How FC financing works for BIG, page-55

Hey jlo2012 it sure is complicated!

On sustainability of the arrangement.

My current understanding is that yes the security deposits are made up of a diverse range of customers with different Video Offer amounts, (bronze through to platinum packages). As you say the FCC $1,000pm membership fee likely refers to a line of credit offered to the SME as a way for FCC to obtain a new customer.

To your question of how sustainable all of this is, BIG has told us they haven't had to default on a customer yet, in that they have been able to replace any Sponsorship Potential Customer that did not become an Accepting Customer within 120 days. That's the strongest indication we have that it is going well. Without a breakdown of how many customers sit along those 120 days however, it is not possible to know in advance how sustainable it is, all we know is that today it appears to be so.

We also know from clause 13 of the second ASX response letter that there are 2,000 customers who have signed a Sponsorship Application Agreement but have not been submitted to FCC - this means they could be swapped out for previous customers who did not become Accepting Customers.

In terms of the numbers we have available:

Point 16 of the ASX response letter dated 22 Feb under the table you referenced states:

"16. The Company is currently in the process of reconciling the total number of Accepted Customers with First Class which it expects to be approximately 791, subject to review and processing. If this is accurate, they would constitute 9.95% as a percentage of Paid Membership Customers and 5.37% as a percentage of Purchasing Decision Customers."

***So we are told that 791 customers at this point began as Sponsorship Agreement Potential Customers and became Accepting Customers.

Point 17 states:

"17. The Company has 7,955 Non-Paid Membership Customers. The Company is unable to confirm the breakdown between customers who were financed by First Class but did not accept their video (i.e. Declined Customers) and other customers who did not accept their video, and as such is unable to present the number of Declined Customers as a percentage of Paid Membership Customers and Purchasing Decision Customers."

***We do not know how many customers are rejected by FCC that are initially signed up as Sponsorship Pool Potential Customers. That means we cannot ascertain if the signup rates are impacted by either SMEs deciding not to proceed with the offer because for example they didn't like the video, or never intended to purchase it or whether everything was good but FCC declined them on credit grounds.

My opinion is that the % referred to in point 16 seem low. Though it was really last quarter that the huge growth in the company started and perhaps many of these customers are now being washed through the system. I don't have a strong view either way as we don't have enough data. I would be more comfortable if the % referred to in point 16 were higher.

Countering this lack of data is that the Board decided to use this as a growth strategy rather than do a CR. They are all heavily invested in the company and so I'm also keeping that in mind. They would have needed to weigh up the cost of possible dilution from a Capital Raise with the risk of this approach. They decided that it was more suitable to take this approach.