Ann: Chairman Provides A$1m Convertible Loan Facility, page-18

ASIC will not take action on this because it is normal practice for listed companies to raise capital and seek shareholder approval later - this is permitted because many things are commercial in confidence.

JH is basically taking a bet on one of a couple of things happening. The first is that because management has tipped in money, the market may take that as a positive sign that the company is viable and increases the chances of a later successful capital raising. If this occurs JH gets very juicy interest payments and 200 million options. The options are probably going to be worthless like all the earlier options; however, in the very unlikely event that the company began to sell product, he could make many times his money at the expense of existing shareholders.

The second option is that the company goes into receivership and JH could potentially exchange the company for the debt. This is a more risky scenario because the only thing of value to anyone within the company is the $80 Million of carried forward tax loses, and makes the company worth much more dead than alive (this is very bad news for existing shareholders). The problem for JH in administration is that it is the administrators that then control the company, not him. If a profitable company came along and wanted the tax losses and a back door listing, they would negotiate with the administrator rather than JH, and could outbid him in a blind tender, or he could get stuck with the company at a value more than the debt. The other bidder would be in a stronger position as the company is only worth something to JH if he can find a buyer, so his negotiating position would be pretty weak.

It is difficult to see how this will play out. The only certainty is that shareholders are passengers and it will end badly for them. It is no surprise that millions of shares were dumped on the market yesterday, creating yet another all time low. I guess they sold out because in another week or so, YPB has to fess up about its quarterly sales and given that they have said nothing about any new customers, it is going to be as ugly as always, if not uglier.