BPH ENERGY LTD — Proxy Solicitation & Information Statement 2009

Nov 22, 2009

BIOPHARMICA LIMITED

ACN 095 912 002

NOTICE OF GENERAL MEETING

TIME : 2:30 pm (WST) DATE : Thursday 24 December 2009

PLACE : North Perth Lesser Hall 24 View Street NORTH PERTH WA 6006

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact Deborah Ambrosini, the Company Secretary on + 61 8 9328 8477.

CONTENTS

Important Notices	3
Notice of General Meeting (setting out the proposed Resolutions)	4
Explanatory Statement (explaining the proposed Resolutions)	8
Glossary	36
Schedule 1 – Terms and conditions of Options	38
Schedule 2 – Terms and conditions of Director Options	40
Schedule 3 – Valuation of Director Options	42
Schedule 4 – Terms and conditions of MDSystems Director Options	43
Schedule 5 – Valuation of MDSystems Director Options	45
Proxy Form	46
Annexure A – MDSystems Pro-Forma Balance Sheet	48
Annexure B – BioPharmica Pro-Forma Balance Sheet	49
Annexure C – Independent Expert’s Report	50

TIME AND PLACE OF GENERAL MEETING AND HOW TO V OTE

VENUE

The General Meeting of the Shareholders to which this Notice of Meeting relates will be held at 2:30 pm (WST) on Thursday 24 December 2009 at:

North Perth Lesser Hall 24 View Street NORTH PERTH WA 6006

YOUR VOTE IS IMPORTANT

The business of the General Meeting affects your shareholding and your vote is important.

VOTING IN PERSON

To vote in person, attend the General Meeting on the date and at the place set out above.

VOTING BY PROXY

To vote by proxy, please complete and sign the enclosed Proxy Form and return by:

• (a) post to BioPharmica Limited, 14 View Street, North Perth, Western Australia, 6006; or

• (b) facsimile to the Company on facsimile number +61 8 9328 8733,

so that it is received not later than 2:30 pm (WST) on Tuesday 22 December 2009.

Proxy Forms received later than this time will be invalid.

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IMPORTANT NOTICES

Key Dates*

Company announces Equal Reduction of Capital	2 October 2009
Snapshot date for eligibility to vote at the General Meeting	7:00pm AEST 22 December 2009
General Meeting	24 December 2009
ASX informed of Shareholder approvals	24 December 2009
Trading in Shares starts on an ‘ex return of capital basis’	29 December 2009
Record Date	5:00pm WST 5 January 2010
In-specie distribution of MDSystems Shares	11 January 2010

*These dates are indicative only and may change

No Prospectus

This document is not a prospectus lodged under Chapter 6D of the Corporations Act. However the Company has received relief from ASIC to enable it to dispose of 80% of its shareholding in MDSystems by way of an in-specie distribution to Shareholders of the Company without the need for a prospectus. Further information regarding the effect of the relief is contained in Section 2.9 of this Notice.

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NOTICE OF GENERAL ME ETI NG

Notice is given that the General Meeting of Shareholders will be held at 2:30 pm (WST) on Thursday 24 December 2009 at the North Perth Lesser Hall, 24 View Street, North Perth, Western Australia.

The Explanatory Statement to this Notice of Meeting provides additional information on matters to be considered at the General Meeting. The Explanatory Statement and the Proxy Form are part of this Notice of Meeting.

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders of the Company at 7:00 pm (AEST) on Tuesday 22 December 2009.

Terms and abbreviations used in this Notice of Meeting and Explanatory Statement are defined in the Glossary.

AGENDA

ORDINARY BUSINESS

1. RESOLUTION 1 – CHANGE OF COMPANY NAME

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as a special Resolution :

“That, for the purpose of Section 157(1) of the Corporations Act and for all other purposes, approval is given for the name of the Company to be changed from BioPharmica Limited to BPH Corporate Limited.”

2. RESOLUTION 2 – EQUAL CAPITAL REDUCTION AND IN-SPECIE DISTRIBUTION

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary Resolution :

“That, for the purposes of Section 256C of the Corporations Act 2001 and for all other purposes, approval is given for the net assets of the Company to be reduced by the Company making a pro rata in specie distribution of 1 MDSystems Share for every 1 BioPharmica Share held by Shareholders registered on the Record Date, on the terms and conditions set out in the Explanatory Statement accompanying this Notice.”

Short Explanation : Under the Corporations Act, the Company must seek Shareholder approval by ordinary resolution to an equal reduction of capital. Please refer to the Explanatory Statement for details.

3. RESOLUTION 3 – ACQUISITION OF A SUBSTANTIAL ASSET – ADVENT ENERGY INVESTMENT

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary Resolution :

“That, for the purposes of ASX Listing Rules 10.1 and 11.1.2 and for all other purposes, approval is given for the Company to enter into an exclusive option deed to subscribe for up to $14 million worth of ordinary, fully paid shares in the capital of Advent Energy, a public unlisted entity.”

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Voting Exclusion: The Company will disregard any votes cast on this resolution by a party to the transaction and a person who may obtain a benefit, except a benefit solely in the capacity of a security holder, if the Resolution is passed and any associates of those persons.

Independent Expert’s Report : Shareholders should carefully consider the Independent Expert’s Report prepared by MGI for the purposes of the Shareholder approval required pursuant to ASX Listing Rule 10.1 which comments on the fairness and reasonableness of the transaction to the non-associated Shareholders in the Company and concludes that the proposed transaction is fair and reasonable .

4. RESOLUTION 4 – SHARE AND OPTION PLACEMENT

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary Resolution :

“That, for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Company to allot and issue up to 95,982,330 Shares together with up to 95,982,330 free attaching Options on the terms set out in the Explanatory Statement accompanying this Notice.”

Short Explanation: Under Listing Rule 7.1, the Company may issue up to 15% of its ordinary share capital in any 12 month rolling period without Shareholder approval. By obtaining the prior approval of Shareholders for the issue of securities proposed under this Resolution, the Company retains the flexibility to make future issues of securities up to that threshold. Please refer to the Explanatory Statement for details.

Voting Exclusion: The Company will disregard any votes cast on this resolution by any person who may participate in the proposed issue and a person who may obtain a benefit, except a benefit solely in the capacity of a security holder, if the Resolution is passed and any associates of those persons.

5. RESOLUTION 5 – ISSUE OF DIRECTOR OPTIONS – MR DAVID BREEZE

To consider and, if thought fit, to pass the following Resolution as an ordinary Resolution :

“That, for the purposes of Section 208 of the Corporations Act, ASX Listing Rule 10.11 and for all other purposes, approval is given for the Directors to allot and issue 2,000,000 Director Options to Mr David Breeze (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mr David Breeze (or his nominee) or any of his associates. However the Company need not disregard a vote if, it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form to vote as the proxy decides.

6. RESOLUTION 6 – ISSUE OF DIRECTOR OPTIONS – MRS DEBORAH AMBROSINI

To consider and, if thought fit, to pass the following Resolution as an ordinary Resolution :

“That, for the purposes of Section 208 of the Corporations Act, ASX Listing Rule 10.11 and for all other purposes, approval is given for the Directors to allot and issue 1,000,000 Director Options to Mrs Deborah Ambrosini (or her nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mrs Deborah Ambrosini (or her nominee) or any of her associates. However the Company need

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not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form to vote as the proxy decides.

7. RESOLUTION 7 – ISSUE OF MDSYSTEMS DIRECTOR OPTIONS – MR DAVID BREEZE

To consider and, if thought fit, to pass the following Resolution as an ordinary Resolution :

“That, for the purpose of Section 208 of the Corporations Act and for all other purposes, approval is given for the Directors to allot and issue 2,000,000 MDSystems Options to Mr David Breeze (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mr Breeze (or his nominee) or any of his associates.

8. RESOLUTION 8 – ISSUE OF MDSYSTEMS DIRECTOR OPTIONS – MRS DEBORAH AMBROSINI

To consider and, if thought fit, to pass the following Resolution as an ordinary Resolution :

“That, for the purpose of Section 208 of the Corporations Act and for all other purposes, approval is given for the Directors to allot and issue 2,000,000 MDSystems Options to Mrs Deborah Ambrosini (or her nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mrs Ambrosini (or her nominee) or any of her associates.

9. RESOLUTION 9 – ISSUE OF MDSYSTEMS DIRECTOR OPTIONS – MR GREG GILBERT

To consider and, if thought fit, to pass the following Resolution as an ordinary Resolution :

“That, for the purpose of Section 208 of the Corporations Act and for all other purposes, approval is given for the Directors to allot and issue 2,000,000 MDSystems Options to Mr Greg Gilbert (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mr Gilbert (or his nominee) or any of his associates.

10. RESOLUTION 10 – PARTICIPATION BY MEC IN SHARE AND OPTION PLACEMENT

To consider and, if thought fit, to pass the following Resolution as an ordinary Resolution :

“That, for the purposes of ASX Listing Rule 10.11 and for all other purposes, approval is given for MEC to participate in the placement contemplated by Resolution 4 by subscribing for up to 24,361,248 Shares together with up to 24,361,248 free attaching Options on the terms and conditions set out in the Explanatory Statement. ”

Short Explanation : Approval is required for the purposes of ASX Listing Rule 10.11 to allow MEC, a deemed related party of the Company, to participate in the placement.

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Voting Exclusion Statement : The Company will disregard any votes cast on this resolution by MEC and any person who might obtain a benefit if the Resolution is passed, except a benefit solely in the capacity of a holder of ordinary securities, and any of their associates.

DATED: 20 NOVEMBER 2009

BY ORDER OF THE BOARD

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DEBORAH AMBROSINI COMPANY SECRETARY

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EXPLANATORY STATEMENT

This Explanatory Statement has been prepared for the information of the Shareholders in connection with the business to be conducted at the General Meeting to be held at 2:30 pm (WST) on Thursday 24 December 2009 at the North Perth Lesser Hall, 24 View Street, North Perth, Western Australia.

This purpose of this Explanatory Statement is to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions in the Notice of Meeting.

1. RESOLUTION 1 – CHANGE OF COMPANY NAME

Resolution 1 seeks Shareholder approval for the Company to change its name. Section 157 of the Corporations Act provides that a company may apply to change its name by the members of the company passing a special resolution to that effect.

It is proposed that the Company name be changed from BioPharmica Limited to BPH Corporate Limited.

2. RESOLUTION 2 – EQUAL CAPITAL REDUCTION AND IN-SPECIE DISTRIBUTION

2.1 General

Resolution 2 seeks Shareholder approval for the net assets of the Company to be reduced by the Company making a pro rata in specie distribution of 1 MDSystems Share for every 1 BioPharmica Share held by Shareholders registered on the Record Date.

2.2 Overview of the proposal

As announced to the market on 12 August 2009 and 21 September 2009, the Company intends to restructure its assets by ultimately splitting the separate business activities and assets of the Company into 2 separate ASX listed entities (subject to the receipt of all necessary Shareholder, regulatory and ASX approvals). To give effect to this, the Company proposes to distribute its assets associated with the Anti Mitotic Drug Discovery Programme and tumour suppressor gene HLS5 to MDSystems, a wholly owned subsidiary of the Company, and convert an existing loan to MDSystems, in consideration for the issue of 47,991,165 fully paid ordinary shares in the capital of MDSystems ( MDSystems Shares ).

Subject to BioPharmica Shareholder approval, the Company will then distribute approximately 80% of its then shareholding in MDSystems to BioPharmica Shareholders (equal to approximately 191,964,660 MDSystems Shares, subject to rounding) by way of a pro rata distribution of 1 MDSystems Share for every 1 BioPharmica Share held on the Record Date (rounded down to the nearest whole number) ( Return Shares ) ( Equal Reduction of Capital ). MDSystems will then seek a listing on the Official List of ASX and undertake an initial public offering of 11,500,000 MDSystems Shares at $0.20 per MDSystems Share to raise approximately $2,300,000 ( IPO ).

The proposed Equal Reduction of Capital will give BioPharmica Shareholders approximately a 76.34% equity interest (collectively) in MDSystems (post IPO assuming $2,300,000 is raised at $0.20 per MDSystems Share).

Following the Equal Reduction of Capital, the Company’s primary focus will be on its principal business activity of developing biomedical research within Australian universities and hospital institutes. The Company will continue to maintain

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approximately a 19.09% interest in MDSystems and its existing interests in Cortical Dynamics Ltd, Diagnostic Array Systems Pty Ltd and the SERS project, with its investees’ biotechnology projects representing the Company’s majority investments.

A pro-forma balance sheet of MDSystems as at 11 November 2009 is contained in Appendix A. This shows the financial position of MDSystems as a standalone entity to the Company as it would be following completion of the Equal Reduction of Capital and completion of the IPO assuming $2,300,000 is raised.

2.3 Effect of the proposal on the Company

If the Equal Reduction of Capital is approved, the net assets of the Company will be reduced by approximately $576,669 (adjusted for the approximate 19.09% interest retained by BioPharmica). The Reduction Amount (as defined in Section 2.6(g) of this Explanatory Statement) is the book value of the Return Shares at their rounded issue price of $0.003 each (the total book value of the MDSystems Shares to be distributed is $576,669).

A pro-forma balance sheet for the Company as at 11 November 2009 is contained in Appendix B which shows the financial impact of the Equal Reduction of Capital on the Company (assuming that no further Shares are issued).

2.4 Effect of the proposal on BioPharmica Shareholders

As at the date of this Notice, the structure of the Company and MDSystems is as follows:

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----- Start of picture text -----

BioPharmica Shareholders
100%
100%
BioPharmica Biotechnology projects
100%
100%
MDSystems Biotechnology research
and commercialisation
----- End of picture text -----

After the Equal Reduction of Capital and MDSystems IPO are completed (assuming $2,300,000 is raised pursuant to the IPO) the structure of the Company and MDSystems will be as follows:

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----- Start of picture text -----

BioPharmica Shareholders
76.34%
100%
19.09% 100%
BioPharmica MDSystems Biotechnology research and
commercialisation
100% 4.57%
Biotechnology IPO subscribers
projects (including BioPharmica
Shareholders who may
participate in the IPO)
----- End of picture text -----

2.5 Advantages and disadvantages of the proposal

The principal advantages and disadvantages to BioPharmica Shareholders of the proposed Equal Reduction of Capital are as follows:

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Advantages

• All BioPharmica Shareholders retain an interest in the development of the biotechnology assets to be distributed through their individual pro-rata shareholding in MDSystems.

• The listing of MDSystems on the ASX has the potential to result in a higher combined market valuation for the Company and MDSystems as standalone entities, than the current market valuation of the Company.

• All BioPharmica Shareholders retain their percentage ownership interest in the capital of the Company.

• Future capital raisings may be more achievable by each individual listed entity.

• MDSystems can appoint a dedicated executive team to maximise the market value of MDSystems.

• A higher corporate profile for MDSystems as an independent entity.

• All BioPharmica Shareholders are able to participate in the ownership of MDSystems prior to MDSystems undertaking an initial public offering and listing on the ASX. Further details relating to MDSystems are outlined in Section 2.11 of this Explanatory Statement.

Disadvantages

• There is no guarantee that the MDSystems Shares or BioPharmica Shares will increase in value.

• MDSystems shareholders may incur additional transaction costs if they wish to dispose of their new investment in MDSystems (i.e. brokerage).

• There is no certainty that the IPO capital will be raised or that MDSystems will receive approval from ASX for Official Quotation of its securities (application for Official Quotation of MDSystems securities will be made to the ASX within approximately 6 months from the date of the General Meeting). Accordingly, if MDSystems is not admitted to Official Quotation, Shareholders will hold their MDSystems investment in an unlisted vehicle. There is a risk that there will therefore not be a ready market to sell MDSystems Shares.

• BioPharmica, as a company whose Shares are quoted on ASX, is a disclosing entity and, as such, is subject to regular reporting and disclosure obligations. Following the Equal Reduction of Capital and for so long as MDSystems remains an unlisted entity, MDSystems will not be obliged to provide the same level of disclosure to its shareholders in relation to its activities as BioPharmica is currently obliged to provide in respect of MDSystems as its wholly owned subsidiary. Further, while MDSystems remains an unlisted entity, shareholders of MDSystems will not be afforded the shareholder protections provided by the ASX Listing Rules.

• There may be a taxation consequence in respect of the distribution of the MDSystems Shares to BioPharmica Shareholders. Shareholders should obtain independent taxation advice prior to voting on this Resolution .

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2.6 Additional important information for Shareholders

In accordance with Section 256C of the Corporations Act and the ASX Listing Rules, the Company provides the following information to Shareholders:

• (a) MDSystems will seek a listing on the Official List of ASX following the Equal Reduction of Capital. In order to be admitted to the Official List, MDSystems is required to comply with the requirements of Chapters 1 and 2 of the ASX Listing Rules. These include the following requirements:

• (i) MDSystems’ constitution being consistent with the ASX Listing Rules. This requirement has been satisfied;

• (ii) the issue of an IPO prospectus by MDSystems;

• (iii) the spread of shareholders of MDSystems being at least 400 holders having parcels with a minimum value of $2,000. It is anticipated that ASX will impose a condition that, in addition to those Shareholders who receive Return Shares, MDSystems will require a further 200 shareholders holding $2,000 parcels; and

• (iv) the net tangible assets of MDSystems being at least $2,000,000 at the time of admission of MDSystems to the official list of the ASX. Following a minimum capital raising of $2,300,000, MDSystems will (after the expenses of the IPO of approximately $300,000) have estimated net tangible assets of approximately $2,210,852.

Provided MDSystems can meet the spread requirement referred to in (iii) above and raise a minimum of $2,300,000 under the IPO, the Company does not anticipate any difficulty in MDSystems being able to comply with the requirements in (i) to (iv) above, however there is no certainty that MDSystems will be admitted to the Official List as admission is subject to ASX discretion. If MDSystems is unable to achieve a listing on ASX, the Company considers, on the basis of a binding funding agreement between the Company and MDSystems, that MDSystems will have sufficient cash reserves in the short to medium term to meet its objectives. The material terms of the funding agreement are as follows:

• (v) the facility limit is $500,000 or such other amount as agreed in writing between the Company and MDSystems ( Loan );

• (vi) interest will accrue on the outstanding amount of the Loan at the rate of 7.69% per annum, calculated daily;

• (vii) the purpose of the Loan is to fund MDSystems’ short term working capital requirements and to satisfy creditors’ claims;

• (viii) at the Company’s request, the Loan is to be secured by a fixed and floating charge over the assets and undertakings of MDSystems;

• (ix) subject to the Corporations Act and the Listing Rules; at any time after MDSystems is admitted to the Official List and before the repayment date of the Loan (see (x) below), the Company is entitled to direct MDSystems to satisfy the repayment of the outstanding amount of the Loan (or any portion of the outstanding amount) by applying it in payment for the subscription of MDSystems Shares by the Company at a price per MDSystems Share equal to the lower of $0.20 and the volume weighted average price per

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MDSystems Share in the 5 trading days prior to the election being made; and

• (x) the Loan and all other outstanding funds are repayable in full to the Company no later than (A) the date falling 12 months after the date of the agreement; (B) the date falling 6 months after the date MDSystems is admitted to the Official List; and (C) the date the agreement is terminated or cancelled in accordance with the agreement (for example, due to default by MDSystems), whichever is earlier.

• (b) The capital structure of BioPharmica at the date of this Notice is as follows:

Number of Shares	Number of Options
95,982,330	12,800,0001

• 1 The Company has the following Options on issue:

• 6,000,000 unlisted Options exercisable at $0.15 each on or before 31 December 2010; and

• 6,800,000 unlisted Options issued under the Company’s employee Share Option scheme.

(c) The capital structure of MDSystems after the transfer of the Anti Mitotic Drug Discovery Programme and tumour suppressor gene HLS5 assets to MDSystems and the conversion of loan funds owing by MDSystems to BioPharmica in consideration for the issue of MDSystems Shares before the IPO is anticipated to be:

Number of MDSystems Shares Number of MDSystems Options

239,955,825[1] Nil

1 32,049,590 of these MDSystems Shares will comprise shares issued to BioPharmica in consideration for conversion of a debt owed by MDSystems to BioPharmica and 15,941,575 will comprise shares issued as consideration for the transfer of the Anti Mitotic Drug Discovery Programme and tumour suppressor gene HLS5assets to MDSystems.

(d) The capital structure of MDSystems (assuming a capital raising of $2,300,000 by the issue of 11,500,000 MDSystems shares) should it list on the ASX is anticipated to be:

Number of MDSystems Shares

Number of MDSystems Options

251,455,825[1] Nil[2]

• 1 The number of MDSystems Shares on issue will increase if more than $2,300,000 is raised under the IPO.

• 2 MDSystems may issue options to its Directors, subject to MDSystems Shareholder approval in accordance with the Corporations Act and the Listing Rules.

(e) The Record Date is set out in the timetable on page 3 of the Notice of Meeting and has been determined in accordance with the Listing Rules.

• (f) The pro-forma statement of financial position of MDSystems should it list on ASX will be as set out in Appendix A.

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• (g) The share capital of the Company as at the Record Date will be reduced by the dollar amount of the book value of the Return Shares ( Reduction Amount ).

• (h) The Return Shares will be that number of MDSystems Shares to be distributed on a pro-rata basis to all holders of ordinary shares in the capital of the Company on the Record Date by applying the formula of 1 MDSystems Share for every 1 BioPharmica Share held (rounded up to the nearest whole number).

• (i) The Equal Reduction of Capital will occur on a date 1 month after Shareholder approval and will be effected by a pro-rata distribution of the Return Shares in specie to all BioPharmica Shareholders registered as such on the Record Date.

• (j) In accordance with ASX Listing Rule 7.22.3, all Options on issue in the Company will have their exercise price per Option reduced by the same amount as the Reduction Amount per BioPharmica Share.

2.7 ASX escrow

The in-specie distribution of the MDSystems Shares will be conditional upon, among other things, the Company obtaining approval from BioPharmica Shareholders and the Company providing the market with at least one month’s notice of the proposed dispatch date for the MDSystems Shares to be distributed.

Subject to the exceptions detailed below, those MDSystems Shares distributed to BioPharmica Shareholders will not be restricted from being traded on ASX.

Subject to ASX approval, only those MDSystems Shares distributed to related parties or promoters of the Company or MDSystems (and those MDSystems Shares retained by the Company (being equal to 19.09% of MDSystems)) will be escrowed upon MDSystems listing on ASX (and therefore restricted from trading) for 24 months or less. Those MDSystems Shares distributed to unrelated BioPharmica Shareholders will not be restricted from being traded on ASX.

2.8 Overseas Shareholders

The distribution of the MDSystems Shares to the Company’s Shareholders under the Equal Reduction of Capital will be subject to the legal and regulatory requirements in each Shareholder’s relevant jurisdiction. If, in the Directors’ opinion, the requirements of any jurisdiction where a BioPharmica Shareholder is resident restricts or prohibits the distribution of MDSystems Shares or otherwise imposes on the Company an undue burden (such as the requirement to prepare a prospectus or other similar disclosure document, for example), the MDSystems Shares to which the relevant Shareholder is entitled will be sold by the Company on their behalf as soon as practicable after the Record Date. The Company will then account to the relevant Shareholder for the net proceeds of sale after deducting the costs and expenses of the sale. As the Equal Reduction of Capital is being represented and satisfied by the distribution to BioPharmica Shareholders of MDSystems Shares and as securities prices may vary from time to time (assuming a liquid market is available), the net proceeds of sale to such BioPharmica Shareholder may be more or less than the notional dollar value of the return of capital as set out in this Explanatory Statement.

2.9 Legal requirements – Section 256C of the Corporations Act

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The proposed reduction of capital by way of an in specie distribution to BioPharmica Shareholders is an equal capital reduction. Under Section 256C of the Corporations Act, this must be approved by an ordinary resolution passed at a general meeting of the Company.

Under Section 256B of the Corporations Act, the Company may only reduce its capital if it:

• (a) is fair and reasonable to Shareholders as a whole;

• (b) does not materially prejudice the Company’s ability to pay its creditors; and

• (c) is approved by Shareholders in accordance with Section 256C of the Corporations Act.

The Directors believe that the Equal Reduction of Capital is fair and reasonable to Shareholders for the reasons set out throughout this Explanatory Statement and that the Equal Reduction of Capital will not prejudice the Company’s ability to pay its creditors.

Offers to issue or sell securities that require disclosure under a prospectus and secondary trading

The Corporations Act restricts:

• (a) the Company from disposing of the MDSystems Shares to its Shareholders by way of an in-specie distribution, without issuing a prospectus; and

• (b) BioPharmica Shareholders from on-selling their MDSystems Shares within the first 12 months after receiving them under an in-specie distribution.

In accordance with ASIC’s Regulatory Guide 188 entitled Disclosure in Reconstructions , ASIC has granted relief from these restrictions.

The effect of the relief granted by ASIC is that:

• (a) the Company is able to dispose of some or all of its shareholding in MDSystems by way of an in-specie distribution to its Shareholders without the need for a prospectus; and

• (b) if the in-specie distribution occurs, BioPharmica Shareholders will not be restricted from selling their MDSystems Shares within the first 12 months after receiving them, as discussed further in Section 2.2 of this Explanatory Statement.

2.10 Directors’ interests and recommendations

Set out below is a table which indicates the BioPharmica Shares in which the Directors have an interest prior to the Equal Reduction of Capital and the number of MDSystems Shares they are likely to have an interest in if Resolution 2 is passed and implemented (assuming no Director Options are exercised before the Record Date):

Director	BioPharmica Shares	MDSystems Shares
Mr David Breeze	12,904,854	12,904,854
Mr Hock Goh	758,538	758,538

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Director	BioPharmica Shares	MDSystems Shares
Mr Greg Gilbert	961,538	961,538
Mrs Deborah Ambrosini	-	-

After considering all relevant factors, the Directors recommend the Company’s shareholders vote in favour of Resolution 2 for the following reasons:

• (a) after a full and proper assessment of all available information, the Directors believe that the proposed transaction is in the best interests of the Company’s Shareholders; and

• (b) in the Directors’ opinion, the benefits of the proposed transaction outweigh its disadvantages, as referred to in Section 2.5 of this Explanatory Statement.

2.11 Information on MDSystems

MDSystems was established to acquire high content information from cell and tissue based assays through image acquisition and analysis to create a range of direct and indirect commercial opportunities.

Research and development is focused on therapeutic and diagnostic discovery and validation using molecular imaging techniques.

The MDSystems owned InCell Analyser 1000 combines high resolution imaging and high-content analysis to provide a technology that rapidly detects and quantifies components of the cell much faster than conventional methods.

MDSystems has been contracted by Professor Kanti Bhoola of the Centre for Asthma, Allergy and Respiratory Research at the Lung Institute of Western Australia (LIWA) to assist in the characterisation of protein expression in human lung and mesothelioma cancer cells. The expression of five proteins within these cells and their response to treatment was required to support previous findings within Professor Bhoola’s research programme.

MDSystems was also contracted by Professor Nigel Laing (WAIMR) to screen for drugs that may reverse inherited neuromuscular diseases. A cell based assay of actin expression was used to screen a collection of pharmaceuticals using high content imaging.

Image capture and analysis of the prepared plates was conducted at the MDSystems laboratory by BioPharmica scientist Rachel Ramsdale and provided analytical results documenting protein location and abundance. The first phase of the project concluded with highly satisfactory results and the second phase of the project ‘The effect of bradykinin on mitogenesis’ is underway.

As a result of this work, interest has been generated as to other potential applications of the InCell Analyser 1000 for research purposes. MDSystems and LIWA are currently negotiating the incorporation of MDSystems’ analysis technology into other research programmes.

Floppy Baby Syndrome

MDSystems is currently collaborating with the Laing Neuromuscular Diseases Group to screen medications that might increase heart actin in skeletal muscles, which

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could potentially offer a treatment for many patients born with Floppy Baby Syndrome.

In a world first, Western Australian scientists have recently cured mice of a devastating muscle disease that causes Floppy Baby Syndrome, a congenital myopathy disorder that causes babies to be born without the ability to properly use their muscles. The research has been published online in the Journal of Cell Biology and reveals how the team’s efforts have cured mice born with the condition.

The currently incurable genetic disease renders most of the affected children severely paralysed and can take the lives of many of these children before the age of one.

2.12 MDSystems Board of Directors

David Breeze B.Ec, MBA, FAICD, AIMM – Executive Director

Executive Director – Age 55

David is a corporate finance specialist with extensive experience in the stock broking industry and capital markets. He has been a corporate consultant to Daiwa Securities; was formerly Manager of Corporate Services for Eyres Reed McIntosh and the State Manager and Associate Director for the stock broking firm BNZ North’s.

David has a Bachelor of Economics and a Masters of Business Administration, and is a Member of the Australian Institute of Management; an Associate Member of the Financial Services Institute of Australasia and a Fellow of the Institute of Company Directors of Australia. He has published in the Journal of Securities Institute of Australia and has also acted as an Independent Expert under the Corporations Act. He has worked on the structuring, capital raising and public listing of over 70 companies involving (in excess of $250 million capital raised). These capital raisings covered a diverse range of areas including oil and gas, gold, food, manufacturing and technology.

Greg Gilbert MHA, MBA, MSc, BA, Dip App Sc – Non Executive Director

Executive Director – Age 61

Greg is a specialist in strategy and planning and works in the health and aged care sector. He has a Master of Science from Cranfield University in the UK and, in addition, has a Master of Health Administration from La Trobe University; a Masters of Business Administration from Deakin University; a Bachelor of Arts from the University of Queensland and a Diploma of Applied Science from the Royal Military College, Duntroon.

Greg has an extensive background in merchant banking and banking, having held the positions of Global Head of Strategy and Finance and Project Director Global Credit Review with the National Australia Bank, as well as having worked in executive roles with Capel Court Investment Bank, CIBC Australia Limited and Bentley and Chau. He has also worked with National Australia Bank as an internal consultant on strategic operational reviews with McKinsey and Company and Booz Allen and Hamilton consultants.

A former Lieutenant Colonel in the Australian Defence Force, Greg has extensive senior management experience in strategic planning, financial management, change management and project management as well as merchant banking and corporate advisory experience in mergers and acquisitions and valuations.

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Deborah Ambrosini B Comm, CA – Executive Director and Company Secretary

Executive Director – Age 36

Deborah is a corporate accountant with over 10 years’ experience in accounting and business development spanning the biotechnology, mining, IT communications and financial services sectors. She has extensive experience both nationally and internationally in financial and business planning, compliance and taxation.

Deborah is also a member of the Institute of Chartered Accountants.

2.13 Information on MDSystems Shares

MDSystems Shares are not currently listed for quotation on any stock exchange, however MDSystems will apply for quotation of MDSystems Shares on the ASX upon successful completion of an IPO capital raising of MDSystems.

A summary of the more significant rights attaching to the MDSystems Shares is set out below. This summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of the MDSystems Shareholders.

Full details of the rights attaching to the MDSystems Shares are set out in MDSystems’ Constitution, a copy of which is available on request.

(a) General meetings

Shareholders are entitled to be present in person, or by proxy, attorney or representative to attend and vote at general meetings of the Company.

Shareholders may requisition meetings in accordance with Section 249D of the Corporations Act and the Constitution of the Company.

(b) Voting rights

Subject to any rights or restrictions for the time being attached to any class or classes of shares, at general meetings of shareholders or classes of shareholders:

• (i) each shareholder entitled to vote may vote in person or by proxy, attorney or representative;

• (ii) on a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a shareholder has one vote; and

• (iii) on a poll, every person present who is a shareholder or a proxy, attorney or representative of a shareholder shall, in respect of each fully paid share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for the share, but in respect of partly paid shares shall have such number of votes as bears the same proportion to the total of such shares registered in the shareholder’s name as the amount paid (not credited) bears to the total amounts paid and payable (excluding amounts credited).

• (c) Dividend rights

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Subject to the rights of persons (if any) entitled to shares with special rights to dividend, the directors may declare a final dividend out of profits in accordance with the Corporations Act and may authorise the payment or crediting by MDSystems to the shareholders of such a dividend. The directors may authorise the payment or crediting by MDSystems to the shareholders of such interim dividends as appear to the directors to be justified by MDSystems’ profits. Subject to the rights of persons (if any) entitled to shares with special rights as to dividend all dividends are to be declared and paid according to the proportions that the amounts paid (not credited) is of the total amounts paid and payable (excluding amounts credited) in respect of the shares in respect of which the dividend is paid. Interest may not be paid by MDSystems in respect of any dividend, whether final or interim.

(d) Winding-up

If MDSystems is wound up, the liquidator may, with the authority of a special resolution of MDSystems, divide among the shareholders in kind the whole or any part of MDSystems’ property, and may for that purpose set such value as the liquidator considers fair upon any property to be so divided, and may determine how the division is to be carried out as between the shareholders or different classes of shareholders. The liquidator may, with the authority of a special resolution of MDSystems, vest the whole or any part of any such property in trustees upon such trusts for the benefit of the contributories as the liquidator thinks fit, but so that no shareholder is compelled to accept any shares or other securities in respect of which there is any liability. Where an order is made for the winding up of MDSystems or it is resolved by special resolution to wind up MDSystems, then on a distribution of assets to members, shares classified by the ASX as restricted securities at the time of the commencement of the winding up shall rank in priority after all other shares.

(e)

Transfer of shares

Generally, shares in MDSystems are freely transferable, subject to formal requirements, the registration of the transfer not resulting in a contravention of or failure to observe the provisions of a law of Australia and the transfer not being in breach of the Corporations Act or the Listing Rules.

(f)

Variation of rights

Pursuant to Section 246B of the Corporations Act, MDSystems may, with the sanction of a special resolution passed at a meeting of shareholders vary or abrogate the rights attaching to shares.

If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class), whether or not MDSystems is being wound up may be varied or abrogated with the consent in writing of the holders of three-quarters of the issued shares of that class, or if authorised by a special resolution passed at a separate meeting of the holders of the shares of that class.

2.14 Risk factors

Introduction

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On successful completion of the Equal Reduction of Capital, BioPharmica Shareholders will become shareholders in MDSystems and should be aware of the non-exhaustive list of general and specific risk factors described below which may affect MDSystems and the value of its securities.

Economic risks

General economic conditions, movements in interest and inflation rates and currency exchange rates may have an adverse effect on MDSystems’ development and production activities, as well as on its ability to fund those activities.

Market conditions

The market price of MDSystems’ securities can fall as well as rise and may be subject to varied and unpredictable influences on the market for equities in general. Neither BioPharmica, MDSystems nor the Directors warrant the future performance of MDSystems or any return on MDSystems’ securities.

Additional requirements for capital

MDSystems’ capital requirements depend on numerous factors. Depending on its ability to generate income from its investments, MDSystems may require further financing in addition to amounts raised under the IPO. Any additional equity financing will dilute shareholdings, and debt financing, if available, may involve restrictions on financing and operating activities. If MDSystems is unable to obtain additional financing as needed it may be required to reduce the scope of its operations and reduce its research and development programmes as the case may be.

Research and development

Neither BioPharmica nor MDSystems can make any representations that any of MDSystems’ research and development will be successful, that MDSystems’ development milestones will be achieved or that it will develop products that are commercially exploitable. There are many risks inherent in the development of biotechnology products, particularly where these are in an early stage of development.

Projects can be delayed or fail, or research may cease to be viable for a range of unexpected scientific and commercial reasons.

Regulatory issues & government

Products derived from MDSystems’ research, development or acquisition may be subject to numerous government regulatory approvals and controls throughout the world and these will affect both the timing and the cost of bringing these products to the market. Delays or failures in obtaining regulatory approval for a product would be likely to have a serious adverse effect on the value of MDSystems and have a consequent impact on MDSystems’ financial performance

MDSystems’ operations are also subject to laws, regulatory restrictions and certain government directives, recommendations and guidelines relating to, amongst other things, occupational safety, laboratory practice, the use and handling of hazardous materials, prevention of illness and injury and environmental protection. There can be no assurance that future legislation will not impose further government regulation, which may adversely affect MDSystems’ business or financial condition.

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Intellectual property rights

Securing rights to intellectual property, and in particular to patents, is an integral part of securing potential product value in the outcomes of pharmaceutical and biomedical research and development. Competition in retaining and sustaining protection of intellectual property and the complex nature of intellectual property can lead to expensive and lengthy patent disputes for which there can be no guaranteed outcome. The granting of a patent does not guarantee that the rights of others are not infringed or that competitors will not develop competing intellectual property that circumvents such patents.

MDSystems’ success depends, in part, on its ability to obtain patents, maintain trade secret protection and operate without infringing the proprietary rights of third parties. Because the patent positions of biotechnology companies can be highly uncertain and frequently involve complex legal and scientific evaluation, neither the breadth of claims allowed in medical device patents nor their enforceability can be predicted.

There can be no assurance that any patents that MDSystems may own or control or license now and in the future will afford MDSystems commercially significant protection of its intellectual property or its projects or have commercial application. While MDSystems has indicated is not aware of any third party interests in its intellectual property rights and has taken steps to protect and confirm its interest in these rights, there is always a risk of third parties claiming involvement in technological and medical discoveries and if any such disputes arise, they could adversely affect MDSystems.

Key personnel and qualified staff

MDSystems is dependent on its management, the loss of whose services could materially and adversely affect MDSystems and impede the achievements of its research and development objectives. Because of the specialised nature of MDSystems’ business, its ability to commercialise its products and maintain its research programme will depend in part upon its ability to attract and retain suitably qualified management, scientists and research people over time. There can be no assurance that MDSystems will be able to attract or retain sufficiently qualified personnel on a timely basis, retain its key scientific and management personnel, or maintain its relationship with key scientific organisations.

Risk of product liability & uninsured risks

MDSystems’ business exposes it to potential product liability risks that are inherent in the research and development, manufacturing, marketing and use of its products. It will be necessary for MDSystems to secure sufficient levels of insurance to cover various product liability risks in the course of maintaining its business. However, there can be no assurance that adequate or necessary insurance coverage will be available at an acceptable cost or in sufficient amounts, if at all, or that product liability or other claims would not materially and adversely affect MDSystems’ business or financial condition.

Uncertainty of future profitability

MDSystems’ ability to operate profitably in the future will depend on its ability to commercialise its products with other organisations on commercial terms for onward sale to customers. This will depend on the ultimate demand for its products by consumers, which cannot be guaranteed. There is no certainty therefore that MDSystems can successfully commercialise its projects.

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Other factors that will determine MDSystems’ profitability are its ability to manage its costs, to execute its development and growth strategies, economic conditions in the markets MDSystems operates, competitive factors and regulatory developments. Accordingly, the extent of future profits, if any, and the time required to achieve a sustained profitability is uncertain. Moreover, the level of such profitability cannot be predicted.

Industry risks

MDSystems’ current and future potential competitors include companies with substantially greater resources than it. There is no assurance that competitors will not succeed in developing products that are more effective or economic than the current products or any of those being developed by MDSystems or which would render the products obsolete and/or otherwise uncompetitive. In addition, MDSystems may not be able to compete successfully against current or future competitors where aggressive pricing policies are employed to capture market share. Such competition could result in price reductions, reduced gross margins and loss of market share, any of which could materially adversely affect MDSystems’ future business, operating results and financial position.

Potential acquisitions

As part of its business strategy, MDSystems may make acquisitions of or significant investments in complementary companies, products or technologies.

Any such future transactions would be accompanied by the risks commonly encountered in making acquisitions of companies, products and technologies.

Speculative investment

The above list of risk factors ought not to be taken as exhaustive of the risks faced by MDSystems or by MDSystems shareholders. The above factors, and others not specifically referred to above, may in the future materially affect MDSystems’ financial performance and the value of its securities. Therefore, MDSystems Shares carry no guarantee with respect to the payment of dividends, returns of capital or the market value of those securities.

ASX listing

Until MDSystems is admitted to the Official List (which the Company cannot guarantee will occur), there will not be a ready market to sell MDSystems Shares. Accordingly, it may be difficult for MDSystems shareholders to realise the value of their investment. Refer to Section 2.5 of this Explanatory Statement for further discussion of this risk.

2.15 Information on BioPharmica post completion of the Equal Reduction of Capital

As discussed in Section 2.1 of this Explanatory Statement, following the Equal Reduction of Capital, the Company’s primary focus will be on its principal business activity of developing biomedical research within Australian universities and hospital institutes. The Company will continue to maintain approximately a 19.09% interest in MDSystems and its existing interests in Cortical Dynamics Ltd, Diagnostic Array Systems Pty Ltd and the SERS project, with its investees’ biotechnology projects representing the Company’s majority investments.

BioPharmica will continue to develop commercial relationships with companies and institutions interested in co-development or collaboration in the following areas:

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• Opportunities in diagnosis and therapy in the areas of oncology, neurodegenerative and infectious disease.

• Array based detection system for the accurate and rapid detection of bacterial species in clinical samples.

• The use of brain function monitoring capability in animals and man.

• The incorporation of SERS fibre optic nanoprobe into sensor devices.

Three of BioPharmica’s projects have advanced to a stage where discussions have been initiated on commercialisation with domestic and international companies. The most recent development in the anti-mitotic cancer therapeutics area addresses a market valued in excess of one billion dollars (US) per year.

BioPharmica will continue its partnerships with various academic institutions including the Western Australian Institute for Medical Research (WAIMR), Swinburne University of Technology (SUT) and The Royal Melbourne Institute for Technology (RMIT) University.

Subject to Resolution 3 being approved, BioPharmica will also seek to maintain its initial 9.7% interest in Advent Energy (refer to Section 3 below) to benefit from exposure to a resources project at an exciting stage of development and to enable Shareholders to reduce investment risk in their shareholding whilst retaining their interest in the Company’s core activities and investments.

2.16 Information on BioPharmica’s Shares

The rights attaching to BioPharmica’s Shares will not alter. It should be noted however that the Company’s net assets will be reduced by $576,669. This effect on the Company’s net assets is set out in the pro-forma balance sheet in Appendix B to this Explanatory Statement.

The highest and lowest recorded sale prices of the Company’s Shares as traded on ASX during the 12 months immediately preceding the date of this Explanatory Statement, and the respective dates of those sales were:

	Price	Date
Highest	$0.4	13 August 2009
Lowest	$0.016	7 April 2009
Last	$0.175	12 November 2009

The Company’s Shares are not listed for quotation on any other stock exchange.

2.17 Disclosure to ASX

BioPharmica, as a company whose Shares are quoted on ASX, is a disclosing entity and, as such, is subject to regular reporting and disclosure obligations. Copies of documents lodged in relation to BioPharmica may be obtained for a fee from, or inspected at, an office of the ASIC.

2.18 Taxation

The following comments are based on the application of Australian taxation laws in force at the date of this Explanatory Statement.

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The views expressed in this summary are not intended as specific advice to Shareholders . The application of tax legislation may vary according to the individual circumstances of Shareholders. It should be emphasised that these comments are general in nature, may not be applicable to individual circumstances and cannot be relied upon for accuracy or completeness.

Demerger under Division 125 of the Tax Assessment Act 1997 (Cth)

There are certain conditions that must be met in order for BioPharmica Shareholders to be able to elect to utilise the capital gains tax ( CGT ) demerger rollover under Division 125 of the Tax Assessment Act 1997 (Cth) ( Tax Act ). In particular, in order to utilise the demerger rollover, subsection 125-70(2) of the Tax Act imposes the requirement that BioPharmica Shareholders receive the same proportion of new interests in MDSystems; and just after the Equal Reduction of Capital, have the same total proportionate market value in MDSystems as they had in BioPharmica. An exception is provided to this proportional rule if BioPharmica Options on issue (being securities that, pursuant to section 256B(2) of the Corporations Act, do not form part of the Equal Reduction of Capital) represent less than 3% of the total ownership interests of BioPharmica. This “3%” exception relates to “value” and not “number” and the Company is of the view that the value of the BioPharmica Options currently on issue is less than 3% of the value of all the interests in BioPharmica. As a result, it is likely that the BioPharmica Shares will qualify for rollover relief under the Tax Act.

For Shareholders who choose to utilise the demerger provisions under Division 125, they can defer the CGT consequences of the demerger until they sell their MDSystems Shares. What will occur is the apportionment of the current CGT cost base of the BioPharmica Shares across both BioPharmica and MDSystems Shares, based on their respective market values immediately after the Equal Reduction of Capital. It is expected that BioPharmica would advise its Shareholders of the respective values.

In addition, for the purposes of applying the CGT discount rules to individual, trust and superannuation fund BioPharmica Shareholders, upon a valid demerger, the distributed MDSystems Shares would be taken to have been acquired at the same time as the underlying BioPharmica Shares. The 12-month month holding period for CGT Discount Purposes would therefore be aligned with the period of the BioPharmica Shares.

Furthermore, the in specie distribution of the MDSystems Shares should not be considered to be a dividend to BioPharmica Shareholders, provided the capital streaming rules under section 45B do not apply.

The taxation consequences for BioPharmica are also more beneficial through a demerger in that any capital gain derived by BioPharmica on the in specie distribution of the MDSystems Shares would be disregarded.

What this means for BioPharmica

Where the MDSystems restructure qualifies as a demerger, the CGT rollover is automatic for BioPharmica, such that the distribution of the MDSystems Shares will be disregarded for CGT purposes. Accordingly, no capital gain will accrue to BioPharmica on this transaction.

In respect to BioPharmica Shareholders, provided BioPharmica debited the value of the MDSystems Shares to its share capital account, the distribution would not be a dividend under ordinary rules.

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2.19 Lodgement with the Australian Securities and Investments Commission

The Company has lodged with the ASIC a copy of this Notice in accordance with Section 256C(5) of the Corporations Act. The ASIC and its officers take no responsibility for the contents of this Notice or the merits of the transactions to which this Notice relates.

2.20 Indicative timetable

The Company intends to distribute the MDSystems Shares to BioPharmica Shareholders (registered as at the Record Date), approximately 1 month from the date of Shareholder approval. Application for Official Quotation of MDSystems’ shares will be made to the ASX within approximately 6 months from the date of the General Meeting.

2.21 Other material information

There is no information material to the making of a decision by a BioPharmica Shareholder whether or not to approve Resolution 2 (being information that is known to any of the Directors and which has not been previously disclosed to Shareholders) other than as disclosed in this Explanatory Statement and all relevant appendices.

3. RESOLUTION 3 – ACQUISITION OF A SUBSTANTIAL ASSET – ADVENT ENERGY INVESTMENT

3.1 General

Resolution 3 seeks Shareholder approval in accordance with Listing Rules 10.1 and 11.1.2 for the Company to exercise an exclusive option to invest in Advent Energy. The option gives BPH the opportunity, subject to the Listing Rules, to acquire between 9.7% and 19.4% of Advent Energy’s share capital at $0.50 per Advent share ( Advent Interest ).

The Company proposes to subscribe for up to $7 million worth of Advent Energy shares initially, whilst retaining the option to subscribe for a second tranche of $7 million at a later stage.

BPH will not be involved in any of the decisions affecting the ongoing operations of Advent Energy’s projects. The investment will be passive in nature.

3.2 The Advent Interest

Advent Energy is an unlisted oil and gas exploration company based in Perth, Western Australia. Advent Energy is entering an exciting period of exploration and development, and is seeking equity capital to assist in its exploration objectives. Advent Energy has successfully secured a $7M conditional funding agreement with Talbot Group Holdings.

Advent Energy holds a portfolio of petroleum exploration and near-term development assets throughout Australia. Its cornerstone project is situated in the offshore Sydney sedimentary Basin, within Petroleum Exploration Permit (PEP) 11. Estimates of the prospective recoverable resources comprised in PEP11, adjacent to the coastline from Wollongong to Newcastle (offshore NSW), are up to 16.3 (P10 or ‘high’) trillion cubic feet of natural gas.

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Advent Energy has continually demonstrated positive indications of hydrocarbon accumulation and migration within PEP11. Successful exploration and field development of the anticipated volumes of hydrocarbons reported would have a positive impact on New South Wales’ and Australia’s energy industry.

3.3 Continuity of the Company’s biotechnology business

The Company will continue to maintain its interest in MDSystems, Cortical Dynamics Ltd, Diagnostic Array Systems Pty Ltd and the SERS project, with its investees’ biotechnology projects representing the Company’s majority investments.

3.4 ASX Listing Rule 10.1

ASX Listing Rule 10.1 provides that an entity (or any of its subsidiaries) must not acquire a “substantial asset” from, or dispose of a substantial asset to:

• (a) a related party of the Company; or

• (b) a substantial holder (if the person and the person’s associates have a “relevant interest”, or had a relevant interest at any time in the 6 months before the transaction, in at least 10% of the total votes attached to the voting securities).

An asset is substantial if its value or the value of the consideration for it is, or in ASX’s opinion is, 5% or more of the equity interests of the company as set out in the latest accounts given to ASX under the Listing Rules.

Mr David Breeze and Mr Hock Goh are common directors of BioPharmica and Advent Energy. In addition, Grandbridge Limited (ACN 089 311 026), a company which Mr Breeze controls approximately 35% of, directly controls 9% of Advent Energy.

On the basis of these relationships between BioPharmica and Advent Energy, ASX has imposed the requirement to obtain Shareholder approval for the purpose of ASX Listing Rule 10.1.

ASX Listing Rule 10.10 provides that shareholder approval sought for the purpose of ASX Listing Rule 10.1 must include a report on the proposed acquisition from an independent expert.

Accompanying this Explanatory Statement is an Independent Expert’s Report prepared by MGI concluding that the proposed transaction is fair and reasonable to the non-associated Shareholders.

3.5 ASX Listing Rule 11.1.2

ASX Listing Rule 11.1.2 provides that if an entity proposes to make a significant change, either directly or indirectly, to the nature or scale of its activities, it must provide full details to ASX as soon as practicable. It must do so in any event before making the change. The following rules apply in relation to the proposed change:

• (a) The entity must give ASX information regarding the change and its effect on future potential earnings, and any information that ASX asks for (Listing Rule 11.1.1).

• (b) If ASX requires, the entity must get the approval of holders of its ordinary securities and must comply with any requirements of ASX in relation to the notice of meeting, which must include a voting exclusion statement (Listing Rule 11.1.2).

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• (c) If ASX requires, the entity must meet the requirements in chapters 1 and 2 of the ASX Listing Rules as if the entity were applying for admission to the Official List (Listing Rule 11.1.3).

Based on information provided to the ASX by the Company, and on the basis that the Company:

• (d) continues its activities as a biotechnology company and expends reasonable amounts on those activities as compared to any further expenditure on Advent Energy or on oil and gas assets generally;

• (e) does make further investments in biotechnology projects; and

• (f) does not dispose of its biotechnology interests,

(collectively the Conditions ), the ASX has determined that, at this stage, ASX Listing Rule 11.1.2 applies to the proposed acquisition of the Advent Interest by the Company and that therefore Shareholder approval under that Listing Rule is required. The approval sought by the Company pursuant to Resolution 3 will therefore also constitute approval for the purposes of Listing Rule 11.1.2.

If in the future the Company proposes to enter into any transactions which impact upon the Conditions, the Company must consult with the ASX so that ASX may consider the application of ASX Listing Rule 11.1, and in particular Listing Rule 11.1.3.

3.6 Benefits to Shareholders

Through this expansion of the Company’s corporate activities, Shareholders will be given exposure to a resources project at an exciting stage of development. The perceived potential uplift in value warrants this as an outstanding investment opportunity. The investment in Advent Energy presents Shareholders with the capacity to reduce investment risk in their shareholding whilst retaining their interest in the Company’s core activities and investments. Further information on Advent Energy can be obtained from the following website: www.adventenergy.com.au.

3.7 Directors’ Recommendation

The Directors recommend that Shareholders vote in favour of Resolution 3 as they are of the view that the acquisition of the Advent Interest by the Company represents an excellent investment opportunity which provides the Company with exposure to a potential provider of oil and gas to the booming Australian economy.

4. RESOLUTION 4 – SHARE AND OPTION PLACEMENT

Resolution 4 seeks Shareholder approval for the allotment and issue of up to 95,982,330 Shares with one (1) free attaching Option exercisable at $0.20 on or before 31 May 2010 for every one (1) Share issued ( Placement ).

ASX Listing Rule 7.1 provides that a company must not, subject to certain exceptions, issue during any 12 month period any equity securities or other securities with rights of conversion to equity (such as an option) if the number of those securities exceeds 15% of the total ordinary securities on issue at the commencement of that 12 month period.

One circumstance where an issue is not taken into account in the calculation of this 15% threshold is where the issue has the prior approval of shareholders in a general meeting.

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The effect of Resolution 4 will be to allow the Directors to issue the Shares and Options pursuant to the Placement during the period of 3 months after the General Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity. This will enable the Company to have the flexibility to issue equity securities in the future up to the 15% threshold without the requirement to obtain Shareholder approval.

ASX Listing Rule 7.3 requires that the following information be provided to Shareholders when seeking an approval for the purposes of ASX Listing Rule 7.1:

• (a) the maximum number of securities to be issued is 95,982,330 Shares;

• (b) the issue price per Share will be the lower of $0.125 and 80% of the average market price for Shares calculated over the 5 days on which sales in the Shares are recorded before the day on which the issue is made;

• (a) the Options will be issued free attaching for nil consideration;

• (b) the Shares will be issued no later than three (3) months after the date of the General Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules);

• (c) the Shares will rank equally with the Company’s current issued Shares;

• (d) the terms and conditions of the Options are set out in Schedule 1;

• (e) it is intended that allotment of the Shares will occur on one date;

• (f) the Shares and Options will be offered to the general public and, subject to Shareholder approval, to MEC on the terms set out in Section 7 of this Explanatory Statement;

• (g) the Company intends to use a portion of the funds raised from the issue of the Shares to invest in Advent Energy on the terms set out in Section 3 of this Explanatory Statement, with the remaining funds allocated to working capital; and

• (h) the Company intends to also use the funds raised from the issue of the Shares to provide working capital to its subsidiary companies.

5. RESOLUTIONS 5 AND 6 – ISSUE OF DIRECTOR OPTIONS

5.1 General

The Company has agreed, subject to Shareholder approval, to allot and issue 2,000,000 Options to Mr David Breeze and 1,000,000 Options to Mrs Deborah Ambrosini ( Director Options ) on the terms and conditions set out below.

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

• (a) obtain the approval of the public company’s members in the manner set out in Sections 217 to 227 of the Corporations Act; and

• (b) give the benefit within 15 months following such approval,

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unless the giving of the financial benefit falls within an exception set out in Sections 210 to 216 of the Corporations Act.

In addition, ASX Listing Rule 10.11 also requires shareholder approval to be obtained where an entity issues, or agrees to issue, securities to a related party, or a person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained unless an exception in ASX Listing Rule 10.12 applies.

The grant of the Director Options to the Related Parties requires the Company to obtain Shareholder approval because the grant of Director Options constitutes giving a financial benefit and as Directors, Mr David Breeze, and Mrs Deborah Ambrosini are related parties of the Company.

The Directors consider that the exceptions set out in Sections 210 to 216 of the Corporations Act and ASX Listing Rule 10.12 may not apply in the current circumstances. Accordingly, Shareholder approval is sought for the grant of Director Options to the Related Parties.

5.2 Shareholder Approval (Chapter 2E of the Corporations Act and Listing Rule 10.11)

Pursuant to and in accordance with the requirements of Sections 217 to 227 of the Corporations Act and ASX Listing Rule 10.13, the following information is provided in relation to the proposed grant of Director Options:

• (a) the related parties are Mr David Breeze and Mrs Deborah Ambrosini and they are related parties by virtue of being Directors;

• (b) the maximum number of Director Options (being the nature of the financial benefit being provided) to be granted to the Related Parties is:

• (i) 2,000,000 Director Options to David Breeze; and

• (ii) 1,000,000 Director Options to Deborah Ambrosini;

• (c) the Director Options will be granted to the Related Parties no later than 1 month after the date of the General Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules) and it is anticipated the Director Options will be issued on one date;

• (d) the Director Options will be granted for nil cash consideration, accordingly no funds will be raised;

• (e) the terms and conditions of the Director Options are set out in Schedule 2;

• (f) the value of the Director Options and the pricing methodology is set out in Schedule 3;

• (g) the relevant interests of the Related Parties in securities of the Company are set out below:

Related Party	Shares	Options
David Breeze	12,904,854	Nil
Deborah Ambrosini	Nil	1,000,000

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(h) the remuneration and emoluments from the Company to the Related Parties for both the current financial year and previous financial year are set out below:

Related Party	Current Financial Year	Previous
		Financial Year
David Breeze	$125,000 per annum commencing on date of appointment	$125,000
Deborah Ambrosini	$25,000 per annum commencing on date of appointment	Nil

(i) if the Director Options granted to the Related Parties are exercised, a total of 3,000,000 Shares would be allotted and issued. This will increase the number of Shares on issue from 95,982,330 to 98,982,330 (assuming that no other Options are exercised and no other Shares issued) with the effect that the shareholding of existing Shareholders would be diluted as follows:

Related Party	Issued Shares	Director	Issued Shares	Dilutionary effect
	as at the date	Options to	upon exercise	upon exercise of
	of this Notice of	be issued	of all Director	Director Options
	Meeting		Options
David Breeze	12,904,854	2,000,000	14,904,854	2.02%
Deborah Ambrosini	Nil	1,000,000	1,000,000	1.01%
TOTAL	12,904,854	3,000,000	15,904,854	3.03%

The market price for Shares during the term of the Director Options would normally determine whether or not the Director Options are exercised. If, at any time any of the Director Options are exercised and the Shares are trading on ASX at a price that is higher than the exercise price of the Director Options, there may be a perceived cost to the Company;

(j) the trading history of the Shares on ASX in the 12 months before the date of this Notice of General Meeting is set out below:

	Price	Date
Highest	$0.4	13 August 2009
Lowest	$0.016	7 April 2009
Last	$0.175	12 November 2009

(k) the primary purpose of the grant of Director Options to the Related Parties is to provide cost effective consideration to the Related Parties for their ongoing commitment and contribution to the Company in their respective roles as Directors. The Board does not consider that there are any significant opportunity costs to the Company or benefits foregone by the Company in issuing the Director Options upon the terms proposed;

(l) Mr David Breeze declines to make a recommendation to Shareholders in relation to Resolution 5 due to his material personal interest in the outcome of the Resolution. The other Directors, who do not have a material interest in the outcome of Resolution 5, recommend that Shareholders vote in favour of Resolution 5. The Board (other than David Breeze) is not aware of any other information that would be reasonably required by Shareholders

29

to allow them to make a decision whether it is in the best interests of the Company to pass the Resolution; and

• (m) Mrs Deborah Ambrosini declines to make a recommendation to Shareholders in relation to Resolution 6 due to her material personal interest in the outcome of the Resolution. The other Directors, who do not have a material interest in the outcome of Resolution 6, recommend that Shareholders vote in favour of Resolution 6. The Board (other than Deborah Ambrosini) is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass the Resolution.

Approval pursuant to ASX Listing Rule 7.1 is not required in order to issue the Director Options to the Related Parties as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the issue of Director Options to the Related Parties will not be included in the 15% calculation of the Company’s annual placement capacity pursuant to ASX Listing Rule 7.1.

6. RESOLUTIONS 7-9 – ISSUE OF MDSYSTEMS DIRECTOR OPTIONS

6.1 General

The Company has agreed, subject to Shareholder approval, to allot and issue:

• (a) 2,000,000 MDSystems Options to Mr David Breeze;

• (b) 2,000,000 MDSystems Options to Mrs Deborah Ambrosini; and

• (c) 2,000,000 MDSystems Options to Mr Greg Gilbert,

( MDSystems Director Options ) on the terms and conditions set out below.

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

• (a) obtain the approval of the public company’s members in the manner set out in Sections 217 to 227 of the Corporations Act; and

• (b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in Sections 210 to 216 of the Corporations Act.

The grant of the MDSystems Director Options to the MDSystems Related Parties requires the Company to obtain Shareholder approval because the grant of MDSystems Director Options constitutes giving a financial benefit and as MDSystems Directors, Mr David Breeze, Mrs Deborah Ambrosini and Mr Greg Gilbert are related parties of the Company.

Approval is being sought from BioPharmica Shareholders and not MDSystems shareholders because at the date of this Notice, MDSystems is a wholly owned subsidiary of BioPharmica.

The Directors consider that the exceptions set out in Sections 210 to 216 of the Corporations Act and ASX Listing Rule 10.12 may not apply in the current circumstances. Accordingly, Shareholder approval is sought for the grant of Director Options to the Related Parties.

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6.2 Shareholder Approval (Chapter 2E of the Corporations Act and Listing Rule 10.11)

Pursuant to and in accordance with the requirements of Sections 217 to 227 of the Corporations Act and ASX Listing Rule 10.13, the following information is provided in relation to the proposed grant of MDSystems Director Options:

• (a) the MDSystems related parties are:

• (i) Mr David Breeze;

• (ii) Mrs Deborah Ambrosini; and

• (iii) Mr Greg Gilbert,

and they are related parties by virtue of being directors of MDSystems, a wholly owned subsidiary of BioPharmica (prior to the Equal Reduction of Capital contemplated in Resolution 2);

• (b) the maximum number of MDSystems Director Options (being the nature of the financial benefit being provided) to be granted to the MDSystems Related Parties is:

• (i) 2,000,000 MDSystems Director Options to Mr David Breeze;

• (ii) 2,000,000 MDSystems Director Options to Mrs Deborah Ambrosini; and

• (iii) 2,000,000 MDSystems Director Options to Mr Greg Gilbert;

• (c) the MDSystems Director Options will be granted to the MDSystems Related Parties no later than 1 month after the date of the General Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules) and it is anticipated the MDSystems Director Options will be issued on one date;

• (d) the MDSystems Director Options will be granted for nil cash consideration, accordingly no funds will be raised;

• (e) the terms and conditions of the MDSystems Director Options are set out in Schedule 4;

• (f) the value of the MDSystems Director Options and the pricing methodology is set out in Schedule 5;

• (a) the relevant interests of the MDSystems Related Parties in securities of the Company and MDSystems are set out below;

MDSystems Related	BioPharmica	BioPharmica	MDSystems
Party	Shares	Options	Shares*
David Breeze	12,904,854	Nil	12,904,854
Deborah Ambrosini	Nil	1,000,000	Nil
Greg Gilbert	961,538	2,000,000	961,538

*Entitlement based on Equal Reduction of Capital and in specie distribution being carried out as proposed in Resolution 2.

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• (g) the remuneration and emoluments from the Company to the MDSystems Related Parties for both the current financial year and previous financial year (inclusive of the remuneration and emoluments received by the Related Parties as set out in Section 5.2(h) of this Explanatory Statement) are set out below:

MDSystems Related	Current Financial Year	Previous
Party		Financial Year
David Breeze	$125,000 per annum commencing on date of appointment	$125,000
Deborah Ambrosini	$25,000 per annum commencing on date of appointment	Nil
Greg Gilbert	$25,000 per annum commencing on date of appointment	$25,000

The MDSystems Related Parties will also receive the following remuneration and emoluments from MDSystems:

MDSystems Related	Current Financial Year	Previous
Party		Financial Year
	$50,000 per annum commencing on
David Breeze	the date of Official Quotation of	Nil
	MDSystems’ securities
	$25,000 per annum commencing on
Deborah Ambrosini	the date of Official Quotation of	Nil
	MDSystems’ securities
	$25,000 per annum commencing on
Greg Gilbert	the date of Official Quotation of	Nil
	MDSystems’ securities

(h) If the MDSystems Director Options granted to the Related Parties are exercised, a total of 6,000,000 MDSystems Shares would be allotted and issued. This will increase the number of MDSystems Shares on issue from 251,168,908 (post IPO, assuming 11,500,000 MDSystems Shares are issued under the IPO) to 257,168,908 (assuming that no other MDSystems Options are exercised and no other MDSystems Shares issued) with the effect that the shareholding of existing MDSystems Shareholders would be diluted as follows:

MDSystems	Issued	MDSystems	Issued	Dilutionary effect
Related Party	MDSystems	Director	MDSystems	upon exercise of
	Shares as at	Options to	Shares upon	MDSystems
	the date of this	be issued	exercise of all	Director Options
	Notice of		MDSystems
	Meeting		Director
			Options
David Breeze	Nil	2,000,000	2,000,000	0.78%
Deborah Ambrosini	Nil	2,000,000	2,000,000	0.78%
Greg Gilbert	Nil	2,000,000	2,000,000	0.78%
TOTAL	Nil	6,000,000	6,000,000	2.34%

The market price for MDSystems Shares during the term of the MDSystems Director Options would normally determine whether or not the MDSystems

32

Director Options are exercised. If, at any time any of the MDSystems Director Options are exercised and the MDSystems Shares are trading on ASX at a price that is higher than the exercise price of the MDSystems Director Options, there may be a perceived cost to the Company;

(i) the trading history of the Shares on ASX in the 12 months before the date of this Notice of General Meeting is set out below:

	Price	Date
Highest	$0.4	13 August 2009
Lowest	$0.016	7 April 2009
Last	$0.175	12 November 2009

There is currently no trading history of MDSystems Shares as at the date of this Notice, however, as discussed in Section 2.2 of this Explanatory Statement, MDSystems will seek admission to the official list of ASX following successful completion of the IPO;

(j) the primary purpose of the grant of MDSystems Director Options to the MDSystems Related Parties is to provide cost effective consideration to the MDSystems Related Parties for their ongoing commitment and contribution to the Company in their respective roles as MDSystems Directors. The Board does not consider that there are any significant opportunity costs to the Company (or MDSystems) or benefits foregone by the Company (or MDSystems) in issuing the MDSystems Director Options upon the terms proposed;

(k) the Board acknowledges the grant of MDSystems Director Options to Mr Greg Gilbert is contrary to Recommendation 9.3 of the ASX Good Corporate Governance and Best Practice Recommendations. However, the Board considers the grant of MDSystems Director Options to Mr Greg Gilbert reasonable in the circumstances, given the necessity to attract the highest calibre of professionals to MDSystems, whilst maintaining MDSystems’ cash reserves;

(l) Mr David Breeze declines to make a recommendation to Shareholders in relation to Resolution 7 due to his material personal interest in the outcome of the Resolution. The other Directors, who do not have a material interest in the outcome of Resolution 7, recommend that Shareholders vote in favour of Resolution 7. The Board (other than Mr David Breeze) is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company (or MDSystems) to pass the Resolution; and

(m) Mrs Deborah Ambrosini declines to make a recommendation to Shareholders in relation to Resolution 8 due to her material personal interest in the outcome of the Resolution. The other Directors, who do not have a material interest in the outcome of Resolution 8, recommend that Shareholders vote in favour of Resolution 8. The Board (other than Mrs Deborah Ambrosini) is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company (or MDSystems) to pass the Resolution; and

(n) Mr Greg Gilbert declines to make a recommendation to Shareholders in relation to Resolution 9 due to his material personal interest in the outcome

33

of the Resolution. The other Directors, who do not have a material interest in the outcome of Resolution 9, recommend that Shareholders vote in favour of Resolution 9. The Board (other than Mr Greg Gilbert) is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company (or MDSystems) to pass the Resolution.

7. RESOLUTION 10 – PARTICIPATION OF MEC IN SHARE AND OPTION PLACEMENT

The effect of Resolution 10 will be to allow MEC Resources Ltd to participate in the placement contemplated by Resolution 4 by subscribing for up to 24,361,248 Shares together with up to 24,361,248 free attaching Options.

ASX Listing Rule 10.11 requires a company to obtain shareholder approval by ordinary resolution prior to the issue of securities to:

• (a) a related party of the Company; or

• (b) a person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained.

Mr David Breeze and Mr Goh Hock are related parties of BioPharmica by virtue of being Directors and are also directors and related parties of MEC. It is the view of the Directors that the exceptions set out in Listing Rule 10.12 do not apply in the current circumstances. On this basis, the Company is seeking Shareholder approval pursuant to Listing Rule 10.11 to allow MEC to participate in the placement the subject of Resolution 4.

The following information is provided for Resolution 10 pursuant to and in accordance with Listing Rule 10.13:

• (c) the related party is MEC and it is deemed a related party by virtue of the fact that two of BioPharmica’s Directors, Messrs David Breeze and Goh Hock, are also directors of MEC:

• (d) the maximum number of Securities to be issued by the Company to MEC is 24,361,248 Shares and 24,361,248 Options;

• (e) the Shares and Options will be issued to MEC no later than 1 month after the date of the General Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules) and it is anticipated the Shares and Options will be issued on one date;

• (f) the issue price per Share will be the lower of $0.125 and 80% of the average market price for Shares calculated over the 5 days on which sales in the Shares are recorded before the day on which the issue is made;

• (g) the Options will be issued for nil consideration on the basis of one (1) free Option for every one (1) Shares issued;

• (h) the Shares will rank equally with the existing Shares on issue;

• (i) the Options will be issued on the terms and conditions set out in Schedule 1 to this Explanatory Statement;

• (i) the Company intends to use a portion of the funds raised from the issue of the Shares to invest in Advent Energy on the terms set out in Section 3 of this

34

Explanatory Statement, with the remaining funds allocated to working capital; and

(j) the Company intends to also use the funds raised from the issue of the Shares to provide working capital to its subsidiary companies.

8. ENQUIRIES

Shareholders are required to contact Deborah Ambrosini, the Company Secretary on + 61 8 9328 8477 if they have any queries in respect of the matters set out in these documents.

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GLOSSARY

$ means Australian dollars.

Advent Energy means Advent Energy Ltd (ACN 109 955 400).

AEST means Australian Eastern Standard Time.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited (ACN 008 624 691) or the financial market operated by it, as the context requires.

ASX Listing Rules means the Listing Rules of ASX.

Board means the current board of directors of the Company.

Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.

Company or BioPharmica means BioPharmica Limited (ACN 095 912 002).

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Director means a director of the Company.

Directors means the current directors of the Company.

Equal Reduction of Capital has the meaning given to that term in Section 2.2 of the Explanatory Statement.

Explanatory Statement means the explanatory statement accompanying the Notice of Meeting.

General Meeting means the meeting convened by the Notice of Meeting.

Independent Expert’s Report means the report by MGI contained in Annexure C to this Notice of Meeting.

IPO means an initial public offer of MDSystems Shares.

MDSystems means Molecular Discovery Systems Limited (ACN 118 494 492).

MDSystems Option means an option to acquire a MDSystems Share.

MDSystems Related Parties means Mr David Breeze, Mrs Deborah Ambrosini and Mr Greg Gilbert.

MDSystems Share means an ordinary, fully paid share in the capital of MDSystems.

MEC means MEC Resources Ltd (ACN 113 900 020).

MGI means MGI Perth Corporate Finance Pty Ltd (ACN 009 342 661).

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Notice of Meeting or Notice of General Meeting means this notice of General Meeting including the Explanatory Statement.

Official List means the official list of ASX.

Official Quotation means official quotation by ASX in accordance with the Listing Rules.

Option means an option to acquire a Share.

Record Date means the date set out in the timetable on page 3 of this Notice of Meeting.

Reduction Amount has the meaning given to that term in Section 2.6(g) of the Explanatory Statement.

Related Parties means Mr David Breeze and Mrs Deborah Ambrosini.

Resolutions means the resolutions set out in the Notice of Meeting, or any one of them, as the context requires.

Return Shares has the meaning given to that term in Section 2.1 of the Explanatory Statement.

Share means a fully paid ordinary share in the capital of the Company.

Shareholder means a holder of a Share.

WST means Western Standard Time as observed in Perth, Western Australia.

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SCHEDULE 1 – TERMS AND CONDITIONS OF O PTIONS

The Options entitle the holder to subscribe for Shares on the following terms and conditions:

• (a) Each Option gives the Optionholder the right to subscribe for one Share. To obtain the right given by each Option, the Optionholder must exercise the Options in accordance with the terms and conditions of the Options.

• (b) The Options will expire at 5:00 pm (WST) on 31 May 2010 ( Expiry Date ). Any Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.

• (c) The amount payable upon exercise of each Option will be 20 cents ( Exercise Price ).

• (d) The Options held by each Optionholder may be exercised in whole or in part, and if exercised in part, multiples of 1,000 must be exercised on each occasion.

• (e) An Optionholder may exercise their Options by lodging with the Company, before the Expiry Date:

• (i) a written notice of exercise of Options specifying the number of Options being exercised; and

• (ii) a cheque or electronic funds transfer for the Exercise Price for the number of Options being exercised,

( Exercise Notice ).

• (f) An Exercise Notice is only effective when the Company has received the full amount of the Exercise Price in cleared funds.

• (g) Within 10 Business Days of receipt of the Exercise Notice accompanied by the Exercise Price, the Company will allot the number of Shares required under these terms and conditions in respect of the number of Options specified in the Exercise Notice.

• (h) The Options are not transferable.

• (i) All Shares allotted upon the exercise of Options will upon allotment rank pari passu in all respects with other Shares.

• (j) The Company will apply for quotation of the Options on ASX and will also apply for quotation of all Shares allotted pursuant to the exercise of Options on ASX within 10 Business Days after the date of allotment of those Shares.

• (k) If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

• (l) There are no participating rights or entitlements inherent in the Options and Optionholders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 Business Days after the issue is announced. This will give Optionholders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue.

38

• (m) In the event the Company proceeds with a pro rata issue (except a bonus issue) of securities to Shareholders after the date of issue of the Options, the exercise price of the Options will be reduced in accordance with the formula set out in ASX Listing Rule 6.22.2.

• (n) In the event the Company proceeds with a bonus issue of securities to Shareholders after the date of issues of the Options, the number of securities over which an Option is exercisable may be increased by the number of securities which the Optionholder would have received if the Option had been exercised before the record date for the bonus issue.

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SCHEDULE 2 – TERMS AND CONDITIONS OF DIRECTOR OPTIONS

The Director Options entitle the holder to subscribe for Shares on the following terms and conditions:

• (a) Each Director Option gives the Optionholder the right to subscribe for one Share. To obtain the right given by each Director Option, the Optionholder must exercise the Director Options in accordance with the terms and conditions of the Director Options.

• (b) The Director Options will expire at 5:00 pm (WST) on 31 December 2014 ( Expiry Date ). Any Director Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.

• (c) The amount payable upon exercise of each Director Option will be 45 cents ( Exercise Price ).

• (d) The Director Options held by each Optionholder may be exercised in whole or in part, and if exercised in part, multiples of 1,000 must be exercised on each occasion.

• (e) An Optionholder may exercise their Director Options by lodging with the Company, before the Expiry Date:

• (i) a written notice of exercise of Director Options specifying the number of Director Options being exercised; and

• (ii) a cheque or electronic funds transfer for the Exercise Price for the number of Director Options being exercised,

( Exercise Notice ).

• (f) An Exercise Notice is only effective when the Company has received the full amount of the Exercise Price in cleared funds.

• (g) Within 10 Business Days of receipt of the Exercise Notice accompanied by the Exercise Price, the Company will allot the number of Shares required under these terms and conditions in respect of the number of Director Options specified in the Exercise Notice.

• (h)

• The Director Options are not transferable.

• (i) All Shares allotted upon the exercise of Director Options will upon allotment rank pari passu in all respects with other Shares.

• (j) The Company will not apply for quotation of the Director Options on ASX. However, the Company will apply for quotation of all Shares allotted pursuant to the exercise of Director Options on ASX within 10 Business Days after the date of allotment of those Shares.

• (k) If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

40

• (l) There are no participating rights or entitlements inherent in the Director Options and Optionholders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Director Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 Business Days after the issue is announced. This will give Optionholders the opportunity to exercise their Director Options prior to the date for determining entitlements to participate in any such issue.

• (m) In the event the Company proceeds with a pro rata issue (except a bonus issue) of securities to Shareholders after the date of issue of the Director Options, the exercise price of the Director Options will be reduced in accordance with the formula set out in ASX Listing Rule 6.22.2.

• (n) In the event the Company proceeds with a bonus issue of securities to Shareholders after the date of issues of the Director Options, the number of securities over which a Director Option is exercisable may be increased by the number of securities which the Optionholder would have received if the Director Option had been exercised before the record date for the bonus issue.

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SCHEDULE 3 – VALUATION OF DIRECTO R OPTIONS

The Director Options to be issued to the Related Parties pursuant to Resolutions 5 and 6 have been valued by internal management.

Using the theoretical Black & Scholes option model and based on the assumptions set out below, the Director Options were ascribed a value range, as follows:

Assumptions:
Valuation date	10November 2009
Market price of Shares	17.5 cents
Exercise price	45 cents
Expiry date	31 December 2014
Risk free interest rate	5.25%
Volatility	50%
Indicative value per Director Option	$0.0431
Total Value of 3,000,000 Director Options	$129,300

Note: The valuation ranges noted above are not necessarily the market prices that the Director Options could be traded at and they are not automatically the market prices for taxation purposes.

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SCHEDULE 4 – TERMS AND CONDITIONS OF MDSYSTEMS DIRECTOR OPTIONS

The MDSystems Director Options entitle the holder to subscribe for MDSystems Shares on the following terms and conditions:

• (a) Each MDSystems Director Option gives the MDSystems Optionholder the right to subscribe for one MDSystems Share. To obtain the right given by each MDSystems Director Option, the MDSystems Optionholder must exercise the MDSystems Director Options in accordance with the terms and conditions of the MDSystems Director Options.

• (b) The MDSystems Director Options will expire at 5:00 pm (WST) on 31 December 2014 ( Expiry Date ). Any MDSystems Director Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.

• (c) The amount payable upon exercise of each MDSystems Director Option will be 40 cents ( Exercise Price ).

• (d) The MDSystems Director Options held by each MDSystems Optionholder may be exercised in whole or in part, and if exercised in part, multiples of 1,000 must be exercised on each occasion.

• (e) An MDSystems Optionholder may exercise their MDSystems Director Options by lodging with MDSystems, before the Expiry Date:

• (i) a written notice of exercise of MDSystems Director Options specifying the number of MDSystems Director Options being exercised; and

• (ii) a cheque or electronic funds transfer for the Exercise Price for the number of MDSystems Director Options being exercised,

( Exercise Notice ).

• (f) An Exercise Notice is only effective when MDSystems has received the full amount of the Exercise Price in cleared funds.

• (g) Within 10 Business Days of receipt of the Exercise Notice accompanied by the Exercise Price, MDSystems will allot the number of MDSystems Shares required under these terms and conditions in respect of the number of MDSystems Director Options specified in the Exercise Notice.

• (h)

• The MDSystems Director Options are not transferable.

• (i) All MDSystems Shares allotted upon the exercise of MDSystems Director Options will upon allotment rank pari passu in all respects with other MDSystems Shares.

• (j) MDSystems will not apply for quotation of the MDSystems Director Options on ASX. However, MDSystems will apply for quotation of all MDSystems Shares allotted pursuant to the exercise of MDSystems Director Options on ASX within 10 Business Days after the date of allotment of those MDSystems Shares.

• (k) If at any time the issued capital of MDSystems is reconstructed, all rights of an MDSystems Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

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• (l) There are no participating rights or entitlements inherent in the MDSystems Director Options and MDSystems Optionholders will not be entitled to participate in new issues of capital offered to MDSystems Shareholders during the currency of the MDSystems Director Options. However, MDSystems will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 Business Days after the issue is announced. This will give MDSystems Optionholders the opportunity to exercise their MDSystems Director Options prior to the date for determining entitlements to participate in any such issue.

• (m) In the event MDSystems proceeds with a pro rata issue (except a bonus issue) of securities to MDSystems Shareholders after the date of issue of the MDSystems Director Options, the exercise price of the MDSystems Director Options will be reduced in accordance with the formula set out in ASX Listing Rule 6.22.2.

• (n) In the event MDSystems proceeds with a bonus issue of securities to MDSystems Shareholders after the date of issues of the MDSystems Director Options, the number of securities over which a MDSystems Director Option is exercisable may be increased by the number of securities which the MDSystems Optionholder would have received if the MDSystems Director Option had been exercised before the record date for the bonus issue.

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SCHEDULE 5 – VALUATION OF MDSYSTEMS DIRECTOR OPTIONS

The MDSystems Director Options to be issued to the MDSystems Related Parties pursuant to Resolutions 7-9 have been valued by internal management.

Using the theoretical Black & Scholes option model and based on the assumptions set out below, the MDSystems Director Options were ascribed a value range, as follows:

Assumptions:
Valuation date	10 November2009
Market price of MDSystems Shares	20 cents
Exercise price	40 cents
Expiry date	31 December 2014
Risk free interest rate	5.25%
Volatility	50%1
Indicative value per MDSystems Director Option	$0.0601
Total Value of 2,000,000 MDSystems Director Options	$120,200

Notes:

1: Although MDSystems is currently unlisted, the value of MDSystems has intrinsic volatility, that is, would be expected to change and fluctuate in line with the performance of the business as well as economic and other factors. Guidance provided in AASB 2 for the assessment of volatility for unlisted/newly listed entities suggests that comparable analysis should form part of the assessment. Accordingly, assessment of volatility in this situation requires the consideration of the volatility of comparable ASX listed entities. On the basis of an assessment of the volatility of comparable ASX listed entities by reference to the historic volatility over a period broadly commensurate with the MDSystems Option term to expiry, the Company considers that a 50% volatility for the MDSystems Options is not unreasonable.

The valuation ranges noted above are not necessarily the market prices that the MDSystems Director Options could be traded at and they are not automatically the market prices for taxation purposes.

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PROXY FORM

APPOINTMENT OF PROXY BIOPHARMICA LIMITED ACN 095 912 002

GENERAL MEETING

		GENERAL MEETING
I/We
of
	being	a member of BioPharmica Limited entitled to attend and vote at the General Meeting,
	hereby
Appoint
	Name of proxy
OR		the Chair of the General Meeting as your proxy

or failing the person so named or, if no person is named, the Chair of the General Meeting, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, as the proxy sees fit, at the General Meeting to be held at 2:30 pm (WST), on Thursday 24 December 2009 at the North Perth Lesser Hall, 24 View Street, North Perth, Western Australia, and at any adjournment thereof.

If no directions are given, the Chair will vote in favour of all the Resolutions.

If the Chair of the General Meeting is appointed as your proxy, or may be appointed by default, and you do not wish to direct your proxy how to vote as your proxy in respect of Resolutions 3-6 and 10 please place a mark in this box.

By marking this box, you acknowledge that the Chair of the General Meeting may exercise your proxy even if they have an interest in the outcome of Resolutions 3 to 6 and 10 and that votes cast by the Chair of the General Meeting for Resolutions 3 to 6 and 10 other than as proxy holder will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on Resolutions 3 to 6 and 10 and your votes will not be counted in calculating the required majority if a poll is called on Resolutions 3 to 6 and 10.

OR

Voting on Business of the General Meeting

Resolution 1 – Change of Company Name Resolution 2 – Equal capital reduction and in specie distribution Resolution 3 – Acquisition of a Substantial Asset – Advent Energy Investment Resolution 4 – Share and Option Placement Resolution 5 – Issue of Director Options – Mr David Breeze Resolution 6 – Issue of Director Options – Mrs Deborah Ambrosini Resolution 7 – Issue of MDSystems Director Options – Mr David Breeze Resolution 8 – Issue of MDSystems Director Options – Mrs Deborah Ambrosini Resolution 9 – Issue of MDSystems Director Options – Mr Greg Gilbert Resolution 10 – Participation by MEC in Share and Option Placement

FOR AGAINST ABSTAIN

Please note : If you mark the abstain box for a particular Resolution, you are directing your proxy not to vote on that Resolution on a show of hands or on a poll and your votes will not to be counted in computing the required majority on a poll.

Signature of Member(s):

Individual or Member 1

Sole Director/Company Secretary

Date: ____ Member 2 Member 3 Director Director/Company Secretary

Contact Name: _____ Contact Ph (daytime): _________

46

BIOPHARMICA LIMITED ACN 095 912 002

Instructions for Completing ‘Appointment of Proxy’ Form

1.

( Appointing a Proxy ): A member entitled to attend and vote at an General Meeting is entitled to appoint not more than two proxies to attend and vote on a poll on their behalf. The appointment of a second proxy must be done on a separate copy of the Proxy Form. Where more than one proxy is appointed, such proxy must be allocated a proportion of the member’s voting rights. If a member appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half the votes. A duly appointed proxy need not be a member of the Company.

1. ( Direction to Vote ): A member may direct a proxy how to vote by marking one of the boxes opposite each item of business. Where a box is not marked the proxy may vote as they choose. Where more than one box is marked on an item the vote will be invalid on that item.

3.

( Signing Instructions ):

• ( Individual ): Where the holding is in one name, the member must sign.

• ( Joint Holding ): Where the holding is in more than one name, all of the members must sign.

• ( Power of Attorney ): If you have not already provided the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.

• ( Companies ): Where the company has a sole director who is also the sole company secretary, that person must sign. Where the company (pursuant to Section 204A of the Corporations Act) does not have a company secretary, a sole director can also sign alone. Otherwise, a director jointly with either another director or a company secretary must sign. Please sign in the appropriate place to indicate the office held.

• ( Attending the Meeting ): Completion of a Proxy Form will not prevent individual members from attending the General Meeting in person if they wish. Where a member completes and lodges a valid Proxy Form and attends the General Meeting in person, then the proxy’s authority to speak and vote for that member is suspended while the member is present at the General Meeting.

• ( Return of Proxy Form ): To vote by proxy, please complete and sign the enclosed Proxy Form and return by:

• (a) post to BioPharmica Limited, 14 View Street, North Perth, Western Australia, 6006; or

• (b) facsimile to the Company on facsimile number +61 8 9328 8733,

so that it is received not later than 2:30 pm (WST) on Tuesday 22 December 2009.

Proxy forms received later than this time will be invalid.

47

APPENDIX A – MDSYSTEMS PRO -FORMA BALANCE SHEET

Molecular Discovery Systems Limited Pro-forma Balance Sheet As at 11 November 2009 Assets Current Assets Cash Trade receivables Financial assets Other debtors Total current assets Non-Current Assets PPE Intangibles Total non-current assets Total Assets Liabilities Current liabilities Payables Provisions Financial liabilities Total current liabilities Total Liabilities Net Assets Equity Share capital Option reserve Retained earnings Total Equity	$ Post Equal Reduction of Capital 24,935 64,453 0 1,203 90,590 956 576,669 577,625 668,215 5,114 4,549 171,033 180,696 180,696 487,519 2,023709 0 -1,536,190 487,519	$ Post Equal Reduction of Capital and IPO 2,324,9351 64,453 0 1,203
		2,390,591 956 576,669
		577,625
		2,968,2161 5,114 4,549 171,033
		180,696
		180,696
		2,787,5201
		4,323,709 0 -1,536,190
		2,787,5201

Notes

1. Assumes a minimum of $2,300,000 is raised under the IPO.

48

APPENDIX B – BIOPHARMICA PRO -FORMA BALANCE SHEET

BioPharmica Limited Pro-forma Balance Sheet As at 11 November 2009

$

Assets Current Assets Cash Trade receivables Financial assets Other debtors Total current assets Non-Current Assets Financial assets PPE Investments in other entities Total non-current assets Total Assets Liabilities Current liabilities Payables Provisions Financial liabilities Total current liabilities Total Liabilities Net Assets Equity Share capital Option reserve Retained earnings Total Equity	2,502,048 0 869,961 146,268
	3,518,277 0 2,295 2,492,433
	2,494,728
	6,013,005 228,032 10,956 295,082
	534,070
	534,070
	5,478,935
	9,480,002 294,892 -4,295,959
	5,478,935

49

APPENDIX C – INDEPENDENT EXPERT’S REPORT – MGI

50

BioPharmica Limited Independent Expert’s Report Page 1

8 October 2009

PRIVATE & CONFIDENTIAL

The Directors BioPharmica Limited 14 View Street NORTH PERTH WA 6006

Dear Sirs/Madam

INDEPENDENT EXPERT REPORT

1. INTRODUCTION

MGI Perth Corporate Finance Pty Ltd (“MGICF”) has been requested by BioPharmica Limited (“BPH” or “the Company”) to prepare an Independent Expert Report in relation to a transaction for which the Company is seeking shareholder approval to enter into an exclusive option to subscribe for up to $14 million of shares in Advent Energy Limited (“Advent”), an unlisted public company (“the Proposed Transaction”).

BPH has been offered an exclusive option to invest in Advent. The option gives BPH the opportunity to acquire between 9.7% and 19.4% of Advent’s share capital at 50c per share. BPH proposes to subscribe for up to 9.7% of Advent share capital initially, whilst retaining the option to subscribe for a second tranche of 9.7% worth of Advent share capital at a later stage.

The Proposed Transaction is the subject of Resolution 3 of the attached Notice of Meeting to be considered at the Company’s forthcoming Extraordinary General Meeting (“EGM”), provisionally set down to be held on or about 23 December 2009. Resolution 3 seeks shareholder approval of the following ordinary resolution: “That, for the purposes of Listing Rule 10.1 and for all other purposes, approval is given for the Company to enter into an exclusive option deed to subscribe for up to $14 million worth of ordinary, fully paid shares in the capital of Advent, a public unlisted entity.”

To assist shareholders in making a decision on the Proposed Transaction, the Directors have requested that MGICF prepare an Independent Expert's Report, which must state whether, in the opinion of the Independent Expert, the Proposed Transaction is fair and reasonable having regard to the interests of BPH shareholders other than those involved in the Proposed Transaction or associated with such persons and whose approval of the Resolution giving effect to this transaction is required at the Extraordinary General Meeting (“non-associated shareholders of BPH”).

The Summary of our opinion is set out in Section 2 of this Report.

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BioPharmica Limited Independent Expert’s Report Page 2

A brief summary of the Proposed Transaction is set out in Section 3 of this Report and a detailed outline is set out fully in the Explanatory Statement accompanying the Notice of Meeting of BPH to be held on or about 23 December 2009.

We understand that this Report will accompany the Notice of Meeting and Explanatory Statement.

2. SUMMARY OF OPINION

• 2.1. Based upon the information set out in this Report, we are of the opinion that the Proposed Transaction is fair and reasonable having regard to the interests of the non-associated shareholders of BPH.

MGICF has formed the opinion that the Proposed Transaction is fair because the value of the Company’s Shares post the Proposed Transaction is greater than the value of the Company’s Shares prior to the Proposed Transaction.

ASIC Regulatory Guide 111 (RG 111), states that an offer is reasonable if it is fair. Notwithstanding this, MGICF has also had regard to other relevant considerations in assessing the reasonableness of the Proposed Transaction. Further details are set out in Section 8 of this Report.

• 2.2. Our opinion is based solely on the information available at the date of the Report as detailed in Section 9 of the Report.

• 2.3. The principal factors that we have taken into account in forming our opinion are set out in the supporting detail to this Report.

• 2.4. The decision of each shareholder as to whether to approve the Proposed Transaction is a matter for individual shareholders. This decision should be based on each shareholder’s views as to matters including value and future market conditions, risk profile, liquidity preferences, investment strategy, portfolio structure and tax position. In particular, taxation consequences may vary from shareholder to shareholder. If shareholders are in any doubt, they should consult an independent professional adviser.

• 2.5. The opinion should be read in conjunction with the full text of this Report which follows after our Financial Services Guide, which sets out our scope and findings.

The supporting detail of our Report (set out in the sections that follow after our Financial Services Guide and Qualifications Declarations and Consents), comprises the following sections:

1. Summary of the Proposed Transaction

2. Purpose of the Report

3. Basis of the Assessment

4. Valuation of BioPharmica Limited Shares Pre Proposed Transaction

5. Valuation of BioPharmica Limited Shares Post Proposed Transaction

6. Assessment as to Fairness and Reasonableness

7. Sources of Information

Yours sincerely

MGI PERTH CORPORATE FINANCE PTY LTD

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T J SPOONER CA FCA(UK) ACIS | Director

BioPharmica Limited Independent Expert’s Report Page 3

MGI Perth Corporate Finance Pty Ltd (“MGICF”) FINANCIAL SERVICES GUIDE

Complaints

1. MGICF (ABN 84 009 342 661) provides valuation advice, valuation reports, Independent Expert's Reports and Investigating Accountant’s Reports in relation to takeovers and mergers, prospectuses and disclosure documents, commercial litigation, tax and stamp duty matters, assessments of economic loss, commercial and regulatory disputes. MGICF holds Australian Financial Services Licence No. 289358.

2. MGICF has been engaged to provide general financial product advice in the form of the attached Report to be provided to you.

Financial Services Guide

1. The Corporations Act 2001 authorises MGICF to provide this Financial Services Guide (FSG) in connection with its provision of an Independent Expert’s Report (IER) to accompany the Notice of Meeting to be sent to BPH shareholders.

2. This FSG is designed to assist retail clients in their use of any general financial product advice contained in the IER. This FSG contains information about MGICF generally, the financial services we are licensed to provide, the remuneration we may receive in connection with the preparation of the IER, and if complaints against us ever arise how they will be dealt with.

Financial services we are licensed to provide

1. Our Australian financial services licence allows us to carry on a financial services business to provide financial product advice for securities and deal in a financial product by arranging for another person to issue, apply for, acquire, vary or dispose of a financial product in respect of securities to retail and wholesale clients.

General Financial Product advice

1. The IER contains only general financial product advice. It was prepared without taking into account your personal objectives, financial situation or needs. It is not intended to take the place of professional advice and you should not make specific investment decisions in reliance upon the information contained in this Report.

2. You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice. You may wish to obtain personal financial product advice from the holder of an Australian Financial Service Licence to assist you in this assessment.

3. Fees, commissions and other benefits we may receive

4. MGICF charges fees to produce reports, including this IER. These fees are negotiated and agreed with the entity which engages MGICF to provide a report. Fees are charged on an hourly basis or as a fixed amount depending on the terms of the agreement with the person who engages us.

5. Neither MGICF nor its directors and officers receives any commissions or other benefits, except for the fees for services referred to above.

6. All of our employees receive a salary and do not receive any commissions or other benefits arising directly from services provided to our clients. The remuneration paid to our directors reflects their individual contribution to the company and covers all aspects of performance. Our directors do not receive any commissions or other benefits arising directly from services provided to our clients.

7. We do not pay commissions or provide other benefits to other parties for referring prospective clients to us.

8. If you have a complaint, please raise it with us first, using the contact details listed below. We will endeavour to satisfactorily resolve your complaint in a timely manner.

9. If we are not able to resolve your complaint to your satisfaction within 45 days of your written notification, you are entitled to have your matter referred to the Financial Industry Complaints Services (FICS), an external complaints resolution service. You will not be charged for using the FICS service.

Contact details

1. MGICF contact details are contained on the first page of our Independent Expert’s Report.

QUALIFICATIONS, DECLARATIONS AND CONSENTS Qualifications

1. MGICF is licensed under the Corporations Act to carry on a financial services business to provide the financial services referred to in section 5 of our Financial Services Guide (refer above). MGICF's authorised representatives have extensive experience in the field of corporate finance, particularly in relation to the valuation of shares and businesses and have undertaken a significant number of valuations, IER’s, IAR’s and similar assignments.

2. This Report was prepared by Mr TJ Spooner, who is an authorised representative of MGICF. Mr Spooner has substantial experience in the provision of valuation and similar advice and has been a qualified Chartered Accountant (UK and Australia) for over 25 years.

Declarations

1. This Report has been prepared at the request of the Directors of BPH to accompany the Notice of Meeting to be sent to BPH shareholders. It is not intended that this Report should serve any purpose other than as stated therein.

Interest

1. MGI is not the auditor of BPH. At the date of the attached Report, neither MGICF, nor Mr TJ Spooner or any other director, executive or employee of MGICF or MGI has any material interest in BPH either directly or indirectly, or in the outcome of the offer, other than in the preparation of this Report for which normal professional fees of approximately $17,500 + GST will be received. Such fee will be payable regardless of whether or not shareholders approve the Proposed Transaction.

Indemnification

1. As a condition of MGICF's agreement to prepare this Report, BPH agrees to indemnify MGICF in relation to any claim arising from or in connection with its reliance on information or documentation provided by or on behalf of BPH which is false or misleading or omits material particulars or arising from any failure to supply relevant documents or information.

Consents

1. MGICF was not involved in the preparation of any other part of the Explanatory Statement to accompany the Notice of Meeting (Explanatory Statement), and accordingly makes no representations or warranties as to the completeness and accuracy of any information contained in any other part of the Explanatory Statement. MGICF consents to the inclusion of this Report in the Explanatory Statement in the form and context in which it is included. At the date of this Report, this consent has not been withdrawn.

BioPharmica Limited Independent Expert’s Report Page 4

3. SUMMARY OF THE PROPOSED TRANSACTION

• 3.1 Background to the transaction

BPH has entered into an exclusive option to subscribe for up to $14 million of shares in the unlisted entity Advent Energy Limited (“Advent”). BPH proposes to subscribe for a minimum of $7 million of Advent shares initially, whilst retaining the option to subscribe for a second tranche of up to $7 million of Advent shares at a later stage.

• 3.2 Continuity of Biotechnology Business

As referred to in greater detail in the attached Notice of Meeting, BPH will continue to maintain its interest in Molecular Discovery Systems Pty Ltd, Cortical Dynamics Ltd, Diagnostic Array Systems Pty Ltd and the SERS project, with its investees’ biotechnology projects representing BPH’s majority investments.

As BPH will not be involved in any of the decisions affecting the ongoing operations of the projects of Advent, the investment will be passive in nature.

• 3.3 Proposed Capital Raising

Resolution 4 of the attached Notice of Meeting seeks shareholder approval for the Company to allot and issue up to 95,982,330 Shares with one free attaching Option exercisable at $0.20 on or before 31 May 2010 for ever one share issued. The issue price per share will be the lower of $0.125 and 80% of the average market price of the Shares calculated over the last 5 days on which sales in the Shares are recorded before the day on which the issue was made and on the terms set out in the Explanatory Statement accompanying the Notice of Meeting.

Paragraph 6(g) of the Explanatory Statement identifies that the Company intends to use a portion of the funds raised from this issue of the Shares and Options to take up an exclusive option to invest in Advent Energy Limited.

The exact number of Shares on issue following completion of the issue and allotment of Shares and Options pursuant to the passing of Resolution 4, 5 and 6 of the Notice of Meeting (but excluding the Molecular Discovery Systems Pty Ltd (“MDS”) options referred to in Resolutions 7, 8 and 9) can not be accurately determined as the Company may decide not to proceed with issuing all the approved Shares and Options the subject of Resolution 4, however, assuming the placement capacity is fully utilised, this would give rise to the following capital structure on completion of the investment in Advent and share issue pursuant to Resolution 4:

191,964,660 Shares

• Listed Options Unlisted Options

111,782,330

BioPharmica Limited Independent Expert’s Report Page 5

4. PURPOSE OF THE REPORT

ASX Listing Rule 10.1 provides that an entity (or any of its subsidiaries) must not acquire a substantial asset from, or dispose of a substantial asset to, inter alia, a related party or a substantial holder (if the person and the person’s associates have a relevant interest, or had a relevant interest at any time in the 6 months before the transaction, in at least 10% of the total votes attached to the voting securities). For the purposes of ASX Listing Rule 10.1, Advent is a “related party” of the Company – this is referred to in greater detail in the Explanatory Statement which forms part of the attached Notice of Meeting.

ASX Listing Rule 10.2 states that “an asset is substantial if its value, or the value of the consideration for it, is, or in the ASX’s opinion is, 5% or more of the equity interests of the entity set out in the latest accounts given to ASX under the Listing Rules.

The expenditure of a minimum of $7 million on the proposed acquisition of an interest in Advent is in excess of 5% of the Company’s equity interests on a consolidated basis as disclosed in the 2009 Annual Report lodged with ASX on 30 September 2009. As a result, the Company is seeking shareholder approval for the purposes of ASX Listing Rules 10.1 and 10.2. To assist shareholders in making a decision on the Proposed Transaction, the Directors have requested that MGICF prepare an Independent Expert's Report, which must state whether, in the opinion of the Independent Expert, the Proposed Transaction is fair and reasonable to the non-associated shareholders of BPH.

5. BASIS OF THE ASSESSMENT

Set out in the Notice of Meeting accompanying this Report are the Australian Securities Exchange (“ASX”) Listing Rules provisions relevant to the Proposed Transaction and information in relation thereto. In preparing our Report, we have had regard to ASIC Regulatory Guide 111 and 112 relating to independent experts’ reports.

The term ‘fair and reasonable’ has no legal definition although over time a commonly accepted interpretation has evolved. However, fair and reasonable has different meanings for different regulatory purposes.

ASIC Regulatory Guide 111 provides that the assessment of whether a proposal is fair and reasonable should involve a comparison of the likely advantages and disadvantages for non associated shareholders if the Proposed Transaction is implemented and if it is not.

In essence, the proposal will be “fair and reasonable” if the non associated shareholders are better off if the proposal is implemented. They will be better off if the expected benefits outweigh the disadvantages to the non associated shareholders.

BioPharmica Limited Independent Expert’s Report Page 6

5. BASIS OF THE ASSESSMENT (CONTINUED)

ASIC regulatory Guide 111, states, inter alia:

• an offer is considered ‘fair’ if the value of the offer price or consideration is equal to, or greater than, the value of the securities that are the subject of the offer.

• an offer is considered ‘reasonable’ if it is fair. It might also be ‘reasonable’ if, despite being ‘not fair’, the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher bid before the close of the offer.

ASIC Regulatory Guide 111 requires the assessment of ‘fair’ to be made assuming 100% ownership of the Company. It considers it to be inappropriate to apply a discount to the value of the securities under the offer that would normally be considered in the valuation of a minority interest to reflect such factors as a lack of control. ASIC Regulatory Guide 111 also provides examples of factors that are relevant in an assessment of reasonableness. The form of analysis the expert uses to evaluate a transaction should address the issues faced by security holders.

In our opinion, for the purposes of this Report ‘fairness’ is taken to mean a reference to quantification of respective values of consideration being paid compared to the value of assets being transferred. ‘Reasonableness’ is taken to include consideration of other qualitative factors which can be assessed on objective grounds.

The assessment as to the fairness and reasonableness of the Proposed Transaction is set out in Section 8 of this Report.

BioPharmica Limited Independent Expert’s Report Page 7

6. VALUATION OF BIOPHARMICA LIMITED SHARES PRE PROPOSED TRANSACTION

6.1. VALUATION OVERVIEW

The usual approach to the valuation of an asset is to seek to determine what a willing but not anxious buyer, acting at arm's length, with adequate information, would be prepared to pay and a willing, but not anxious seller would be prepared to accept in an open market.

In valuing BPH prior to consideration of the Proposed Transaction, we have considered the following valuation approaches:

• Discounted cash flow (DCF) approach;

• Capitalisation of future maintainable earnings (earnings based) approach;

• Orderly realisation of assets (asset based) approach;

• Quoted price for BPH listed securities (market value) approach.

In applying the above methodologies, it would be open to an expert to have regard to the amount an alternative bidder might be willing to offer if all the securities in the target were available for purchase, for example, in selecting earnings multiples and underpinning any overall judgment as to value.

6.2 VALUATION APPROACH

The traditional valuation method used to value companies is the capitalisation of future maintainable earnings, with such earnings being estimated using historical results. However, in order to adopt such a basis of valuation, a business must have a track record of profitability. As BPH does not have a track record of profitability having incurred consolidated losses of $1.6m and $2.2m for the years ended 30 June 2008 and 2009 respectively, we consider a valuation on this basis to be inappropriate.

MGICF believes that the most appropriate method for valuing the issued Shares in BPH is the assetbased approach. The most common form of asset based approach is the Net Realisable Value method. The resultant net realisable assets of the Company can then be expressed in terms of a value per share.

As noted in Section 6.3 of this Report, the majority of BPH's assets (other than Cash and cash equivalents) comprise Acquired Intellectual Property and Goodwill. In determining the net realisable value of these intangible assets, we have considered available information regarding its key projects and, in particular, BPH’s 2009 Financial Report lodged with ASX on 30 September 2009 (“2009 Financial Report”). In particular, we note the following disclosures in the 2009 Financial Report in respect of the carrying values of its intangible assets (comprising intellectual property and goodwill):

Intellectual Property impairment:

• We note that acquired intellectual property of HLS5 has been reviewed and the Directors are of the opinion that there have been no impairment triggers activated during the financial year. There has been no impairment charged to the profit and loss for the period.

• The investment in the SERS technology has been reviewed and the Directors are of the opinion that the investment amount is fully impaired. This amount has been fully written off to the income statement.

BioPharmica Limited Independent Expert’s Report Page 8

Goodwill impairment:

• The goodwill has been impairment tested for the financial year. The Directors believe that the goodwill associated with the SERS technology is fully impaired as there are currently no contracts in place to support this amount. The full amount of the goodwill has been written off to the income statement.

Going Concern Basis:

We also note the following Directors’ disclosures in the 2009 Financial Report regarding the appropriateness of the going concern basis of preparation of the Financial Report:

• The Directors have reviewed their expenditure and have implemented methods of costs reduction. The Directors as a part of their cash monitoring, have voluntarily suspended cash payments for their Director’s fees. The Director’s fees of the Company are expected to be paid via Shares (subject to shareholder approval).

• The Company is vigorously pursuing partnering opportunities so their key technology can be further developed in order for the commercialisation phase to commence. The Company is also focusing on further developing its anti-mitotic drugs program toward pre-clinical trials.

• On 12th August 2009, the Directors announced its plans to conduct a shareholder share purchase plan (“SSP”) for continuing its research and development, commercialisation and additional working capital.

• The Directors have prepared cash flow forecasts that indicate that the consolidated entity and the parent entity will have sufficient cashflows for a period of at least 12 months from the date of this Report.

• Based on the cash flow forecasts and the monitoring of operational costs, the Directors are satisfied that the going concern basis of preparation is appropriate. The financial report has therefore been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

In respect of the SSP referred to above, we also note the Company’s recent ASX announcement of 29 September 2009 which advised that the Company had successfully raised $2.73 million (representing 93% subscription).

We further note that Resolution 2 of the Notice of Meeting seeks shareholder approval for the in specie distribution (“spin off”) of a significant proportion of the Company’s investment in MDS. Resolution 1, comprising a proposed change of name to BPH Corporate, also encapsulates its portfolio of technology and early-stage investments.

It should be noted we have not been requested to comment on whether the proposed MDS spin-off is fair and reasonable and hence is outside of the scope of this Report.

As a crosscheck to the valuation on the above basis, MGICF has used the market value approach with reference to the market price of BPH Shares prior to the announcement of the Proposed Transaction. This valuation crosscheck calculation is set out in Section 6.4.5 of this Report.

BioPharmica Limited Independent Expert’s Report Page 9

6.3 VALUE OF BPH’S SHARES PRE PROPOSED TRANSACTION

In establishing the value of BPH prior to the Proposed Transaction, the net asset backing per share has been determined based upon the audited position as at 30 June 2009, with no adjustments for any subsequent transactions, other than the completion of the SSP referred to in 6.2 above. We are not aware of any such material transactions, other than the proposed spin-off of MDS, the subject of Resolution 2 of the Notice of Meeting, which we have assumed will not materially impact on the value of an individual’s shareholding (as the combined value of BPH and MDS post spin-off has been assumed to not be materially different to BPH pre spin-off). BPH’s principal assets comprise Intangible Assets and Cash and Cash Equivalents. Valuation assessments were then carried out on BPH’s other assets and liabilities, with no adjustments being made in this respect.

Based on the Adjusted 30 June 2009 Balance Sheet, this has resulted in a net asset backing per share of 3.6 cents pre Proposed Transaction, as calculated below:

6.3.1 BIOPHARMICA LIMITED

Balance Sheets	Audited 30.06.09 $	Adjusted1 30.06.09 $
Current Assets Cash and Cash Equivalents Trade and Other Receivables Financial Assets Other Current Assets Total Current Assets Non-Current Assets Financial Assets Intangible Assets Property, Plant & Equipment Total Non-Current Assets Total Assets Current Liabilities Trade and Other Payables Financial Liabilities Short Term Provisions Total Current Liabilities Total Liabilities Net Assets Total number of Shares on issue Net asset backing per share (undiluted)	372,268 171,914 88,149 18,843 651,174 48,949 809,954 5,549 864,452 1,515,626 405,683 384,415 9,040 799,138 799,138 716,488 74,980,016 0.96 cents	3,117,268 171,914 88,149 18,843
		3,396,174
		48,949 809,954 5,549
		864,452
		4,260,626
		405,683 384,415 9,040
		799,138
		799,138
		3,461,488
		95,982,330 3.6 cents

1 This comprises the Audited balance Sheet as at 30.06.09, as adjusted for the completion of the SSP on 28 September 2009.

BioPharmica Limited Independent Expert’s Report Page 10

6.4 ISSUED CAPITAL AND SHARE TRANSACTIONS

6.4.1 ISSUED CAPITAL

As at the date of this Report, the total issued share capital of BPH comprises 95,982,330 fully paid ordinary Shares. Movements in BPH's share capital since 30 June 2009 are provided in the table below. The values below are net of share issue costs.

	Number of Shares	Note	$
Balance as at 30 June 2009	74,980,016	Fully paid ordinary Shares	7,308,660
Issued 28 September 2009	21,002,314	Issued pursuant to completion of SSP	2,745,000
As at the date of this Report	95,982,330		10,053,660

6.4.2 OPTIONS

At the date of this Report, there are 12,800,000 Options on issue. Movements in BPH's Options since 30 June 2009 are provided in the table below.

	Number of Options	Note	$
Balance as at 30 June 2009	12,150,000		-
Issued in the period	2,150,000	Issued pursuant to the share option scheme	-
Expired during the period	(1,500,000)		-
As at the date of this Report	12,800,000		-

These Options are all unlisted and exercisable as detailed in the table below:

Total Number	Exercise Price	Expiry Date
500,000	(i)	17 October 2011	-
500,000	(i)	29 April 2013	-
6,000,000	$0.15	31 December 2010	-
2,650,000	$0.15	30 June 2013	-
3,000,000	$0.15	16 December 2013	-
150,000	$0.35	30 September 2014	-
12,800,000			-

(i) The exercise price will be the average amount determined by the market price for the 5 days prior to the exercise.

NB The Options the subject of the attached Notice of Meeting are not included in the above summary.

BioPharmica Limited Independent Expert’s Report Page 11

6.4.3 SHARE TRADING

The following summary provides details of the monthly trading volumes of BPH’s Shares on ASX since 1 April 2009:

Month	High	Low	Total Monthly Volume
October 2009 (to 6th) September 2009 August 2009 July 2009 June 2009 May 2009 April 2009	0.16 0.19 0.40 0.03 0.04 0.04 0.04	0.12 0.12 0.03 0.02 0.02 0.03 0.02	3,053,700 8,844,300 34,880,300 423,500 1,507,100 713,100 181,400

Source: Yahoo Finance

In the past 6 months the Company’s share price has fluctuated from a low of 2 cents (rounded) on 7 April 2009 to a brief high of 40 cents on 13 August 2009, having been relatively static in the 2 to 4 cents range for the four months to July 2009 on comparatively thin trading volumes. Note the volume for the month of October to date (6[th] ) comprises only three trading days.

There has been a noticeable change in the share price since 10 August 2009 pursuant to the announcement on 10 August 2009 regarding the finalisation of a new agreement with University of Western Australia (“UWA”) to replace the previous farm-in agreement whereby BPH now owns 100% of the intellectual property of the HLS5 project. After the peak of 40 cents on 13 August, the price retreated to 12 cents and then pursuant to the announcement on 19[th] September regarding the investment opportunity in Advent, the share price reached its recent high of 19 cents, having traded in a range of 12 to 13 cents in the 10 days prior to the announcement.

BPH Recent Share Price History:

The chart below represents the movement in share price of BPH listed Shares since March 2009:

==> picture [274 x 190] intentionally omitted <==

Source: asx.com.au

BioPharmica Limited Independent Expert’s Report Page 12

6.4.4 SCHEDULE OF RECENT ASX ANNOUNCEMENTS

Recent announcements since the lodgement of key announcements in August 2009 are summarised below:

Date	ASX Announcement
02/10/2009	Molecular Discovery Systems Spin Off and IPO
30/09/2009	Annual Report to shareholders
29/09/2009	Change of Director’s Interest Notice
29/09/2009	Appendix 3B
29/09/2009	Successful Completion of Shareholder Share Purchase Plan
21/09/2009	Extension of Shareholder Share Purchase Plan
18/09/2009	BPH Signs Option Deed with Advent Energy
16/09/2009	Shareholder Update - Advent Energy Limited
15/09/2009	New IPO Intended for BPH and Investment Overview
11/09/2009	BPH Granted New Investment Opportunity
11/09/2009	Trading Halt
31/08/2009	Initial Director’s Interest Notice
31/08/2009	Director Appointment
26/08/2009	GBA: Clarification of Grandbridge Investments
26/08/2009	Final Director’s Interest Notice
26/08/2009	Resignation of Director
24/08/2009	Invitation to Participate BioPharmica Share Purchase Plan
24/08/2009	Cleansing Statement Share Purchase Plan
20/08/2009	BioPharmica - Promising results for Cortical Dynamics
19/08/2009	Preliminary Final Report and Audited Financial Statements
14/08/2009	Change of Director’s Interest Notice
12/08/2009	BioPharmica Share Purchase Plan Indicative Timetable
12/08/2009	BioPharmica Shareholder Share Purchase Plan
11/08/2009	US Patent Granted for HLS5
10/08/2009	New Anti-Mitotic Drug Development for Pre-Clinical Testing
10/08/2009	BPH Confirms 100% Ownership of New Anti Cancer Agents

6.4.5 MARKET VALUE

In the ten days prior to the date of the announcement, BPH’s share price fluctuated between 12 and 13 cents which included the benefit of the announcements in August 2009 regarding ownership of the HLS5 asset and related spin off of MDS. In the four months prior to these announcements, BPH’s share price fluctuated between 2 cents and 4 cents.

The valuation per share determined in Section 6.3.1 is not inconsistent with this market value range having regard to the additional upside factored into the recent share price in respect of the HLS5 asset announcements.

BioPharmica Limited Independent Expert’s Report Page 13

7. VALUATION OF BIOPHARMICA LIMITED SHARES POST PROPOSED TRANSACTION

7.1 COMPONENTS OF THE PROPOSED TRANSACTION

The key components of the Proposed Transaction comprise the investment of up to $14 million in two tranches into Advent, subject to the ASX Listing Rules.

7.2 N ET ASSET VALUATION POST PROPOSED TRANSACTION

In establishing the value of BPH following completion of the Proposed Transaction, the net asset backing per share has been determined based upon the adjusted position as at 30 June 2009 as referred to in Section 6.3.1 of this Report, as further adjusted for the investment in Advent.

Valuation assessments were then carried out on assets and liabilities, with the following matters being of particular relevance:

a) Fair Value of Investment in Advent

This is addressed in Sections 7.2.2 to 7.2.5 below and provides evidence that in our view no impairment adjustment to the carrying value of the proposed investment in Advent is necessary.

b) MDS Spin-off

As referred to in Section 6.3 above, we have assumed the spin-off of MDS will not materially impact on the value of an individual’s shareholding (as the combined value of BPH and MDS post spin-off has been assumed to not be materially different to BPH pre spin-off).

c) Cash Assets

For the purposes of this Report, we have assumed that the first tranche of investment of $7 million in respect of Resolution 3 will be funded from the proposed capital raising the subject of Resolution 4 of the attached Notice of Meeting. In order to demonstrate the impact on the Company’s cash and overall Balance Sheet, we have also provided a further Balance Sheet which reflects the taking up of the second tranche of investment. In addition, we have assumed the full placement capacity the subject of Resolution 4 is taken up at a price of 12.5 cents per share. Please also refer to Note (iii) of the Notes and Assumptions to the Adjusted Balance Sheet as at 30 June 2009 Post Proposed Transaction in Section 7.2.1 below.

d) Unexercised Options

It has been assumed that none of the BPH Options referred to in Section 6.4.2 and the attached Notice of Meeting are exercised. In the event that some, or all, of these are exercised, this will increase the available funds by the payment of the applicable exercise price and the issued share capital and the computation of net asset backing per share would need to be adjusted accordingly.

• d) No adjustment has been made in respect of any potential taxation consequences in respect of the Proposed Transaction.

This has resulted in a net asset backing per share of 8.05 cents post Proposed Transaction, as calculated below:

BioPharmica Limited Independent Expert’s Report Page 14

7.2.1 Adjusted Balance Sheet as at 30 June 2009 Post Proposed Transaction

	Assets Current Assets Cash Trade Receivables Financial Assets Other current assets Total current assets Non Current Assets Financial Assets Investment in Advent Intangibles PPE Total Non current assets Total Assets Liabilities Current liabilities Payables Financial Liabilities Provisions Total current liabilities Total Liabilities Net Assets Equity Share Capital Option reserve Retained Earnings Minority Equity Interest Total Equity	Audited 30.06.09 $ 372,268 171,914 88,149 18,843 651,174 48,949 0 809,954 5,549 864,452 1,515,626 405,683 384,415 9,040 799,138 799,138 716,488 7,308,660 294,645 (6,905,542) 18,725 716,488	SSP Adjusted 30.06.09 $ 3,117,268 171,914 88,149 18,843 3,396,174 48,949 0 809,954 5,549 864,452 4,260,626 405,683 384,415 9,040 799,138 799,138 3,461,488 10,053,660 294,645 (6,905,542) 18,725 3,461,488	Adjusted Post 1st Tranche $ 8,115,059 171,914 88,149 18,843 8,393,965 48,949 7,000,000 809,954 5,549 7,864,452 16,258,417 405,683 384,415 9,040 799,138 799,138 15,459,279 22,051,451 294,645 (6,905,542) 18,725 15,459,279	Adjusted Post 2nd Tranche Notes $ 1,115,059 (ii)-(iv) 171,914 88,149 18,843 1,393,965 48,949 14,000,000 (iii), (a) 809,954 (v) 5,549 14,864,452 16,258,417 405,683 384,415 9,040 799,138 799,138 15,459,279 22,051,451 (iii) 294,645 (6,905,542) 18,725 15,459,279
	Shares on issue Net Asset Backing per share (undiluted)	74,980,016 0.0096	95,982,330 0.0360	191,964,660 0.0805	191,964,660 (vi) 0.0805 (d)

The above Balance Sheets should be read in conjunction with the attached Notes and Assumptions below and the matters referred to in Section 7.2 above.

BioPharmica Limited Independent Expert’s Report Page 15

Notes and Assumptions

• (i) The adjusted Balance Sheet comprises the audited consolidated balance sheet at 30 June 2009, as adjusted for completion of the SSP and the Proposed Transaction.

(ii)	The Post transaction cash balance comprises:	$
	Consolidated Cash Balance as at 30 June 2009	372,268
	SSP: 21,002,314 Shares at 13.07 cents each	2,745,000
	Capital raised pursuant to Resolution 4:
	95,982,330 at 12.5 cents each (see (iii) below)	11,997,791
	Purchase of shares in Advent–1stTranche	(7,000,000)
		---------------
	Cash Balance Post First Tranche	8,115,059
	Purchase of shares in Advent–2ndTranche (see (iv) below)	(7,000,000)
		---------------
	Cash Balance Post Transaction	1,115,059
		---------------

• (iii) The issue price for the Shares and free-attaching Options the subject of Resolution 4 has been assumed to be 12.5 cents. In the event that BPH’s share price falls below 15.65 cents, the issue price of Shares will be less than 12.5 cents and commensurately less cash will be raised.

• (iv) In the event that the Company determines not to take up all of its entitlement in Advent, then less funds will be expended in this respect.

• (v) We have assumed that no impairment adjustments are necessary. We note that the Company has only very recently lodged its BPH 2009 Annual Report.

• (vi) The total number of Shares on issue at completion of the Proposed Transaction is set out below.

	Number of Shares issued
Existing Shares on issue_pre_Proposed Transaction	74,980,016
Shares issued pursuant to SSP	21,002,314
As approved by Resolution 4	95,982,330
	----------------
Total forecast number of Shares on issue
_Post_Proposed Transaction	191,964,660
	----------------

7.2.2 Estimated value of Advent consideration

As referred to in Section 3 above, the consideration for the Proposed Transaction comprises the acquisition of up to $14 million of shares in Advent, subject to the ASX Listing Rules. BPH proposes to subscribe for $7 million of Advent shares initially, whilst retaining the option to subscribe for a second tranche of up to $7 million of Advent shares at a later stage. Hence the deemed issue price is 50 cents per share.

For the purposes of estimating the likely value of these shares and any applicable impairment that should be taken into account in assessing the carrying value of the investment in Advent, we have reviewed Advent’s Balance Sheet to 30 June 2009, its current projects, the Balance Sheet of its holding company, MEC Resources Ltd (ASX Code: MMR) (“MEC”), recent announcements made by MEC, together with the Conditional Funding Agreement with Talbot Group Holdings. These are addressed in Sections 7.2.3 to 7.2.5 below.

BioPharmica Limited Independent Expert’s Report Page 16

• 7.2.3 Background to Advent and its Projects

Included below is information on Advent and its projects, based on information extracted from MEC’s 2009 Annual Report:

Advent is an unlisted oil and gas exploration and development company. Advent has acquired Asset Energy Pty Ltd and a shareholding in Central Petroleum Ltd (ASX: CTP) from MEC for an equity consideration in Advent.

In October 2008, Advent announced a $7 million funding commitment from Talbot Group Holdings, and has recently engaged an adviser to complete Advent’s capital requirements. PEP 11 Oil and Gas Permit

Advent is pursuing its option to increase its current 25% interest to an 85% interest in Petroleum Exploration Permit PEP 11, an oil and gas permit located in the Offshore Sydney Basin from Bounty Oil and Gas NL (Bounty). Advent’s interest in PEP 11 is via its wholly owned subsidiary Asset Energy Pty Ltd.

The Offshore Sydney Basin is an untested but proven petroleum basin situated along the heavily populated and industrialised central coast of New South Wales. No drilling has taken place in the basin despite a significant number of wells drilled in the adjacent Onshore Sydney Basin which have flowed gas or encountered oil shows.

Covered by PEP 11, a 200km long, 8,100km[2] permit, the Offshore Sydney Basin is a significant exploration area with large scale structuring and potentially multi-Tcf gas and condensatecharged Permo-Triassic reservoirs.

Advent commissioned specialists from the Nanjing Institute to integrate the PEP11 1981, 1991 and 2004 seismic data for the first time. Six prospects and leads were identified which Advent estimates could comprise up to 16.3 (P10) Trillion cubic feet (Tcf) of prospective recoverable gas resources. The P50 and P90 estimated prospective recoverable resources are 5.1 Tcf and 1.2 Tcf respectively. The largest of these is the Fish Prospect, which alone has the potential to hold (at the P10 level) up to 9.2 Tcf prospective recoverable gas resources.

The Baleen prospect is located in the northern sector of the Permit in an average depth of 125m of water and is situated on the crest of the Offshore Uplift on a thrusted anticline.

Independent confirmation of a thermogenic hydrocarbon source in the offshore Sydney Basin was revealed at the Petroleum Exploration Society of Australia’s (PESA) Eastern Australasian Basins Symposium, 14-17 September 2008. The confirmation of this type of hydrocarbon gas seepage is a significant development for Advent, as active seeps of the nature reported are considered by experts in this field to occur in basins now actively generating hydrocarbons and/or that contain excellent migration pathways.

The prospectivity of this proven petroleum basin has been further enhanced by the confirmation of the presence of apparent ongoing hydrocarbon seeps. Furthermore, in an ongoing review of its exploration data for the PEP11 project, Advent has interpreted significant new seismically indicated gas features. Key indicators of hydrocarbon accumulation features have been interpreted from the ongoing review of the 2004 seismic data. Seismic features have been independently validated and revealed through collaboration with the CSIRO in Perth, Western Australia, and with Mr Timothy Berge, a consultant geophysicist whom has published widely in this area and possesses extensive international experience with multinational oil companies.

In additional prospectivity studies of PEP11, Advent has recently interpreted significant new prospective multi-Tcf stratigraphic plays. Mapped prospects and leads within the Offshore Sydney Basin are generally located less than 50km from Australia’s largest energy market, the Sydney-Wollongong-Newcastle greater metropolitan area. This area has a population of approximately 5m.

BioPharmica Limited Independent Expert’s Report Page 17

Traditionally, all natural gas used in New South Wales has been piped in from South Australia and the Bass Strait. However, studies by the Australian Bureau of Agricultural and Resource Economics (ABARE) and the Australian Petroleum Production and Exploration Association (APPEA) state that those sources may not be able to meet the demand for gas in the medium to longer term.

During the 2nd quarter of 2009, Advent invited drilling rig companies to tender for the provision of a jack-up drilling rig to drill the Fish Prospect. Evaluation of the tenders received is continuing, as are discussions regarding the various sub-letting options of drilling rigs currently operating in the vicinity of PEP11. Environmental approvals are in the process of being lodged, whilst the conceptual well engineering design and drill stem testing planning has been completed by Du-El Drilling Services.

Advent is in discussions with possible farm-in partners and is highly optimistic of commencing drilling in PEP 11 during 2010.

On 24 September 2009 MEC provided ASX an update on progress to a drilltest of PEP 11 offshore Sydney Basin advising that Advent:

� is currently in advanced negotiations to secure a drilling rig and has lodged environmental applications for drilling in preparation for a drill test which is expected for the first half of the calendar year 2010; and

� has received a report from the Commonwealth Scientific and Industrial Research Organisation (“CSIRO”) which provides independent reporting of direct hydrocarbon indicators showing on seismic data in PEP 11;

� The report which details amplitude versus offset (AVO) processing and review of seismic data acquired in 2004 reports the apparent presence of direct hydrocarbon indicators (DHI) on seismic lines;

� The DHI have initially been observed on seismic line B4-15 along the main structural trend and are adjacent to the previously identified Baleen Prospect. They include high amplitude bright spot reflections, attenuation of high frequencies in instantaneous frequency plots, and bright spot features in Root Mean Squared amplitude plots.

These anomalous features are considered prime indicators for the occurrence of hydrocarbons and Advent believes that these DHI are highly encouraging for the prospectivity of PEP11 in the offshore Sydney Basin.

A detailed review of the CSIRO report is currently being compiled.

Western Australia – Exmouth Sub-Basin

Advent has an 8.3% interest (Permit Operator: Strike Oil Ltd) in a shallow, near shore permit in the Exmouth sub-Basin region of the Carnarvon Basin, which contains the undeveloped Rivoli Gas Field discovery. The Department of Defence is considering a proposal to supply gas from the Rivoli Gas Field to its communications station located north of Exmouth, following completion of the independent Front End Engineering Design study during the final quarter of 2007. In the meantime, the Department of Defence continues to fund further work including the gathering of environmental information to ensure an early and comprehensive stakeholder engagement upon project sanction.

Discussions between the Department of Defence and the Rivoli Joint Venture regarding the potential future energy supply had been postponed until the Department of Defence’s White Paper was produced. Advent is optimistic that discussions may now continue during the last half of 2009.

Northern Perth Basin

In February 2009, Advent farmed-out 100% of EP 419 to Exoma Energy Ltd. EP 419 covers 559km2 on the north eastern side of the Perth Basin. Advent has retained a 3% royalty on future profitable production from EP 419.

BioPharmica Limited Independent Expert’s Report Page 18

South Australia – Cooper Basin

Advent has a conditional non-exclusive farm-in agreement to acreage in the South Australian Cooper Basin with Victoria Petroleum N.L., Impress Energy Ltd and Roma Petroleum N.L. The agreement covers the Catalina block in Petroleum Exploration License (“PEL”) 111 situated in the Western Cooper basin of South Australia. The conditional agreement enables Advent to earn up to a 50% interest in the Catalina block in this PEL.

– Northern Territory/Western Australia Bonaparte Basin

Advent holds EP 386 and RL 1 in the onshore Bonaparte Basin in Northern Australia. The Bonaparte Basin is a hydrocarbon-bearing sedimentary basin straddling the border between the Northern Territory (NT) and Western Australia (WA). Most of the basin is located offshore, covering 250,000 square kilometres, compared to just over 20,000 square kilometres onshore.

Advent holds 100% of Exploration Permit EP 386 (4,760 square kilometres in area) which covers the entire Western Australian section of the onshore Bonaparte Basin. Since 1960 twelve wells have been drilled in or near EP 386 and only sixteen in the whole of the onshore basin. Although no commercial fields have yet been discovered, six exploration wells are classified as gas discoveries. The tenements contain five sub-commercial gas fields which could be advanced to commercial status with additional work, in particular the Garimala Gas Field which may have an areal extent of more than 10km[2 ] and could trap more than 25 Bcf OGIP. Three modest gas discoveries have been made along the western edge of the basin, in an area characterised by a structural-stratigraphic trapping and active migration known as the Waggon Creek Embayment.

In the NT, Advent holds 100% of Retention Lease RL-1 (166 square kilometres in area), which covers the Weaber Gas Field and two related prospects, Weaber North and Weaber Southwest. Geoscience Australia has estimated that the Weaber field contains 4.3 million barrels of oil equivalent.

Advent received a report from Lan Nguyen (Tanvinh Resources Pty Ltd) during the period. Tanvinh Resources who have advised that there is strong evidence that there is considerable upside potential in the area if formation damage can be avoided. Advent is highly encouraged by this review that suggests commercial flow rates could be achieved from the existing gas accumulations and that stratigraphic traps are present associated with the existing discoveries which could provide additional upside potential to the hydrocarbon resources/reserves previously identified within EP386 and RL1. As a result, Advent has initiated a multi-phased study to address methods of minimising formation damage and significantly improve gas flow rates.

Central Australia – Amadeus, Pedirka, Basins

Advent also holds a large shareholding in an ASX-listed Australian onshore hydrocarbon explorer Central Petroleum Ltd (ASX: CTP). In December 2008, Central Petroleum Ltd announced the acquisition of a farmin partner (PXA) by BG Group subsidiary Queensland Gas Company (QGC) for over A$18 million to entitle QGC to contribute to the exploration of Central Petroleum Ltd’s permits to earn a 20% interest in those permits. Advent has reserved its right to claim damages from Central Petroleum Ltd and its subsidiaries following repudiatory breach of contract regarding farmin by Advent to Central’s permits.

CTP holds exploration tenements that cover approximately 253,000km[2] of central Australia: the largest prospective consolidated and under-explored onshore acreage in Australia.

NB - The geological information supplied above has been based on information provided by geologists who have had in excess of five years experience in their field of activity. All Mineral Resource and Reserve Statements have been previously published by the companies concerned. Resources quoted in this section equal 100% of the resource and do not represent MEC’s investees’ equity share.

BioPharmica Limited Independent Expert’s Report Page 19

7.2.4 (Unaudited) Advent Balance Sheet as at 30 June 2009

Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets Intangibles Capitalised exploration costs Financial assets Property Plant and Equipment Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Provisions Total Current Liabilities Non-Current Liabilities Other financial liabilities Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Option Reserve Accumulated losses Total Equity Total number of shares on issue at 30 June 2009 Net Asset Backing per share	Consolidated 2009 $ 2008 $	Parent 2009 $ 2008 $
	935,965 466,082 52,117 10,975 988,082 477,057 22,674 22,674 1,626,589 1,680,647 628,128 1,687,500 170 - 2,277,561 3,390,821 3,265,643 3,867,878 249,248 93,908 81,844 81,844 331,092 175,752	935,604 455,468 52,017 10,054
		987,621 465,522
		22,674 22,674 945,812 999,930 1,288,187 2,357,562 170 -
		2,256,843 3,380,166
		3,244,464 3,845,688
		249,036 93,908 81,844 81,844
		330,880 175,752
	2,111,022 507,654 2,111,022 507,654	2,067,566 485,464
		2,067,566 485,464
	2,442,114 683,406 823,529 3,184,472 4,249,792 4,249,792 111,510 5,225 (3,537,773) (1,070,545) 823,529 3,184,472 88,836,240 0.009	2,398,446 654,503
		846,018 3,184,472
		4,249,792 4,249,792 111,510 5,225 (3,515,284) (1,070,545)
		846,018 3,184,472

BioPharmica Limited Independent Expert’s Report Page 20

As at 30 June 2009, MEC had an interest in 73.96% of the ordinary shares capital of Advent Energy Limited and Asset Energy Proprietary Limited.

We note that Advent’s principal assets prior to the Proposed Transaction comprise Exploration and Development expenditure. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. In determining the net realisable value of these exploration assets, we have considered available information regarding its key projects which are referred to in Section 7.2.3 of this Report.

• 7.2.5 Review of MEC Balance Sheet

MEC’s parent entity Balance Sheet as at 30 June 2009 is summarised below and comprises:

	$
Cash	544,661
Loans to Advent/Asset	1,540,048
Listed Shares	188,889
Cash and cash equivalents	544,661
Other Assets	273,628
Less Liabilities	(158,317)
	----------------
Total Net Assets excluding Advent Investment	2,388,909
Investment in Advent	3,285,062
	----------------
Total Net Assets	5,673,971
	----------------
Current Market Capitalisation1	40,471,203

1 Based on 109,381,630 shares on issue at 7 October 2009 at the last price traded of 37 cents.

After deducting MEC’s other net assets of $2,388,909 (which are not understood to have changed materially since 30 June 2009), this gives rise to an effective current market value of its 73.96% investment in Advent (and its subsidiary) of $38,082,294.

This equates to a total market value of $51,491,993 prior to the additional proposed share issues to BPH the subject of this Report and the conditional investment agreement with Talbot Group Holdings.

The conditional investment agreement with Talbot was signed on 10 November 2008 and comprises an investment of $7m for 14m shares at 50 cents each which in our opinion provides further supporting evidence of the appropriateness of the issue price of 50c per share for the shares the subject of the Proposed Transaction. In particular it is noted that this comprises a recent arm’s length transaction.

In our view this provides appropriate evidence that the carrying value of an investment of between 9.7% and 19.4% in Advent does not require any impairment adjustment.

This is further supported by a review of MEC’s shares which since 24 August 2009 have traded in a range of between 37 cents and 83 cents, as shown in the table below.

BioPharmica Limited Independent Expert’s Report Page 21

MEC Recent Share Price History:

The chart below represents the movement in share price of MEC listed shares since March 2009:

==> picture [283 x 195] intentionally omitted <==

Source: asx.com.au

7.3 Oil and Gas Industry

7.3.1 Industry Overview

Production/consumption

Australia’s oil and condensate production for 2007/08 totalled 161.6 million barrels (or 443 thousand barrels per day). Without future discoveries, production could be less than 30 per cent of demand by the year 2025. Production of oil and condensate in Western Australia and waters adjacent to that state account for more than 70 per cent of Australia’s crude oil and condensate production.

Gas resources are estimated to exceed more than 100 years of supply at current levels of consumption, while oil reserves total less than 7 years based on current levels of production. Petroleum accounted for 54 per cent of Australia’s total primary energy demand in 2005/06, of which oil was 33 per cent and gas was 21 per cent. The share attributable to gas is expected to rise to 24 per cent by the year 2019/20.

Exports/imports

Australia exported 100.6 million barrels of crude oil and condensate in 2007/08 and imported 163.5 million barrels for refinery feedstock. Exports of petroleum and petroleum products were valued at $20 billion for 2007/08, while imports were valued at $30.4 billion. Australia has been in a trade deficit position since 2003/04, which could rise to exceed $20 billion per annum within the next decade. 44% of Australia’s gas production is exported in the form of liquefied natural gas.

Economic Significance

Total taxation payments made by the industry currently exceed more than $6 billion per annum. Each new two-train LNG project has the potential to generate more than $1.5 billion per year in future taxation revenues for governments in Australia. The industry is estimated to employ more than 20,000 Australians, with many more involved in service and support industries. Funds invested on petroleum exploration have risen rapidly over the last three years and totaled $3 billion in 2007/08. However, the number of exploration wells drilled has remained flat.

BioPharmica Limited Independent Expert’s Report Page 22

Gas – A Clean Green Fuel

Gas uses between 17 and 50 per cent less water than coal in the generation of electricity in Australia, while gas used for domestic power generation is estimated to emit as little as 30-50 per cent of the carbon dioxide emitted by coal.

Changes to operating environment

A number of major changes have occurred in the industry’s operating environment since 2007. Most prominent has been the global financial crisis and rapid downturn in the world economy. Consequences have included a major fall in world oil prices from a peak of almost US$150 per barrel in July 2008 to less than one quarter of that by year-end. This, after five years of rapid increases in industry costs, is squeezing margins and industry profitability and reducing oil and gas demand.

Aside from the economic environment, the election of new governments nationally and in Western Australia has created a wave of policy changes and reviews in addition to actions for addressing impediments to investment and growth in this industry and elsewhere. Of particular relevance have been the steps by government to respond to community concerns about climate change and to reduce uncertainty about the costs and nature of future greenhouse policies and programs. Government has also recognised the need to ensure that Australia’s tax regime is sufficiently competitive to attract increased investment in the downstream gas industry, including LNG. Approvals processes and regulation have also come under scrutiny with reviews initiated nationally and in Western Australia.

Source: Australian Petroleum & Exploration Association Limited

7.3.2 Short Term Energy Outlook

Global Petroleum Overview:

Sustained economic growth in China and signs of a turnaround in other Asian countries continue to fuel expectations of a global recovery in world oil consumption. The US-based Energy information Administration (EIA) has revised its expectations for world oil consumption upwards by 0.2 million barrels per day (bbl/d) for the remainder of 2009 and for 2010, in large part because of the revision to Asian growth. However, EIA has not revised its West Texas Intermediate (WTI) oil price projections upward because ample oil supplies remain on the market. Oil inventories remain high and EIA expects oil production by the Organisation of the Petroleum Exporting Countries (OPEC) to increase as well.

Global Petroleum Consumption:

Global oil consumption declined by 3.2 million bbl/d in the first half of 2009 compared with yearearlier levels. Members of the Organisation for Economic Cooperation and Development (OECD) accounted for most of the decline, as non-OECD oil consumption was down by about 0.4 million bbl/d during that period. Preliminary data indicate that oil consumption in the third quarter of 2009 was 1.2 million bbl/d below year-earlier levels. EIA’s current macroeconomic outlook assumes that the world economy begins to recover at the end of 2009, led by non-OECD Asia. As a result, EIA expects world oil consumption to grow in the fourth quarter of 2009 compared with yearearlier levels, which would be the first such growth in five quarters. EIA projects world oil consumption growth of 1.1 million bbl/d in 2010, with almost all of the growth occurring in the nonOECD countries.

Non-OPEC Supply:

Total non-OPEC supply averaged 50.1 million bbl/d in the first half of 2009, about 0.2 million bbl/d higher than in the first half of 2008. The largest amount of growth came from South America and the former Soviet Union, which was offset in part by a decline in European production.

BioPharmica Limited Independent Expert’s Report Page 23

Non-OPEC supply is expected to increase by 0.6 million bbl/d in the second half of 2009 and by 0.2 million bbl/d in 2010, compared with year-earlier levels. Over the forecast period, higher output from Brazil, the United States, Azerbaijan, Kazakhstan, and Canada should offset falling production in Mexico and the North Sea.

OPEC Supply:

OPEC crude oil production was 28.7 million bbl/d in the first half of 2009, down 2.6 million bbl/d from year-earlier levels. EIA expects OPEC production to rise gradually over the second half of the year in response to an anticipated rebound in demand, unless prices fall sharply from current levels. OPEC is scheduled to meet in Angola on December 22 to reassess the market situation. EIA projects OPEC crude oil production to climb to 29.3 million bbl/d in the second half of 2009, and then average 29.2 million bbl/d in 2010.

Global Petroleum Inventories:

Based on revised data, OECD commercial oil inventories stood at 2.76 billion barrels at the end of the second quarter of 2009. At 61 days of forward cover, OECD commercial inventories were well above average levels for that time of year. EIA expects OECD oil inventories to remain higher than average historical levels throughout the forecast period.

Crude Oil Prices:

WTI oil prices averaged $69 per barrel in September, about $2 per barrel below the August average, as expectations of an economic recovery and higher oil consumption were weighed down by currently weak demand and high inventories. With prices near $70 per barrel, OPEC agreed to maintain its existing production targets, as expected, at its meeting in September.

Source: Energy information Administration - Short Term Energy Outlook released 06.10.09.

8. ASSESSMENT AS TO FAIRNESS AND REASONABLENESS

• 8.1 Assessment as to Fairness

As noted in Section 5 of this Report, an offer is considered "fair" if the value of the consideration being offered is equal to, or greater than, the value of the securities that are the subject of the offer. MGICF's assessment as to the fairness of the Proposed Transaction is set out below:

MGIBPCS valuation of BPH share	MGIBPCS valuation of BPH share after
prior to the Proposed Transaction	completion of the Proposed Transaction
3.6 cents	8.05 cents

After consideration of the above, the Proposed Transaction is considered to be fair to the nonassociated shareholders of BPH as the preferred value of a share after completion of the Proposed Transaction is higher than the current value of a BPH share.

• 8.2 Assessment as to Reasonableness

ASIC Regulatory Guide 111 states that an offer is reasonable if it is fair. Under this criterion as the value of BPH Shares after completion of the Proposed Transaction is greater than their value prior thereto, the offer is reasonable. There are a number of other relevant factors to be considered in assessing the reasonableness of the Proposed Transaction. These factors are set out below as advantages and disadvantages.

BioPharmica Limited Independent Expert’s Report Page 24

8.2.1 Advantages and Disadvantages of the Proposed Transaction proceeding:

Advantages of the Proposed Transaction proceeding

• The Proposed Transaction will give BPH the opportunity to access Advent’s range of hydrocarbon exploration permits with a focus on near term production potential with preexisting infrastructure and exploration upside;

• Advent is considered by BPH to possess the requisite ability to properly manage and exploit the projects held by the company, with drilling scheduled for early 2010;

• The outlook for the Oil and Gas industry provides a promising platform for the ongoing development of Advent’s core assets;

• Advent’s investment agreement with Talbot Holdings provides additional capital, thereby mitigating BPH’s exposure;

• As Advent is a subsidiary of MEC Resources, a company listed on ASX, details of Advent’s projects and progress have been included in MEC’s continuous disclosure obligations since MEC’s initial investment in Advent;

• Despite the fact that Advent is not currently listed on ASX, having regard to the nature and composition of the assets, the present composition of the Advent Board, MEC’s current buoyant share price (indicative of the market’s view of Advent, given it is MEC’s cornerstone investment), a future listing on ASX is possible. In addition, Advent’s key assets are potentially in a readily disposable form;

• Funding for the Proposed Transaction is predominantly expected to be derived from the proposed capital raising the subject of Resolution 4 of the Notice of Meeting which will expand the Company’s Equity base and ensure that the Company continues to have minimal Debt exposure;

Advantages of the Proposed Transaction proceeding (continued)

• In the event that the upside opportunities in Advent do not prove to be successful, BPH does not have to proceed with the second tranche investment in Advent; and

• The investment in Advent provides diversification to the range of existing biotechnology investments held by BPH, thereby providing the Company with a greater spread of industry risk.

Disadvantages of the Proposed Transaction proceeding

• The Company’s available cash reserves will be significantly reduced;

• Existing shareholders’ interest in the Company will be diluted as a result of the issue of Shares to fund the Proposed Transaction;

• If the Company wishes to proceed with its second tranche investment of up to a further $7 million, it will have to substantially utilise its placement capacity the subject of Resolution 4 which will cause further dilution of existing shareholders’ interests;

• The number of Shares to be issued to raise the necessary capital to fund the second tranche investment of up to a further $7 million is predicated in this Report on an issue price of 12.5 cents per share. In the event that BPH’s share price falls below 15.65 cents, the issue price of Shares will be less than 12.5 cents, hence less capital will raised and this could potentially give rise to funds being needed to be raised via an alternative arrangement which may be on less favourable terms and potentially lead to further dilution of existing shareholders’ interests;

BioPharmica Limited Independent Expert’s Report Page 25

Disadvantages of the Proposed Transaction proceeding (continued)

• The shares in Advent that BPH will acquire are not presently listed on ASX and hence the marketability of its investment in Advent is relatively illiquid; and

• Advent’s substantial portfolio of exploration permits will require access to substantial capital to further identify and develop these assets.

• 8.2.2 Advantages and Disadvantages of the Proposed Transaction not Proceeding:

Advantages of the Proposed Transaction not proceeding

• The Company will avoid the disadvantages referred to above; and

• The Company will have substantial available funds to expend on developing its other biotechnology assets.

Disadvantages of the Proposed Transaction not proceeding

• If the Proposed Transaction is not approved, it is likely that BPH will need to reconsider its future strategic direction and if it wishes to proceed, it will need to secure alternative funding, which is likely to necessitate further dilution of existing shareholders’ interests in the Company and may be on less favourable terms.

In our opinion, on balance, the advantages of approving the Proposed Transaction are greater than the disadvantages. These advantages arise both as a result of implementing the Proposed Transaction and of avoiding the disadvantages that may arise as a result of not implementing the Proposed Transaction. Accordingly, in our opinion, the Proposed Transaction is reasonable to the non-associated shareholders of BPH.

• 8.3 Conclusion

Based on the valuation of an BPH share and on the above assessment, MGICF is of the opinion that the Proposed Transaction is fair and reasonable to the non-associated shareholders of BPH.

9. SOURCES OF INFORMATION

In making our assessment as to whether the Proposed Transaction is fair and reasonable to the non-associated shareholders of BPH, we have reviewed relevant published available information and other unpublished information of the Company which is relevant in the circumstances. In addition, we have held discussions with the Company's Directors and management. Information we have received includes, but is not limited to the following:

• BPH's annual report for the year ended 30 June 2009;

• MEC's annual report for the year ended 30 June 2009;

• Advent’s draft annual report for the year ended 30 June 2009;

• Recent ASX announcements lodged by BPH;

• Recent ASX announcements lodged by MEC;

• Share Price data for BPH;

• Talbot Investment Agreement dated 10 November 2008;

• Information in the public domain;

• Discussions with Directors of BPH; and

• Draft Notice of Meeting and Explanatory Statement this Report will accompany.