item 7 of the Corporations Act. The Independent Expert’s Report comments on the fairness and reasonableness of the transaction the subject of Resolution 2 to the non-associated Shareholders. The Independent Expert has determined that the issue of Shares to SIO is not fair, and not reasonable to the non-associated Shareholders.

The Independent Expert has valued Shares prior to the issue of Shares to SIO on a controlling interest basis as between $0.0289 and $0.1045. The Independent Expert has valued Shares post the issue of Shares to SIO on a minority interest basis of $0.0218 and $0.0771. As the value of a Share on a minority interest basis post the issue of Shares to SIO is less than the value of a Share on a controlling interest basis prior to the issue of Shares to SIO, the Independent Expert has determined that the issue of Shares to SIO at $0.02 is not fair to the non-associated Shareholders. The Independent Expert has also determined that the issue of Shares to SIO is not reasonable. Section 2.3 of the Independent Expert’s Report sets out the Independent Expert’s assessment of reasonableness. The Independent Expert has outlined the following factors as advantages of the issue of Shares to SIO:

• results in further alignment between the Company and SIO;
• provides the Company with the ability to settle the Loan with Shares rather than out of cash reserves, which the Company can then use to pursue growth opportunities;
• a cleaner and more flexible capital structure, allowing the Company to facilitate future equity and/or debt capital raisings, including by releasing the security currently held by SIO under the terms of the Facility Agreement;
• no further interest will accrue on the Loan;
• removes the risk of an accelerated repayment of the Loan;
• provides certainty on the price at which the Loan can be converted;
• does not result in the non-associated Shareholders losing control of the Company.

The Independent Expert has outlined the following factors as disadvantages of the issue of Shares to SIO:

• the conversion is not fair to the non-associated Shareholders;
• the issue price of shares to SIO is below the Company’s asset based valuation and recent share prices;
• dilution of the non-associated Shareholders; and
• forgoing the opportunity to pursue alternative options for the repayment of the Loan.

A copy of the Independent Expert’s Report accompanies this Notice.
The Directors recommend that all Shareholders read the Independent Expert’s Report in full.
Directors’ recommendation
On the basis of the advantages and disadvantages of the issue of Shares to SIO as outlined in the Independent Expert’s Report and notwithstanding the Independent Expert’s conclusion that the issue of Shares to SIO is not fair, and not reasonable to the non-associated Shareholders, the Directors (excluding Yanheng Wu who was absent from the board meeting held to consider the recommendation to Shareholders on this Resolution 2) recommend that Shareholders vote in favour of Resolution 2.

The Facility Agreement was executed at a time of heightened credit risk for the Company prior to the sale of part of the Infusion segment to BTC Health Limited in May 2019 referred to above. At the time the Facility Agreement was executed, there were limited sources of credit available to the Company and the Facility Agreement was undertaken on commercial terms commensurate with the risk of the transaction which allowed the Company to continue pursuing its strategic and operational pursuits, including the sale of the Infusion business. The Directors recognise the benefits to the Company of obtaining this Facility Agreement, continue to support the terms of this transaction and believe that the conversion the subject of this Resolution 2 will further strengthen the alignment of SIO’s interests with the interests of all other Shareholders.