news-3b, page-10

Rusty, most of your great post is correct, but there is a key clause regarding the Notes that is quite important to your 22c argument.

This is from the August 11th announcement:

The Notes will have a term of 18 months and will, at the election of the Note Holder, be convertible to ordinary fully paid Coretrack shares ("Shares") at the conversion price of 22 cents in the first 6 months, or thereafter at the lesser of 22 cents or 80% of the daily volume weighted average sale price of the Company's Shares sold on ASX for the 5 trading days immediately prior to provision by the Note Holder of a written conversion notice (5 Day VWAP). In the event the Company undertakes an equity raising for less than 22 cents per Share, the conversion price will be reduced to the lesser of the price of the equity raising or 80% of the 5 Day VWAP.

So given there was a subsequent capital raising at a lower price (the October rights issue at a "deemed issue price" of 14c a share), the notes can be converted at 14c anytime up until expiry (i.e. February 2012).

So converting the Notes now at 14c is curious. I would have taken it is a major positive if it they had been converted a few weeks ago when 80% of the VWAP was less than 14c (i.e. someone locking in a never to be seen again low price), but given they can convert at 14c anytime between now until Feb 2012, I'm not sure what to make of it.

Some possible scenarios (I'm sure there are many others) of why a Noteholder might convert now.

(a) As leevardi suugests, you were confident the SP will RISE and wanted to access an earlier Capital Gains (I'm no tax expert).

(b) You expect the SP will FALL but you don't hold existing shares, only Notes. So you convert the shares at 14c with the intent of selling the shares back into the market at current prices.

(c) You assess the company's risk of failure is higher and want to liquidate your exposure. So you convert now with the intent of selling the shares back into the market and remove risk of the company failing to repay its debt to you in February 2012.

(d) You were part of Management or Cygnet and wanted to send a positive signal to the market (a bit like when the announce a Director is buying shares) prior to a capital raising announcement.

IMO could be either positive or negative, next key announcement might tell the story, but I don't think we can read too much into it just now.

Also, as someone else has pointed out in an earlier post will be interesting to see what Greenrock announce tomorrow when they come out of trading halt, given they have a relationship with Cygnet and they are a prospective client of Coretrack