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YPB Group Ltd ACN 108 649 421

NOTICE OF ANNUAL GENERAL MEETING

The Annual General Meeting of YPB Group Limited will be held via Zoom teleconference on Wednesday, 22 July 2020 commencing at 11 am (Sydney time).

YPB Group (the Company) advises Shareholders that the Meeting will be held in compliance with the Australian government’s restrictions on public gatherings.

Due to the COVID-19 situation, it is not possible for Shareholders to physically attend the Meeting. As a result, the Company strongly encourages all Shareholders to vote by directed proxy in lieu of attending the meeting in person. Proxy forms for the meeting should be lodged before 11 am (Sydney time) on 20 July 2020.

The Company has made arrangements for Shareholders who wish to remotely participate in the Meeting via electronic means. Those Shareholders should contact the Company by email [email protected] or by phone at (08) 6555 2950 to obtain further details of how to participate and vote at the Meeting by no later than 5 pm (Sydney time) 17 July 2020.

Shareholders can also submit and are encouraged to submit any questions in advance of the Meeting by emailing the questions to [email protected] by no later than 5 pm (Sydney time) 17 July 2020.

If the above arrangements with respect to the Meeting change, Shareholders will be updated via the ASX Market Announcements Platform and on the Company’s website at https://ypbsystems.com/

The business of the Meeting affects your shareholding and your vote is important. This Notice and the accompanying Explanatory Memorandum should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their stock broker, investment advisor, accountant, solicitor or other professional adviser prior to voting.

Should you wish to discuss any matter please do not hesitate to contact the Company Secretary by telephone on (08) 6555 2950.

YPB GROUP LTD

NOTICE OF ANNUAL GENERAL MEETING

Notice of Annual General Meeting

Notice is given that the Annual General Meeting of Shareholders of YPB Group Limited (“ YPB ” or the “ Company ”) will be held at 11 am, on Wednesday, 22 July 2020 (Sydney time) via Zoom teleconference ( Annual General Meeting ).

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

The Directors have determined that, pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth), the persons eligible to vote at the Annual General Meeting are those who are registered Shareholders as at 5 pm (Sydney time) on Monday, 20 July 2020.

Terms used in this Notice are defined in the Glossary.

AGENDA

Financial Statements

To receive and consider the financial statements of the Company and its controlled entities for the period ended 31 December 2019 and the related Directors' Report, Directors' Declaration and Audit Report.

ORDINARY BUSINESS

Resolution 1

ADOPTION OF DIRECTORS’ REMUNERATION REPORT

To consider and, if thought fit, to pass the following resolution as a non-binding resolution :

“That, for the purposes of section 250R(2) of the Corporations Act and for all other purposes, approval is given for the adoption of the Remuneration Report.”

Voting Exclusion Statement:

The Company will disregard any votes cast on this Resolution:

(a) by or on behalf of a member of the Key Management Personnel of the Company whose remuneration details are included in the Remuneration Report as contained in the Company’s annual financial report for the year ended 31 December 2019, or their Closely Related Parties (in any capacity); or
(b) as proxy by any person who is a member of the Key Management Personnel at the time of the Meeting, or by a Closely Related Party of any member of Key Management Personnel,

unless the vote is cast as proxy for a person who is entitled to vote on the Resolution and:

(c) it is cast in accordance with the direction on the Proxy Form specifying how the proxy is to vote on the Resolution; or
(d) it is cast by the Chair of the Annual General Meeting and the Proxy Form expressly authorizes the Chair exercise the proxy and vote as the Chairman decides even though the resolution is connected directly or indirectly with the remuneration of a Key Management Personnel and even

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though the Chair of the Annual General Meeting is a member of the Key Management Personnel.

Note: In accordance with section 250R(3) of the Corporations Act, the vote on Resolution 1 will be advisory only and will not bind the Directors of the Company.

The Chairman of the Annual General Meeting intends to vote all available proxies in favour of Resolution 1.

Resolution 2

RE-ELECTION OF DIRECTOR (MR GERARD EAKIN)

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

“That Mr Gerard Eakin, who retires in accordance with clause 60 of the Constitution and, being eligible offers himself for re-election as a Director of the Company, is hereby re-elected as a Director of the Company.”

The Chairman of the Annual General Meeting intends to vote all available proxies in favour of Resolution 2.

Resolution 3

RE-ADOPTION OF PERFORMANCE RIGHTS PLAN

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

“That, for the purposes of Listing Rule 7.2 (exception 13(b)) and for all other purposes, approval be given for the Company to re-adopt the PR Plan and for the issue of Performance Rights under the PR Plan (including to Directors) from time to time on the terms and conditions set out in the Explanatory Memorandum.”

Voting Exclusion Statement:

The Company will disregard any votes cast on this Resolution by or on behalf of any person who is eligible to participate in the PR Plan or an associate of those persons in respect of which approval is sought. However, this does not apply to a vote cast in favour of this Resolution by:

(a) a person as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with directions given to the proxy or attorney to vote on the Resolution in that way;
(b) the Chair of the Meeting as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with a direction given to the Chair to vote on the Resolution as the Chair decides; or
(c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:
(i) the beneficiary provides written confirmation to the Shareholder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting on the Resolution; and
(ii) the holder of votes on the Resolution in accordance with the directions given by the beneficiary to the holder to vote in that way.

The Chairman intends to vote all available proxies in favour of Resolution 3.

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Resolution 4

APPROVAL TO ISSUE SERVICE SHARES TO MR PHILIP WADE

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

“That, for the purposes of Listing Rule 10.11 and for all other purposes, approval be given for the Company to issue 25,600,000 Shares to Mr Philip Wade or a nominee of Mr Philip Wade as consideration for commercial advisory services provided to the Company and on the terms and conditions set out in the Explanatory Memorandum.”

Voting Exclusion Statement:

The Company will disregard any votes cast on this Resolution by or on behalf of Mr Wade and any other person who will likely obtain a material benefit as a result of the issuing of the Service Shares (except a benefit solely by reason of being a Shareholder) or any of their associates . However, this does not apply to a vote cast in favour of this Resolution by:

(a) a person as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with directions given to the proxy or attorney to vote on the Resolution in that way;
(b) the Chair of the Meeting as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with a direction given to the Chair to vote on the Resolution as the Chair decides; or
(c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:
(i) the beneficiary provides written confirmation to the Shareholder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting on the Resolution; and
(ii) the holder of votes on the Resolution in accordance with the directions given by the beneficiary to the holder to vote in that way.

The Chairman intends to vote all available proxies in favour of Resolution 4.

Resolution 5

APPROVAL OF ISSUE OF JFH SHARES, JFH OPTIONS AND INCREASE IN VOTING POWER

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

“That, for the purposes of item 7 of section 611 of the Corporations Act and for all other purposes, approval is given for:

(a) the Company to issue to J F Houston Holdings Pty Ltd (and/or their nominee) 600,000,000 Shares and 600,000,000 Options;
(b) upon the exercise of the Options, the Company to issue such number of Shares determined in accordance with the Options terms and conditions; and
(c) the acquisition by the Houston Parties of a relevant interest in the issued voting Shares of the Company otherwise prohibited by section 606(1) of the Corporations Act, by virtue of the issue of the Shares referred to in paragraphs (a) and (b),

with a resulting increase in the voting power of Houston Parties and its associates in the Company from 9% (at the date of this Notice) to a maximum of 46.7% (immediately following the issue of those Shares), and on the terms and conditions and in the manner set out in the Explanatory Memorandum accompanying this Notice."

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Voting Exclusion Statement:

The Company will disregard any votes cast on this Resolution by or on behalf of the Houston Parties and any other person who will obtain a material benefit as a result of the issue of Securities (except a benefit solely by reason of being a Shareholder) or any of their associates. However, this does not apply to a vote cast in favour of this Resolution by:

(a) a person as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with directions given to the proxy or attorney to vote on the Resolution in that way;
(b) the Chair of the Meeting as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with a direction given to the Chair to vote on the Resolution as the Chair decides; or
(c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:
(i) the beneficiary provides written confirmation to the Shareholder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting on the Resolution; and
(ii) the holder of votes on the Resolution in accordance with the directions given by the beneficiary to the holder to vote in that way.

The Chairman intends to vote all available proxies in favour of Resolution 5

Resolution 6

RATIFICATION OF PRIOR ISSUE OF PLACEMENT SHARES ISSUED

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

“That, for the purposes of Listing Rule 7.4 and for all other purposes, the issue of 100,000,000 Placement Shares be ratified on the terms and conditions set out in the Explanatory Memorandum.”

Voting Exclusion Statement:

The Company will disregard any votes cast on this Resolution by or on behalf of any persons that participated in the Placement or an associate to those persons in respect of which approval is sought. However, this does not apply to a vote cast in favour of this Resolution by:

(a) a person as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with directions given to the proxy or attorney to vote on the Resolution in that way;
(b) the Chair of the Meeting as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with a direction given to the Chair to vote on the Resolution as the Chair decides; or
(c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:
(i) the beneficiary provides written confirmation to the Shareholder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting on the Resolution; and
(ii) the holder of votes on the Resolution in accordance with the directions given by the beneficiary to the holder to vote in that way.

The Chairman intends to vote all available proxies in favour of Resolution 6.

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Resolution 7

RATIFICATION OF PRIOR ISSUE SHARES

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

“That, for the purposes of Listing Rule 7.4 and for all other purposes, the issue of 6,000,000 Shares to EverBlu Capital Pty Ltd be ratified on the terms and conditions set out in the Explanatory Memorandum.”

Voting Exclusion Statement:

The Company will disregard any votes cast on this Resolution by or on behalf of EverBlu Capital Pty Ltd or its associates. However, this does not apply to a vote cast in favour of this Resolution by:

(a) a person as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with directions given to the proxy or attorney to vote on the Resolution in that way;
(b) the Chair of the Meeting as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with a direction given to the Chair to vote on the Resolution as the Chair decides; or
(c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:
(i) the beneficiary provides written confirmation to the Shareholder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting on the Resolution; and
(ii) the holder of votes on the Resolution in accordance with the directions given by the beneficiary to the holder to vote in that way.

The Chairman intends to vote all available proxies in favour of Resolution 7.

Resolution 8

RATIFICATION OF PRIOR ISSUE OF SHARES

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

“That, for the purposes of Listing Rule 7.4 and for all other purposes, the issue of 11,666,667 Shares to Golden Triangle Capital Pty Ltd be ratified on the terms and conditions set out in the Explanatory Memorandum.”

Voting Exclusion Statement:

The Company will disregard any votes cast on this Resolution by or on behalf of Golden Triangle Capital Pty Ltd or its associates. However, this does not apply to a vote cast in favour of this Resolution by:

(a) a person as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with directions given to the proxy or attorney to vote on the Resolution in that way;
(b) the Chair of the Meeting as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with a direction given to the Chair to vote on the Resolution as the Chair decides; or
(c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:
(i) the beneficiary provides written confirmation to the Shareholder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting on the Resolution; and

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NOTICE OF ANNUAL GENERAL MEETING

(ii) the holder of votes on the Resolution in accordance with the directions given by the beneficiary to the holder to vote in that way.

The Chairman intends to vote all available proxies in favour of Resolution 8.

Resolution 9

APPROVAL OF ISSUE OF SHARES

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

ordinary resolution :

“That, for the purposes of Listing Rule 7.1 and for all other purposes, approval be given for the Company to issue 26,333,333 Shares at an issue price of $0.003 per Share to Famile Pty Ltd on the terms and conditions set out in the Explanatory Memorandum.”

Voting Exclusion Statement:

The Company will disregard any votes cast on this Resolution by or on behalf of Famile Pty Ltd or any other person who will obtain a material benefit as a result of the proposed issue (except a benefit solely by reason of being a Shareholder) or its associates. However, this does not apply to a vote cast in favour of this Resolution by:

(a) a person as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with directions given to the proxy or attorney to vote on the Resolution in that way;
(b) the Chair of the Meeting as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with a direction given to the Chair to vote on the Resolution as the Chair decides; or
(c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:
(i) the beneficiary provides written confirmation to the Shareholder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting on the Resolution; and
(ii) the holder of votes on the Resolution in accordance with the directions given by the beneficiary to the holder to vote in that way.

The Chairman intends to vote all available proxies in favour of Resolution 9.

Resolution 10

APPROVAL OF ISSUE OF SHARES

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

ordinary resolution :

“That, for the purposes of Listing Rule 7.1 and for all other purposes, approval be given for the Company to issue 118,095,238 Shares at an issue price of $0.003 to Hong Sian (Adrian) Tan on the terms and conditions set out in the Explanatory Memorandum.”

Voting Exclusion Statement:

The Company will disregard any votes cast on this Resolution by or on behalf of Hong Sian (Adrian) Tan or any other person who will obtain a material benefit as a result of the proposed issue (except a benefit solely by reason of being a Shareholder) or their associates. However, this does not apply to a vote cast in favour of this Resolution by:

(a) a person as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with directions given to the proxy or attorney to vote on the Resolution in that way;

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(b) the Chair of the Meeting as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with a direction given to the Chair to vote on the Resolution as the Chair decides; or
(c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:
(i) the beneficiary provides written confirmation to the Shareholder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting on the Resolution; and
(ii) the holder of votes on the Resolution in accordance with the directions given by the beneficiary to the holder to vote in that way.

The Chairman intends to vote all available proxies in favour of Resolution 10.

Resolution 11

APPROVAL TO ISSUE UP TO $3,000,000 WORTH OF SHARES

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

“That, for the purposes of Listing Rule 7.1 and for all other purposes, approval be given for the Company to issue up to the number of Shares determined by A$3,000,000 divided by the Top-up Placement Issue Price on the terms and conditions set out in the Explanatory Memorandum.”

Voting Exclusion Statement:

The Company will disregard any votes cast on this Resolution by or on behalf of a person who is expected to participate in the issue of Shares, or who will obtain a material benefit as a result of the issue of Shares (except a benefit solely by reason of being a Shareholder) or any associate of those persons. However, this does not apply to a vote cast in favour of this Resolution by:

(a) a person as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with directions given to the proxy or attorney to vote on the Resolution in that way;
(b) the Chair of the Meeting as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with a direction given to the Chair to vote on the Resolution as the Chair decides; or
(c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:
(i) the beneficiary provides written confirmation to the Shareholder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting on the Resolution; and
(ii) the holder of votes on the Resolution in accordance with the directions given by the beneficiary to the holder to vote in that way.

Note: The proposed allottees of any Shares issued under Resolution 11 is not as yet known or identified. In accordance with Listing Rule 14.11.1 and the relevant note under that rule concerning Listing Rule 7.1, as at the date of this Notice it is not known who may participate in the proposed issued (if any). Accordingly, no Shareholders are currently excluded from voting on this Resolution 11.

For the avoidance of doubt, to the extent that the Directors believe that a Shareholder may participate in the Top-up Placement, that Shareholder’s vote on this Resolution will be disregarded. In addition, a person who has voted in favour of this Resolution will not be entitled to participate in the Top-up Placement.

The Chairman intends to vote all available proxies in favour of Resolution 11.

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SPECIAL BUSINESS

Resolution 12

APPROVAL OF ADDITIONAL CAPACITY TO ISSUE EQUITY SECURITIES UNDER LISTING RULE 7.1A

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

“That, for the purposes of Listing Rule 7.1A and all other purposes, approval be given for the issue of Equity Securities totalling up to 10% of the issued capital of the Company at the time of issue, calculated in accordance with the formula prescribed in Listing Rule 7.1A.2 and on the terms and conditions set out in the Explanatory Memorandum.”

Voting Exclusion Statement:

The Company will disregard any votes cast on this Resolution by any person who is expected to participate in, or who will obtain a material benefit as a result of, the issues of Equity Securities under Listing Rule 7.1A (except a benefit solely by reason of being a Shareholder) or any associates of those persons. However, this does not apply to a vote cast in favour of this Resolution by:

(a) a person as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with directions given to the proxy or attorney to vote on the Resolution in that way;
(b) the Chair of the Meeting as proxy or attorney for a person who is entitled to vote on this Resolution, in accordance with a direction given to the Chair to vote on the Resolution as the Chair decides; or
(c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:
(i) the beneficiary provides written confirmation to the Shareholder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting on the Resolution; and
(ii) the holder of votes on the Resolution in accordance with the directions given by the beneficiary to the holder to vote in that way.

The Chairman of the Annual General Meeting intends to vote all available proxies in favour of Resolution 12.

Resolution 13

APPOINTMENT OF AUDITOR

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

That, pursuant to and in accordance with section 327B of the Corporations Act and for all other purposes, PKF, having consented to act as the Company's auditor, is appointed as the Company's auditor effective from the date of the Meeting on the terms and conditions in the Explanatory Memorandum.

The Chairman intends to vote all available proxies in favour of Resolution 13.

Dated: 16 June 2020

By order of the Board.

Sebastian Andre

Company Secretary

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Notes

Attendance at the Meeting

The Company advises shareholders that the Meeting will be held in compliance with the Australian government’s restrictions on public gatherings. Due to the COVID-19 situation, it is not possible for shareholders to physically attend the Meeting.

Shareholders can also submit and are encouraged to submit any questions in advance of the Meeting by emailing the questions to [email protected] by no later than 5 pm (Sydney time) Thursday, 9 July 2020.

Explanatory Memorandum

The Notice should be read in conjunction with the accompanying Explanatory Memorandum.

Eligibility to vote

In accordance with the Corporations Act and the Constitution, a person's entitlement to vote at the Annual General Meeting will be determined by reference to the number of Shares registered in the name of that person (reflected in the register of members) as at 5 pm (Sydney time) on Monday, 20 July 2020.

How to vote

Each Shareholder is entitled to attend and vote at the Annual General Meeting in person or by proxy.

Proxy votes

Each Shareholder is entitled to appoint not more than two proxies to attend and vote in their place.

Where more than one proxy is appointed, the appointment may specify the proportion or number of votes that the proxy may exercise, otherwise each proxy may exercise half of the votes.

A proxy need not be a Shareholder.

A Proxy Form must be signed (in the form attached to this Notice) by the Shareholder or the Shareholder’s attorney.

Proxy Forms must reach the Company at least forty-eight (48) hours before the Annual General Meeting.

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The address for lodgement of Proxy Forms is:

Delivery Address Postal Address Fax Number Level 12 Boardroom Pty Limited + 61 2 9290 9655 225 George Street GPO Box 3993 Sydney NSW 2000 Sydney NSW 2001 Australia Australia

Online

https://www.votingonline.com.au/ypbagm2020

Undirected Proxies

Subject to the above, the Chairman of the Annual General Meeting intends to vote all undirected proxies in favour of the Resolutions. However, the Company encourages all Shareholders who submit Proxy Forms to direct their proxy how to vote on each Resolution by marking the boxes on the Proxy Form (Step 2) for each item of business.

Directed Proxies

In accordance with the Corporations Act, if a Proxy Form specifies the way a proxy is to vote on a Resolution, then:

(a) a proxy need not vote on a show of hands, but if the proxy does vote, the proxy must vote as directed;
(b) if the proxy is the Chairman, the proxy must vote as directed on a poll;
(c) if the proxy is not the Chairman, the proxy need not vote on a poll, but if the proxy does vote, the proxy must vote as directed; and
(d) if the proxy is not the Chairman and does not attend the Annual General Meeting or does not vote on a Resolution, but the Proxy Form specifies how to vote and a poll is demanded, then the Chairman is taken to have been appointed as the proxy and must vote as directed.

Power of Attorney

A Shareholder's attorney may sign the Shareholder's Proxy Form on behalf of the Shareholder. By signing the Proxy Form, the Shareholder's attorney confirms that the authority under which he or she executed the Proxy Form has not been revoked.

If the Shareholder's attorney signs the Proxy Form, then the attorney must, when it sends the Proxy Form to the Company, also send the authority (or a certified copy of the authority) under which the Proxy Form was signed. Each of the Proxy Form and authority must be received at least forty-eight (48) hours before the Annual General Meeting.

Bodies Corporate

A body corporate may appoint an individual as its representative to exercise any of the powers the body may exercise at the Annual General Meeting. The appointment may be a standing one. Unless the

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appointment states otherwise, the representative may exercise on behalf of the appointing body all of the powers that the appointing body could exercise at the Annual General Meeting or in voting on a Resolution.

Enquiries

Shareholders are invited to contact the Company Secretary Sebastian Andre on 08 6555 2950 if they have any queries in respect of the matters set out in these documents.

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Explanatory Memorandum YPB Group Ltd

1. Introduction

This Explanatory Memorandum has been prepared to assist Shareholders in considering the Resolutions set out in the Notice. This Explanatory Memorandum forms part of, and should be read in conjunction with, the Notice.

Terms used in this Explanatory Memorandum are defined in the Glossary.

2. General

2.1 FINANCIAL STATEMENTS

The Corporations Act requires that the annual financial report (including the Directors' Report, financial statements and the Audit Report) be laid before the Annual General Meeting. Although not requiring a vote of Shareholders, an opportunity will be provided for Shareholders to ask questions on the reports, including to the Company's auditor, who will be available to answer questions relating to the Audit Report.

2.2 Resolution 1: ADOPTION OF DIRECTORS’ RENUMERATION REPORT

(a) Background

The Board is committed to creating value for Shareholders by applying the Company’s funds productively and responsibly. A portion of the funds available to the Company is applied to remunerate your Directors.

The Board is aware of the sensitivities of Shareholders to remuneration practices generally, and submits its Remuneration Report to Shareholders for consideration and adoption under a non-binding Resolution. This Resolution is advisory only and does not bind the Company or its Directors. The Board will consider the outcome of the vote and comments made by Shareholders on the Remuneration Report at the meeting when reviewing the Company’s remuneration policies.

The Board advises Shareholders that due to the challenging market conditions, all Directors have agreed to waive all entitlements to Director remuneration for the remainder of 2020.

The Remuneration Report appears within the Directors’ Report in the Company’s annual report and describes the remuneration practices of the Company and the rationale underpinning those practices.

Under the Corporations Act:

(a) the Company is required to disregard any votes cast on this item of business by any member of Key Management Personnel of the Company and their Closely Related Parties, except as directed by any proxies;
(b) the Company is required to put to its Shareholders a resolution proposing the calling of another meeting of Shareholders to consider the appointment of Directors of the Company ( Spill Resolution ) if, at consecutive annual general meetings, at least 25% of the votes cast on a remuneration report resolution are voted against adoption of the remuneration report and at the first of those annual general meetings a Spill Resolution was not put to vote. If required, the Spill Resolution must be put to vote at the second of those annual general meetings;

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(c) if more than 50% of votes cast are in favour of the Spill Resolution, the company must convene a Shareholder meeting ( Spill Meeting ) within 90 days of the second annual general meeting;
(d) all of the Directors of the Company who were in office when the Directors’ Report (as included in the company’s annual financial report for the previous financial year) was approved, other than the Managing Director of the company, will cease to hold office immediately before the end of the Spill Meeting but may stand for re-election at the Spill Meeting; and
(e) following the Spill Meeting those persons whose election or re-election as Directors of the Company is approved will be the Directors of the Company.

Less than 25% of votes were cast against the remuneration report at YPB’s previous annual general meeting, so there will not be a ‘ Spill Resolution ’ at YPB’s 2020 Annual General Meeting.

(b) Board Recommendation

Noting that each Director has a personal interest in their own remuneration from the Company (as such interests are described in the Remuneration Report) and, as described in the voting exclusions on this Resolution, that each member of the Key Management Personnel (or any Closely Related Party of a Key Management Personnel) is excluded from voting on this Resolution, the Board unanimously recommend that Shareholders vote in favour of Resolution 1 to adopt the Remuneration Report.

2.3 Resolution 2: RE-ELECTION OF DIRECTOR (MR GERARD EAKIN)

(a) Background

Mr Eakin was first appointed to the Board on 4 March 2016 and was re-elected at the annual general meeting held on 31 May 2018. Mr Eakin, being the longest serving director since re-election now retires in accordance with clause 60 of the Constitution and, being eligible, offers himself for re-election.

Mr Eakin has had a 30 year-plus career in Australian equities in both portfolio management and equity research. His focus has been identifying and supporting companies with superior potential. He is the founder of Manifest Capital Management and manages Australian equity portfolios for a select group of high net worth investors.

Previously, Mr Eakin was the Head of Australian Equites at Rothschild Australia Asset Management managing funds of approximately $3 billion and the Head of Smaller Companies Research at JP Morgan/Ord Minnett and Merrill Lynch.

(b) Board Recommendation

The Board recommends (with Mr Eakin abstaining) that Shareholders vote in favour of Resolution 2.

2.4 Resolution 3: RE-ADOPTION OF PERFORMANCE RIGHTS PLAN

(a) Introduction

The employee and officer incentive plan known as the YPB Group Limited Performance Rights Plan ( PR Plan ) was adopted by Shareholders at the annual general meeting held on 18 November 2014. The PR Plan was subsequently re-adopted by Shareholders at the general meeting of the Company held on 27 November 2017 as the PR Plan must be approved by Shareholders every three (3) years. Accordingly, Resolution 3 seeks Shareholder approval for the re-adoption of the PR Plan.

The PR Plan involves the issue of Performance Rights which are exercisable subject to their vesting conditions being met, and upon such exercise will result in the issue or transfer of Shares to the relevant participant.

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(b) Summary of the PR Plan

The Board may determine, from time to time, which Directors, senior management and consultants of the Company ( Eligible Participants ) and their related bodies corporate are eligible to participate in the PR Plan, and the exercise price and other terms of the issue of Performance Rights. Participation in the PR Plan is voluntary. The Performance Rights granted are non-transferable, except with the prior approval of the Board. The maximum number of Performance Rights issued under the PR Plan in the previous 3 years will be no more than 5% of the issued capital of the Company (on a fully diluted basis).

All Performance Rights are granted at a nil issue price unless otherwise determined by the Board and each Performance Right enables the holder to be issued one Share upon exercise, subject to the rules governing the PR Plan ( PR Rules ).

The Performance Rights may be exercised, subject to the satisfaction of any exercise conditions imposed by the Board, in accordance with the date determined by the Board. The Board may determine that the Performance Rights are exercisable, regardless of whether the applicable exercise conditions have been satisfied, if an event occurs whereby a person who did not have control of the Company acquires control of the Company. A person may acquire control of the Company if that person acquires 50% or more of the issued Shares in the Company.

Subject to the Listing Rules, if the Company makes any new issue of Securities or alterations to its capital by way of a rights issue, bonus issue or other distribution of capital, reduction of capital or construction of capital then the Board may make adjustments to the rights attaching the Performance Rights (including, without limitation, to the number of Shares which may be acquired on exercise of the Performance Rights) on any basis that it deems fit in its absolute discretion.

Subject to the Listing Rules, unless the Board determines otherwise, a Performance Right holder is only entitled to participate (in respect of Performance Rights granted under the PR Plan) in a new issue of Shares to existing Shareholders of the Company if the Performance Right holder has validly exercised the Performance Right holder's Performance Right and become a Shareholder prior to the relevant record date, and is then only entitled to participate in relation to Shares of which the Performance Right holder is the registered holder.

An Eligible Participant may retain their existing Performance Rights, subject always to the terms and conditions of the PR Plan, if the Eligible Participant ceases employment or office with the Company (or a member of the Company's corporate group) in the circumstances where the Eligible Participant is a "Good Leaver". An Eligible Participant will be a "Good Leaver" if they cease employment or office due to redundancy, retirement, death, permanent incapacity or any other circumstances determined by the Board.

If an Eligible Participant becomes a "Bad Leaver", then all Performance Rights held by that Eligible Participant will automatically lapse, unless the Board determines otherwise. A Eligible Participant will become a "Bad Leaver" if the Eligible Participant commits a fraudulent or other dishonest act, or the Eligible Participant ceases to be employed by or hold office with the Company (or the Company's corporate group) in circumstances where they are not a "Good Leaver" (including where they have engaged in serious misconduct or a material breach of their employment contract).

(c) Notice requirements under Listing Rule 7.2 (exception 13(b))

The Company is seeking Shareholder approval under Listing Rule 7.2 (exception 13(b)) in order to enable the Company to issue Performance Rights to non-Directors without the issues being counted towards reducing the number of Equity Securities which the Company can issue without Shareholder approval under the limit imposed by Listing Rule 7.1

If Resolution 3 is not passed, any Performance Rights issued under the PR Plan will count toward the Company’s 15% placement capacity under Listing Rule 7.1 or must otherwise be subject to Shareholder approval. This may limit the Company’s ability to utilise the PR Plan.

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In addition to the above summary of the terms of the PR Plan, the following information is provided in accordance with Listing Rule 7.2 (exception 13(b)):

(a) as at the date of this Notice there are currently 85,524,659 Performance Rights on issue;
(b) since the re-adoption of the PR Plan in 2017 a total of 85,524,659 Performance Rights have been issued under the PR Plan;
(c) the maximum number of Performance Rights proposed to be issued under the PR Plan following the approval of re-adoption of the PR Plan will be no more than 5% of the issued capital of the Company (on a fully diluted basis); and
(d) the number of Performance Rights issued under the PR Plan will not exceed 5% of the issued capital of the Company (on a fully diluted basis).

If Resolution 3 is not passed, any Employee Incentives issued under the Plan will count toward the Company’s 15% Placement Capacity or must otherwise be subject to Shareholder approval. This may limit the Company’s ability to utilise the Plan.

(d) Reason for the PR Plan

The issuing of Performance Rights is a recognised practice in Australia as part of the remuneration of employees (including senior executives) and consultants of the Company. Issuing performance-based rights is considered a positive alternative to cash payments as the recipient benefits if the value of the Company increases – in which case all Shareholders benefit.

(e) Board Recommendation

The Board may be beneficiaries under the PR Plan and accordingly make no recommendation in regards to Resolution 3.

2.5 Resolution 4: APPROVAL TO ISSUE SERVICE SHARES TO MR PHILIP WADE

(a) Background

Resolution 4 seeks Shareholder approval for the issue of 25,600,000 Shares at an issue price of $0.005 per Share ( Service Shares ) to Mr Philip Wade as consideration for commercial advisory and business development services rendered to the Company by Mr Wade outside of his current engagement with the Company. Mr Wade has agreed to receive the Service Shares as an alternative to being paid in cash for the services.

Approval of Resolution 4 will allow the Company to apply the funds, which would otherwise have been paid in cash to Mr Wade, to its commercial operations. If this Resolution is not passed, the Company will not issue the Service Shares to Mr Philip Wade and the Company may have to pay a cash fee of $128,000 for the commercial advisory and business development services provided by Mr Wade.

Accordingly, the Company is seeking Shareholder approval under Listing Rule 10.11 for the issue of the Service Shares to Mr Wade.

(b) Listing Rule 10.11

Listing Rule 10.11 requires a listed company to obtain Shareholder approval by ordinary resolution prior to the issue of Equity Securities to a Related Party. Mr Wade is a Director of the Company and therefore considered to be a Related Party of the Company pursuant to Listing Rule 10.11.1.

If this Resolution is not passed, Mr. Philip Wade will not be issued 25,600,000 Shares as consideration for his commercial advisory and business development services and the Company would be required to pay Mr Wade for these services.

(c) Shareholder approval under Listing Rule 7.1 not sought

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Exception 14 to Listing Rule 7.2 provides that Shareholder approval under Listing Rule 7.1 is not required for the issue of Shares to Related Parties which are approved under Listing Rule 10.11.

Accordingly, Shareholder approval is not required for the issue of Service Shares to Mr Wade and the Service Shares will not be included in the 15% calculation of the Company's annual placement capacity pursuant to Listing Rule 7.1.

(d) Shareholder approval under Chapter 2E of the Corporations Act not sought

For a public company, or an entity that a 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 221 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 apply.

The issue of Service Shares to Mr Wade falls within the definition of a "financial benefit" for the purposes of the Corporations Act.

Consequently, the issue of Service Shares to Mr Wade will for the purposes of Chapter 2E of the Corporations Act, constitute giving a financial benefit to a Related Party of the Company.

It is the view of the Directors that the giving of a financial benefit to Mr Wade as a Related Party of the Company is on arm's length terms and falls within the exception set out in section 210 of the Corporations Act. Accordingly, Shareholder approval for the purposes of Chapter 2E of the Corporations Act is not being sought.

(e) Information required by Listing Rule 10.13

Pursuant to and in accordance with Listing Rule 10.13, the following information is provided in relation to Resolution 4:

Name of the allottee	Philip Wade (a Director of the Company) and is a Related Party of the Company pursuant to Listing Rule 10.11.1.	Philip Wade (a Director of the Company) and is a Related Party of the Company pursuant to Listing Rule 10.11.1.	Philip Wade (a Director of the Company) and is a Related Party of the Company pursuant to Listing Rule 10.11.1.	Philip Wade (a Director of the Company) and is a Related Party of the Company pursuant to Listing Rule 10.11.1.
Maximum number of Service Shares to be issued	25,600,000 Shares.
Date of issue	As soon as practical but in any event no later than one (1) month after the Annual General Meeting.
Price at which the Service Shares are to be issued	$0.005 per Share.
Terms of Service Shares	The Service Shares will rank equally in all aspects with the existing Shares.
Purpose of the issue	Consideration for commercial advisory and business development services outside of his current engagement with the Company rendered to the Company in lieu of cash payment.
Remuneration package of Mr Wade		Monetary ($)	Share- based payments, options and rights ($)	Total ($)
	Mr Wade	40,000	22,000	62,000

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Use (or intended use) of the funds No funds will be raised as the issue is in lieu of raised consideration for services rendered by Mr Wade to the Company.

(f) Board Recommendation:

The Board (with Mr Wade abstaining) recommends that Shareholders vote in favour of Resolution 4.

2.6 Resolution 5: APPROVAL OF ISSUE OF JFH SHARES, JFH OPTIONS AND INCREASE IN VOTING POWER

(a) Background

On 21 February 2020, the Company entered into a loan agreement with J F Houston Holdings Pty Ltd, a related entity of Executive Director and Chairman, Mr John Houston to provide funding of $220,000 to the Company for working capital purposes. On 31 March 2020 and 9 June 2020, the loan agreement was amended to increase the size of the loan to $600,000 and extend the repayment date ( JFH Loan ). The Company obtained the JFH Loan in early 2020 in challenging market conditions resulting from the COVID 19 crisis where other sources of funding where not available to the Company, particularly with significant decreases in the All Ordinaries Indexes.

The key terms of the JFH Loan are as follows:

Interest rate	8% per annum accruing on the Loan Amount, payable in a lump sum on the Repayment Date.
Repayment Date	20 August 2020.
Loan Amount	$600,000.
Security status	Unsecured.
Transferability	Non-transferable.
Events of default	The loan becomes immediately due and repayable at the election of the lender if an event of default occurs. The events of default in the loan agreement are typical for a loan of this nature and include a breach of an obligation, undertaking or warranty in the loan agreement, a judgement in excess of $50,000 is obtained against the Company and is not set aside or satisfied paid within 7 days, an insolvency event involving the Company and the funds not being used for working capital of the Company.

As at the date of this Notice, $11,100 of interest has accrued under the JFH Loan.

On 9 June 2020, J F Houston Holdings Pty Ltd and the Company entered into a subscription agreement pursuant ( Subscription Agreement ) to which, subject to Shareholder approval, the Company would issue J F Houston Holdings Pty Ltd the following:

(a) 600,000,000 Shares ( JFH Shares ) at an issue price of $0.001 per Share; and
(b) 600,000,000 Options ( JFH Options ) free attaching options.

The subscription price for the JFH Shares will be set off against the amount owed by the Company to J F Houston Holdings Pty Ltd pursuant to the JFH Loan.

Upon the issue of the JFH Shares and JFH Options to J F Houston Holdings Pty Ltd all outstanding amounts under the JFH Loan (including interest) will be deemed to have been repaid by the Company.

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Resolution 5 seeks Shareholder approval for the issue of the JFH Shares and the JFH Options to J F Houston Holdings Pty Ltd.

If Shareholders do not approve Resolution 5, the Company will not issue the JFH Shares or JFH Options to J F Houston Holdings Pty Ltd and the Company will be required to repay the JFH Loan and accrued interest on the repayment date of Thursday, 20 August 2020.

Resolution 5 is an ordinary resolution.

(b) Impact on Capital Structure and voting power

Mr Houston and the other Houston Parties currently hold a relevant interest in 152,541,801 Shares and voting power of approximately 9% of the issued share capital of the Company at 16 June 2020, being the last practicable date prior to finalisation of this Notice.

The capital structure of the Company following the issue of the JFH Shares to J F Houston Holdings Pty Ltd will be as follows:

	Shares	Voting Power
Houston Parties’ current holding (as at the date of this Notice)(1)	152,541,801	9%
Other Shareholders	1,541,827,585	91%
Total Shares currently on issue	1,694,369,386	100%
Houston Parties’ holding following issue of the JFH Shares	752,541,801	32.8%
Other Shareholders	1,541,827,585	67.2%
Total Shares post issue of JFH Shares	2,294,369,386	100%

The capital structure of the Company and the holdings of the Houston Parties following the issue of the JFH Shares and exercise of the JFH Options will be as follows:

	Shares	Voting Power
Scenario 1: Houston Parties’ holding following issue of the 600,000,000 shares and exercising 150,000,000 Options(2)	902,541,801	37%
Other Shareholders	1,541,827,585	63%
Total	2,444,369,386	100%
Scenario 2: Houston Parties’ holding following issue of the 600,000,000 shares and exercising 300,000,000 Options(2)	1,052,541,801	41%
Other Shareholders	1,541,827,585	59%
Total	2,594,369,386	100%
Scenario 3: Houston Parties’ holding following issue of the 600,000,000	1,352,541,801	46.7%

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shares and exercising 600,000,000 Options(2)
Other Shareholders	1,541,827,585	53.3%
Total	2,894,369,386	100%

Notes:

(1) No further securities are issued before or after the date of this Notice and the 155,080,213 Existing Options are not exercised.
(2) Assumes:
a. No further Shares are issued by the Company other than those to be issued to J F Houston Holdings Pty Ltd pursuant to Resolution 5;
b. No other Convertible Securities are exercised or converted;
c. No further Options are issued by the Company; and
d. J F Houston Holdings Pty Ltd elects to exercise a percentage of his Options as expressed in the scenario.

Accordingly, upon issue of the JFH Shares and the exercise of all the JFH Options, Mr Houston will have a maximum relevant interest in 1,352,541,801 Shares and a maximum voting power of 46.7% in the Company.

The issue of the JFH Shares will constitute approximately 32.8% of the undiluted issued share capital. If Shareholder approve Resolution 5 and the JFH Shares are issued, Shareholders (other than Mr Houston) will be diluted from 91% to 67.2%.

The issue of the JFH Shares and exercise of all the JFH Options will constitute approximately 47% of the undiluted issued share capital. If Shareholder approve Resolution 5 and the JFH Shares are issued and all JFH Options are exercised, Shareholders (other than Mr Houston) will be diluted from 91% to 53.3%.

(c) Independent Expert’s Recommendation

The Company has appointed Nexia ( Independent Expert ) as an independent expert and commissioned it to prepare a report ( Independent Expert's Report ) to provide an opinion as to whether or not the proposed issue of the JFH Shares and JFH Options is fair and reasonable to Shareholders.

The Independent Expert's Report was prepared to satisfy the recommendations of the ASIC Regulatory Guide 74. If Resolution 5 is approved, the Houston Parties will acquire a relevant interest of more than 20% in the Company.

The Independent Expert has concluded that the proposed issue of securities in Resolution 5 is not fair but reasonable to Shareholders.

In coming to this view, the Independent Expert considered the advantages and disadvantages of the Subscription Agreement, and other significant factors, which are set out in summary form only below.

The advantages identified by the Independent Expert are:

(a) The Subscription Agreement represents an opportunity for the non-associated Shareholders to retain some of the value of their shares in circumstances where the Company has been unable to attract investors to further develop its MotifMicro assets
(b) In the absence of an alternate third-party proposal being made it is unlikely that the Company will be able to continue as a going concern which would mean that the

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Company may be placed into liquidation. In that event the existing Shareholders would be unlikely to see any return on their investment.

(c) The non-associated Shareholders will retain the ability to participate in any potential valuation upside associated with the continued holding of shares, as well as the benefit of any future potential dividends or capital returns.

The disadvantages identified by the Independent Expert are:

(a) There is no certainty that future funding or partnering will occur in which case the MotifMicro assets will not be able to be brought to market.
(b) There is no certainty that even if future research and development funding can be obtained that the resulting research and development will lead to successful commercialisation.
(c) The Subscription Agreement is unlikely to provide the Company with the ability to pay dividends in the short to medium term.

The Independent Expert's assessment of the Subscription Agreement is based on a number of assumptions.

Shareholders are strongly encouraged to read the Independent Expert's Report (a full copy of which is set out in Annexure 2.

The Independent Expert has consented to the use of the Independent Expert's Report in the form and context in which it appears.

(d) Shareholder approval under Listing Rule 7.1 not sought

Listing Rule 7.1 provides that a company must not (subject to specified exceptions), without the approval of shareholders, issue or agree to issue during any 12 month period any Equity Securities, or other securities with rights to convert to equity (such as a performance right), if the number of those securities exceeds 15% of the number of ordinary securities on issue at the commencement of that 12 month period.

An exception is where the issue is approved by Shareholders in a general meeting under ASX Listing Rule 10.11 (refer to Listing Rule 7.2 exception 14) or item 7 of section 611 of the Corporations Act (refer to Listing Rule 7.2 exception 16). If Resolution 5 is passed and the Company obtains Shareholder approval under item 7 of section 611 of the Corporations Act and Listing Rule 10.11, the Company will not require Shareholder approval under Listing Rule 7.1 for the issue of Securities to J F Houston Holdings Pty Ltd and the Securities will not be included in the 15% calculation of the Company's annual placement capacity.

(e) Listing Rule 10.11

Listing Rule 10.11 requires a listed company to obtain Shareholder approval by ordinary resolution prior to the issue of Equity Securities to a Related Party. J F Houston Holdings Pty Ltd is considered a Related Party of the Company as Mr Houston, a Director of the Company controls J F Houston Holdings Pty Ltd. J F Houston Holdings Pty Ltd is therefore considered to be a Related Party of the Company pursuant to Listing Rule 10.11.1. Accordingly, the Company is seeking Shareholder approval under Listing Rule 10.11 for the issue of the JFH Shares and JFH Options.

An exception is where the issue is approved for the purposes of item 7 of section 611 of the Corporations Act (refer to Listing Rule 11.2 exception 6). Accordingly, the Company does not need to seek Shareholder approval under Listing Rule 10.11 for the issue of the JFH Shares and JFH Options.

(f) Shareholder approval under Chapter 2E of the Corporations Act not sought

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

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(a) obtain the approval of the public company's members in the manner set out in sections 221 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 apply.

The issue of JFH Shares and JFH Options to J F Houston Holdings Pty Ltd falls within the definition of a "financial benefit" for the purposes of the Corporations Act.

Consequently, the issue of JFH Shares to J F Houston Holdings Pty Ltd will for the purposes of Chapter 2E of the Corporations Act, constitute giving a financial benefit to a Related Party of the Company.

It is the view of the Directors that the giving of a financial benefit to J F Houston Holdings as a Related Party of the Company is on arm's length terms and falls within the exception in section 210 of the Corporations Act. Accordingly, Shareholder approval for the purposes of Chapter 2E of the Corporations Act is not being sought.

(g) Section 611 of the Corporations Act

Section 606 of the Corporations Act prohibits a person acquiring a relevant interest in the issued voting shares of a public company if, because of the transaction, that person’s or another person’s voting power in the company increases from:

(a) 20% or below to more than 20%; or
(b) a starting point that is above 20% and below 90%.

The voting power of a person in a company is determined by reference to section 610 of the Corporations Act. A person’s voting power in a company is the total of the votes attaching to the shares in the company in which that person and that person’s associates (within the meaning of the Corporations Act) have a relevant interest, divided by the total number of votes attaching to all voting shares in the Company.

Under section 608 of the Corporations Act, a person will have a relevant interest in shares if:

(a) the person is the registered holder of the shares;
(b) the person has the power to exercise or control the exercise of votes or disposal of the shares; or
(c) the person has over 20% of the voting power in a company that has a relevant interest in shares, then the person has a relevant interest in said shares.

For the purposes of determining who is an associate it is necessary to consider section 12 of the Corporations Act. Any reference to associate in Chapters 6 to 6C of the Corporations Act has the meaning give to that term in section 12. A person is only an associate for the purpose of Chapters 6 to 6C if that person is an associate under section 12.

Section 12 of the Corporations Act provides that a person ( first person ) will be an associate of the other person ( second person ) if:

(a) the first person is a body corporate and the second person is:
i. a body corporate the first person controls;
ii. a body corporate that controls the first person: or

iii. a body corporate that is controlled by an entity that controls the first person;

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(b) the second person has entered or proposes to enter into a relevant agreement with the first person for the purpose of controlling or influencing the composition of the Board or the conduct of the designated body's affairs; or
(c) the second person is a person with whom the first person is acting or proposes to act, in concert in relation to the designated body's affairs.

The Corporations Act defines "control" and "relevant agreement" very broadly as follows:

(a) section 50AA of the Corporations Act defines "control" as the capacity to determine the outcome of decisions about the financial and operating policies of a company. In determining the capacity it is necessary to take into account the practical influence a person can exert and any practice or pattern of behaviour affecting the company's financial or operating policies; and
(b) section 9 of the Corporations Act defines "relevant agreement" as an agreement, arrangement or understanding:
i. whether formal or informal or partly formal and partly informal;
ii. whether written or oral or partly written and partly oral; and
iii. whether or not having legal or equitable force and whether or not based on legal or equitable rights.

Associates are determined as a matter of fact. For example where a person controls or influences the board or the conduct of a company’s business affairs, or acts in concert with a person in relation to the company’s business affairs.

Section 611 of the Corporations Act contains exceptions to the prohibition in section 606 of the Corporations Act. Item 7 of section 611 of the Corporations Act provides a mechanism by which shareholders of a company may approve an issue of shares to a person which results in that person’s or another person’s voting power in the company increasing from:

(a) 20% or below to more than 20%; or
(b) a starting point that is above 20% and below 90%.

On completion of the issue of the JFH Shares and the exercise of all the JFH Options, the Houston Parties will have a maximum relevant interest in 1,352,541,801 Shares and a maximum voting power of 46.7% in the Company.

(h) Information required by item 7 of section 611 of the Corporations Act and ASIC Regulatory Guide 74

*Regulatory Guide 74*
The identity of the parties to be issued the relevant Shares and their associates.	J F Houston Holdings Pty Ltd will be issued the JFH Shares and up to 600,000,000 Shares upon the exercise of all the JFH Options. J F Houston Holdings Pty Ltd is an entity controlled by Mr John Houston. The Bimm Corporation Ltd is an associated of J F Houston Holdings Pty and Mr Houston as it is another entity controlled by Mr Houston.
The maximum extent of the increase in that person’s voting power in the Company	As at the date of this Notice, the Houston Parties have a relevant interest in 152,541,801 Shares and voting power of 9%. On completion of the issue of the JFH Shares and the issue of up to 600,000,000 Shares upon the exercise of all the JFH Options,the maximum increase in the

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	NOTICE OF ANNUAL GENERAL MEETING
	voting power of the Houston Parties will be 37.7% (From 9% to 46.7%).
The voting power the person would have as a result of the acquisition	On completion of the issue of the JFH Shares and the issue of up to 600,000,000 Shares upon the exercise of all the JFH Options, the Houston Parties will have a relevant interest in a maximum of 1,352,541,801 Shares and a maximum voting power of 46.7%.
The maximum extent of the increase in the voting power of each of the acquirer’s associates that would result from the acquisition	The maximum extent of the increase in the associates of the Houston Parties voting power will be equivalent to the increase in voting power of the Houston Parties, being 37.7% (From 9% to 46.7%).
The voting power that each of the acquirer’s associates would have as a result of the acquisition	The voting power that the associates of the Houston Parties would acquire will be equivalent to the voting power of the Houston Parties, being 37.7% (From 9% to 46.7%).
An explanation of the reasons for the proposed acquisition	The Shares (including upon exercise of the JFH Options) issued to J F Houston Holdings Pty Ltd the subject of Resolution 5 are being issued to raise funds to repay the JFH Loan.
When the proposed acquisition is to occur	The Shares to be issued to J F Houston Holdings Pty Ltd the subject of Resolution 5 will be issued as soon as possible and in any event no later than 1 month after the date of the Meeting.
The material terms of the proposed acquisition	See section 6.2(a) for a summary of the terms of the Subscription Agreement and JFH Loan. Other than the agreements disclosed above, there are no contracts or proposed contracts between the Company, J F Houston Holdings Pty Ltd and any of the other Houston Parties which is conditional upon, or directly or indirectly dependent on, Resolution 5 being approved by Shareholders.
Intentions regarding the future of the Company if Shareholders approve Resolution 5	J F Houston Holdings Pty Ltd has advised the Company that it: (a) has no current intention to make any significant change to the existing business of the Company; (b) has no current intention to inject further capital into the Company; (c) has no present intention of making changes regarding the future employment of the present employees of the Company; (d) does not intend for any assets to be transferred between the Company and J F Houston Holdings Pty Ltd ; and

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	NOTICE OF ANNUAL GENERAL MEETING
	(e) has no current intention to redeploy any of the Company's fixed assets.
Intention to significantly change the Company's financial or dividend policies	J F Houston Holdings Pty Ltd has advised the Company that it has no current intention to change the Company's financial or dividend policies of the Company.
The interests of the Directors in Resolution 5	Mr John Houston is a Director of the Company and also the controller of J F Houston Holdings Pty Ltd. Mr Houston has abstained from expressing a view or making a recommendation to Shareholders in respect of Resolution 5.

(i) Board Recommendation

The Board recommends (with Mr Houston abstaining) that Shareholders vote in favour of Resolution 5.

2.7 Resolution 6: RATIFICATION OF PRIOR ISSUE OF PLACEMENT SHARES ISSUED

(a) Background

On 10 December 2019, the Company issued 100,000,000 Placement Shares to certain sophisticated and professional investors via a private placement announced to the market on 6 December 2019 within the Company's placement capacity under Listing Rule 7.1 ( Placement and the Shares issued being the Placement Shares ). The Company raised $600,000 from the Placement.

Listing Rule 7.4 provides that the issue of Securities made under Listing Rule 7.1 can be ratified by Shareholders under Listing Rule 7.4. If Shareholders ratify the issue of Shares, the issue will not reduce the Company's placement capacity under Listing Rule 7.1.

Accordingly, Resolution 6 seeks Shareholder approval under Listing Rule 7.4 for the ratification of the issue of Placement Shares issued under the Company's 15% placement capacity under Listing Rule 7.1 to provide flexibility for the Company to issue Equity Securities under the Company's 15% placement capacity in the next 12 months without the requirement to obtain Shareholder approval.

If this Resolution is not passed, the Placement Shares will be included in calculating the Company’s 15% Placement Capacity in Listing Rule 7.1, effectively decreasing the number of Equity Securities the Company can issue without Shareholder approval under Listing Rule 7.1 for the periods noted immediately above.

(b) Information required by Listing Rule 7.5

Persons to whom Placement Shares were issued	Sophisticated and professional investors, none of whom are Related Parties of the Company.
The number and class of Placement Shares issued	100,000,000 Shares.

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	NOTICE OF ANNUAL GENERAL MEETING
Issue price of Placement Shares	$0.006 per Share.
Issue date of Placement Shares	10 December 2019.
Terms of Placement Shares	The Placement Shares were issued on the same terms and conditions as the Company's existing Shares.
Use of funds	The funds raised from the Placement were used for the technical development of Motif Micro and the Connect Platform, to cover the costs of the Placement and for general working capital purposes.

(c) Board Recommendation

The Board recommends that Shareholders vote in favour of Resolution 6 .

2.8 Resolution 7: RATIFICATION OF PRIOR ISSUE OF SHARES

(a) Background

On 6 December 2019, the Company announced that EverBlu Capital Pty Ltd would perform the role of lead manager and corporate adviser in relation to the Placement. The Company further announced that EverBlu Capital Pty Ltd would receive 6,000,000 Shares ( Broker Shares ) and a 6% fee on the gross amount raised under the Placement.

The Broker Shares were issued on 10 December 2019 within the Company's placement capacity under Listing Rule 7.1.

Accordingly, Resolution 7 seeks Shareholder approval under Listing Rule 7.4 for the ratification of the issue of Broker Shares issued under the Company's 15% placement capacity under Listing Rule 7.1 to provide flexibility for the Company to issue Equity Securities under the Company's 15% placement capacity in the next 12 months without the requirement to obtain Shareholder approval.

If this Resolution is not passed, the Broker Shares will be included in calculating the Company’s 15% Placement Capacity in Listing Rule 7.1, effectively decreasing the number of Equity Securities the Company can issue without Shareholder approval under Listing Rule 7.1 for the periods noted immediately above.

(b) Information required by Listing Rule 7.5

Persons to whom Broker Shares were issued	EverBlu Capital Pty Ltd
The number and class of Broker Shares issued	6,000,000 Shares
Issue price of Broker Shares	$0.006 per Share.
Issue date of Broker Shares	10 December 2019
Terms of Broker Shares	The Broker Shares were issued on the same terms and conditions as the Company's existing Shares.

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NOTICE OF ANNUAL GENERAL MEETING

Summary of agreement for Broker Shares	The Company entered into an arrangement with Everblu Capital Pty Ltd whereby it agreed to act as corporate advisor and lead manager for the Company’s Placement announced on 6 December 2019. Pursuant to this arrangement, the Company agreed to issue 6,000,000 Broker Shares at $0.006 per share to Everblu Capital Pty Ltd and pay Everblu Capital Pty Ltd a 6% fee on the gross amount raised in the Placement.
Purpose of the issue	The Broker Shares were issued to EverBlu Capital Pty Ltd as payment for their corporate advisory and lead manager roles in relation to the Placement.

Summary of agreement for Broker
Shares

The Company entered into an arrangement with
Everblu Capital Pty Ltd whereby it agreed to act as
corporate advisor and lead manager for the
Company’s Placement announced on 6 December
2019. Pursuant to this arrangement, the Company
agreed to issue 6,000,000 Broker Shares at $0.006 per
share to Everblu Capital Pty Ltd and pay Everblu
Capital Pty Ltd a 6% fee on the gross amount raised in
the Placement.

Purpose of the issue

The Broker Shares were issued to EverBlu Capital Pty
Ltd as payment for their corporate advisory and lead
manager roles in relation to the Placement.

(c) Board Recommendation

The Board recommends that Shareholders vote in favour of Resolution 7 .

2.9 Resolution 8: RATIFICATION OF PRIOR ISSUE OF SHARES

(a) Background

On 10 December 2019, the Company announced that it had issued 11,666,667 Shares at an issue price of $0.006 to Golden Triangle Capital Pty Ltd in lieu of cash payable for services provided to the Company by Golden Triangle Capital Pty Ltd in respect of corporate advisory services.

The Shares were issued on 10 December 2019 within the Company's placement capacity under Listing Rule 7.1.

Accordingly, Resolution 8 seeks Shareholder approval under Listing Rule 7.4 for the ratification of the issue of the Shares issued under the Company's 15% placement capacity under Listing Rule 7.1 to provide flexibility for the Company to issue Equity Securities under the Company's 15% placement capacity in the next 12 months without the requirement to obtain Shareholder approval.

If this Resolution is not passed, the 11,666,667 Shares issued to Golden Triangle Capital Pty Ltd will be included in calculating the Company’s 15% Placement Capacity in Listing Rule 7.1, effectively decreasing the number of Equity Securities the Company can issue without Shareholder approval under Listing Rule 7.1 for the periods noted immediately above.

(b) Information required by Listing Rule 7.5

Persons to whom Shares were issued	Golden Triangle Capital Pty Ltd
The number and class of Shares issued	11,666,667 Shares
Issue price of Shares	$0.006 per share
Issue date of Shares	10 December 2019

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NOTICE OF ANNUAL GENERAL MEETING

	NOTICE OF ANNUAL GENERAL MEETING
Terms of Shares	The Shares were issued on the same terms and conditions as the Company's existing Shares.
Summary of agreement	The Company and Golden Triangle Pty Ltd entered into a consulting agreement on 9 December 2019. Golden Triangle Pty Ltd agrees to provide ongoing corporate advisory services to the Company including providing business advice to the Board and the management of any potential new transactions. The Company has agreed that the consideration for these services will be the issue of 11,666,667 Shares in lieu of cash for the services provided. The agreement can be terminated by either party subject to a 30-day notice period.
Purpose of the issue	The Shares were issued to Golden Triangle Capital Pty Ltd in consideration for ongoing corporate advisory services provided to the Company by Golden Triangle Capital Pty Ltd.

(c) Board Recommendation

The Board recommends that Shareholders vote in favour of Resolution 8

Resolution 9 to 10 (INCLUSIVE): APPROVAL OF ISSUE OF SHARES TO EMPLOYEES AND CONSULTANTS

(a) Background

Resolutions 9 to 10 (inclusive) seek Shareholder approval for the issue of an aggregate of 144,428,571 Shares to Famile Pty Ltd and Hong Sian (Adrian) Tan in lieu of cash payables and services provided to the Company.

Subject to Shareholder approval for Resolutions 9 to 10 (inclusive), the number of Shares to be issued will be in accordance with the table below:

Employee/Consultant (and/or their nominee)	Number of Shares	Issue Price per Share
Famile Pty Ltd	26,333,333	$0.003
Hong Sian (Adrian) Tan	118,095,238	$0.003
Total	144,428,571

(b) Listing Rule 7.1

Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue more Equity Securities during any 12-month period that that amount which represents 15% of the number of fully paid ordinary Securities on issue at the commencement of that 12 month period. Accordingly, Shareholder approval is sought to approve the issue of the Employee Shares. The effect of such approval is that any such Employee Shares will not be counted as reducing the number of Equity Securities which the Company can issue without Shareholder approval under the limit imposed by Listing Rule 7.1. This will allow the Company flexibility in the future.

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NOTICE OF ANNUAL GENERAL MEETING

If Resolution 9 to 10 (inclusive) are not passed the issue of up to 144,428,571 Shares will be included in calculating the Company’s 15% limit in Listing Rule 7.1, effectively decreasing the number of equity securities it can issue without Shareholder approval over the 12 month period following the relevant issue dates.

(c) Required information

Listing Rule 7.3 requires that the following information be provided to Shareholders in respect of Resolution 9 and 10 for the purposes of providing approval under Listing Rule 7.1.

The names of the persons to whom the entity will issue the securities or the basis upon which those persons were or will be identified or selected.		Employee/Consultant (and/or their nominee)
		Famile Pty Ltd
		Hong Sian (Adrian) Tan
The number and class of securities the entity will issue		The maximum number of Shares to be issued is up to 144,428,571 Shares broken down as follows: Number of Shares Famile Pty Ltd 26,333,333 Hong Sian (Adrian) Tan 118,095,238 The Shares to be issued will rank equally in all aspects with the existing fully paid ordinary Shares.
The date or dates on by which the entity will issue the securities		As soon as practicable but in any event no later than three (3) months following the date of the Meeting.
The price or other consideration the entity will receive for the securities		$0.003 per Share.
The purpose of the issue, including an agreement, a summary or any other material terms of the agreement		The Employee Shares are being issued in lieu of cash payable for such activities as sales, marketing, commercial and business development services, company secretarial services, retention and performance payments, provided to the Company.
If the securities are being issued under an agreement, a summary of any other material terms of the agreement.		The Employee Shares are being issued in consideration for liabilities which accrued to the Company as a result of various employment and consultant agreements. A summary of each Employee/Consultant is provided below: Famile Pty Ltd The Company and Famile Pty Ltd had previously entered into a consulting agreement on 1 October 2018. Famile Pty Ltd agrees to provide company secretary services to the Company for a fee monthly fee of A$7,500 and an entitlement to participate in the YPB’s Performance Rights Plan, subject to Board approval. The agreement was terminated on 26 August 2019 following Mr Adam Gallagher’s resignation as Company Secretary. The Company has agreed to issue 26,333,333 Shares to Famile Pty Ltd in connection with the services heprovided the

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NOTICE OF ANNUAL GENERAL MEETING

	Company and in lieu of participation in YPB’s Performance Rights Plan. Hong Sian (Adrian) Tan Mr Hong Sian (Adrian) Tan is the current CFO of YPB pursuant to pursuant to his employment is entitled to a remuneration of approximately A$20,000 per month. The Company has agreed to issue 118,095,238 Employee Shares to Mr Hong Sian (Adrian) Tan in compensation for the reduction in his salary for the period October 2018 to April 2020 and a performance payment equal to 6 months salary.
A voting exclusion statement	See Resolution 9 to 10

Company and in lieu of participation in YPB’s
Performance Rights Plan.
Hong Sian (Adrian) Tan
Mr Hong Sian (Adrian) Tan is the current CFO of YPB
pursuant to pursuant to his employment is entitled to a
remuneration of approximately A$20,000 per month.
The Company has agreed to issue 118,095,238
Employee Shares to Mr Hong Sian (Adrian) Tan in
compensation for the reduction in his salary for the
period October 2018 to April 2020 and a performance
payment equal to 6 months salary.

A voting exclusion statement

See Resolution 9 to 10

(d) Board Recommendation

The Board recommends that Shareholders vote in favour of Resolution 9 to 10 (inclusive).

2.10 Resolution 11: APPROVAL TO ISSUE UP TO $3,000,000 WORTH OF SHARES

(a) Background

Resolution 11 seeks Shareholder approval under Listing Rule 7.1 for the issue of that number of Shares determined by A$3,000,000 divided by the Top-up Placement Issue Price ( Top-up Placement ).

The Top-up Placement Issue Price for the Shares will not be less than 80% of the 5 day VWAP.

Listing Rule 7.1 prohibits a company from issuing Securities representing more than 15% of its issued capital in any 12 month period without shareholder approval. Shareholder approval is sought to approve the issue of the Shares.

By approving the issue of the Shares the subject of this Resolution, the issues will not diminish the 15% annual placement capacity of the Company. This will provide the Company with flexibility to issue further Equity Securities within the next 12 months up to the 15% annual placement capacity set out in Listing Rule 7.1 without the requirement to obtain Shareholder approval.

If this Resolution is not passed, the issue of up to $3,000,000 worth of shares will be included in calculating the Company’s 15% Placement Capacity in Listing Rule 7.1, effectively decreasing the number of Equity Securities the Company can issue without Shareholder approval under Listing Rule 7.1 for the periods noted immediately above.

(b) Required information

Listing Rule 7.3 requires that the following information be provided to Shareholders in respect of Resolution 11 for the purposes of providing approval under Listing Rule 7.1.

The names of the persons to whom the entity will issue the securities or the basis upon which those persons were or will be identified or selected.	The Directors intend that the Shares will be issued to sophisticated and professional investors and will not be Related Parties of the Company.
The number and class of securities the entity will issue	The maximum number of Shares to be issued is up to that number of Shares which, when multiplied by the issue price, equals $3,000,000. The table below provides examples of the maximum number of Shares that may be issued if Shareholders approve the Resolution. The table uses various issue

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NOTICE OF ANNUAL GENERAL MEETING

		NOTICE OF ANNUAL GENERAL MEETING
		prices to calculate the maximum number of Shares that may be issued assuming $3,000,000 is raised by the Company: Issue Price ($ per Share) Number of Shares $0.008 375,000,000 $0.007 428,571,428 $0.006 500,000,000 $0.005 600,000,000 $0.004 750,000,000 $0.003 1,000,000,000 $0.002 1,500,000,000 $0.001 3,000,000,000 The Shares to be issued will rank equally in all aspects with the existing fully paid ordinary Shares.
The date or dates on by which the entity will issue the securities		The Shares will be issued no later than three (3) months following the date of the Meeting. It is intended that the issue of Shares will occur progressively.
The price or other consideration the entity will receive for the securities		The price at which the Shares are to be issued will be calculated using the 5 day VWAP for Shares. For the purposes of the below examples it has been assumed that the issue price of the Shares will not be less than 80% of the 5 day VWAP. Example 1:Using the Current Share Price of $0.003 at the time of preparing this Notice as being equivalent to the 5 day VWAP for illustration purposes, the issue price will not be less than 80% of $0.003, which is $0.0024. Accordingly, the total number of Shares that may be issued pursuant to Shareholder approval for this Resolution would be approximately 1,250,000,000. Example 2: If the 5 day VWAP is decreased by 50% which is equal to $0.0015, the issue price will not be less than 80% of $0.0015, which is $0.0012. Accordingly, the total number of Shares that may be issued pursuant to Shareholder approval for this Resolution would be approximately 2,500,000,000. Example 3: If the 5 day VWAP is increased by 50% which is equal to $0.0045, the issue price will not be less than 80% of $0.0045, which is $0.0036. Accordingly, the total number of Shares that may be issued pursuant to Shareholder approval for this Resolution would be approximately 666,666,667. Potential Dilution Effect:

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NOTICE OF ANNUAL GENERAL MEETING

	No. of Shares	Total no. of Shares on issued post issue of Shares	Total no. of Shares on issued post issue of Shares	Total no. of Shares on issued post issue of Shares	Dilution Factor*
	1,250,000,000	2,944,369,386			42.45%
	2,500,000,000	4,194,369,386			59.60%
	666,666,667	2,361,036,053			28.24%
	*The dilution factor does not take into account the impact of any exercise of Convertible Securities by a Convertible Security holder.
The purpose of the issue, including an agreement, a summary or any other material terms of the agreement	The funds raised from the issue of the Shares are intended to be used for the technical development of the Connect Platform and Motif Micro as well as for general working capital purposes. The table below highlights the proposed use of funds: Key Expenditure Area Allocation (%) Amount ($) Staff salaries and operational costs 25% 750,000 Development of MotifMicro 33% 1,000,000 Development of Connect 13% 400,000 Productisation and Innovation activities 5% 150,000 Marketing and Business Development 13% 380,000 Capital Expenditure on equipment 3% 100,000 Capital raising and transaction costs 7% 220,000
	Key Expenditure Area		Allocation (%)	Amount ($)
	Staff salaries and operational costs		25%	750,000
	Development of MotifMicro		33%	1,000,000
	Development of Connect		13%	400,000
	Productisation and Innovation activities		5%	150,000
	Marketing and Business Development		13%	380,000
	Capital Expenditure on equipment		3%	100,000
	Capital raising and transaction costs		7%	220,000
A voting exclusion statement	See Resolution 11

(c) Board Recommendation

The Board recommends that Shareholders vote in favour of Resolution 11

2.11 Resolution 12 : APPROVAL OF ADDITIONAL CAPACITY TO ISSUE EQUITY SECURITIES UNDER LISTING RULE 7.1A

(a) Background

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NOTICE OF ANNUAL GENERAL MEETING

Listing Rule 7.1A enables an Eligible Entity to issue Equity Securities up to 10% of its issued share capital through placements over a 12-month period after the Annual General Meeting ( 10% Placement Facility ). The 10% Placement Facility is in addition to the Company's 15% placement capacity under Listing Rule 7.1.

The Company is seeking Shareholder approval by way of a special resolution to have the ability, if required, to issue Equity Securities under the 10% Placement Facility. The effect of Resolution 12 will be to allow the Directors to issue Equity Securities under Listing Rule 7.1A during the 10% Placement Period without using the Company’s 15% placement capacity under Listing Rule 7.1.

If Shareholders approve Resolution 12, the number of Equity Securities permitted to be issued under the 10% Placement Facility will be determined in accordance with the formula prescribed in Listing Rule 7.1A.2 (see below).

If Resolution 12 is not passed, the issue of the Placement Shares will be included in calculating the Company’s 10% limit in Listing Rule 7.1A, effectively decreasing the number of equity securities it can issue without Shareholder approval over the 12 month period following the issue date.

Resolution 12 is a special resolution and therefore requires approval of 75% of the votes cast by Shareholders present and eligible to vote at this Meeting (in person, by proxy, by attorney or, in the case of a corporate Shareholder, by a corporate representative).

(b) Listing Rule 7.1A

The Company is an Eligible Entity for the purposes of the Listing Rules as it is not included in the S&P/ASX 300 Index and has a market capitalisation of approximately $3.39m based on the closing Share price of $0.02 per Share on 16 June 2020.

Any Equity Securities issued under the 10% Placement Facility must be in the same class as an existing quoted class of Equity Securities of the Company.

The Company, as at the date of the Notice, has on issue one class of quoted Equity Securities being Shares.

An approval under 7.1A commences on the date of the Annual General Meeting at which the approval is obtained and expires on the first to occur of:

(a) the date that is 12 months after the date of the Annual General Meeting at which the approval is obtained;
(b) the time and date of the Company's next Annual General Meeting; and
(c) the time and date of the approval by Shareholders of the Company ordinary securities of a transaction under Listing Rule 11.1.2 or Listing Rule 11.2,

( 10% Placement Period ).

The exact number of Equity Securities that the Company may issue under an approval under Listing Rule 7.1A will be calculated according to the following formula:

(A x D) – E

Where:

A is the number of ordinary securities on issue at the commencement of the relevant period:
(A) plus the number of ordinary Securities issued in the relevant period under an exception in Listing Rule 7.2 other than exception 9, 16 or 17;
(B) plus the number of fully paid ordinary Securities issued in the relevant period on the conversion of Convertible Securities within Listing Rule 7.2 exception 9 where:

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  - (I) the Convertible Securities were issued or agreed to be issued before the commencement of the relevant period; or

  - (II) the issue of, or agreement to issue, the Convertible Securities were approved, or taken under these Listing Rules to have been approved under Listing Rule 7.1 or Listing Rule 7.4;

(C) plus the number of fully paid ordinary Securities issued in the relevant period under an agreement to issue Securities within Listing Rule 7.2 exception 16 where:
- (I) the agreement was entered into before the commencement of the relevant period; or
- (II) the agreement or issue was approved, or taken under these Listing Rules to have been approved under Listing Rule 7.1 or Listing Rule 7.4;
(D) plus the number of any other fully paid ordinary Securities issued in the relevant period with approval under Listing Rule 7.1 or Listing Rule 7.4;
(E) plus the number of partly paid Securities that became fully paid in the relevant period; and
(F) less the number of ordinary Securities cancelled in the previous relevant period.
D is 10%.
E is the number of Equity Securities issued or agreed to be issued under Listing Rule 7.1A.2 in the relevant period where the issue or agreement has not been subsequently approved by the holders of its ordinary Securities under Listing Rule 7.4.

For the purposes of this formula 'relevant period' means:

(A) if the entity has been admitted to the official list of the ASX for 12 months or more, the 12 month period immediately preceding the date of the issue or agreement; or
(B) if the entity has been admitted to the official list of the ASX for less than 12 months, the period from the date the entity was admitted to the official list to the date immediately preceding the date of the issue or agreement.

(c) Notice requirements under Listing Rule 7.3A

Minimum Price

The minimum price at which the Equity Securities may be issued for cash consideration is not less than 75% of the VWAP of Equity Securities in that class, calculated over the 15 Trading Days on which trades in that class were recorded immediately before:

(a) the date on which the price at which the Equity Securities are to be issued is agreed by the Company and the recipient of the Securities; or
(b) if the Equity Securities are not issued within 10 Trading Days of the date in section (a) above, the date on which the Equity Securities are issued.

Purpose of issue under 10% Placement Facility

The Company may issue Equity Securities under the 10% Placement Facility for cash consideration, the proceeds of which will be applied to fund the Company’s existing and future activities, appraisal of corporate opportunities, investments in new businesses (if any), the costs incurred in undertaking placement(s) of Securities under Listing Rule 7.1A and for general working capital.

The Company will comply with the disclosure obligations under Listing Rules 7.1A.4 upon issue of any Equity Securities.

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YPB GROUP LTD NOTICE OF ANNUAL GENERAL MEETING

Allocation under the 10% Placement Facility

The Company’s allocation policy is dependent on the prevailing market conditions at the time of any proposed issue pursuant to the 10% Placement Facility. The identity of the allottees of Equity Securities will be determined on a case-by-case basis having regard to the factors including but not limited to the following:

(a) the methods of raising funds that are available to the Company, including but not limited to, rights issue or other issue in which existing Shareholders can participate;
(b) the effect of the issue of the Equity Securities on the control of the Company;
(c) the financial situation and solvency of the Company; and
(d) advice from corporate, financial and broking advisers (if applicable).

The allottees under the 10% Placement Facility have not been determined as at the date of this Notice but may include existing substantial Shareholders and/or new Shareholders who are not Related Parties or associates of a Related Party of the Company.

Further, if the Company is successful in acquiring new businesses, assets or investments, it is likely that the allottees under the 10% Placement Facility may include the vendors of the businesses, assets or investments

Previous approval under Listing Rule 7.1A

The Company has previously obtained Shareholder approval under Listing Rule 7.1A at the 2019 annual general meeting held on 17 June 2019. The approval granted on 17 June 2019 will cease to be valid as at the date of this Annual General Meeting. If approval is given under Resolution 12 the 10% Placement Facility will apply for a maximum period of 12 months from this Annual General Meeting.

Previous issues under Listing Rule 7.1A

As the Company has previously obtained Shareholder approval under Listing Rule 7.1A and is now seeking Shareholder approval to renew its capacity to issue an additional 10% of its issued capital under Listing Rule 7.1A, it is required by Listing Rule 7.3A.6 to provide details of all issues of Securities under Listing Rule 7.1A in the 12 months preceding the date of the meeting at which the approval is sought.

During the 12-month period preceding the proposed date of the Meeting, being on and from 17 June 2019, the Company issued a total of 86,534,615 Equity Securities under Listing Rule 7.1A which represents approximately 7.73% of Equity Securities on issue at the commencement of the 12 months preceding the date of this Meeting.

Further details of the issue of Equity Securities under Listing Rule 7.1A during the 12 month period preceding the proposed date of the Meeting are set out in the table below:

Issue date	Quantity and class	Persons issued to or basis of issue	Issue price	Consideration and use of funds
6 August 2019	86,534,615 Shares	Sophisticated and professional investors who participated in the placement announced on 1 August 2019.	$0.00714	$617,857 cash. The funds raised under the placement announced to the market on 1 August 2019 were applied to new business development, marketing costs, repayment of debt and costs associated with the placement.

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YPB GROUP LTD NOTICE OF ANNUAL GENERAL MEETING

Risk of voting dilution

If Resolution 12 is approved by Shareholders and the Company issues Equity Securities under the 10% Placement Facility, the existing Shareholders' voting power in the Company will be diluted as shown in the table below. Shareholders may be expose to economic risk and voting dilution, including the following:

(a) the market price for the Company's Equity Securities may be significantly lower on the date of the issue of the Equity Securities than on the date of the Annual General Meeting; and
(b) the Equity Securities may be issued at a price that is at a discount to the market price for the Company's Equity Securities on the issue date,
which may have an effect on the amount of funds raised by the issue of the Equity Securities.

The below table shows the dilution of existing Shareholders on the basis of the market price of Shares as at 16 June 2020 ( Current Share Price ) being $0.002 and the current number of ordinary Securities for Variable "A" calculated in accordance with the formula in Listing Rule 7.1A.2 as at the date of this Notice.

The table also shows two examples where the issue price of ordinary securities has decreased by 50% and increase by 100% as against the current market price.

Variable 'A' in Listing Rule 7.1A.2		Issue Price	Issue Price	Issue Price
		$0.001 50% decrease in Current Share Price	$0.002 Current Share Price	$0.004 100% increase in Current Share Price
Current Variable A 1,694,369,408 Shares	Shares issued 10% voting dilution	169,436,941	169,436,941	169,436,941
	Funds raised	$169,437	$338,874	$677,748
50% decrease in current Variable A 2,541,554,112 Shares	Shares issued 10% voting dilution	254,155,411	254,155,411	254,155,411
	Funds raised	$254,155	$508,311	$1,016,622
100% increase in Variable A 3,388,738,816 Shares	Shares issued 10% voting dilution	338,873,882	338,873,882	338,873,882
	Funds raised	$338,874	$677,748	$1,355,496

The table has been prepared on the following assumptions:

(a) the Company issues the maximum number of Equity Securities available under the 10% Placement Facility;
(b) no Options (including any Options issued under the 10% Placement Facility) are exercised into Shares before the date of the issue of the Equity Securities;
(c) the 10% voting dilution reflects the aggregate percentage dilution against the issued share capital at the time of issue. This is why the voting dilution is shown in each example as 10%;

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NOTICE OF ANNUAL GENERAL MEETING

(d) the table does not show an example of dilution that may be caused to a particular Shareholder by reason of placements under the 10% Placement Facility, based on that Shareholder’s holding at the date of the Annual General Meeting;
(e) the table shows only the effect of issues of Equity Securities under Listing Rule 7.1A, not under the 15% placement capacity under Listing Rule 7.1;
(f) the issue of Equity Securities under the 10% Placement Facility consists only of Shares. If the issue of Equity Securities includes Options, it is assumed that those Options are exercised into Shares for the purpose of calculating the voting dilution effect on existing Shareholders; and
(g) For the purposes of the above table the Current Share Price is $0.002 being the closing price of the Shares on ASX on 16 June 2020.

The following table also shows examples where the issue price of ordinary securities has decreased by 50% and increase by 100% as against the current market price assuming that the capital raising pursuant to Resolution 12 is completed.

Variable 'A' in Listing Rule 7.1A.2		Issue Price	Issue Price	Issue Price
		$0.001 50% decrease in Current Share Price	$0.002 Current Share Price	$0.004 100% increase in Current Share Price
Variable A 3,569,369,408 Shares	Shares issued 10% voting dilution	356,936,941	356,936,941	356,936,941
	Funds raised	$356,937	$713,874	$1,427,748
50% decrease in current Variable A 5,354,054,112 Shares	Shares issued 10% voting dilution	535,405,411	535,405,411	535,405,411
	Funds raised	$535,405	$1,070,811	$2,141,622
100% increase in Variable A 7,138,738,816 Shares	Shares issued 10% voting dilution	713,873,882	713,873,882	713,873,882
	Funds raised	$713,874	$1,427,748	$2,855,496

The table has been prepared on the same assumptions as the table above in this section. Using the Current Share Price of $0.002 at the time of preparing this Notice as being equivalent to the 5-day VWAP for illustration purposes, the issue price will not be less than 80% of $0.002, which is $0.0016. Accordingly, the total number of Shares that may be issued pursuant to Resolution 12 capital raising is assumed to be 1,875,000,000.

(d) Board Recommendation

The Board recommends that Shareholders vote in favour of Resolution 12

Resolution 13: APPOINTMENT OF AUDITOR

(a) Background

The Company is seeking Shareholder approval to appoint PKF as auditors of the Company and its consolidated entities.

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NOTICE OF ANNUAL GENERAL MEETING

Effective from the date of the Annual General Meeting, Hall Chadwick resigned as auditor of the Company after receiving the consent of ASIC. Hall Chadwick has provided audit services to the Company since 2014. The Board thanks Hall Chadwick for its services provided as auditor of the Company.

As required, the Company has received a written notice of nomination made pursuant to section 328B from a shareholder of the Company for PKF to be appointed as the Company's auditor. A copy of the notice of nomination is included in Annexure 4.

PKF has consented to act in the capacity of auditor effective from the date of the Meeting, subject to the passing of Resolution 13, and all other requirements of the Corporations Act in relation to the appointment of an auditor have been, or, at the date of the Notice are being met.

The Company does not believe that the audit quality will be diminished as a result of changing auditors.

The Chairman intends to exercise all available proxies in favour of Resolution 13

(b) Board Recommendation

The Board recommends that Shareholders vote in favour of Resolution 13 .

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ANNEXURE 1: GLOSSARY

$ means Australian Dollars.

10% Placement Facility has the meaning set out in section 2.11(a).

10% Placement Period has the meaning set out in section 2.11(a).

Audit Report means the auditor's report set out in the Company's annual financial report for the year ended 31 December 2019.

Annual General Meeting means the meeting convened by the Notice.

ASX means ASX Limited or the market operated by it, as the context requires.

Board means the board of Directors of the Company.

Broker Shares has the meaning given to that term in section 2.8(a).

Business Day means a day on which the banks are open for general banking business in Sydney, Australia.

Chairman or Chair means the Chairman of the Annual General Meeting.

Closely Related Party of a member of the Key Management Personnel means:

(a) a spouse or child of the member;
(b) a child of the member's spouse;
(c) a dependent of the member or the member's spouse;
(d) anyone else who is one of the member's family and may be expected to influence the member, or be influenced by the member, in the member's dealing with the entity;
(e) a company the member controls; or
(f) a person prescribed by the Corporations Regulations 2001 (Cth).

Company or YPB means YPB Group Limited (ACN 108 649 421).

Constitution means the constitution of the Company.

Corporations Act means the Corporations Act 2001 (Cth).

Current Share Price means $0.002.

Director means a director of the Company.

Directors' Declaration as defined by section 298 of the Corporations Act.

Directors' Report means the director's report set out in the Company's annual financial report for the year ended 31 December 2019.

Eligible Entity as defined in Listing Rule 19.

Eligible Participant has the meaning given to that term in section 2.4(b).

Employee Shares means the 144,428,571 Shares at an issue price of $0.003 to be issued to employees or consultants (and/or their nominee) pursuant to Resolutions 9 – 10.

Equity Securities as defined in Listing Rule 19.

EverBlu Capital Pty Ltd means EverBlu Capital Pty Ltd (ACN 612 793 683).

Exercise Price has the meaning ascribed to that term in Annexure 3.

Expiry Date has the meaning ascribed to that term in Annexure 3.

Explanatory Memorandum means the explanatory memorandum accompanying the Notice.

Page | 39

YPB GROUP LTD

NOTICE OF ANNUAL GENERAL MEETING

Famile Pty Ltd means Famile Pty Ltd (ACN 129 638 151).

Glossary means the glossary set out in Annexure 1.

Golden Triangle Capital Pty Ltd means Golden Triangle Capital Pty Ltd (ACN 622 693 243).

Hall Chadwick means Hall Chadwick Chartered Accountants and Business Advisers (NSW) (90 214 713 490)

Houston Parties means the J F Houston Holdings Pty Ltd, The Bimm Corporation Ltd and Mr John Houston.

J F Houston Holdings Pty Ltd means J F Houston Holdings Pty Ltd (ACN 142 906 616).

JFH Loan has the meaning set out in section 2.6(a).

JFH Shares has the meaning given in section 2.6(a).

Key Management Personnel has the meaning as in the accounting standards issued by the Australian Accounting Standards Board and means those persons having authority and responsibility for planning, directing and controlling the activities of the Company, or if the Company if part of a consolidated entity, of the consolidated entity, directly or in directly, including any Director (whether executive or otherwise) of the Company.

Listing Rule means a Listing Rule of the ASX.

Managing Director means the managing director of the Company from time to time.

New Share has the meaning ascribed to that term in Annexure 1.

Nexia means Nexia Brisbane Corporate Finance Pty Ltd (ABN 67 603 962 429)

Notice means the Notice of Meeting accompanying this Explanatory Memorandum.

Option means an option to subscribe for a Share.

Option Terms means the terms of the JFH Options set out in Annexure 3.

Performance Rights means the rights offered under the PR Plan.

PKF means PKF Brisbane Audit (ABN 33 873 151 348)

Placement means the private placement to various sophisticated and professional investors as announced on 6 December 2019.

Placement Shares means the Shares issued on 10 December 2019 at an issue price of $0.006 pursuant to the Placement.

PR Plan means the YPB Group Limited Performance Rights Plan the terms of which are summarised in section 2.4(b).

PR Rules means the rules that govern the PR Plan.

Proxy Form means the proxy form for the Annual General Meeting accompanying the Notice.

Related Party as defined in Listing Rule 19.

Remuneration Report means the remuneration report set out in the Company's annual financial report for the year ended 31 December 2019.

Resolution means a resolution to be passed at the Annual General Meeting.

Securities as defined in Listing Rule 19.

Service Shares means the 25,600,000 Shares at an issue price of $0.005 to be issued to Mr Wade pursuant to Resolution 4.

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YPB GROUP LTD

NOTICE OF ANNUAL GENERAL MEETING

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

Shareholder means a holder of a Share in the Company.

Spill Meeting has the meaning set out in section 2.2(a).

Spill Resolution has the meaning set out in section 2.2(a).

Subscription Agreement means the agreement between J F Houston Holdings Pty Ltd and the Company entered on 9 June 2020.

Top-up Placement has the meaning given in section 2.10(a)

Top-up Placement Issue Price means the issue price that is at least 80% of the VWAP of the Company’s shares calculated over the last five (5) days on which sales in the Shares were recorded before the issue of the relevant shares.

Trading Day as defined in Listing Rule 19.

Variable A means "Variable A" as calculated in accordance with Listing Rule 7.1A.2.

VWAP means the volume weighted average share price of the Shares traded on ASX (excluding special crossings, crossing made prior to the commencement of normal trading, crossings made during the closing phase or the after hours adjust phase, overseas trades and overnight crossings or trades pursuant to the exercise of any options or other securities convertible into the Shares).

Page | 41

YPB GROUP LTD

NOTICE OF ANNUAL GENERAL MEETING

ANNEXURE 2: INDEPENDENT EXPERT REPORT

Page | 42

Independent Expert’s Report YPB Group Limited

Proposed Issue of Shares and Options in YBP Group Limited (ACN 108 649 421) to JF Houston Holdings Pty Ltd (ABN 47 759 915 456)

5 June 2020

In our Opinion the Proposed Transaction is Not Fair but is Reasonable to the Non-Associated Shareholders.

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FINANCIAL SERVICES GUIDE

Dated: 5 June 2020

What is a Financial Services Guide (“FSG”)?

This FSG is issued in relation to the independent expert’s report (“the Report” or “IER”) prepared by Nexia Brisbane Corporate Finance Pty Ltd (ABN 67 603 962 429) (“Nexia”) to help you decide whether to use any of the general financial product advice provided by Nexia, under its Australian Financial Services Licence (“AFSL”), Number 478 534.

This FSG includes information about:

Nexia and how they can be contacted;
the financial services Nexia is authorised to provide;
how Nexia is paid;
any relevant associations or relationships of Nexia;
how complaints are dealt with as well as information about internal and external dispute resolution systems, and how you can access them; and
the compensation arrangements that Nexia has in place.

Where you have engaged Nexia we act on your behalf when providing financial services. Where you have not engaged Nexia, Nexia acts on behalf of our client when providing these financial services and are required to provide you with an FSG because you receive a report or other financial services from Nexia.

Engagement

The independent expert’s report (“IER”) is intended to accompany the Explanatory Memorandum required to be provided to the shareholders of YPB Group Limited (ACN 108 649 421) (“YPB” or “the Company”).

Financial Services that Nexia are Authorised to Provide

Nexia holds an Australian Financial Services Licence, which authorises it to provide, amongst other services, financial product advice for securities. We provide financial product advice when engaged to prepare a report in relation to a transaction relating to this type of financial product.

Nexia's Responsibility to You

Nexia has been engaged by the independent directors of YPB to provide general financial product advice in the form of an IER to be sent to the shareholders of YPB as part of the notice of general meeting to consider the Proposed Transaction which, if approved, would result in the conversions of a $600,000 debt owed to JF Houston Holdings Pty Ltd (“JFH”) into 600,000,000 fully paid ordinary shares in the Company and 600,000,000 options to acquire fully paid ordinary shares in the Company expiring on 31 December 2020 at an exercise price of $0.002. The IER will be included with the Explanatory Information Memorandum and the Notice of the General Meeting to be sent to shareholders. These documents are collectively referred to as the “Transaction Documents”.

You have not engaged Nexia directly but have received a copy of the Report because you have been provided with a copy of an Explanatory Memorandum. Nexia or the employees of Nexia are not acting for any person other than our client which, in this case, is YPB.

Nexia is responsible and accountable to you for ensuring that there is a reasonable basis for the conclusions in the IER.

General Financial Product Advice

As Nexia has been engaged by YPB, the IER only contains general advice as it has been prepared without taking into account your particular personal objectives, financial situation or needs. You should consider the appropriateness of the general advice in the IER having regard to your circumstances before you act on the general advice contained in the IER.

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You should also consider the other parts of the Transaction Documents before making any decision in relation to the Proposed Transaction on which this IER is based.

Fees Nexia May Receive

Nexia charges fees for preparing reports. These fees will usually be agreed with and paid by the Client. Fees are agreed on either a fixed fee or a time cost basis. In this instance, the Client has agreed to pay Nexia a fee of up to $15,000 (excluding GST and out of pocket expenses) for preparing the IER. Nexia and its officers, representatives, related entities and associates will not receive any other fee or benefit in connection with the provision of this IER.

Nexia officers and employees receive remuneration from certain Nexia associated entities. In the ordinary course of completion of their professional work, remuneration and benefits are not provided directly in connection with any engagement for the provision of general financial product advice in the IER.

Referrals

Nexia does not pay commissions or provide any other benefits to any person for referring customers to them in connection with the reports that Nexia is licensed to provide.

Associations and Relationships

Through a variety of business structures Nexia is controlled by and operates as part of the Nexia Brisbane Group. Nexia's directors are members of the Nexia Brisbane Group. Mr Ken Robertson, a director of Nexia and a member of the Nexia Brisbane Group, has prepared this Report. The financial product advice in the Report is provided by Nexia and not by the Nexia Brisbane Group.

From time to time Nexia, the Nexia Brisbane Group and its related entities may provide professional services, including audit, tax and financial advisory services, to companies and issuers of financial products in the ordinary course of their businesses.

No individual involved in the preparation of the IER holds a substantial interest in, or is a substantial creditor of, the Client or has other material financial interests in the Proposed Transaction.

Nexia’s contact details are set out on our letterhead.

Nexia is unaware of any matters or circumstances that would preclude it from preparing the IER on the grounds of independence under regulatory or professional requirements. In particular, Nexia has had regard to the provisions of applicable pronouncements and other guidance statements relating to professional independence issued by Australian professional accounting bodies and the Australian Securities and Investment Commission (“ASIC”).

Complaints Resolution

As the holder of an AFSL Nexia is required to have a system for handling complaints from persons to whom we provide financial product advice. If you have a complaint in relation to the preparation or completion of the IER, please let Nexia know. All complaints must be in writing, and in the first instance, should be sent to:

The Complaints Officer

Nexia Brisbane Corporate Finance Pty Ltd

GPO Box 1189

BRISBANE QLD 4001

If you have difficulty in putting your complaint in writing, please telephone the Complaints Officer, on (07) 3229 2022 for assistance.

Written complaints are recorded, acknowledged within five days and investigated as soon as practical, and not more than 45 days after receiving the written complaint, the response to your complaint will be advised in writing within this timeframe.

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External Complaints Resolution Process

Nexia is a member of the Australian Financial Complaints Authority Limited (“AFCA”) (member number 362 03). If Nexia cannot resolve the complaint to your satisfaction within 45 days, you may refer the matter to AFCA. AFCA is an external dispute resolution scheme for consumers who are unable to resolve complaints with members financial service organisations. From 1 November 2018, AFCA took over the responsibility of dealing with external complaints from the Financial Ombudsman Service (“FOS”).

Further details about AFCA are available at the AFCA website www.afca.org.au or by contacting them directly at:

Australian Financial Complaints Authority Limited

GPO Box 3, Melbourne Victoria 3001

Telephone: 1800 931 678 Facsimile (03) 9613 6399

Email: [email protected]

ASIC also has a free call information line which you may use to obtain information about your rights. The ASIC free call number is 1300 300 630.

Compensation Arrangements

Nexia has professional indemnity insurance cover as required by the Corporations Act 2001(Cth).

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5 June 2020

The Directors YPB Group Limited Level 29, 66 Goulburn Street Sydney, NSW 2000

Dear Sirs,

Independent Expert’s Report on the Proposed Transaction

1. INTRODUCTION

Company Background

1.1. YPB Group Limited (“YPB” or “the Company”) develops and offers a number of brand protection, anticounterfeiting and retail consumer engagement products. YPB’s anti-counterfeiting technologies and solutions are designed to detect and prove product authenticity throughout the supply chain and trigger engagement between brands and their customers.
1.2. While YPB already offers a number of products and solutions such as tracer technology, the primary product currently under development is the MotifMicro product and associated offerings. MotifMicro uses nano-scale, sequence-encoded microcrystals to provide high security, covert and smartphonereadable anti-counterfeiting technology. The purpose of this product is to provide a highly effective anti-counterfeiting and brand protection offering with which consumers can readily engage, therefore simultaneously protecting brand name products while increasing consumer engagement. YPB is seeking to raise funds to provide working capital and to continued development and commercialisation.
1.3. The MotifMicro patent is being developed in two stages. The first stage, being MM1, which is a covert embedded security feature which provides a simple binary ‘yes’ or ’no’ response when scanned indicating the presence, or lack thereof, of the security feature. Secondly, the MM2 covert security feature will be serialised and will therefore be a superior product. Both products are intended to be readable by smartphone.

The Proposed Transaction

1.4. Since early 2020, the Directors have been seeking additional funds in order to provide continued working capital for the development of its existing products and patents, particularly MotifMicro, however these attempts to date have not been successful partly due to environmental factors, specifically the COVID-19 pandemic.

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1.5. Accordingly, short term related party loans were arranged in the amount of $600,000 from JFH (“JFH”). The terms on these loans required repayment to be made within 120 days of the loan advance date. It is now proposed that in order to facilitate the continued operations of YPB, these loans be repaid by issue of 600,000,000 ordinary shares at $0.001 per share and 600,000,000 options to subscribe to additional shares on the following terms:
exercise price of $0.002 per share;
exercise date of 31 December 2020; and
one option entitles the holder to subscribe for one ordinary share.
1.6. It is noted that YPB has made substantial losses in the previous three financial years (2017, 2018 and 2019) and has realised significant operating and investing cash outflows. It is unlikely that the Company will be able to continue to meet its working capital needs and fully develop and commercialise the MotifMicro patented product without further injection of funds and as such further capital raising activities are planned for the latter half of 2020. Repayment of the JFH related party loan in cash would significantly increase the burden on YPB to urgently raise capital. We have been advised by YPB’s capital raising advisor that it is unlikely additional capital could have been raised in sufficient time.
1.7.
Accordingly, it is proposed that a share subscriber agreement be entered into with JFH whereby:
JFH will be issued 600,000,000 ordinary shares in YPB at a price of $0.001 per share (total of $600,000).
JFH will be issued with options to acquire up to a further 600,000,000 shares in YPB at an exercise price of $0.002 per share (total of $1,200,000). The proposed expiry date of the options is 31 December 2020.
1.8. Currently, there are 1,694,369,386 ordinary shares on issue in YPB. JFH and its associates currently own the following shares in YPB:
JFH 62,169,479 (3.7%)
• The Bimm Corporation Pty Ltd (“TBC”) 90,372,322 (5.3%) • Total : 152,541 ,801 (9.0%)
1.9. It should be noted that JFH and TBC are related parties of Mr John Houston, Director and CEO of YPB. As a result of this proposed transaction, the total shares in YPB will be between the following ranges:

Assuming the options are not exercised

Total shares in YPB 2,294,369,386
Shares held by JFH and associated parties 752,541,801 (32.8%)

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Assuming all options are exercised

Total shares in YPB
Shares held by JFH and associated parties

2,894,369,386

1,352,541,801 (46.7%)

2. PURPOSE OF THE IER

2.1. We have been engaged to prepare this IER by the Independent Directors in relation to the Proposed Transaction so as to satisfy the requirements of Chapter 6 and specifically Section 611 item 7 of the Corporations Act 2001 Cth (“the Act”).
2.2. Under Section 606 of the Act, an acquisition of an interest in voting shares in a publicly listed company where that acquisition would take the person’s interest to greater than 20% is prohibited except as allowed for under Section 611. As provided for by Section 611 Item 7 of the Act a person may acquire shares in a public company where that acquisition takes that person from below 20% to over 20% where it is approved previously by a resolution passed at a general meeting of the company in which the acquisition is made, and
(a) no votes were cast in favour of the resolution by:
- (i) the person proposing to make the acquisition and their associates; or
- (ii) the persons (if any) from whom the acquisition is to be made and their associates; and
(b) the members of the company were given all information known to the person proposing to make the acquisition or their associates, or known to the company, that was material to the decision on how to vote on the resolution, including:
- (i) the identity of the person proposing to make the acquisition and their associates; and
- (ii) the maximum extent of the increase in that person’s voting power in the company that would result from the acquisition; and
- (iii) the voting power that person would have as a result of the acquisition; and
- (iv) the maximum extent of the increase in the voting power of each of that person’s associates that would result from the acquisition; and
- (v) the voting power that each of that person’s associates would have as a result of the acquisition.
2.3. The Company is seeking approval of the shareholders at the General Meeting.
2.4. As set out in paragraph 1.9 above, the proposed transaction will increase JFH’s and its associated parties’ interest in voting shares from 9.0% to between 32.8% and 46.7% depending on the number of options that are exercised and as such is prohibited under Section 606 of the Act unless it meets the criteria set out in Section 611 Item 7 of the Act.

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2.5. Regulatory guidance issued by ASIC requires that a director has the obligation to provide shareholders with full and proper disclosure to enable them to assess the benefits of a proposed transaction for the purposes of assisting them to decide whether to approve any resolution relating to a proposed transaction.
2.6. This IER is to accompany the Notice of the General Meeting of the Company, proposed to be held on 16 July 2020, and the Explanatory Memorandum (“the Transaction Documents”) being sent to the shareholders. In addition the IER will provide assistance to the Independent Directors in respect of meeting their obligations to provide the Shareholders with full and proper disclosure of matters relating to the Proposed Transaction so as to enable them to assess the benefits of the Proposed Transaction and to assist them in deciding on their voting intentions.

3. APPROACH

3.1. In preparing our IER, we have considered the requirements of:
ASIC Regulatory Guide 111 Content of Expert Reports (“RG 111”); and
ASIC Regulatory Guide 112 Independence of Experts (“RG 112”).
3.2. As indicated above, we have also considered the impact of Section 611 Item 7 of the Act in terms of the proposed acquisition of shares where the person acquiring increases their share from below 20% to greater than 20%. Section 611 Item 7 of the Act deals with the rules to be followed for such acquisitions. The purpose of Chapter 6 – Takeovers is to ensure that:
acquisition of control takes place in an efficient, competitive and informed market;
holders of shares or interests and the directors of the company or body responsible for the scheme:
- know the identity of any person who proposes to acquire a substantial interest in the company, body or scheme; and
- have reasonable time to consider the proposal;
- are given enough information to enable them to assess the merits of the proposal; and
as far as practicable, the holders of the relevant class of voting shares or interests all have a reasonable and equal opportunity to participate in any benefits accruing to the holders through any proposal under which a person would acquire a substantial interest in the company, body or scheme; and
an appropriate procedure is followed as a preliminary to compulsory acquisition of voting shares or interests or any other kind of securities under Part 6A.1 of the Act.
3.3. RG 111 sets out guidelines in respect of IER’s and what matters an independent expert should consider to assist shareholders in making informed decisions about transactions such as the subject

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of this IER. RG 111 also states that the independent expert must provide separate assessments of fairness and reasonableness. In other words, fairness and reasonableness is not a single test but constitutes two different concepts.

3.4. RG 111.11 indicates that an offer is 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. The value of the securities being the subject of the offer is determined assuming:
a knowledgeable and willing, but not anxious, buyer and knowledgeable and willing, but not anxious seller acting at arm’s length; and
100% ownership of the ‘company’ and irrespective of whether the consideration is script or cash. The expert should not consider the percentage holding of the ‘allottee’ or its associates in the company when making this comparison. For example, in valuing securities in the target entity, it is inappropriate to apply a discount on the basis that the shares being acquired represent a minority or portfolio parcel of shares.
3.5. For the purpose of considering whether or not the Proposed Transaction is fair we have compared the fair value of a share in YPB on a control basis prior to the Proposed Transaction to the fair value of a share in YPB on a minority basis after the Proposed Transaction.
3.6. RG 111 states that an offer is reasonable if it is fair. It may also be reasonable if, despite being not fair the independent expert believes that there are sufficient reasons to accept the offer.
3.7. When deciding whether an offer is reasonable, in the current context, an expert might consider:
the Allottee’s pre-existing voting power in securities in the Company;
other significant security holding blocks in the Company;
the liquidity of the market in the Company’s securities;
taxation losses, cash flow or other benefits through achieving 100% ownership of the Company;
• any special value of the Company to the non-associated shareholders, such as a particular technology, the potential to write off outstanding loans from the Company, etc;
the likely market price if the Proposed Transaction is unsuccessful; and
the value to an alternative party and likelihood of an alternative proposal being made.
3.8. RG112 sets out guidelines in respect of the level of independence of experts preparing a report of this nature.

4. SUMMARY AND OPINION

4.1. This section is a summary of our opinion and cannot substitute for a complete reading of this IER. Our opinion is based solely on information available as at the date of this IER.

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4.2. The principal factors that we have considered in forming our opinion are summarised below.

Assessment of Fairness

4.3. In accordance with RG 111, and in the current context, the Proposed Transaction is considered 'fair' if the value of the offer price or consideration paid (cash, shares or a combination of both) is equal to or greater than the market value of the shares & options being issued.
4.4. For the purpose of considering whether or not the Proposed Transaction is fair we have compared the fair value of a share in YPB on a control basis prior to the Proposed Transaction to the fair value of a share in YPB on a minority basis after the Proposed Transaction.
4.5. We have determined the value of the shares prior to the share issue on a control basis to be between $0.00147 and $0.00322 per share, with a mid-point of $0.00234 . the price of the shares on a minority interest basis after the transaction are assessed to be as set out in Table 4.1 below.

Table 4.1 – Value of Shares

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

DCF Average 50 Day VWAP
Value per Share on a Pre-Proposed
$ 0.00147 $ 0.00234 $ 0.00322
Transaction, Control basis
Value per Share on a Post-Proposed
$ 0.00110 $ 0.00152 $ 0.00191
Transaction, Minority Interest Basis
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4.6. As the value of the shares post transaction are less than the value of the shares pre transaction under all scenarios, we have assessed this transaction to be not fair.

Assessment of Reasonableness

4.7. In accordance with RG 111, a transaction is reasonable if:
the transaction is fair; or
despite not being fair, but considering other significant factors, shareholders should obtain an overall benefit if the transaction proceeds.
4.8. In forming our opinion, we have considered the following relevant factors:
the transaction is assessed to be not fair; however
the Company is unlikely to be able to raise sufficient capital to repay the $600,000 related party debt and fund its continuing development and working capital requirements in the absence of any other offer to acquire the shares, capacity to raise funds on the open market or avenues for debt financing on acceptable terms (i.e. terms that are not also determinantal to shareholder value such as ‘death spiral’ convertible notes);

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we are advised by the Company’s capital raising partner that it is highly unlikely that sufficient funds can be raised and that there was limited or no capacity to raise funds during the COVID19 pandemic. We have also been provided evidence of the:
- rejection of YPB’s application for a loan from the National Australia Bank (“NAB”); and
- draft terms of convertible notes wherein the terms would have been highly detrimental to the value of the shareholder’s interest, being that the debt could be converted into a fixed dollar amount of shares as opposed to a fixed number of shares as is normal. These are commonly referred to as “death spiral convertible notes” which create an opportunity and incentive for the debt holder to short sell the company’s shares in order to obtain a greater number of shares. The more shares issued under such an arrangement, the further diluted the company’s share price becomes.
4.9. On this basis, we have determined that due to the limitations on YPB’s capacity to raise funds in the short term and failed attempts to date to obtain debt funding, that the transaction is reasonable .

Summary of Opinion

4.10. Accordingly, in our opinion, the Proposed Transaction is not fair but reasonable to the nonassociated shareholders of YPB as a whole.

5. OTHER MATTERS

Shareholders Individual Circumstances

5.1. Our analysis has been undertaken, and our conclusions are expressed at an aggregate level. Accordingly, Nexia has not considered the effect of the Proposed Transaction on the particular circumstances of individual shareholders. Some individual shareholders may place a different emphasis on various aspects of the Proposed Transaction from those adopted in this IER. Accordingly, individual shareholders may reach different conclusions as to whether or not the Proposed Transaction gives a fair value in their individual circumstances.
5.2. The ultimate decision on whether to approve the Proposed Transaction should be based on shareholders’ own assessment of their circumstances. After carefully reading all relevant documentation provided, including the Explanatory Memorandum to the Notice of General Meeting. We strongly recommend that shareholders consult their own professional advisers and consider their own specific circumstances before voting in favour of, or against approving the Proposed Transaction.

Sources of Information Relied Upon

5.3. The details of the information referred to and relied upon by Nexia in arriving at the opinions expressed in this IER are set out in Appendix B.
5.4. The statements and opinions contained in this IER are given in good faith and are based on our consideration and assessment of the information provided by YPB and that which is otherwise publicly available.

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Current Market Conditions

5.5. The opinions set out in this IER are based on the economic, market and other conditions prevailing at the date of signing this IER. These conditions may change significantly over a relatively short period of time.
5.6. Any changes in those conditions may result in any valuation or other opinion becoming quickly outdated and in need of revision.

Disclaimer and Limitations

5.7. This IER has been prepared at the request of the independent directors and is intended to accompany the Transaction Documents that are to be sent to the shareholders. This IER may be relied upon only by those persons. Accordingly, this IER and the information and opinions contained within it may not be relied upon by any person other than the directors and shareholders without our written consent. Nexia accepts no responsibility to any person other than the directors or the shareholders in relation to this this IER. Nexia acknowledges that this IER will be lodged with the regulatory authority, ASIC.
5.8. While we have agreed to the inclusion of this IER with the Transaction Documents to be sent to the shareholders, Nexia is not responsible for the contents of the Transaction Documents or any other document associated with the Proposed Transaction.
5.9. Nexia and related entities (“Nexia Brisbane Group”) and I disclaim liability to any other person relying upon this IER. This IER may not be disclosed, copied to any other person other than to those referred to in the immediately preceding two paragraphs without either my or Nexia’s express written authority.

Yours faithfully

Nexia Brisbane Corporate Finance – AFSL No.478 534

Ken Robertson

Director

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INDEPENDENT EXPERT’S REPORT

Our Report is set out under the following headings:

1. OUTLINE OF THE TRANSACTION AND GROUP ............................................................................10
2. PURPOSE OF REPORT ................................................................................................................11
3. BASIS OF EVALUATION ..............................................................................................................13
4. OVERVIEW OF YPB GROUP LIMITED...........................................................................................15
5. INDUSTRY OVERVIEW ...............................................................................................................20
6. VALUATION METHODOLOGIES ...................................................................................................23
7. VALUE OF YPB ...........................................................................................................................25
8. ASSESSMENT OF FAIRNESS .......................................................................................................29
9. ASSESSMENT OF REASONABLENESS ...........................................................................................32
10. OPINION ..................................................................................................................................33
SCHEDULE 1 – DETAILED DISCOUNTED CASHFLOW MODEL ...............................................................34
SCHEDULE 1.1 – NOTES TO SCHEDULE 1 ...........................................................................................35
SCHEDULE 2 – BUSINESS DESCRIPTIONS OF COMPARABLE COMPANIES .............................................44
APPENDIX A – GLOSSARY ..................................................................................................................47
APPENDIX B - SOURCES OF INFORMATION ........................................................................................48
APPENDIX C - STATEMENT OF DECLARATION & QUALIFICATIONS ......................................................49
APPENDIX D - VALUATION METHODOLOGIES ....................................................................................51

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1. Outline of the Transaction and Group

1.1. Since early 2020, the directors have been seeking additional funds in order to provide continued working capital for the development of its existing products and patents, particularly MotifMicro, however these attempts to date have not been successful partly due to environmental factors, specifically the COVID-19 pandemic.
1.2. Accordingly, short term related party loans were arranged in the amount of $600,000 from JFH. The terms on these loans required repayment to be made within 120 days of the loan advance date. It is now proposed that in order to facilitate the continued operations of YPB, these loans be repaid by the issue of 600,000,000 ordinary shares at $0.001 per share and 600,000,000 options to subscribe to additional shares on the following terms:
exercise price of $0.002 per share
exercise date of 31 December 2020; and
one option entitles the holder to subscribe to one ordinary share.
1.3. It is noted that YPB has made substantial losses in the previous three financial years (2017, 2018 and 2019) and has realised significant operating and investing cash outflows. It is unlikely that the Company will be able to continue to meet its working capital needs and fully develop and commercialise the MotifMicro patented product without further injection of funds and as such further capital raising activities are planned for the latter half of 2020. Repayment of the JFH related party loan in cash would significantly increase the burden on YPB to urgently raise capital. We have been advised by YPB’s capital raising advisor that it is unlikely this additional amount of capital could be raised in sufficient time.
1.4. Accordingly, it is proposed that a share subscriber agreement be entered into with JFH whereby:
JFH will be issued 600,000,000 ordinary shares in YPB at a price of $0.001 per share (total of $600,000).
JFH will be issued with options to acquire up to a further 600,000,000 shares in YPB at a price of $0.002 per share (total of $1,200,000). The proposed expiry date of the options is 31 December 2020.
1.5. Currently, there are 1,694,369,386 ordinary shares on issue in YPB. JFH and its associates currently own the following shares in YPB:
JFH 62,169,479 (3.7%)
• TBC 90,372,322 (5.3%) • Total : 152,541 ,801 (9.0%)
1.6. It should be noted that JFH and TBC are related parties of Mr John Houston, a director and CEO of YPB. As a result of the Proposed Transaction, the total shares in YPB will be between the following ranges:

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Assuming the options are not exercised

Total shares in YPB 2,294,369,386
• JFH & associated parties 752,541,801 (32.8%) Assuming all options are exercised
• Total shares in YPB – 2,894,369,386 • JFH & associated parties 1,352,541,801 (46.7%)

2. Purpose of Report

2.1. In order to advise the shareholders, it is important to review relevant legislation and the regulatory guidelines issued by the Australian Securities and Investment Commission (“ASIC”) for applicability to the Proposed Transaction. The purpose of this IER is to form an opinion and advise the shareholders on whether the share and option issue is fair and reasonable to the shareholders. This IER will accompany the Explanatory Memorandum and the Notice of Meeting ("Transaction Documents") required to be provided to the Shareholders to assist them in voting on whether or not to approve the Proposed Transaction.
2.2. We have identified the following regulatory requirements will apply to the Proposed Transaction:
Section 606 of the Act;
Section 611 Item 7 of the Act;
ASIC Regulatory Guide 111 Content of Expert Reports (RG.111);
ASIC Regulatory Guide 112 Independence of Experts (RG.112);

Sections 606 and 611 Item 7 of the Act

2.3. The purpose of Chapter 6 – Takeovers is to ensure that:
acquisitions of control take place in an efficient, competitive and informed market;
holders of shares or interests and the directors of the company or body responsible for the scheme:
- know the identity of any person who proposes to acquire a substantial interest in the company, body or scheme; and
- have reasonable time to consider the proposal;
- are given enough information to enable them to assess the merits of the proposal; and
as far as practicable, the holders of the relevant class of voting shares or interests all have a reasonable and equal opportunity to participate in any benefits accruing to the holders through any proposal under which a person would acquire a substantial interest in the company, body or scheme; and

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an appropriate procedure is followed as a preliminary to compulsory acquisition of voting shares or interests or any other kind of securities under Part 6A.1 of the Act.
2.4. Under Section 606 of the Act, an acquisition of an interest in voting shares in a publicly listed company where that acquisition would take the person’s interest to greater than 20% are prohibited except as allowed for under Section 611. As provided for by Section 611 Item 7 of the Act a person may acquire shares in a public company where that acquisition takes that person from below 20% to over 20% where it is approved previously by a resolution passed at a general meeting of the company in which the acquisition is made, and
(a) no votes were cast in favour of the resolution by:
- (i) the person proposing to make the acquisition and their associates; or
- (ii) the persons (if any) from whom the acquisition is to be made and their associates; and
(b) the members of the company were given all information known to the person proposing to make the acquisition or their associates, or known to the company, that was material to the decision on how to vote on the resolution, including:
- (i) the identity of the person proposing to make the acquisition and their associates; and
- (ii) the maximum extent of the increase in that person’s voting power in the company that would result from the acquisition; and
- (iii) the voting power that person would have as a result of the acquisition; and
- (iv) the maximum extent of the increase in the voting power of each of that person’s associates that would result from the acquisition; and
- (v) the voting power that each of that person’s associates would have as a result of the acquisition.
2.5. The Company is seeking approval of the shareholders at the General Meeting.

ASIC Regulatory Guide 111 Acquisitions approved by members (RG.111)

2.6. RG.111 sets out guidelines in respect of IER’s and what matters an independent expert should consider to assist shareholders in making informed decisions about transactions such as the Proposed Transaction that is the subject of this IER. Included in the guidelines is a recommended approach to analysing the Proposed Transaction and the choice of methodology to be used.

ASIC Regulatory Guide 112 Independence of Experts (RG.112)

2.7. RG. 112 sets out guidelines in respect of the level of independence of experts preparing a report of the nature required by RG.111.

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3. Basis of Evaluation

3.1. RG 111 requires analysis of a transaction under two distinct criteria being:
is the offer fair; and
is the offer reasonable?
3.2. RG 111 states that fair and reasonable are regarded as two separate elements and are not regarded as a compound phrase.
3.3. In determining what is fair and reasonable in terms of a proposed transaction, RG 111 states that the transaction is 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. This comparison should be made:
assuming a knowledgeable and willing but not anxious buyer and a knowledgeable and willing but not anxious seller acting at arm’s length; and
assuming 100% ownership of the Company and irrespective of whether consideration is cash or scrip.
3.4. For the purpose of considering whether or not the Proposed Transaction is fair we have compared the fair value of a share in YPB on a control basis prior to the Proposed Transaction to the fair value of a share in YPB on a minority basis after the Proposed Transaction. That is to say, is the value of the shares held by non-associated shareholders at least equal to or higher than before the transaction.
3.5. An offer is reasonable if it is fair, or if the offer is not fair, and the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of a higher bid before the close of an offer.
3.6. For the purpose of considering whether or not the Proposed Transaction is fair we have compared the calculated value under:
firstly, the Discounted Cash Flow methodology; and
secondly, using the 50-day Volume Weighted Average Price (VWAP).
3.7. In our assessment of the reasonableness of the Proposed Transaction, our consideration has included the following matters:
other significant security holding blocks in YPB;
the liquidity of the market in YPB’s securities;
any special value to YPB, such as technology, the potential to write-off outstanding loans, etc;
the likely market price if the Proposed Transaction does not proceed;
the value to an alternate party and the likelihood of an alternative offer being made; and

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the financial position of YPB in the event it is unable to secure additional working capital and development funding.

Individual Shareholders’ Circumstances

3.8. The ultimate decision whether to approve the Proposed Transaction should be based on each shareholder’s assessment of the Proposed Transaction, including their own risk profile, liquidity preference, tax position and expectations as to value and future market conditions. If in doubt about the Proposed Transaction or matters dealt with in this IER, shareholders should seek independent professional advice.

Scope and Limitations on Reliance on Information

3.9. The scope of the procedures we undertook in forming our opinion on whether the Proposed Transaction is fair and reasonable to the Shareholders as a whole has been limited to those procedures, we believe are required in order to form our opinion. Our procedures did not include verification work nor constitute an audit or assurance engagement in accordance with Australian Auditing and Assurance Standards.
3.10. The documents and information relied on for the purposes of this IER are set out in Appendix B. We have considered and relied upon this information and believe that the information provided is reliable, complete and not misleading and we have no reason to believe that any documents and material facts have been withheld. The information provided was evaluated through analysis, enquiry and review for the purpose of forming an opinion as to whether the Proposed Transaction is fair and reasonable to the Shareholders as a whole. However, we do not warrant that our enquiries have identified or verified all of the matters which an audit or extensive examination might disclose.
3.11. We understand the accounting and other financial information that was provided to us has been prepared in accordance with generally accepted accounting principles.
3.12. An important part of the information used in forming an opinion of the kind expressed in this IER is the opinions and judgement of the directors and management. This type of information has also been evaluated through analysis, enquiry and review to the extent practical. However, it must be recognised that such information is not always capable of external verification or validation.
3.13. Nexia are not the auditors of YPB. We have analysed and reviewed information provided by the directors and management of YPB and made further enquiries where appropriate. Preparation of this IER does not imply that we have in any way audited the accounts or records of YPB.
3.14. In forming our opinion, we have assumed:
matters such as title, compliance with laws and regulations and contracts in place are in good standing and will remain so and that there are no material legal proceedings, other than as publicly disclosed;
the information set out in the Information Memorandum to the Notice of General Meeting to consider the Proposed Transaction including the Share Issue to be sent to shareholders is complete, accurate and fairly represented in all material respects; and

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the publicly available information relied upon by Nexia in its analysis was accurate and not misleading.
3.15. This Report has been prepared after taking into consideration the current economic and market conditions. We take no responsibility for events occurring after the date of this IER which may impact upon this IER or which may impact upon the assumptions referred to in the IER.

4. Overview of YPB Group Limited

Corporate History

4.1. YPB consists of a large number of wholly owned subsidiary companies. A list of these companies is set out in Table 4.1 below.

Table 4.1 – Wholly Owned Subsidiaries of YPB

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Principle Place of Business /
Name Place of Incorporation Ownership Interest
YPB Limited (HK) Hong Kong 100%
YPB Technology (Beijing) Limited People's Republic of China 100%
Product ID & Quality Systems (Beijing) Ltd People's Republic of China 100%
Brand Reporter Pty Ltd Australia 100%
YPB Group (USA) Inc USA 100%
YPB Intellectual Product Protection Inc USA 100%
YPB Print Solutions Inc USA 100%
YPB Group Co., Ltd Thailand 100%
YPB Group International Co., Ltd Thailand 100%
nTouch Holdings Pty Ltd Australia 100%
nTouch Agency Pty Ltd Australia 100%
nTouch Pty Ltd Australia 100%
nTouch IP Pty Ltd Australia 100%
YPB Product Development Pty Ltd Australia 100%
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4.2. YPG’s registered address is Level 29, 66 Goulburn Street, Sydney NSW 2000, Australia while it has two principle places of business being:
Level 39, Exchange Tower, 388 Sukhumvit Road, Khlong Toey, Bangkok 10110, Thailand; and
A2 Building-East, BEX R&D Centre, No.9 Jiuxianqiao Road, Chaoyang District, Beijing 1000016, People’s Republic of China.

Business Activities

4.3. YPB develops and offers a number of brand protection, anti-counterfeiting and retail consumer engagement products. YPB’s anti-counterfeit technologies and solutions are designed to detect and prove product authenticity throughout the supply chain and trigger engagement between brands and their customers.
4.4. While YPB already offers a number of products and solution such as tracer technology, the primary product currently under development is the MotifMicro product and associated offerings. MotifMicro

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uses nano-scale, sequence-encoded microcrystals to provide high security, covert and smartphonereadable anti-counterfeiting technology. The purpose of this product is to provide a highly effective anti-counterfeiting and brand protection offering with which consumers can readily engage, therefore simultaneously protecting brand name products while increasing consumer engagement. YPB is seeking to raise funds to provide working capital and to continue development and commercialisation.

4.5. The MotifMicro patent is being developed in two stages, being MM1 and MM2. MM1 is a covert embedded security feature that provides a simple binary ‘yes’ or ‘no’ response when scanned indicating the presence, or lack thereof, of the security feature. The MM2 covert security feature will be serialised and will therefore be a superior product. Both products are intended to be readable by smartphones.

Directors and Key Management

4.6. The directors and Key Management Personnel of YPB Group as at the date of this Report are:
John Houston (CEO and related party of JFH and TBC);
George (Su) Su;
Gerard Eakin;
Philip Wade;
Sebastian Andre (Company Secretary); and
Adrian Tan (CFO).

Financial Information

4.7. YPB’s financial reports for the period ended 30 December 2019 were audited by Hall Chadwick (NSW) and were unqualified.

Capital Structure and Ownership

4.8. YPB Limited’s issued share capital as at 31 December 2019 comprised 1,694,369,386 fully paid ordinary shares. The top 20 shareholders of YPB’s issued share capital, as at 31 December 2019 were as set out in Table 4.2 below.

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Table 4.2 – Top 20 Shareholders

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Name Shares Held % Held
HSBC Custody Nominees (Australia) Limited 104,172,141 6.1%
The Bimm Corporation Pty Ltd 90,372,322 5.3%
JF Houston Holdings Pty Ltd 62,169,479 3.7%
Mr Paul Bisso 53,098,565 3.1%
Mr Patrick Doyle 47,976,551 2.8%
Mr Evan Phillip Clucas & Ms Leanne Jane Weston 29,324,234 1.7%
Mr Ronald Langley 29,215,213 1.7%
Mr Ronald Langley & Mrs Ronald Langley 26,250,000 1.5%
Ack Pty Ltd 22,564,103 1.3%
4 Eyes Limited 22,000,000 1.3%
Leet Investments Pty Ltd 18,000,000 1.1%
Aust Executor Trustees Ltd 16,648,737 1.0%
Mr Mark Andrew Tkocz 16,204,256 1.0%
Cashmere Nominees Pty Ltd 15,000,000 0.9%
Leet Investments Pty Ltd 13,597,326 0.8%
Mr Sean Patrick Mulqueeney 13,500,000 0.8%
Mr Sewa Singh 13,000,000 0.8%
Mr Paul Klumper 12,000,000 0.7%
Mr Gangadhar Bevinakoppa 12,000,000 0.7%
Euthenia Tyche Pty Ltd 11,775,568 0.7%
628,868,495 37.1%
1,065,500,891 62.9%
1,694,369,386 100.0%
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Source: YPB 2019 Annual Report.

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Financial Performance

4.9. Set out in Table 4.3 below are the audited consolidated profit and loss results of YPB for the period from 1 January 2017 to 30 December 2019.

Table 4.3 – Historical Profit and Loss - Consolidated

	Year to Date 30-Apr-20 30-Dec-19 30-Dec-18 30-Dec-17 AUD$'000 AUD$'000 AUD$'000 AUD$'000 Year Ended
Total Revenue Less Expenditure Consulting Fees Directors' Fees Employee Benefits Expense Production Costs Rental Expenses Options Expense Research and Development Costs Marketing Costs Traveling Expense Share-Based Payments Regulatory Expenses Professional Fees Impairment Loss Assets Written-Off Other Expenses Total Expenditure Ebitda Less Depreciation & Amortisation Ebit Finance Costs Other Income/Expenditure Income Tax Expense Net Profit / (Loss) Exchange Differences on Translation of Foreign Operations Total Net Profit Including Other Income	187 1,119 1,987 1,998 (15) (1,466) (1,481) (1,583) (102) (160) (80) (142) (736) (2,454) (2,986) (3,219) (6) (176) (635) (1,007) (109) (214) (359) (314) - (67) (845) (1) (119) (319) (393) (1,023) (24) (313) (162) (79) (20) (277) (365) (607) - (38) (54) (179) (2) (180) (245) (188) (271) (255) (414) (418) - (2,006) (2,356) (10,709) (6) - (52) - (147) (682) 1,060 (1,452)
	(1,557) (8,607) (9,367) (20,921)
	(1,371) (7,488) (7,380) (18,923)
	(31) (223) (165) (967)
	(1,402) (7,711) (7,545) (19,890)
	(53) (394) (65) (387) 15 - - - - 118 332 16
	(1,439) (7,987) (7,278) (20,261)
	6 (958) (250)
	(1,439) (7,981) (8,236) (20,511)

Source: YPB 30 December 2019 and 30 December 2018 audited financial statements; YPB Management Profit and Loss for the 4 months 1 January 2020 to 30 April 2020.

4.10. As shown in Table 4.3 above, a significant impact on EBITDA has been impairment losses in 2017, 2018 and 2019 of $10,709,000, $2,356,000 and $2,006,000 respectively. As the MotifMicro product is still in the process of being commercialised and fully developed, significant revenues have not yet been derived. Existing revenues are derived primarily from the sale of tracer technology, customer

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engagement products and anti-theft devices, although the anti-theft device aspect of YPB’s operations has now ceased.

4.11. Revenues in YTD April 2020 are proportionally down on prior years and lower than the 2020 cashflow budget. This may in part be due to the impact of the COVID-19 Pandemic.

Financial Position

4.12. Set out in Table 4.4 below are the consolidated Balance Sheets of YPB as at 30 December 2017, 30 December 2018 and 30 December 2019.

Table 4.4 – Historical Balance Sheets - Consolidated

	30-Dec-19 30-Dec-18 30-Dec-17 AUD$'000 AUD$'000 AUD$'000 Year Ended

Current Asset
Cash and Cash Equivalents Trade and Other Receivables Inventories Total Current Assets	774 487 845 384 701 508 240 282 333
	1,398 1,469 1,686

Non-Current Assets
Plant and Equipment Intangibles Total Non-Current Assets	353 184 197 6,500 8,443 9,115
	6,853 8,627 9,312

Total Assets	8,251 10,096 10,998
Current Liabilities Trade and Other Payables Deferred Revenue Financial Liabilities Lease Liabilities Borrowings	1,421 1,569 6,782 - 144 240 1,462 1,723 1,836 141 - - - - 1,002
Total Current Liabilities Non-Current Liabilities Borrowings Lease Liabilities Total Non-Current Liabilities	3,024 3,436 9,860
	- - - 75 - -
	75 - -
Total Liabilities
	3,099 3,436 9,860

Net Assets Equity Issued Capital Reserves Accumulated Losses Total Equity	5,152 6,660 1,138
	69,126 61,980 49,124 2,499 3,386 3,740 (66,473) (58,707) (51,726)
	5,152 6,660 1,138

Source: YPB 30 December 2019 and 30 December 2018 audited financial statements.

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4.13. It should be noted that the above Balance Sheets do not include the $600,000 related party loans provided by JFH as these were provided post 31 December 2019. The most recent balance sheet provided to us was as at 31 December 2019. The April 2020 management accounts do not include a Balance Sheet as we are advised that only ‘simplified’ management accounts are prepared. The Balance Sheet for the group which would require detailed consolidation, is not prepared on a monthly basis.
4.14. The most significant asset on the YPB Balance Sheet is the capitalised value of the MotifMicro patent licence and capitalised development costs. As at 31 December 2019 the value of this intangible asset was subject to an independent fair value assessment, however it is noted that this assessment was done without full consideration of the ongoing impacts of the COVID 19 pandemic.
4.15. Due to lack of profitability and significant revenue to date, the Company has funded its operations and development costs primarily through the issue of share capital, with equity from shares issued increasing from $49,124,000 in 2017 to $69,126,000 in 2019.

5. Industry Overview

Industry Research

5.1. The Company operates within the global anti-counterfeiting packaging industry. This industry can be subdivided into overt and covert features designed to verify the authenticity of products and combat losses resulting from counterfeit products.
5.2. The industries which drive demand for anti-counterfeiting packaging are broad as a number of industries suffer from losses as a result of counterfeiting. Some of the current largest industry groups driving demand globally include:
food and beverage;
healthcare;
clothing;
electronics;
cosmetics; and
automotive.
5.3. Overall, considerable growth is expected in the coming years partly due to advances in technology, and particularly within the healthcare and pharmaceuticals industry due to potentially harmful impacts of non-authentic products. Growth from other industries comes from increasing desire to protect brand names and reduce losses arising from counterfeit versions of brand name products.
5.4. We have set out in Tables 5.1 and 5.2 below our analysis of comparable companies in the industry. It can be noted from reviewing these companies that the majority of these companies are currently unprofitable, and in some cases are not yet generating significant revenue.

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5.5. The below data also shows that there is limited forecast data available for companies similar to YPB. It should be noted that each of the following companies are not exactly the same as YPB in that:
some companies, while offering an anti-counterfeiting solution, offer a different product (i.e. specialty inks that can be applied to a product and react in a unique way under certain testing methods). Furthermore, each is at a different stage with some being more established than YPB;
some companies’ revenues are not derived exclusively from anti-counterfeit packaging; and
some companies do not operate with the same geographic profile as YPB.
5.6. Detailed business descriptions of the comparable companies along with Nexia’s commentary is attached as Schedule 2.

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Table 5.1 - Comparable Companies – Financial Data

Actual Actual Actual FY 19 FY 20 FY 21 FY 22 FY 19 FY 20 FY 21 FY 22 FY 19 FY 20 FY 21 FY 22 Consensus Forecast Revenue Consensus Forecast EBITDA EBITDA % Consensus Forecast**	Actual Actual Actual FY 19 FY 20 FY 21 FY 22 FY 19 FY 20 FY 21 FY 22 FY 19 FY 20 FY 21 FY 22 Consensus Forecast Revenue Consensus Forecast EBITDA EBITDA % Consensus Forecast**	Actual Actual Actual FY 19 FY 20 FY 21 FY 22 FY 19 FY 20 FY 21 FY 22 FY 19 FY 20 FY 21 FY 22 Consensus Forecast Revenue Consensus Forecast EBITDA EBITDA % Consensus Forecast**	Actual Actual Actual FY 19 FY 20 FY 21 FY 22 FY 19 FY 20 FY 21 FY 22 FY 19 FY 20 FY 21 FY 22 Consensus Forecast Revenue Consensus Forecast EBITDA EBITDA % Consensus Forecast**
Document Security Systems, Inc. (AMEX:DSS)	30.20 32.67 39.81 33.05	(2.30) (1.77) 2.09 12.00	(7.6%) (5.4%) 5.2% 36.3%
Nocopi Technologies, Inc. (OTCPK:NNUP)	4.00 - - -	1.30 - - -	32.5% - - -
VerifyMe, Inc. (OTCPK:VRME)	0.40 - - -	(3.70) - - -	(925.0%) - - -
Nanotech Security Corp. (TSXV:NTS)	7.00 - - -	(1.40) - - -	(20.0%) - - -
Spectra Systems Corporation (AIM:SPSC)	20.60 22.11 24.75 -	8.40 8.10 8.72 -	40.8% 36.6% 35.2% -
Applied DNA Sciences, Inc. (NasdaqCM:APDN)	8.00 9.36 13.08 -	(12.80) - - -	(160.0%) - - -
DataDot Technology Limited (ASX:DDT)	3.40 - - -	(1.50) - - -	(44.1%) - - -
Wellness CenterUSA,Inc.(OTCPK:WCUI)	- - - -	(2.50) - - -	- - - -

Table 5.2 – Comparable Companies – Trading Multiples

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Market Total Enterprise Revenue Multiples EBITDA Multiples
Capitalisation Value (TEV) TEV/19 TEV/20 TEV/21 TEV/22 TEV/19 TEV/20 TEV/21 TEV/22
Document Security Systems, Inc. (AMEX:DSS) 25.90 31.20 1.03 x 0.96 x 0.78 x 0.94 x 14.93 x 2.6 x
Nocopi Technologies, Inc. (OTCPK:NNUP) 9.50 8.10 2.03 x 6.23 x
VerifyMe, Inc. (OTCPK:VRME) 20.80 19.60 49 x
Nanotech Security Corp. (TSXV:NTS) 18.40 9.30 1.33 x
Spectra Systems Corporation (AIM:SPSC) 134.80 116.00 5.63 x 5.25 x 4.69 x 13.81 x 14.32 x 13.3 x
Applied DNA Sciences, Inc. (NasdaqCM:APDN) 82.50 71.30 8.91 x 7.62 x 5.45 x
DataDot Technology Limited (ASX:DDT) 4.50 4.80 1.41 x
Wellness Center USA, Inc. (OTCPK:WCUI) 5.80 7.30
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*AUD Millions

Source: S&P Capital IQ

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6. Valuation Methodologies

Definition of Market Value

6.1. In forming our opinion as to whether or not the Proposed Transaction is fair and reasonable to the YPB Shareholders as a whole, we have assessed the value of the issued shares and options of YPB on a fair value basis. RG 111.11 indicates that an offer is 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. The value of the securities being the subject of the offer is determined assuming:
a knowledgeable and willing, but not anxious, buyer and knowledgeable and willing, but not anxious seller acting at arm’s length; and
100% ownership of the ‘target’ and irrespective of whether the consideration is script or cash. The expert should not consider the percentage holding of the ‘bidder’ or their associates in the target when making this comparison. For example, in valuing securities in the target entity, it is inappropriate to apply a discount on the basis that the shares being acquired represent a minority or portfolio parcel of shares.

Selection of Methodology

6.2. RG 111 provides guidance on the valuation methods that an independent expert should consider. These methods include:
the discounted cash flow method and the estimated realisable value of any surplus assets;
the application of earnings multiples (appropriate to the business or industry in which the entity operates) to the estimated future maintainable earnings or cash flows of the entity, added to the estimated realisable value of any surplus assets;
the amount that would be available for distribution to security holders on an orderly realisation of assets;
the quoted price for listed securities, when there is a liquid and active market and allowing for the fact that the quoted price may not reflect their value, should 100% of the securities be available for sale;
any recent genuine offers received by the target for the entire business, or any business units or assets as a basis for valuation of those business units or assets; and
the amount that an alternative party might be willing to offer if all the securities in the target were available for purchase.
6.3. Each methodology is appropriate in certain circumstances. The decision as to which methodology to apply generally depends on the nature of the asset being valued, the methodology most commonly applied in valuing such an asset and the availability of appropriate information.
6.4. As such, we have considered the following commonly accepted valuation methodologies.

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Table 6.1 – Valuation Methodologies Considered – Shares in YPB

Method	Adopted?	Note
		Most technically advanced method. Forecast were
Discounted Cashflow	Yes	available and provided by YPB. After review and necessary adjustment these were used as the basis
		for a DCF valuation.
Earnings Multiple	No	YPB has no earnings over which to apply an earnings multiple
Realisation of Net Assets	No	Fair value of primary asset, being intangibles is derived from its future cashflows.
Quoted Price of Listed Securities	Yes	YPB is a listed company and as such Volume Weighted Average Price (VWAP) of securities is an appropriate methodology to apply.
Recent Genuine Offers	No	No recent genuine offers that reflect current circumstances.
Amount that an alternative bidder might offer	No	No evidence that an alternative bidder exists or information as to what they might offer.

6.5. In determining the fair value of YPB, we have applied the discounted cash flow method based on forecast information prepared by YPB. We have reviewed these forecasts and together with industry research, analysis of assumptions, discussions with management, review of historical performance and professional judgement, we have adjusted these forecasts. These forecasts have then been used as the basis for creating a discounted cashflow model to determine the enterprise value of the Company from which surplus net assets are added/(deducted) to arrive at total equity value.
6.6. Furthermore, Regulation 111.65 encourages the expert to consider two methodologies where possible. Accordingly, we have adopted as a secondary methodology the Quoted Price of Listed Securities methodology. As YPB is a listed company we have obtained the Company’s 50-Day Volume Weighted Average Price of shares (VWAP) to facilitate a valuation using this methodology.
6.7. It should be noted that in addition to receiving 600,000,000 shares in YPB, JFH will as part of the Proposed Transaction be issued with 600,000,000 options to acquire shares in YPB on the following terms:
exercise price of $0.002;
- exercise date of 31 December 2020; and
one option entitles the holder to subscribe for one ordinary share.
6.8. Accordingly, it is also necessary to calculate the value of the options to be issued under the Proposed Transaction. To do this, we have adopted the Black Scholes methodology, whereby the options are valued using the following key assumptions:
volatility of 156.59%;
an appropriate risk-free rate for the term of the options of 0.27%; and
exercise price of $0.002.

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7. Value of YPB

Discounted Cashflow Methodology

Cashflow Forecast

7.1. The first step in applying a discounted cashflow methodology is to develop a forecast of future cashflows. As discussed at paragraph 0, the future cashflows adopted for the purposes of this valuation are based on the detailed forecast prepared by YPB. We have adjusted these cashflow forecasts based on our own industry research, analysis of the assumptions, discussions with YPB’s management, a review of historical performance and our professional judgment. The resulting detailed cashflow forecast, including detailed notes on how certain amounts have been forecast, is set out in Schedule 1 to this Report.
7.2. It should be noted that the cashflows set out in Schedule 1 are based on assumptions about the future including, but not limited to:
expected industry growth;
timeframe for commercialisation of Motifmicro;
expected costs; and
likely size of the potential revenue opportunities.
7.3. It should be noted therefore that these future cashflows may be substantially different in the event that actual results differ from these assumptions.

Weighted Average Cost of Capital

7.4. The second step in determining the value of the company using the discounted cashflow method is to apply a discount rate to the future forecast cashflow using a Weighted Average Cost of Capital (WACC).
7.5. We have determined a WAAC of 21.99% as set out in Table 7.1 below.

Table 7.1 – Weighted Average Cost of Capital

Reference	% Formula
Cost of Equity Risk Free Rate A Market Risk Premium B Beta C D Small Cap & Alpha Risk Premium E Cost of Equity F Cost of Debt Cost of Debt G Company Tax Rate H Cost of Debt After Tax I WACC Debt to Equity Ratio J WACC K	0.90% 6.50% 1.14 7.41% B x C 20.00% 28.31% A + D + E 10.00% 27.50% 7.25% G x (1-H) 30% 21.99% (F x(1-J))+(I x J)

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Risk-Free Rate

7.6. The risk-free rate measures the rate of return an investor can earn without taking any additional risks. A measure of the risk-free rate in the Australian market is generally accepted as being the yield to maturity derived from ten-year Commonwealth Government Bonds.
7.7. The ten-year Commonwealth Government Bond rate as at 1 June 2020 was 0.90%

Market Risk Premium

7.8. The next step is to establish an appropriate “market risk premium”. In doing so, consideration has been given to the third paragraph, page 157, of “The Valuation of Business, Shares and Other Equity”, Fourth Edition (2003), by Wayne Lonergan, which states, “The market risk premium (re)presents the additional return (typically 5 per cent to 8 per cent) over and above the risk-free rate of return which investors will require in order to compensate them for the diversifiable risks associated with an investment in the market portfolio”.
7.9. Consequently, under normal economic conditions, I consider it reasonable to adopt a market risk premium of 6.5%.

Beta

7.10. A measure of the perceived risk of a stock is its beta rating, with a rating lower than 1 indicating a lower risk compared to the overall market, while a beta of greater than 1 indicating a higher perceived risk. The current 5-year beta for YPB is 1.14.

Small Cap and Alpha Risk Premium

7.11. In the case of many smaller companies, there are additional risk associated with size (such as economies of scale. There can also be additional risk associated with companies such as dependence on a single or large customer and uncertainty in future operations. In the case of YPB, we have determined that there is significant risk that arises from the fact that:
it is currently and historically a loss-making operation;
significant reliance is placed on the successful development and commercialisation of the MotifMicro patent licence and associated product. Accordingly, there is significant risk including but not necessarily limited to:
- full development and commercialisation may be further delayed (or never achieved);
- demand for the product may be overestimated;
- a competitor may develop a similar or superior product before or shortly after Motifmicro is released; and
- costs associated with marketing, developing and supporting the MotifMicro product may be greater than anticipated.

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this is additional to the typical risks faced by YPB due to its size which includes a comparatively small customer base.
7.12. Accordingly, we have adopted an additional risk premium of 20% to reflect these risks.

After Tax Cost of Debt

7.13. The cost of debt of 10% is based on the current interest rate for the Company’s convertible note borrowings as advised by YPB. After applying the current Australian corporate tax rate of 27.5% (to represent the tax deductibility of interest on interest bearing debts), this results in and after-tax cost of debt of 7.25%

Debt to Equity Ratio

7.14. The debt to equity ratio is based on the current debt to equity ratio of the Company.

Enterprise Value – Discount Cashflow

7.15. The third step is to apply the discount rate (WACC) to the forecast cashflows to arrive at the current present value, representing the enterprise value of the Company’s operations. Applying the discount rate of 21.99% to the cashflows as set out on Schedule 1 results in an enterprise value of $3,670,640.

Equity Value and Surplus Net Asset/(Liabilities)

7.16. The final step in determining the equity value (and value per share) of the Company using the discounted cashflow model is adding/(deducting) any surplus or deficit of net assets. As set out in Table 7.2 below, we have determined that the Company has a deficit of net assets in the amount of $(1,462,083).
7.17. It should be noted that Table 7.2 is based on the balance sheet as at 31 December 2019 as this is the most recent balance sheet made available to us. Accordingly, the discounted cashflows include expected cashflows for the entire 2020 financial year.

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Table 7.2 – Surplus Net Assets/(Liabilities)

	Balance Sheet As at 30 Dec 2019	Net Operating Assets	Surplus Net Assets/(Liabilities)
		$AUD'000
Current Assets
Cash and Cash Equivalents	774	774	-
Trade and Other Receivables	384	384	-
Inventories	240	240	-
Total Current Assets	1,398	1,398	-
Non-Current Assets
Trade and Other Receivables	-		-
Property, Plant and Equipment	353	353	-
Intangible Assets			-
- Goodwill	-	-	-
- Intellectual Property	-	-	-
- Customer Relationship	-	-	-
-Patent Licence Rights	6,500	6,500	-
Total Non-Current Assets	6,853	6,853	-
Total Assets	8,251	8,251	-
Current Liabilities
Trade and Other Payables	1,421	1,421	-
Lease Liabilities	141	141	-
Financial Liabilities	1,462	-	1,462
Total Current Liabilities	3,024	1,562	1,462
Non-Current Liabilities
Lease Liabilities	75	75	-
Total Non-Current Liabilities	75	75	-
Total Liabilities	3,099	1,637	1,462
Net Assets	5,152	6,614	(1,462)

7.18. Accordingly, using the discount cashflow methodology, we have determined an equity value of YPB as follows:

Enterprise Value

AUD $3,670,640

Less: Surplus Liabilities

AUD $(1,462,083)

Equity Value

AUD $2,208,557

Shares on Issue 1,694,369,386 Value per Share AUD $0.00130

Alternative Methodology - Quoted Price of Listed Security

In order to validate the findings of our initial valuation methodology, being the discounted cashflow methodology, we have conducted a secondary valuation of the Company using the quoted price of

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listed security methodology, in this case the 50-day Volume Weighted Average Price (VWAP) of YPB’s listed shares. We have adopted a long period in order to account for the comparatively low trading volumes and relatively static price in the weeks leading up to this Report.

7.19. Based on the 50 Day VWAP (to 1 June 2020), the value of the equity in the Company would be as follows:

Table 7.3 – Equity Value – 50 Day VWAP

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AUD $
$AUD'000
50 Day VWAP $ 0.00286
No. Shares on Issue 1,694,369,386
Equity Value $ 4,845,896
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7.20. It is noted that the value as a result of the 50-day VWAP is higher than the value determined under the discounted cashflow model. The reasons for this may include:
the shares in YPB could be considered ‘speculative’ in that investors are investing money in the hopes that the Company is highly successful, and its development and commercialisation plans fully realised. As such the share price may be somewhat inflated from the underlying value determined in the more conservative discounted cashflow which is weighted for probabilities and adopts industry average EBITDA margins.
the value derived in the discounted cashflow is still within the range of quoted prices in the past 50 days, with a minimum share price of $0.00100 and maximum share price of $0.00400.
the value derived from the discounted cashflow model may be overly conservative in some of its assumptions.

8. Assessment of Fairness

8.1. As discussed in Section 3, RG.111.11 states that an offer is ‘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. For the purpose of considering whether or not the Proposed Transaction is fair we have compared the fair value of a share in YPB on a control basis prior to the Proposed Transaction to the fair value of a share in YPB on a minority basis after the Proposed Transaction. That is to say, is the value of the shares held by the non-associated shareholders at least equal to or higher than before the Proposed Transaction?
8.2. In order to determine the value of the securities in the Company prior to the Proposed Transaction on a control basis, it is necessary to adjust the value per share derived in Section 7 of this Report for a:
control premium; and

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liquidity discount.
8.3. A control premium is the premium an investor will pay to acquire shares in a company that will provide them a degree or complete control over the decision making of the company, including but not limited to the distribution of profits. A control premium adjustment is necessary as:
prior to the Proposed Transaction, JFH and its associates did not have sufficient shares in the company to obtain control;
subsequent of the transaction, JFH and its associates will have a considerable degree of control over the company as:
- they will own greater than 20% of the company’s voting shares but less than 50%; and
- there will be no one other shareholder or small group of shareholders with a significant enough shareholding to comprise control.
8.4. Accordingly, we have adopted a control premium of 25%
8.5. A liquidity discount is the discount that an investor will apply to a share that cannot be quickly and easily converted into cash. While YPB is a publicly listed company it is unlikely, particularly given the historical trading volumes, that a single shareholder with between 752,541,801 (32.8%) and 1,352,541,801 (46.7%) would be able to dispose of those shares in a short time frame on the open market, or if possible then at least not likely without dramatically driving down the value of the shares.
8.6.
Accordingly, we have adopted a liquidity discount of 10%.
8.7. In applying these percentages to the values determined in Section 7 in order to arrive at a preProposed Transaction price, we have calculated the following values as set out in Table 8.1 below.

Table 8.1 – Pre-Proposed Transaction Value of Securities in YPB

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Factor DCF Average 50 Day VWAP
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Equity Value		2,208,557	3,527,227	4,845,896
Shares on Issue		1,694,369,386	1,694,369,386	1,694,369,386
Value Per Share		0.00130	0.00208	0.00286
Control Premium	25%	552,139	881,807	1,211,474
Liquidity Discount	(10%)	(276,070)	(440,903)	(605,737)
Adjusted Equity	Value	2,484,626	3,968,130	5,451,633
Value Per Share		0.00147	0.00234	0.00322

8.8. The next step is to determine the post proposed transaction value of securities in YPB, which is achieved by:

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determining the value of shares in YPB pre-proposed transaction on a minority interest, liquid basis;
adding to that the value of consideration offered by JFH in exchange, in this case the $600,000 related party loans which will be converted less the value of the options issued to JFH; and
adjusting the increased value for the effect of the dilution of shares resulting from the issue of 600,000,000 shares under the proposed transaction.
8.9. It is necessary to calculate the post transaction value per share on a minority interest and liquid basis for the Proposed Transaction, as the non-associated shareholders will largely forgo the opportunity to be controlling shareholders or to share in control collectively.
8.10. Accordingly, by applying these steps, we have determined the value of the securities in YPB post the Proposed Transaction to be as set out in Table 8.2 below.

Table 8.2 – Post-Proposed Transaction Value of Securities in YPB

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DCF Average 50 Day VWAP
Equity Value 2,208,557 3,527,227 4,845,896
Shares on Issue 1,694,369,386 1,694,369,386 1,694,369,386
Value Per Share Pre Transaction on a Minority
Interest, Liquid Basis 0.00130 0.00207 0.00286
Add: Value of Consideration 600,000 600,000 600,000
Less: Value of Options Issued (280,470) (637,317) (1,058,966)
Equity Value After Proposed Transaction 2,528,087 3,489,910 4,386,931
New Shares on Issue 2,294,369,386 2,294,369,386 2,294,369,386
Value Per Share 0.00110 0.00152 0.00191
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8.11. As shown in Table 8.2 above, under all scenarios, the value of the ordinary shares in YPB after the Proposed Transaction on a minority interest basis is less than it was before the Proposed Transaction on a majority interest basis (Table 8.1). Accordingly, we have assessed the Proposed Transaction to be not fair.
8.12. As set out in paragraph 6.8, the method we have adopted to value the options issue is the Black Scholes Methodology. The key assumptions used are:
volatility of 156.59%;
applicable risk free-rate for the term of the options of 0.27%
exercise price of $0.002

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9. Assessment of Reasonableness

Approach to Assessing Reasonableness

9.1. In accordance with ASIC Regulatory Guide 111 an offer is reasonable if it is fair. In forming our conclusions in this Report, we have compared the advantages and disadvantages to YPB shareholders if the Proposed Transaction proceeds.

Advantages of the Transaction

9.2. We outline in Table 9.1 below the potential advantages of the Proposed Transaction.

Table 9.1 - Advantages

Advantage	Explanation
From the perspective of the non- associated shareholders	The Proposed Transaction represents an opportunity for the non- associated shareholders to retain some of the value of their shares in circumstances where the Company has been unable to attract investors to further develop its MotifMicro assets. In the absence of an alternate third-party proposal being made it is unlikely that the Company will be able to continue as a going concern which would mean that the Company may be placed into liquidation. In that event the non-associated shareholders would be unlikely to see any return on their investment. The non-associated shareholders will retain the ability to participate in any potential valuation upside associated with the continued holding of shares, as well as the benefit of any future potential dividends or capital returns.

Advantage

Explanation

From the perspective of the non-
associated shareholders

The Proposed Transaction represents an opportunity for the non-
associated shareholders to retain some of the value of their shares in
circumstances where the Company has been unable to attract
investors to further develop its MotifMicro assets.
In the absence of an alternate third-party proposal being made it is
unlikely that the Company will be able to continue as a going concern
which would mean that the Company may be placed into liquidation.
In that event the non-associated shareholders would be unlikely to
see any return on their investment.
The non-associated shareholders will retain the ability to participate in
any potential valuation upside associated with the continued holding
of shares, as well as the benefit of any future potential dividends or
capital returns.

Disadvantages of the Transaction

9.3. We outline in Table 9.2 below the potential disadvantages of the Proposed Transaction.

Table 9.2 - Disadvantages

Disadvantage	Explanation
From the perspective of the non- associated shareholders	There is no certainty that future funding or partnering will occur in which case the MotifMicro assets will not be able to be brought to market. There is no certainty that even if future research and development funding can be obtained that the resulting research and development will lead to successful commercialisation. The Proposed Transaction is unlikely to provide the Company with the ability to pay dividends in the short to medium term.

Disadvantage

Explanation

From the perspective of the non-
associated shareholders

There is no certainty that future funding or partnering will occur in
which case the MotifMicro assets will not be able to be brought to
market.
There is no certainty that even if future research and development
funding can be obtained that the resulting research and development
will lead to successful commercialisation.
The Proposed Transaction is unlikely to provide the Company with the
ability to pay dividends in the short to medium term.

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Conclusion as to Reasonableness

9.4. In accordance with RG 111, a transaction is reasonable if:
the transaction is fair; or
despite not being fair, but considering other significant factors, shareholders should obtain an overall benefit if the transaction proceeds.
9.5. Although the Proposed Transaction is not fair, when taking into account other significant factors, we have concluded that the Proposed Transaction is reasonable .

10. Opinion

10.1. Accordingly, in our opinion, the Proposed Transaction is not fair but reasonable to the nonassociated YPB shareholders.
10.2. An individual’s decision in relation to the Proposed Transaction may be influenced by his or her particular circumstances. If in doubt the individual should consult an independent adviser, who should have regard to their individual circumstances.
10.3. The ultimate decision on whether to approve the Proposed Transaction should be based on shareholders’ own assessment of their circumstances. After carefully reading all relevant documentation provided, including the Explanatory Memorandum to the Notice of General Meeting we strongly recommend that shareholders consult their own professional advisers and consider their own specific circumstances before voting in favour of, or against approving the Proposed Transaction.

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Schedule 1 – Detailed Discounted Cashflow Model

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2020 2021 2022 2023 2024 TV
Notes Combined Combined Combined Combined Combined Combined
0.5 1.5 2.5 3.5 4.5 4.5
$AUD'000
Revenue from Existing Operations 2A 855 1,271 1,403 1,549 1,710
Revenue from Motif Micro (AUD) 2B 563 3,016 5,858 8,407 11,425
Revenue 1,418 4,287 7,261 9,955 13,135
Consulting Fees 3, 5 (15) (15) (16)
Directors' Fees 3, 5 (306) (312) (319)
Employee Benefits Expense 3, 5 (2,284) (3,179) (3,203)
Production Costs 3, 5 (33) (58) (62)
Licence Fees 3, 5 (94) (302) (397)
Rental Expenses 3, 5 (337) (398) (409)
Research and Development Costs 3, 5 (405) (641) (678)
Marketing Costs 3, 5 (84) (134) (193)
Traveling Expense 3, 5 (133) (160) (191)
Regulatory Expenses 3, 5 (185) (203) (223)
Professional Fees 3, 5 (71) (72) (74)
Other Expenses 3, 5 (418) (382) (390)
Expenditure (4,364) (5,857) (6,155) (6,471) (8,538)
EBITDA (2,947) (1,570) 1,106 3,484 4,597
EBITDA MARGIN % 4, 5 -208% -37% 15% 35% 35%
Less Depreciation 6 (293) (450) (571) (697) (790) (790)
EBIT (3,240) (2,020) 535 2,788 3,807 3,883
Add/(Less)
CAPEX 7 (701) (1,799) (710) (549) (388) (388)
Tax 8 - - - - (514) (971)
Working Capital Movements 9 14 (142) (78) (160) (125) (125)
Depreciation (non-cash) 6 293 450 571 697 790 790
Free Cash Flow 10 (3,634) (3,511) 318 2,776 3,570 3,190
Discount Rate 0.905 0.742 0.608 0.499 0.409 0.409
Discounted Cashflow (3,288) (2,605) 193 1,385 1,460 6,526
TOTAL VALUE 11 3,671
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Schedule 1.1 – Notes to Schedule 1

Note 1

(i) In preparing the discounted cashflow model, the MotifMicro forecast was provided in USD, while the historical profit and loss results and YPB company cashflow budget are in AUD. For the purposes of this discounted cashflow model, the cashflows from MotifMicro are converted into AUD using the current spot rate. (1 June 2020 - 1 AUD = 0.6742 USD – source: Reserve Bank of Australia)

Note 2A

(i) Revenue from existing operations was forecast in the YPB cashflow budget to be $1.151 million, which represent less than 1% growth on the 2019 results of $1.119 million. Review of the 30 April 2020 year to date (YTD) results suggest annualised revenue of $0.560 million, which is materially lower. Accordingly, in 2020 we have adopted the mid-point of annualised 2019 results and forecast 2020 results to reflect that:
it is reasonable to consider that the April 2020 YTD results are reduced as a result of the COVID-19 pandemic and that, in the absence of the pandemic, the 2019 trading year results might have been otherwise achievable; and
it is reasonable to consider that, as the COVID-19 pandemic passes (or at least the significant economic lockdowns associated with the pandemic), that revenue generated may recover to prepandemic levels achieved in 2019. There are already easing of economic restrictions in YPB’s key markets which at this stage appear likely to continue.
(ii) From the 2021 year to 2024 year, revenue from existing operations is forecast to grow at 10.4%, being forecast industry average Compound Annual Growth Rate (CAGR). In 2021, we have elected to apply this growth to the 2019 annualised trading results on the basis that by 2021, economic restrictions resulting from the pandemic are removed or substantially reduced. We note that the industry CAGR of 10.4% adopted is lower than was adopted in the 2019 valuation of the MotifMicro patent which did not include the likely impacts of COVID-19.

Note 2B

(i) Revenues from MotifMicro were initially forecasted by YPB to be as follows:

	2020	2021	2022	2023	2024
		$USD'000
Orignal Forecast	3,169	17,480	25,767	52,822	63,288

(ii) These forecasts were based on the following assumptions:
year on year growth of 20% for each potential customer;
volume based pricing, whereby customers with high volumes qualified for lower per application pricing; and
the following customers / opportunities.

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Forecast Revenue
2020 2021 2022 2023 2024
USD'000
MM1
Type 1 - Contracted Customer 450 540 648 778 933
Type 2 - In Negotiations 377 1,410 180 216 259
Type 3 - Tender Phase 742 3,010 490 490 490
Type 4 - Generic Industry Based
Blue Sky Opportunities - 100 445 534 641
MM2
Type 1 - Contracted Customer 600 720 864 1,037 1,244
- -
Type 2 - In Negotiations 5,600 6,720 8,064
Type 3 - Tender Phase 1,000 1,200 1,440 1,728 2,074
Type 4 - Generic Industry Based
Blue Sky Opportunities - 10,500 16,100 41,320 49,584
3,169 17,480 25,767 52,822 63,288
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Type 1 customers are customers who have signed a master service agreement and who are currently completing trail periods with options to extend, such as Panpass.
Type 2 customers are customers who are in negotiations to entered into an agreement, but to date, no agreement has been formalised, such as Treasury Wine Estates.
Type 3 customers are opportunities where we are advised that YPB has tendered or has an opportunity to tender, but for which negotiations have not yet formally commenced.
Type 4 customers are opportunities that are based on YPB’s research into various industries where YPB perceives that there is a specific demand for anti-counterfeiting, such as alcohol, tobacco and healthcare.
(iii) The categorisation of these customers is based on inputs from YPB’s management.
(iv) It is our view, as supported in the 2019 valuation of the MotifMicro patent, that these assumptions are overly optimistic and as such probability percentages have been placed against each of the above opportunities. We have based these percentages on input from YPB’s management and on probabilities assessed in the independent 2019 valuation of the MotifMicro patent. We consider the probabilities used in the 2019 valuation to be reasonable, however we have adjusted them down slightly to account for our professional opinions and the impacts of COVID-19. The probabilities adopted are as follows:
- Type 1 – 75%
- Type 2 – 55%
- Type 3 – 30%; and
- Type 4 – 10%
(v) We have further adjusted YPB’s revenue forecast on the following basis:

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Delay of all MotifMicro revenue stream by 9 months to account for the delays YPB is currently experiencing, and likely to continue experiencing, as a result of COVID-19;
Reduce year or year growth to be 10.4% based on industry forecast CAGR.
(vi) Accordingly, this results in the following adjusted revenue forecast:

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2020 2021 2022 2023 2024
$USD'000
Adjusted 379 2,033 3,950 5,668 7,703
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Note 3 - Costs 2021 and 2022

(i) Consulting Fees - based on YPB cashflow budget. As discussed with YPB’s management, the vast majority of these costs have been eliminated from YPB’s operations as a result of restructuring. This assertion is supported by the April 2020 YTD profit and loss results and as such, we have determined it to be reasonable. This cost has been inflated at a rate of 2% in 2021 and 2022, being total OECD average CPI for the 12 months to March 2020.
(ii) Director’s fees - forecast to be $180,000 in the 2020 financial year based on YPBs cashflow budget. Our review of the April 2020 YTD results indicates, that on an annualised basis it is more likely that the director’s fees will be $306,230. Accordingly, this cost has been adopted and inflated at 2% in 2021 and 2022.
(iii) Employee benefits expense – Existing operations were forecast to be AUD$1.994 million while MotifMicro operations were forecast to be AUD$1.160 million (USD $0.782 million). MotifMicro operations employee expenses were based on:
a. specific technical and production staff that are expected to be hired as MotifMicro continues to be developed and becomes commercialised. Costs for each staff member are based on YPB’s assessment of the average USD wage of those staff required and scaled down by a ‘conversion’ percentage to reflect the fact that these staff will most likely be employed in Thailand where labour costs are lower; and
b. an allowance for additional general administrative and support staff associated with the additional revenue and operations.

Upon review, it is our considered opinion that these costs appear reasonable, however we have opted to delay these costs by 9 months for consistency with the 9-month delay forecast in revenue. This approach was confirmed with YPB’s management who indicated it is likely these staff would not be hired until the MotifMicro product begins to generate revenues.

The existing operational wages have been inflated at 2% in 2021 and 2022. The MotifMicro costs in 2021 and 2022 were based on actual forecast wages for those years (subject to the 9-month delay applied). Again, it is expected that significant efficiencies will be achieved as revenues increase. The wage ratio in 2020, which is 159% of revenue, is not considered reasonable to carry forward to later years with higher levels of revenue.

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(iv) Production Costs – there are minimal production costs associated with YPB’s primary products including MotifMicro and tracer technology. A review of the April 2020 YTD profit and loss indicated that production costs for the existing operations are approximately 3% of revenue, and accordingly that amount has been adopted in the 2020, 2021 and 2022 years. Production costs in 2019 take into account that in that year YPB was still selling anti-theft devices, which has now ceased.

Production costs of MotifMicro are based on YPB management’s assessment that costs of USD $5,333 per 1,000,000,000 applications is likely to be incurred. This is considered reasonable based on our understanding of the MotifMicro product that production costs would be extremely low / marginal based on the amount of product required for each application, and as such we have accepted these estimates as being reasonable. Note that these estimates are affected by the probabilities applied to revenue (i.e. lower revenue = lower application volumes = lower production costs).

(v) Licence Fees – Licence fees adopted are consistent with the patent licence agreement entered into with MIT, which stipulates:
a. 5% royalty on all MotifMicro revenues;
b. milestone payments in 2021 and 2022 of USD $100,000 each (milestones are expected to be achieved in these years); and
c. licence fees of USD $75,000 in 2020 and USD $100,000 per year thereafter.
(vi) Rental Expense – Rent for YPB’s existing operations is based on the YPB cashflow budget of AUD $0.308 million. This cost has been inflated in 2021 and 2022 by 3%.

An additional rental expense of USD $80,000; $82,400 and $84,872 in 2020, 2021 and 2022 respectively was initially included to account for the likely increased space required when MotifMicro production commenced in full. As with revenues, we have adopted a 9-month delay in this cost to reflect the expected delay in commercialisation of MotifMicro. Accordingly, the additional rent adopted in the cashflow above to account for Motifmicro expansion is USD $20,000; $80,600 and $83,018.

(vii) Research and Development – These costs represent the uncapitalised wages, laboratory costs, contractors etc. required to continue and support the development of YPB’s products. Existing operations were forecast in the YPB cashflow budget to be AUD $0.331 million. We have accepted this as reasonable on the basis the 2019 research and development costs were AUD $0.319 million while April 2020 YTD results suggest annualised costs of AUD $0.358 million. These costs have been inflated by 2% in the 2021 and 2022 years.

An additional research and development costs of USD $200,000; $220,000 and $242,000 in the 2020, 2021 and 2022 respectively were initially included to account for the additional R&D support required once the MotifMicro product was more commercialised. As with revenues, we have adopted a 9-month delay in these costs to reflect the expected delay in commercialisation of MotifMicro. Accordingly, the additional research and development adopted in the cashflow above to account for MotifMicro expansion is USD $50,000; $205,000 and $225,500 in the 2020, 2021 and 2022 financial years respectively.

(viii) Marketing Costs – Marketing costs associated with existing operations were forecast to be $AUD 62,347. This is substantially lower than the marketing cost in 2019, however in discussion with YPB’s management

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we were advised that YPB had ceased their existing marketing strategy and had adopted a more costeffective model. This appears to be consistent with April 2020 YTD results which indicate an annualised marketing cost of $72,493. While we have accepted as reasonable a reduced cashflow associated with marketing, we have adopted the annualised April 2020 YTD result as our estimate in 2020 which is slightly higher than has been forecasted by YPB.

Additional Marketing cost for the Motifmicro operation are based on a % of MotifMicro revenue, being 2% overall.

(ix) Travelling Expense – Travelling expenses in 2020 are based on the YPB 2020 cashflow budget of AUD $126,926. In 2020, it is likely that the majority of these cost will be incurred in the latter half of 2020 as a result of the COVID-19 pandemic and its associated restriction on travel. It is therefore reasonable that travel associated with the existing operations is forecasted to be less than in the 2019 financial year. We are also advised that as a result of the new marketing approach, travel costs in future years are not expected to be at the same level as in prior years. Accordingly, in 2021 and 2022 we have inflated budgeted 2020 expense of $126,936 by 2% p.a.

Additional traveling costs for the MotifMicro operation are based on a % of MotifMicro revenue, being 1% overall.

(x) Regulatory Expense – Regulatory expenditures are based primarily on MIT legal fees which amount to $USD 120,000 per annum and is forecast to increase at a rate of 10% in 2021 and 2022.
(xi) Professional Fees – Professional fees incurred in 2019 were significant. Similarly, professional fees in the April 2020 YTD results are $270,658. In our opinion, the majority of these expenditures should be excluded from an assessment of the business value of YPB as they relate largely to professional fees associated with capital raising and one-off transactions. Accordingly, we have adopted as professional fees an amount of 5% of revenue in 2020, which we have inflated but 2% p.a. in 2021 and 2022. We have adopted these costs to reflect ongoing audit fees, tax work and other routine compliance work.
(xii) Other Expenses – Other expenses for 2020 are as forecasted by YPB in the 2020 cashflow budget. In assessing the reasonableness of this amount, we considered:
other expenses in 2019 were $682,132, however excluding the effects of forex gains/losses, nonrecurring bad debt write offs, inventory obsolescence write offs, asset write offs and legal fees, these costs amount to AUD $351,530; and
other expenses in the four months to 30 April 2020 were AUD $146,844, which annualises and converted to AUD amounts to $440,535. Excluding the effect of forex gains/loss and licence fees (already accounted for in the costs above) the annualised cost is $319,224.

Accordingly, we have adopted this expenditure as reasonable and inflated it by 2% in 2021 and 2022.

Note 4 – Costs 2023 and 2024

(i) The initial YPB revenue and expenditure forecast resulted in considerably high EBITDA margins in excess of 80% in 2024 (the final year forecast by YPB). It is our view that margins at this level are not reasonable. We further believe that it is not possible to reliably forecast specific costs associated with

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MotifMicro beyond 2022. Accordingly, we have calculated costs overall by reference to comparable company EBTIDA ratios which we have determined to be 35% as shown in Table 5.1 of this Report, specifically:

in the 2019 year, the two comparable companies that were profitable generated EBITDA margins of 32.5% and 40.8%, the midpoint of which is 36.6%.
the comparable company, Document Security Systems Inc, which is currently unprofitable, is forecast to reach an EBITDA margin of 36.3%.
the comparable company, Spectra Systems Corporation, which generated an EBTIDA margin of 40.8% in 2019, is forecasted to achieve EBITDA margins of 36.6% and 35.2% in 2020 and 2021 respectively.

Note 5 – Costs Generally

(i) While the costs adopted in the 2020, 2021 and 2022 are in our view based on reasonable assumptions, we have considered the resulting EBITDA generally as a sense check on the reasonableness of those assumptions. Specifically, it is our expectation that a company in YPB’s position would:
a. generate substantial losses for the next few years as its product achieves commercialisation and a customer base is built up over time; and
b. achieve profitability on a gradual basis, building up from relatively small profits to an industry average.
(ii) Overall, we consider that the costs adopted across the forecast period have resulted in reasonable EBITDA percentages including losses in earlier years and a build up towards an industry average of 35%.

Note 6 – Depreciation

(i) Depreciation is calculated as follows:

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

Additions 2020 2021 2022 2023 2024
AUD$'000
2019 353 223 130
2020 720 72 144 144 144 144
2021 1,854 185 371 371 371
2022 730 73 146 146
2023 563 56 113
2024 397 40
(295) (460) (588) (717) (813)
----- End of picture text -----

(ii) The additions, in 2019 are representative of the closing balance of property plant and equipment in the 2019 financial statements. Depreciation in the 2020 balance is forecast to be equal to deprecation recorded in 2019 until the balance is exhausted (i.e. written down to $Nil).

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(iii) The additions in 2020 and onwards are based on capital expenditures forecast (See Note 7). Depreciation of these amounts is based on 20% p.a. which is based on accounting policy note 6D(i) in YPB’s annual report which states that deprecation rates of between 10% and 33% are adopted.
(iv) Depreciation is calculated purely for taxation purposes as it is a tax-deductible expenditure. As it is a non-cash item deprecation which is added back to free cashflows after taxation is calculated.

Note 7 – Capital Expenditure (CAPEX)

(i) Capital expenditure is based on:
primarily, the purchase of large pieces of machinery, laboratory equipment etc. to facilitate MotifMicro production. This machinery is forecast to be purchased across the 2020 and 2021 years and total USD $1,300,000.
future ongoing capital expenditure based on scale up in production, purchase of new computers and printing trials; and
a recurring allowance to account for ongoing replacement, minor purchases, upgrades etc.

Note 8 – Income Tax

(i) Income tax is based on Australian Small to Medium Enterprise (SME) tax rates as follows:
2020: 27.5%;
2021: 26%; and
2022 and beyond: 25%.
(ii) It is assumed that losses incurred in the initial years will be used to offset taxable income in subsequent profitable years.

Note 9 – Working Capital

(i) Working capital movements are based on working capital ratios such as debtor days, creditor days etc. These ratios have been selected based on discussion with YPB’s management, review of historical ratios and our professional judgement.

Note 10 – Terminal Value

(i) The discount cashflow valuation includes a terminal value applied after 2024. This terminal value is based on a perpetual growth rate of 2% (Total OECD average CPI for the 12 months to March 2020) and the final EBITDA derived in 2024. Tax has been applied to this calculation at a rate of 25%.

Note 11 – Sensitivity

(i) As set out it paragraph 7.2, the above cashflows are based on the assumption about the future including but not limited to:

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expected industry growth;
timeframe for commercialisation of Motifmicro;
expected costs; and
likely size of the potential revenue opportunities.
(ii) It should be noted therefore that these future cashflows may be substantially different in the event that actual results differ from these assumptions.
(iii) To demonstrate the sensitivity of these outcome, an analysis has been present based on decreasing and increasing the probability adopted at note 2B by 5% proportionally (that is to say, an original probability of 75% would be reduced to 71.25% and increased to 78.75%, with 3.75% being 5% of 70%). The resulting discounted cashflow would be as follows:

Increased Probabilities by 5%

	2020 2021 2022 2023 2024 TV $AUD'000
Revenue from Existing Operations 2A Revenue from Motif Micro (AUD) 2B Revenue Expenditure EBITDA EBITDA MARGIN % 4, 5 Less Depreciation 6 EBIT Add/(Less) CAPEX 7 Tax 8 Working Capital Movements 9 Depreciation (non-cash) 6 Free Cash Flow 10 Discount Rate Discounted Cashflow TOTAL VALUE 11	855 1,271 1,403 1,549 1,710 591 3,167 6,151 8,827 11,997
	1,446 4,438 7,554 10,376 13,706

	(4,369) (5,869) (6,177) (6,744) (8,909)

	(2,924) (1,431) 1,377 3,632 4,797
	-202% -32% 18% 35% 35% (293) (450) (571) (697) (790) (790)
	(3,217) (1,882) 806 2,935 4,007 4,087
	(701) (1,799) (710) (549) (388) (388) - - - - (729) (1,022) 13 (148) (90) (169) (133) (133) 293 450 571 697 790 790
	(3,611) (3,378) 577 2,914 3,548 3,335
	0.905 0.742 0.608 0.499 0.409 0.409
	(3,268) (2,507) 351 1,454 1,451 6,824
	4,305

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Decreased Probabilities by 5%

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

2020 2021 2022 2023 2024 TV
$AUD'000
Revenue from Existing Operations 2A 855 1,271 1,403 1,549 1,710
Revenue from Motif Micro (AUD) 2B 535 2,865 5,565 7,986 10,854
Revenue 1,390 4,136 6,968 9,535 12,564
Expenditure (4,359) (5,844) (6,133) (6,428) (8,166)
EBITDA (2,970) (1,708) 835 3,107 4,397
EBITDA MARGIN % 4, 5 -214% -41% 12% 33% 35%
Less Depreciation 6 (293) (450) (571) (697) (790) (790)
EBIT (3,263) (2,158) 264 2,410 3,607 3,679
Add/(Less)
CAPEX 7 (701) (1,799) (710) (549) (388) (388)
Tax 8 - - - - (236) (920)
Working Capital Movements 9 15 (136) (67) (150) (119) (119)
Depreciation (non-cash) 6 293 450 571 697 790 790
Free Cash Flow 10 (3,656) (3,643) 59 2,408 3,654 3,043
Discount Rate 0.905 0.742 0.608 0.499 0.409 0.409
Discounted Cashflow (3,309) (2,703) 36 1,202 1,494 6,225
TOTAL VALUE 11 2,945
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Schedule 2 – Business Descriptions of Comparable Companies

Company Name	Business Description	Headquarters	Nexia Comments
Document	Document Security Systems, Inc. focuses on developing and selling	200 Canal View Boulevard,
Security	counterfeit prevention, brand protection, and validation of authentic print	Suite 300, Rochester, New
Systems, Inc.	media products. It operates through five segments: DSS Packaging and	York, 14623, United States
(AMEX:DSS)	Printing Group, DSS Plastics Group, DSS Digital Group, DSS Technology
	Management, and DSS International. The company emphasizes on fraud
	and counterfeit prevention for various forms of printed documents and
	digital information. It markets its primary anti-counterfeiting products and
	technologies under the AuthentiGuard name. Document Security Systems,
	Inc. holds various patents for optical deterrent technologies that provide
	protection of printed information from unauthorized scanning and copying.
	The company operates combined security printing and packaging facility,
	and a plastic card facility that produces secure and non-secure documents.
	Document Security Systems, Inc. licenses its anti-counterfeiting
	technologies to printers and brand-owners. In addition, the company
	provides cloud computing services, including disaster recovery, back-up,
	and data security services. Further, Document Security Systems, Inc.
	acquires intellectual property assets and interests in companies owning
	intellectual property assets for the purpose of monetizing these assets
	through various value-enhancing initiatives, including investments in the
	development and commercialization of patented technologies, licensing,
	strategic partnerships, and commercial litigation. Additionally, the company
	assists in the development and marketing of its digital authentication
	products in the Hong Kong market. Document Security Systems, Inc. was
	founded in 1984 and is headquartered in Rochester, New York.
Nocopi	Nocopi Technologies, Inc. develops and markets specialty reactive inks for	480 Shoemaker Road, Suite	Part of operations for
Technologies,	applications in the large educational and toy products; and technologies for	104, King of Prussia,	this company are in
Inc.	document and product authentication. The company offers specialty inks for	Pennsylvania, 19406, United	an unrelated industry.
(OTCPK:NNUP)	coloring books, activity kits, play sheets, single use place mats, greeting	States	While it's speciality
	cards, board games, promotional products, or other paper-based		inks are a
	applications; and anti-counterfeiting and anti-diversion technologies and		considerably different
	products for various applications in the authentication of documents having		product, they are
	intrinsic value, such as merchandise receipts, checks, travellers’ checks, gift		aimed at meeting a
	certificates, and event tickets, as well as product labelling and packaging		similar need, which is
	services. It also licenses its patented reactive ink technologies for the		a method for
	entertainment and toy, and document and product authentication markets.		identifying genuine
	The company operates in the North America, Europe, South America, Asia,		products and
	and Australia. Nocopi Technologies, Inc. was founded in 1983 and is		documents
VerifyMe, Inc. (OTCPK:VRME)	headquartered in King of Prussia, Pennsylvania. VerifyMe, Inc. provides security solutions for the identification and authentication of people, products, and packaging for various applications in the United States. The company offers RainbowSecure technology that combines an invisible ink with a proprietary tuned laser to enable counterfeit products to be exposed for gaming industry; and SecureLight technology, which changes the color of ink for use in various applications, including credit cards, driver's licenses, passports, stock certificates, clothing labels, currencies, ID cards, and tax stamps, as well as to protect apparels, pharmaceuticals, and other physical products. It also provides SecureLight+ technology, a solution that can be authenticated by proprietary tuned laser devices, and with fluorescent lighting; VeriPAS technology, which provides brand owners geographical business intelligence on counterfeiting; and authentication tools, which allows customers to authenticate items with a customized beeper that identifies a product bearing their unique anti-counterfeit solution. VerifyMe, Inc. has a strategic partnership with INX International Ink Company. The company was formerly known as LaserLock Technologies, Inc. and changed its name to VerifyMe, Inc. in July 2015. VerifyMe, Inc. was founded in 1999 and is based in Rochester,New York.	Clinton Square, Suite 510, 75 South Clinton Avenue Rochester, New York, 14604, United States

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	Nanotech Security Corp. (TSXV:NTS) Nanotech Security Corp. researches, creates, and produces nano- optic structures and color shifting materials for authentication and brand enhancement applications in Canada and internationally. The company offers currency authentication products, such as security foils and stripes under the KolourDepth and M2 names; and colour- shifting foils and threads under the LumaChrome name for banknotes and government IDs. It also provides security foils, pressure sensitive adhesive labels, and online brand protection solutions under the LiveLogo, LivePortrait, and LumaChrome names for brand protection. The company was formerly known as Wireless2 Technologies, Inc. and changed its name to Nanotech Security Corp. in April 2010. Nanotech Security Corp. was founded in 1984 and is headquartered in Burnaby, Canada. 3292 Production Way, Suite 505, Burnaby, British Columbia, V5A 4R4, Canada
	Spectra Systems Corporation (AIM:SPSC) Spectra Systems Corporation discovers, develops, and sells integrated optical systems in Rhode Island and internationally. It operates in three segments: Authentication Systems, Secure Transactions, and Banknote Cleaning. The company offers integrated solutions, including a system of taggant materials and sensor equipment to authenticate banknotes that are used by central banks, as well as G7 country for passport security; banknote cleaning solution that lifts sebum and other substances from the banknote through a dry process based on supercritical CO2 cleaning; and solutions to authenticate brand name products. It also provides solutions that deliver various levels of security and enable manufacturing companies to control products in process and detect defects in real-time; and internal control systems used to verify the accuracy of transactions logged by providers of lottery and gaming operators. In addition, the company offers software and hardware systems comprising high-speed currency authentication sensors; quality control equipment for use in paper and polymer banknote manufacturing and printing; authentication solutions designed to enhance the security of branded products; and security printers and hologram makers. The company was formerly known as Spectra Science Corporation and changed its name to Spectra Systems Corporation in June 2001. Spectra Systems Corporation was founded in 1996 and is headquartered in Providence, Rhode Island. 40 Westminster Street, 2nd Floor, Providence, Rhode Island, 02903, United States
	Applied DNA Sciences, Inc. (NasdaqCM:AP DN) Applied DNA Sciences, Inc. develops and markets plant based or other DNA technology solution in the United States, Europe, and Asia. The company’s supply chain security and product authentication solutions include SigNature molecular tags that are ingredients used to fortify brand protection efforts and strengthen supply chain security, as well as mark, track, and convict criminals; SigNature T molecular tags, which are tagging and authentication systems for use in brand protection efforts and raw material source compliance programs; and fiberTyping, a test of native cotton fiber DNA. It also provides Smart DNA, a tagging solution for vehicle and home asset marking, as well as other for commercial and government applications; Beacon locked optical markers, which create a protected covert screening tool that can be adapted to packaging, security labels, and high–value assets through inks, varnishes, and coatings; and SigNify IF portable DNA readers that provides real-time authentication of molecular tags. In addition, the company offers Applied DNA Sciences Portal, a software platform that enables customers to manage the security of company-marked goods from point of marking to point of authentication or validation to end of life; and DNA Transfer Systems and Cannabis Tracking System, which offer remote Internet access for real-time monitoring. Further, it provides CertainT Supply Chain Platform that provides proof of product claims for materials, items, or products; and Triathlon PCR systems that allow for the large-scale production of specific DNA sequences. Additionally, the company offers contract research services for the nucleic acid-based medical and biologic markets; and various RNA based drug and biologic customers for preclinical studies. The company was formerly known as Datalink Systems, Inc. and changed its name to Applied DNA Sciences, Inc. in 2002. Applied DNA Sciences, Inc. was founded in 1983 and is headquartered in Stony Brook, New York. 50 Health Sciences Drive, Stony Brook, New York, 11790, United States

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DataDot	DataDot Technology Limited, together with its subsidiaries, provides asset	Unit 9, 19 Rodborough Road,
Technology	identification, management, protection, and authentication solutions to	Frenchs Forest, New South
Limited	governments, police, insurance companies, and blue-chip customer base	Wales, 2086, Australia
(ASX:DDT)	within the automotive industry in Australasia, the Americas, and Europe.
	The company operates in two segments, DataDotDNA and DataTraceID. It
	manufactures and distributes asset identification systems, including
	DataDotDNA polymer and metallic microdots; asset registers, which are
	databases that record asset identification data and are accessible by law
	enforcement agencies and insurance investigators; and security
	DataTraceID authentication solutions. The company also provides theft
	deterrence solutions, including ToolMate that protects tools, as well as
	deters thieves using the microdot identification technology; and PartMate,
	which protects stock by combining microdots with encoded serial numbers
	and a hidden tracer that can be viewed with a black-light. In addition, it
	offers authentication solutions for liability reduction, warranty claims,
	counterfeit detection, track and trace, grey market/diversion, supply chain
	management, enhanced packaging, retail loss prevention, credentials/ID
	cards, and document security. Additionally, the company offers DataDotDNA
	National Register, a law enforcement resource center that allows
	customers to verify the original owner of assets protected by DataDotDNA.
	It also operates as a re-seller of PadJack’s range of network security
	products. The company sells its products through a network of distributors
	in 28 countries. DataDot Technology Limited is based in Frenchs Forest,
	Australia.
Wellness Center	Wellness Center USA, Inc. engages in the healthcare and medical	2500 West Higgins Road, Suite
USA, Inc.	businesses in the United States and internationally. It operates through	780, Hoffman Estates, Illinois,
(OTCPK:WCUI)	Medical Devices, and Authentication and Encryption Products and Services	60169, United States
	segments. The company is primarily involved in the marketing and
	distribution of online sports and nutrition supplements. It also designs,
	develops, manufactures, markets, and distributes targeted ultraviolet
	phototherapy devices, including Psoria-Light that is used in targeted PUVA
	photochemistry and UVB phototherapy for the treatment of skin conditions,
	such as psoriasis, vitiligo, atopic dermatitis, seborrheic dermatitis, and
	leukoderma. In addition, the company offers Stealth Mark encryption and
	authentication solutions, which provide technologies within the security and
	supply chain management vertical sectors; and data intelligence services
	comprising proprietary, unprecedented, and actionable technology for
	industries, companies, and agencies. Wellness Center USA, Inc. was
	founded in 2010 and is based in Hoffman Estates, Illinois.

Source: S&P Cap IQ

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Appendix A – Glossary

Term	Definition
Act	Corporations Act 2001 (Cth)
ACFA	Australian Financial Complaints Authority
AIHW	Australian Institute of Health and Welfare
ASIC	Australian Securities and Investment Commission
Board	The Board of Directors of the Company
Company or YPB	YPB Group Limited
The Share Issue	The issue of shares to JF Houston Holdings Pty Ltd
JFH	JF Houston Holdings Pty Ltd
Existing Operations	The operation of the company excluding Motifmicro future results
Motifmicro Operations	The future cashflows as a result of development and commercialisation of Motifmicro.
Non-Associated Shareholders	Those shareholders of the Company other than JFH and associated entities.
FOS	The Financial Ombudsman Service which has now been replaced by AFCA
FSG	Financial Services Guide
IER	This independent Expert Report dated 4 June 2020
Consideration	the price per share of $0.001 (totalling $600,000) to be paid by JFH under the proposed transaction by way conversion of an existing $600,000 debt
The Shares Issued	The 600,000,000 shares proposed to be issued to JFH in exchange for the consideration
The Options Issued	The 600,000,000 options proposed to be issued to JF Houston in exchange for the consideration
RG 111	ASIC Regulatory Guide 111: Content of Expert Reports
RG 112	ASIC Regulatory Guide 112: Independence of Experts
DCF	Discounted Cash Flow
EBITDA	Earnings Before Interest, Tax, Depreciation and Amortisation
EBIT	Earnings Before Interest and Tax
CAPEX	Capital Expenditure
WC	Working Capital
AUD	Australian Dollars
USD	US Dollars

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APPENDIX B - SOURCES OF INFORMATION

ASIC database
S&P Capital IQ market research database, including comparable company information
Audited consolidated financial statements of YPB for the period from 1 January 2017 to 31 December 2019
Management profit and loss statement for YPB from 1 January 2020 to 30 April 2020
Detailed balance sheet, profit and loss and trial balance for YPB for the 2019 and 2018 financial years.
Regulatory Guide 111: Content of expert reports
Regulatory Guide 112: Independence of experts
Financial forecast for the MotifMicro product prepared by YPB
YPB cashflow budget for the 2020 financial year
Copies of MotifMicro Patent Licence Agreement
Various supporting documents regarding existing and potential opportunities.
Information provided by YPB’s management in response to our queries.

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APPENDIX C - STATEMENT OF DECLARATION & QUALIFICATIONS

Confirmation of Independence

Prior to accepting this engagement Nexia Brisbane Corporate Finance Pty Ltd (“Nexia”) determined its independence with respect to YPB with reference to ASIC Regulatory Guide 112: Independence of expert’s Reports (“RG 112”). Nexia considers that it meets the requirements of RG 112 and that it is independent of YPB.

Also, in accordance with Section 648(2) of the Corporations Act 2001 we confirm we are not aware of any business relationship or financial interest of a material nature with YPB or its related parties or associates that would compromise our impartiality.

Mr Ken Robertson, Director of Nexia, has prepared this Report. Neither he nor any related entities of Nexia have any interest in the promotion of the Proposed Transaction nor will Nexia receive any benefits, other than normal professional fees, directly or indirectly, for or in connection with the preparation of this Report. Our fee is not contingent upon the success or failure of the Proposed Transaction and has been calculated with reference to the expected time to be spent on the engagement at normal professional fee rates for work of this type. Accordingly, Nexia does not have any pecuniary interests that could reasonably be regarded as being capable of affecting our ability to give an unbiased opinion under this engagement.

Nexia provided a draft copy of this Report to the Directors and management of YPB for their comment as to factual accuracy, as opposed to opinions, which are the responsibility of Nexia alone. Changes made to this Report, as a result of the review by the Directors and management of YPB, have not changed the methodology or conclusions reached by Nexia.

Reliance on Information

The statements and opinions given in this Report are given in good faith and in the belief that such statements and opinions are not false or misleading. In the preparation of this Report Nexia has relied upon information provided on the basis it was reliable and accurate. Nexia has no reason to believe that any information supplied to it was false or that any material information (that a reasonable person would expect to be disclosed) has been withheld from it. Nexia evaluated the information provided to it by YPB as well as other parties, through enquiry, analysis and review, and nothing has come to our attention to indicate the information provided was materially misstated or would not afford reasonable grounds upon which to base its Report. Accordingly, we have taken no further steps to verify the accuracy, completeness or fairness of the data provided.

Our procedures and enquiries do not include verification work, nor constitute an audit or review in accordance with Australian Auditing Standards. Nexia does not audit and it should not be construed that it has audited or in any way verified any of the information provided to it, or that its enquiries could have verified any matter which a more extensive examination might disclose.

The sources of information that we relied upon are outlined in Appendix B of this Report.

Qualifications

Nexia carries on business at Level 28, 10 Eagle Street, Brisbane, QLD 4000. Nexia Brisbane Corporate Finance Pty Ltd holds Australian Financial Services Licence No: 478 534 authorising it to provide financial product advice on securities to retail clients.

Mr Ken Robertson specifically was involved in the preparing and reviewing this Report. Mr Robertson is a Registered Company Auditor, Chartered Tax Adviser, Fellow of Chartered Accountants Australia and New Zealand and has over 30 years’ experience in accounting and advisory services in both valuation work and corporate finance.

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Consent and Disclaimers

The preparation of this Report has been undertaken at the request of the Directors of YPB. It also has regard to relevant ASIC Regulatory Guides. It is not intended that the Report should be used for any other purpose than to accompany the Explanatory Memorandum to the Notice of General Meeting to consider the Proposed Transaction which is to be sent to YPB shareholders. In particular, it is not intended that this Report should be used for any purpose other than as an expression of Nexia’s opinion as to whether or not the Proposed Transaction is fair and reasonable to YPB shareholders.

Nexia consents to the issue of this Report in the form and context in which it is included in the Explanatory Memorandum to the Notice of General Meeting to consider the Proposed Transaction which is to be sent to YPB shareholders.

Shareholders should read all documents issued by YPB that consider the Proposed Transaction in their entirety prior to proceeding with a decision. Nexia had no involvement in the preparation of these documents, with the exception of our Report.

This Report has been prepared specifically at the request of the directors of YPB. Neither Nexia, nor any member or employee thereof undertakes responsibility to any person, other than a shareholder of YPB, in respect of this Report, including any errors or omissions howsoever caused. This Report is "General Advice" and does not take into account any person's particular investment objectives, financial situation and particular needs. Before making an investment decision based on this advice, you should consider, with or without the assistance of a securities advisor, whether it is appropriate to your particular investment needs, objectives and financial circumstances.

Our procedures and enquiries do not include verification work, nor constitute an audit or review in accordance with Australian Auditing Standards.

Our opinions are based on economic, market and other conditions prevailing at the date of this Report. Such conditions can change significantly over relatively short periods of time. Furthermore, financial markets have been particularly volatile in recent times. Accordingly, if circumstances change significantly, subsequent to the issue of this Report, our conclusions and opinions may differ from those stated herein. There is no requirement for Nexia to update this Report for information that may become available subsequent to its date.

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Appendix D - VALUATION METHODOLOGIES

In preparing this Report we have considered valuation methods commonly used in practice and those recommended by RG 111. These methods include:

the discounted cash flow method;
the capitalisation of earnings method;
asset based methods; and
analysis of share market trading.

Discounted Cash Flow Method

Description

Of the various methods noted above, the discounted cash flow method has the strongest theoretical standing. It is also widely used in practice by corporate acquirers and company analysts. The discounted cash flow method estimates the value of a business by discounting expected future cash flows to a present value using an appropriate discount rate. A discounted cash flow valuation requires:

a forecast of expected future cash flows;
an appropriate discount rate; and
an estimate of terminal value.

It is necessary to project cash flows over a suitable period of time (generally regarded as being at least five years) to arrive at the net cash flow in each period. For a finite life project or asset this would need to be done for the life of the project. This can be a difficult exercise requiring a significant number of assumptions such as revenue growth, future margins, capital expenditure requirements, working capital movements and taxation.

The discount rate used represents the risk of achieving the projected future cash flows and the time value of money. The projected future cash flows are then valued in current day terms using the discount rate selected.

A terminal value reflects the value of cash flows that will arise beyond the explicit forecast period. This is commonly estimated using either a constant growth assumption or a multiple of earnings (as described under capitalisation of future maintainable earnings below). This terminal value is then discounted to current day terms and added to the net present value of the forecast cash flows.

The discounted cash flow method is often sensitive to a number of key assumptions such as revenue growth, future margins, capital investment, terminal growth and the discount rate. All of these assumptions can be highly subjective sometimes leading to a valuation conclusion presented as a range that is too wide to be useful.

Use of the Discounted Cash Flow Method

A discounted cash flow approach is usually preferred when valuing:

early stage companies or projects;
limited life assets such as a mine or toll concession;
companies where significant growth is expected in future cash flows; or

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projects with volatile earnings.

It may also be preferred if other methods are not suitable, for example if there is a lack of reliable evidence to support a capitalisation of earnings approach. However, it may not be appropriate if reliable forecasts of cash flow are not available and cannot be determined.

Capitalisation of Earnings Method

Description

The capitalisation of earnings method is a commonly used valuation methodology that involves determining a future maintainable earnings figure for a business and multiplying that figure by an appropriate capitalisation multiple. This methodology is generally considered a short form of a discounted cash flow, where a single representative earnings figure is capitalised, rather than a stream of individual cash flows being discounted. The capitalisation of earnings methodology involves the determination of:

a level of future maintainable earnings; and
an appropriate capitalisation rate or multiple.

A multiple can be applied to any of the following measures of earnings:

Revenue – most commonly used for companies that do not make a positive EBITDA or as a cross-check of a valuation conclusion derived using another method.

EBITDA - most appropriate where depreciation distorts earnings, for example in a company that has a significant level of depreciating assets but little ongoing capital expenditure requirement.

EBIT - in most cases EBIT will be more reliable than EBITDA as it takes account of the capital intensity of the business.

NPAT - relevant in valuing businesses where interest is a major part of the overall earnings of the group (e.g. financial services businesses such as banks).

Multiples of EBITDA, EBITA and EBIT value the whole businesses, or its enterprise value irrespective of the gearing structure. NPAT (or P/E) values the equity of a business.

The multiple selected to apply to maintainable earnings reflects expectations about future growth, risk and the time value of money all wrapped up in a single number. Multiples can be derived from three main sources.

Using the guideline public company method, market multiples are derived from the trading prices of stocks of companies that are engaged in the same or similar lines of business and that are actively traded on a free and open market, such as the ASX or the NSX. The merger and acquisition method is a method whereby multiples are derived from transactions of significant interests in companies engaged in the same or similar lines of business. In Australia, this has been called the comparable transaction methodology.

Use of the Capitalisation of Earnings Method

The capitalisation of earnings method is widely used in practice. It is particularly appropriate for valuing companies with a relatively stable historical earnings pattern which are expected to continue. This method is less appropriate for valuing companies or assets if:

there are no suitable listed company or transaction benchmarks for comparison;

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the asset has a limited life;
future earnings or cash flows are expected to be volatile; or
there are negative earnings, or the earnings of a business are insufficient to justify a value exceeding the value of the underlying net assets.

Asset Based Methods

Description

Asset based valuation methods estimate the value of a company based on the realisable value of its net assets, less its liabilities. There are a number of asset-based methods including:

orderly realisation;
liquidation value;
net assets on a going concern basis;
replacement cost; and
reproduction cost.

The orderly realisation of assets method estimates Fair Market Value by determining the amount that would be distributed to shareholders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner. The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame.

Since wind up or liquidation of the company may not be contemplated, these methods in their strictest form may not necessarily be appropriate. The net assets on a going concern basis method estimate the market values of the net assets of a company but do not take account of realisation costs.

The asset / cost approach is generally used when the value of the business’s assets exceeds the present value of the cash flows expected to be derived from the ongoing business operations, or the nature of the business is to hold or invest in assets. It is important to note that the asset approach may still be the relevant approach even if an asset is making a profit. If an asset is making less than an economic rate of return and there is no realistic prospect of it making an economic return in the foreseeable future, an asset approach would be the most appropriate method.

Use of Asset Based Methods

An asset-based approach is a suitable valuation method when:

an enterprise is loss making and is not expected to become profitable in the foreseeable future;
assets are employed profitably but earn less than the cost of capital;
a significant portion of the company’s assets are composed of liquid assets or other investments (such as marketable securities and real estate investments); or
it is relatively easy to enter the industry (for example, small machine shops and retail establishments).

Asset based methods are not appropriate if:

the ownership interest being valued is not a controlling interest, has no ability to cause the sale of the company’s assets and the major holders are not planning to sell the company’s assets; or

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a business has (or is expected to have) an adequate return on capital, such that the value of its future income stream exceeds the value of its assets.

Analysis of Share Trading

The most recent share trading history provides evidence of the Fair Market Value of the shares in a company where they are publicly traded in an informed and liquid market. There should also be some similarity between the size of the parcel of shares being valued and those being traded. Where a company’s shares are publicly traded then an analysis of recent trading prices should be considered, at least as a cross-check to other valuation methods.

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YPB GROUP LTD

NOTICE OF ANNUAL GENERAL MEETING

ANNEXURE 3: TERMS AND CONDITIONS OF JFH OPTIONS

Term	Detail
Exercise Price	The exercise price for the Options will be $0.002 per Option.
Entitlement on exercise	Each Option entitles the holder to subscribe for one Share (New Share).
Expiry Date	Each Option will expire 6 months after it is issued.
Period of exercise	Options may be exercised at any time prior to the Expiry Date. Any Options not exercised by the Expiry Date will automatically lapse.
Conversion	Exercise of an Option is subject to the Corporations Act, the Listing Rules and the Constitution and any approvals of Shareholders required under those laws and the Constitution.
How to exercise an Option	To exercise, the holder is required to deliver a duly completed notice of exercise to the Company at any time prior to the Expiry Date accompanied by the full payment of the Exercise Price.
Ranking	New Shares issued on exercise of the Options will rank equally with all existing Shares.
Quotation	The Company may seek to obtain quotation of the Options.
Transferability	The Options will not be transferable.
Reconstruction of capital	If at any time the issued capital of the Company is reconstructed (including consolidation, subdivision, reduction of return), all rights of a holder of Options are to be changed to the extent necessary in a manner consistent with the Corporations Act and the Listing Rules at the time of the reconstruction.
Participation in new issues	There are no participation rights or entitlements inherent in the Options and holders of Options will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options without exercising the Options. Holders of these Options will be afforded the period of at least 20 Business Days prior to and inclusive of the record date (to determine entitlements to the new issue) to exercise their Options.
Change in Exercise Price/number of underlying ordinary shares	If there is a bonus issue to Shareholders, the number of ordinary Shares over which an Option is exercisable may be increased by the number of Shares which the holder of the Option would have received if the Option had been exercised before the record date for the bonus issue.
Alteration of Option Terms	The Exercise Price and the one-for-one exercise ratio are fixed for the life of the Options subject to reconstruction under these Option Terms, the Listing Rules and the Corporations Act.

Page | 43

YPB GROUP LTD

NOTICE OF ANNUAL GENERAL MEETING

ANNEXURE 4: NOMINATION OF AUDITOR

15 June 2020

The Directors YPB Group Limited Suite 1, 295 Rokeby Road Subiaco WA 6008

Dear Sirs,

NOMINATION OF AUDITOR

For the purposes of section 328B(1) of the Corporations Act 2001, as a member of YPB Group Limited ( Company ), I hereby nominate PKF Brisbane Audit for appointment as auditor of YPB Group Limited and its consolidated entities at the Annual General Meeting of the Company or any adjournment thereof.

Yours faithfully

Hong Sian (Adrian) Tan

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All Correspondence to:

By Mail Boardroom Pty Limited GPO Box 3993 Sydney NSW 2001 Australia
By Fax: +61 2 9290 9655

 Online: www.boardroomlimited.com.au

By Phone: (within Australia) 1300 737 760 (outside Australia) +61 2 9290 9600

YOUR VOTE IS IMPORTANT

For your vote to be effective it must be recorded before 11am (Sydney Time) on Monday 20 July 2020.

 TO VOTE ONLINE

STEP 1: VISIT https://www.votingonline.com.au/ypbagm2020 STEP 2: Enter your Postcode OR Country of Residence (if outside Australia) STEP 3: Enter your Voting Access Code (VAC):

BY SMARTPHONE Scan QR Code using smartphone QR Reader App

TO VOTE BY COMPLETING THE PROXY FORM

STEP 1 APPOINTMENT OF PROXY

Indicate who you want to appoint as your Proxy.

If you wish to appoint the Chair of the Meeting as your proxy, mark the box. If you wish to appoint someone other than the Chair of the Meeting as your proxy please write the full name of that individual or body corporate. If you leave this section blank, or your named proxy does not attend the meeting, the Chair of the Meeting will be your proxy. A proxy need not be a securityholder of the company. Do not write the name of the issuer company or the registered securityholder in the space.

Appointment of a Second Proxy

You are entitled to appoint up to two proxies to attend the meeting and vote. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by contacting the company’s securities registry or you may copy this form.

STEP 3 SIGN THE FORM

The form must be signed as follows:

Individual: This form is to be signed by the securityholder.

Joint Holding : where the holding is in more than one name, all the securityholders should sign.

Power of Attorney: to sign under a Power of Attorney, you must have already lodged it with the registry. Alternatively, attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: this form must be signed by a Director jointly with either another Director or a Company Secretary. Where the company has a Sole Director who is also the Sole Company Secretary, this form should be signed by that person. Please indicate the office held by signing in the appropriate place.

STEP 4 LODGEMENT

To appoint a second proxy you must:

(a) complete two Proxy Forms. On each Proxy Form state the percentage of your voting rights or the number of securities applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.

(b) return both forms together in the same envelope.

STEP 2 VOTING DIRECTIONS TO YOUR PROXY

To direct your proxy how to vote, mark one of the boxes opposite each item of business. All your securities will be voted in accordance with such a direction unless you indicate only a portion of securities are to be voted on any item by inserting the percentage or number that you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given item, your proxy may vote as he or she chooses. If you mark more than one box on an item for all your securities your vote on that item will be invalid.

Proxy which is a Body Corporate

Where a body corporate is appointed as your proxy, the representative of that body corporate attending the meeting must have provided an “Appointment of Corporate Representative” prior to admission. An Appointment of Corporate Representative form can be obtained from the company’s securities registry.

Proxy forms (and any Power of Attorney under which it is signed) must be received no later than 48 hours before the commencement of the meeting, therefore by 11am (Sydney Time) on Monday 20 July 2020. Any Proxy Form received after that time will not be valid for the scheduled meeting.

Proxy forms may be lodged using the enclosed Reply Paid Envelope or:

 Online https://www.votingonline.com.au/ypbagm2020  By Fax + 61 2 9290 9655  By Mail Boardroom Pty Limited GPO Box 3993, Sydney NSW 2001 Australia  In Person Boardroom Pty Limited Level 12, 225 George Street, Sydney NSW 2000 Australia

Attending the Meeting

If you wish to attend the meeting please bring this form with you to assist registration .

YPB Group Limited

ACN 108 649 421

Your Address

This is your address as it appears on the company’s share register. If this is incorrect, please mark the box with an “X” and make the correction in the space to the left. Securityholders sponsored by a broker should advise their broker of any changes. Please note, you cannot change ownership of your securities using this form.

PROXY FORM

STEP 1 APPOINT A PROXY I/We being a member/s of YPB Group Ltd (Company) and entitled to attend and vote hereby appoint: the Chair of the Meeting (mark box)

OR if you are NOT appointing the Chair of the Meeting as your proxy, please write the name of the person or body corporate (excluding the registered securityholder) you are appointing as your proxy below

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chair of the Meeting as my/our proxy at the Annual General Meeting of the Company to be held via Zoom Telecast on Wednesday, 22 July 2020 at 11am (Sydney Time) and at any adjournment of that Meeting, to act on my/our behalf and to vote in accordance with the following directions or if no directions have been given, as the proxy sees fit.

The Chair of the Meeting intends to vote undirected proxies in favour of each of the items of business.

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

STEP 2 VOTING DIRECTIONS
If you mark the Abstain box for a particular item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your vote will not
be counted in calculating the required majority if a poll is called.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Res 1 Adoption of Directors’ Remuneration Report Res 8 Ratification of Prior Issue of Shares –
11,666,667 Shares
Res 2 Re-election of Director (Mr Gerard Eakin) Res 9 Approval of Issue of Shares –
26,333,333 Shares
Res 3 Re-adoption of Performance Rights Plan Res 10 Approval of Issue of Shares –
118,095,238 Shares
Res 4 Approval to Issue Service Shares to Mr Res 11 Approval to Issue up to $3,000,000
Philip Wade Worth of Shares
Res 5 Approval of Issue of JFH Shares, JFH Res 12 Approval of Additional Capacity to issue
Options and Increase in Voting Power Equity Securities Under Listing Rule 7.1A
Res 6 Ratification of Prior Issue of Placement Res 13 Appointment of Auditor
Shares Issued
Res 7 Ratification of Prior Issue of Shares –
6,000,000 Shares
----- End of picture text -----*

STEP 3 SIGNATURE OF SECURITYHOLDERS This form must be signed to enable your directions to be implemented.

Individual or Securityholder 1 Securityholder 2 Securityholder 3 Sole Director and Sole Company Secretary Director Director / Company Secretary Contact Name…………………………………………….... Contact Daytime Telephone………………………................................ Date / / 2020

AI assistant

CODEIFAI LIMITED — AGM Information 2020

64630_rns_2020-06-17_2fecf8b6-699c-4d92-b052-618b448be75f.pdf

YPB Group Ltd ACN 108 649 421

NOTICE OF ANNUAL GENERAL MEETING

The Annual General Meeting of YPB Group Limited will be held via Zoom teleconference on Wednesday, 22 July 2020 commencing at 11 am (Sydney time).

Notice of Annual General Meeting

AGENDA

Financial Statements

ORDINARY BUSINESS

Resolution 1

ADOPTION OF DIRECTORS’ REMUNERATION REPORT

Voting Exclusion Statement:

Resolution 2

RE-ELECTION OF DIRECTOR (MR GERARD EAKIN)

Resolution 3

RE-ADOPTION OF PERFORMANCE RIGHTS PLAN

Voting Exclusion Statement:

Resolution 4

APPROVAL TO ISSUE SERVICE SHARES TO MR PHILIP WADE

Voting Exclusion Statement:

Resolution 5

APPROVAL OF ISSUE OF JFH SHARES, JFH OPTIONS AND INCREASE IN VOTING POWER

Voting Exclusion Statement:

Resolution 6

RATIFICATION OF PRIOR ISSUE OF PLACEMENT SHARES ISSUED

Voting Exclusion Statement:

Resolution 7

RATIFICATION OF PRIOR ISSUE SHARES

Voting Exclusion Statement:

Resolution 8

RATIFICATION OF PRIOR ISSUE OF SHARES

Voting Exclusion Statement:

Resolution 9

APPROVAL OF ISSUE OF SHARES

ordinary resolution :

Voting Exclusion Statement:

Resolution 10

APPROVAL OF ISSUE OF SHARES

ordinary resolution :

Voting Exclusion Statement:

Resolution 11

APPROVAL TO ISSUE UP TO $3,000,000 WORTH OF SHARES

Voting Exclusion Statement:

SPECIAL BUSINESS

Resolution 12

APPROVAL OF ADDITIONAL CAPACITY TO ISSUE EQUITY SECURITIES UNDER LISTING RULE 7.1A

Voting Exclusion Statement:

Resolution 13

APPOINTMENT OF AUDITOR

Sebastian Andre

Notes

Attendance at the Meeting

Explanatory Memorandum

Eligibility to vote

How to vote

Proxy votes

Undirected Proxies

Directed Proxies

Power of Attorney

Bodies Corporate

Enquiries

Explanatory Memorandum YPB Group Ltd

1. Introduction

2. General

2.1 FINANCIAL STATEMENTS

2.2 Resolution 1: ADOPTION OF DIRECTORS’ RENUMERATION REPORT

(a) Background

(b) Board Recommendation

2.3 Resolution 2: RE-ELECTION OF DIRECTOR (MR GERARD EAKIN)

(a) Background

(b) Board Recommendation

2.4 Resolution 3: RE-ADOPTION OF PERFORMANCE RIGHTS PLAN

(a) Introduction

(b) Summary of the PR Plan

(c) Notice requirements under Listing Rule 7.2 (exception 13(b))

(d) Reason for the PR Plan

(e) Board Recommendation

2.5 Resolution 4: APPROVAL TO ISSUE SERVICE SHARES TO MR PHILIP WADE

(a) Background

CODEIFAI LIMITED AGM Information 2020