message from brian andrews

Hi guys,

I sent through a message to the info address on the HGR web site as follows:

Hello,

I am an investor in HGR and am looking to increase my holding to a more substantial level.

I have one point of worry and one of analysis that I am hoping you can help me with.

The first is whether there is a response from the company in regards to the Journal of Analytical Toxicology report into saliva based drug testing devices (report attached) and the view that the OraLine IV product stood out in regards to delivering false positives. This appears to be a major flaw, particularly in THC testing and due to the sponsors of the research and the regard in which the Walsh Group is held I am worried that this sort of report could severely impact sales, particularly in the US markets.

The second point is whether there is any ball park figure(s) that can be used for the level of profit per OraLine IV device, based upon bulk quantity orders coming through. I am basing my current evaluation on a $1 profit margin as (a) this is a nice round number, and (b) would seem an appropriate figure for the $8 retail sale price.

Any assistance that you could provide would be much appreciated!

Thanks and regards,

Tim

I received the following in reply:

Dear Tim,

I am familiar with the study you have described, Dr. Walsh did not follow our instructions for use and used an intermediary foam collector device which contraindicated for use with our device, we collect whole saliva deposited directly into the spoon and this is what allows us to get such low levels of detection for THC. In terms of false positives, if we state a cut off level of 4ng/ml and then get a positive confirmation at 2ng/ml this would be described as a false positive as it is below the manufacturers cut off level. In tests conducted for our 510(k) filing what got consistent true positives for THC at 1.3ng/ml from real pot smokers, you cannot replicate this in a non native environment which is what Dr. Walsh has attempted to do, he should know better and refused to listen to Dr. Sun’s advice hence the study outcomes. From our perspective his study lacks credibility and certainly hasn’t created any issues for us in the U.S. I have attached a more relevant independent study for your reference.

On the valuation issue I trust you will appreciate that I would be stepping over the line to making statements about margins without advice the whole market which would be inappropriate as it would telegraph our cost structure to our competitors. The board are presently work on some metric that can be shared with investors to facilitate valuation, I will ensure you receive a copy when the board have resolved this matter.

Regards

Brian

I love it that the company is transperant enough to take time to talk to investors - this in my view is key, as it is me and you that prop up their share price that allow them to issue shares and options to raise capital to do things like the purchase of Sun labs.

Reading between the lines, I believe there are two sentences that are particularly positive here:

1. "From our perspective his study lacks credibility and certainly hasn’t created any issues for us in the U.S." - hopefully we will be getting some strong US sales figures soon; and

2. "The board are presently work on some metric that can be shared with investors to facilitate valuation, I will ensure you receive a copy when the board have resolved this matter." - it is a great problem for the board to have when they need to build a model to assist us in working out the value of the company.

I'm glad I bought when I did, because I feel that December is going to be a big month for them following the AGM.

Cheers,

Tim