Ann: Change in substantial holding , page-52

Sir Jaycee and Hanse,

There’s a lot of things that are questionable about this situation, but at the end of the day what could the management do at the time?

The $10m given on June 30th enabled them to have Current Assets (CA) almost match Current Liabilities at EOY (CA of $35m & CL of $35.5m). This probably enabled them to avoid a ‘going concern’ qualification again from the auditors, which they would have got if CA were $25m. I don’t think they would have wanted such a view prior to listing on AIM.

Then they got another $10m in August. The $20m really bought them time and meant they didn’t have to raise money via Australia or UK. Imagine if they had of tried to raise cash on AIM and for what purpose? At least they could say that the $20m raised via Socius would pay off Mashala which most of us were happy with hearing. Whilst that hasn’t happened yet, it should happen before the end of December.

I do feel sorry for long term holders who may have been buoyed by the announcement of a cornerstone investor only to be sold into by Socius. Not sure if I’d say Socius manipulated the price down as there were/are some overwhelming market conditions and Socius protected themselves on the way down. Conti knew that was a possibility if markets continued to tank and besides they needed the $20m.

If back in June/July Socius had been given the shares at a discount lets say 29 cents (compared to the original 37 cent average) most holders would have been upset as well, and the price probably would have been pulled down as a consequence.

Bottom line – where would Conti have been without that $20m then? Essentially it has bought Conti time to complete the deals that we’re expecting to complete very soon. For now we still have a cornerstone investor, as well and as at end of Sept $17m in the bank, an increased stake in Mashala and supposedly another $30m on the way.

As someone said a few weeks ago, Conti is quite educational on many levels. I like most holders want greater transparency and with it certainty, but for now I’m happy to have the opportunity to fight for another day and that’s what I think they managed to achieve via this transaction. The transitioning phase to mid tier is taking a lot longer than I hoped and I expect more uncertainties along the way, but that’s life at this end of the market in these uncertain times.