Onwards and Upwards..., page-10

Just to clear up some apparent confusion, and avoid possible surprises, on the capacity of the Company to raise equity capital, as referred to earlier in this thread.

ASX Listing Rule 7.1 allows any listed company to raise capital without the need for shareholder approval within a post-AGM 12-month period through the further release of up to 15% of the number of shares already on issue.

Listing Rule 7.1.A provides for an additional 10% placement facility for smaller companies (those not included in the S&P/ASX 300 and a market capitalisation of $300 million or less), but requires shareholder approval. This is standard practice for small companies in early growth phase with constant capital demands. The rationale here is that such companies, particularly those not yet profitable, do not have the same access to alternative capital resources, such as debt, enjoyed by larger ones.

Resolution 7 of Cellmid’s November 2013 AGM, which received only 72% support (75% required), related to this additional capacity. Some shareholders appear to have believed that the Company was at risk of raising capital that it did not require.

From the AGM Notice of Meeting:

“At the date of this Notice of Annual General Meeting, the Company has on issue 650,470,078 ordinary shares and therefore at this date has a capacity to issue, subject to shareholder approval being obtained under Resolutions 5, 6 and 7:

(1) 97,570,512 equity securities under ASX Listing Rule 7.1; and

(2) 65,047,008 equity securities under ASX Listing Rule 7.1A."

Only issuance (1) received approval.

On 20 December 2013 Cellmid raised $2 million through a placement of 66,666,666 CDY at 3.0 cents to “sophisticated and professional investors” without shareholder approval. Around that time an additional 4 million CDY were issued as payments to RM Research and Brynne Pty Ltd.

I estimate therefore that the Company still has capacity for a limited capital raising this year. I note that calculations in the recent Baillieu Holst Report are based on the assumption that $3 million will be raised through the issuance of 100 million CDY during FY14/15 “in order to complete the early clinical work on midkine in cancer”.

T7