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Safety Medical Products Limited ACN 007 817 192

Notice of General Meeting and Explanatory Statement and Independent Expert’s Report and Proxy Form

General Meeting to be held at Trident Capital, Level 24, 44 St Georges Terrace, Perth, Western Australia on 17 December 2014 commencing at 10.00am (WST).

The Independent Expert reporting on Resolutions 3(a), 3(b), 4(a) and 4(b) concludes that the acquisition is FAIR AND REASONABLE to the non-associated Shareholders of the Company.

This Notice of General Meeting and Explanatory Statement should be read in its entirety. If Shareholders are in doubt as to how to vote, they should seek advice from their accountant, solicitor or other professional adviser without delay.

NOTICE OF GENERAL MEETING

Notice is given that a General Meeting of Shareholders of Safety Medical Products Limited ( Company ) will be held at Trident Capital, Level 24, 44 St Georges Terrace, Perth, Western Australia on 17 December 2014, commencing at 10.00am (WST).

SPECIAL BUSINESS

1. Resolution 1 – Capital Consolidation

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

“That, subject to Resolutions 2 to 12 (inclusive) being passed, in accordance with section 254 H of the Corporations Act and the Constitution, and for all other purposes approval be and is hereby given that the Existing Shares in the Company shall be consolidated on a 1 for 10 basis, with any fractional entitlements being rounded down. The consolidation of the Existing Shares will occur 6 Business Days from the date of the General Meeting at which this Resolution is passed.”

2. Resolution 2 – Change in nature and scale of activities of the Company

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

“That, subject to Resolutions 1 and 3(a) to 12 (inclusive) being passed, in accordance with ASX Listing Rule 11.1.2, and for all other purposes, approval is given for the Company to make a significant change to the nature and scale of its activities as set out in the Explanatory Statement.”

3. Resolutions 3(a) and 3(b) – Issue of Consideration Shares and Consideration Options to Related 3D Medical Vendors

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

(a) “That, subject to Resolutions 1 and 2 and 3(b) to 12 (inclusive) being passed and in accordance with item 7 of section 611 and section 208 of the Corporations Act and for all other purposes, approval be and is hereby given to the issue of 46,951,226 Consideration Shares at a deemed issue price of $0.02 to the “Related 3D Medical Vendors” (as that term is defined in the Explanatory Statement), under the Prospectus, as part consideration for the Company acquiring 100% of the issued capital of 3D Medical, and for the acquisition by the Related 3D Medical Vendors of a Relevant Interest (details of which are set out in Annexure A to the Explanatory Statement) in the New Shares to be issued to them as contemplated by this Resolution 3(a), further details of which are contained in the Explanatory Statement.”

Shareholders should note that if this Resolution is passed, the approval of Shareholders is not required under Listing Rule 7.1.

(b) “That, subject to Resolutions 1 to 3(a) and 4(a) to 12 (inclusive) being passed and in accordance with item 7 of section 611 and section 208 of the

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Corporations Act and for all other purposes, approval be and is hereby given to the issue of:

(i) 19,570,629 Consideration Options to Related 3D Medical Vendors for no monetary consideration, each Consideration Option having an exercise price of $0.05 per Share and expiring 18 months after Completion ( Tranche 1 Consideration Options ); and
(ii) 11,667,082 Consideration Options Related 3D Medical Vendors for no monetary consideration, each Consideration Option having an exercise price of $0.05 per Share and expiring 24 months after Completion ( Tranche 2 Consideration Options )

further details of which are contained in the Explanatory Statement.”

Shareholders should note that if this Resolution is passed, the approval of Shareholders is not required under Listing Rule 7.1.

Voting Exclusion Statement: The Company will disregard any votes cast on this Resolution by any person who may receive Consideration Shares or Consideration Options, and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities if the Resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

4. Resolutions 4(a) and 4(b) – Issue of Consideration Shares and Consideration Options to Unrelated 3D Medical Vendors

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

(a) “That, subject to Resolutions 1 to 3(b) (inclusive) and 4(b) to 12 (inclusive) being passed and in accordance with item 7 of section 611 of the Corporations Act and for all other purposes, approval be and is hereby given to the issue of 128,048,774 Consideration Shares at a deemed issue price of $0.02 to the “Unrelated 3D Medical Vendors” (as that term is defined in the Explanatory Statement), under the Prospectus, as part consideration for the Company acquiring 100% of the issued capital of 3D Medical, and for the acquisition by the Unrelated 3D Medical Vendors of a Relevant Interest (details of which are set out in Annexure A to the Explanatory Statement) in the New Shares to be issued to them as contemplated by this Resolution 4(a), further details of which are contained in the Explanatory Statement.”

Shareholders should note that if this Resolution is passed, the approval of Shareholders is not required under Listing Rule 7.1.

(b) “That, subject to Resolutions 1 to 4(a) and 5 to 12 (inclusive) being passed, and in accordance with item 7 of section 611 of the Corporations Act and for all other purposes, approval be and is hereby given to the issue of the:
(i) 53,374,431 Consideration Options to Unrelated 3D Medical Vendors for no monetary consideration, each Consideration Option having an exercise price of $0.05 per Share and expiring 18 months after Completion ( Tranche 1 Consideration Options ); and
(ii) 31,819,305 Consideration Options Unrelated 3D Medical Vendors for no monetary consideration, each Consideration Option having an exercise

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price of $0.05 per Share and expiring 24 months after Completion ( Tranche 2 Consideration Options ),

further details of which are contained in the Explanatory Statement.”

Shareholders should note that if this Resolution is passed, the approval of Shareholders is not required under Listing Rule 7.1.

Voting Exclusion Statement: The Company will disregard any votes cast on this Resolution by any person who may receive Consideration Options or Consideration Options and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities if the Resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

5. Resolution 5 – Issue of New Shares pursuant to the Capital Raising

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

“That, subject to Resolutions 1 to 4(b) (inclusive) and 6 to 12 (inclusive) being passed, and in accordance with ASX Listing Rule 7.1, and for all other purposes, approval be and is hereby given to the issue of up to 60,000,000 New Shares at an issue price of $0.05 per New Share to raise a minimum of $3,000,000 under a Prospectus, with provision to accept oversubscriptions of up to 100,000,000 New Shares to raise up to a total of $5,000,000, further details of which are contained in the Explanatory Statement.”

Voting Exclusion Statement: The Company will disregard any votes cast on this Resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities if the Resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

6. Resolution 6 – Right to apply under the Prospectus by Proposed Directors

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

“That, subject to the passing of Resolutions 1 to 5 (inclusive) and 0 to 12 (inclusive), and in accordance with ASX Listing Rule 10.11, and section 208 of the Corporations Act and for all other purposes, approval is given for the Company to allot and issue to the Proposed Directors (and/or their nominees) up to 2,000,000 New Shares out of the New Shares that may be issued pursuant to Resolution 5 on the terms set out in the Explanatory Statement.”

Voting Exclusion Statement: The Company will disregard any votes cast on this Resolution by the Proposed Directors and any associates of the Proposed Directors who may participate in the proposed issue. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

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7. Resolution 7 – Issue of Facilitation Shares to Trident Capital

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

“That, subject to Resolutions 1 to 6 (inclusive) and 8 to 12 (inclusive) being passed, and in accordance with ASX Listing Rule 7.1, and for all other purposes, approval is given to the issue of 875,000 Facilitation Shares to Trident Capital Pty Ltd (and/or its nominees) under a Prospectus, further details of which are contained in the Explanatory Statement.”

Voting Exclusion Statement: The Company will disregard any votes cast on this Resolution by Trident Capital Pty Ltd and any Associates of Trident Capital Pty Ltd. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

8. Resolution 8 – Issue of Facilitation Shares to Taylor Collison

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

“That, subject to Resolutions 1 to 0 (inclusive) and 9 to 12 (inclusive) being passed, and in accordance with ASX Listing Rule 7.1, and for all other purposes, approval is given to the issue of 3,500,000 Facilitation Shares to Taylor Collison (and/or its nominees) under a Prospectus, further details of which are contained in the Explanatory Statement.”

Voting Exclusion Statement: The Company will disregard any votes cast on this Resolution by Taylor Collison Limited and any Associates of Taylor Collison Limited. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

9. Resolution 9 – Issue of Advisory Shares to Ken Poutakidis

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

“That, subject to Resolutions 1 to 8 (inclusive) and 0 to 12 (inclusive) being passed and in accordance with Listing Rule 7.1 and for all other purposes, approval be and is hereby given to the issue of 4,375,000 Advisory Shares to Ken Poutakidis under the Prospectus, further details of which are contained in the Explanatory Statement.”

Voting Exclusion Statement: The Company will disregard any votes cast on this Resolution by Ken Poutakidis and any Associates of Ken Poutakidis. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

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10. Resolution 10 – Change of Company name

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

“That, subject to Resolutions 1 to 9 (inclusive) and 11 and 12 being passed, in accordance with section 157(1) of the Corporations Act, and for all other purposes, the Company change its name from “Safety Medical Products Limited” to “3D Medical Limited”.”

11. Resolution 11 – Appointment of Frank Pertile as Director

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

“That subject to Resolutions 1 to 0 (inclusive) and Resolution 12 being passed and in accordance with rule 19.3 of the Constitution, and for all other purposes, Mr Frank Pertile, having provided conditional consent to act and be appointed as a director of the Company from completion of the Proposed Transaction, be elected as a director of the Company with effect from completion of the Proposed Transaction.”

Voting Exclusion Statement: The Company will disregard any votes cast on this Resolution by Frank Pertile and any Associates of Frank Pertile. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

12. Resolution 12 – Appointment of Matthew Morgan as Director

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

(a) “That subject to Resolutions 1 to 11 (inclusive) being passed and in accordance with rule 19.3 of the Constitution, and for all other purposes, Mr Matthew Morgan, having provided conditional consent to act and be appointed as a director of the Company from completion of the Proposed Transaction, be elected as a director of the Company with effect from completion of the Proposed Transaction.”

Voting Exclusion Statement: The Company will disregard any votes cast on this Resolution by Matthew Morgan and any Associates of Matthew Morgan. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

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Explanatory Statement

The accompanying Explanatory Statement forms part of this Notice of General Meeting and should be read in conjunction with it.

Resolutions 1 to 12 (inclusive) are subject to and conditional on each of those resolutions being passed. Accordingly, the resolutions should be considered collectively as well as individually.

Shareholders are specifically referred to the Glossary in the Explanatory Statement which contains definitions of capitalised terms used in this notice of General Meeting and the Explanatory Statement.

Proxies

Please note that:

(a) a Shareholder entitled to attend and vote at the General Meeting is entitled to appoint a proxy;
(b) a proxy need not be a member of the Company;
(c) a Shareholder may appoint a body corporate or an individual as its proxy;
(d) a body corporate appointed as a Shareholder’s proxy may appoint an individual as its representative to exercise any of the powers that the body may exercise as the Shareholder’s proxy; and
(e) Shareholders entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise, but where the proportion or number is not specified, each proxy may exercise half of the votes.

The enclosed proxy form provides further details on appointing proxies and lodging proxy forms. If a Shareholder appoints a body corporate as its proxy and the body corporate wishes to appoint an individual as its representative, the body corporate should provide that person with a certificate or letter executed in accordance with the Corporations Act authorising him or her to act as that company’s representative. The authority may be sent to the Company or its share registry in advance of the General Meeting or handed in at the General Meeting when registering as a corporate representative.

Voting Entitlements

In accordance with Regulations 7.11.37 and 7.11.38 of the Corporations Regulations 2001, the Board has determined that a person’s entitlement to vote at the General Meeting will be the entitlement of that person set out in the register of Shareholders as at 5.00pm (WST) on 15 December 2014. Accordingly, transactions registered after that time will be disregarded in determining Shareholder’s entitlement to attend and vote at the General Meeting.

By Order of the Board of Directors

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Deborah Ho Company Secretary Safety Medical Products Limited 13 November 2014

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Explanatory Statement

This Explanatory Statement has been prepared for the information of Shareholders in relation to the business to be conducted at the Company’s General Meeting.

The purpose of this Explanatory Statement is to provide Shareholders with all information known to the Company which is material to a decision on how to vote on the resolutions in the accompanying Notice of General Meeting.

This Explanatory Statement should be read in conjunction with the Notice of Meeting. Capitalised terms in this Explanatory Statement are defined in the Glossary.

This Explanatory Statement includes information and statements that are both historical and forward-looking. To the extent that any statements relate to future matters, Shareholders should consider that they are subject to risks and uncertainties. Those risks and uncertainties include factors and risks specific to the industry as well as matters such as general economic conditions. Actual events and results may differ materially. None of the Company, the Directors, or their advisors can assure Shareholders that forecasts or implied results will be achieved.

1. Proposed Transaction

1.1 Background

On 23 June 2014 the Company announced to ASX that it had entered into a Heads of Agreement as follows:

(a) The Company agreed to acquire all the issued capital of 3D Medical held by the 3D Medical Shareholders in consideration for the Company:
(i) agreeing to issue to the 3D Medical Vendors the Consideration Shares pro rata to their respective shareholdings;
(ii) agreeing to issue to Ken Poutakidis or his nominee 43,750,000 Advisory Shares;
(iii) agreeing to issue to the 3D Medical Vendors the Consideration Options pro rata to their respective shareholdings; and
(iv) paying the Cost Repayment to 3D Medical (or its nominee) in the following instalments:
- a. 50% of the Cost Repayment on the Execution Date; and
- b. 50% of the Cost Repayment on the date which is 3 Business Days after the receipt by the Company of cleared funds under the SPP.

1.2 Overview of 3D Medical

(a) Background

3D Medical was incorporated in November 2013 with the clear focus of commercialising the greater application of data already being captured by diagnostic imaging (DI) service providers. 3D Medical understands that digital patient data is the foundation for a new era of more meaningful diagnostic and treatment aides, an expedited path to excellence for training medical and healthcare practitioners, greater efficacy and improved workflow for practitioners, in more meaningful patient communication and in personalised medical and

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healthcare solutions. In addition to the clinical data captured, 3D Medical has also identified an opportunity in management data analytics that leverages the information captured in systems broadly used in the DI sector.

3D Medical has identified the convergence in the capabilities of the technologies at the point of data capture, middle software where the required data is extracted, and the backend use and application of the data. Each layer of technology has now reached a level of sophistication and capability to be incorporated into a service that offers genuine benefits to the medical and healthcare sector and, most importantly, to the patient.

3D Medical was established with the explicit aim of quickly becoming the pre-eminent provider and facilitator for the take up and application of new technologies that put to greater use 3D volumetric patient data that improves patient outcomes as well as practitioner efficacy and workflow. This data is already being captured in 3D format but is currently often not put to any greater use than being interpreted or “viewed” in 2D.

3D Medical has launched with a two-pillar technology platform offer. There will be a particular focus on facilitating the availability to the broad medical and healthcare sector access to 3D printing technology and services. 3D Medical will provide specialised 3D printing services to the medical and healthcare sector with the focus being on printing patient specific anatomical models that provide a visual and functional aide to healthcare participants (clinicians, patients, researchers and hospital providers). 3D Medical will also make available and market 3D holographic projection workstations.

(b) 3D printing and holographic projection

3D Medical currently focuses its activities on the twin technology platforms of 3D printing and holographic projection.

3D printing creates physical three-dimensional models of a patient’s anatomical parts utilising the images and data already captured by conventional diagnostic imaging tools. The models are unique to the individual patient’s anatomy and can therefore act as a functional and visual aid in reviewing and understanding the complexities of a patient’s condition. This is particularly relevant in complex pre-surgical planning and patient communication. The application of 3D printing and its incorporation into best practice medical protocols offers clinicians, healthcare professionals, patients and researchers greater accuracy, effectiveness and efficiency in achieving improved patient outcomes.

Holographic projection is the second launch technology platform for 3D Medical. This technology has the potential to significantly alter the practice of medicine and will enhance efficacy and workflow at the practitioner level, accelerate the pathway to excellence in medical education and training and offer patients greater insight into their condition and ailment. 3D Medical seeks to become the pre-eminent company in identifying and facilitating the take up and application of technologies that apply the data already being captured by conventional diagnostic imaging in a greater and more meaningful way to achieve greater systemic efficiencies, improve practitioner effectiveness and achieve better patient outcomes.

3D Medical expects its revenue streams to come from marketing its technical expertise in 3D printing and from the distribution of holographic projection viewers to radiology providers and medical specialists such as cardiology, neurology, gastroenterology and orthopedics, areas of healthcare that currently receive medical data in 2D, even though it is captured in 3D.

The Australian medical and healthcare sector is extremely competitive and consequently Australian medical providers are early adopters of new medical technology and techniques

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to provide a superior customer (clinician, patient) experience that enables them to protect and grow market share and profitability. 3D Medical believes radiology providers in particular will be early adopters of the Company’s services so as to offer their referrers alternative methods of diagnosis delivery that provide superior healthcare outcomes for their patients.

(c) Financial History

3D Medical is essentially a start-up with limited trading history. Since incorporating in November 2013, 3D Medical’s activities have been aimed at commercializing the greater use and application of data already being captured by the diagnostic imaging sector, with an initial focus on several technology platforms.

Capital raised to date has been used to secure exclusive rights to novel image display technologies and the capability to deliver 3D printed anatomical models. In May 2014, 3D Medical entered into a memorandum of understanding (MOU) with EchoPixel to secure the exclusive market and distribution rights for the EchoPixel t3D-Viewer in Australia and New Zealand. Likewise, in August 2014 3D Medical entered into a MOU with GestSure to exclusively market and distribute the GestSure System in Australia and New Zealand. In October 2014 3D Medical entered into a Heads of Agreement (HOA) to exclusively sell 3D Group's 3D printing services in the Australasian medical sector. In addition to that agreement 3D Medical has also entered into a sale and supply agreement with Capitol Health Ltd (ASX: CAJ) to provide 3D anatomical models. 3D Medical will launch this service in Q1 2015.

Given 3D Medical’s limited trading history and given that its business is largely unproven, it is difficult to make an evaluation of 3D Medical’s business or its prospects. Accordingly, no assurance can be given that the Company will achieve commercial viability through the acquisition of 3D Medical and the implementation of its business plans.

(d) Business Plan

Following completion of the Capital Raising, the Company will focus on growing 3D Medical’s business by fully commercialising 3D Medical’s products and by prioritising funds towards sales and marketing in accordance with the table set out in section 1.13. By commercializing 3D Medical’s product, the Company will endeavour to increase sales with a view to generating profits. In addition, the Company will consider opportunities for growth by entering into licensing and distribution agreements or acquisitions that compliment 3D Medical’s business.

1.3 Share Sale Agreement

On 6 October 2014, the Company, 3D Medical and the 3D Medical Vendors entered into the Share Sale Agreement. Subject to various conditions, the Company agreed to purchase 100% of the ordinary shares in 3D Medical, and the 3D Medical Vendors agreed to sell all of their ordinary shares in 3D Medical to the Company.

The key terms of the Share Sale Agreement are:

(a) The Share Sale Agreement is subject to and conditional upon the following conditions precedent:
(i) Both parties completing their due diligence on the other to their absolute satisfaction;

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(ii) Prior to Completion, the Company does not receive a proposal in respect of the Company which an independent expert determines to be superior to the Proposed Transaction for Shareholders of the Company;
(iii) The Company obtaining and complying with the Company Approvals and any other requirements, approvals, consents or authorisations from ASIC, ASX or other Regulatory Authority as determined necessary by the Company (acting reasonably) or as may be required to legally and validly implement the Proposed Transaction (including any Consolidation or Recompliance, if required);
(iv) The Company completing the Consolidation and Recompliance (if required);
(v) The 3D Medical Vendors and 3D Medical obtaining all required 3D Medical shareholder approvals as may be required to legally and validly implement the Proposed Transaction; and
(vi) 3D Medical shall facilitate and the Company shall complete the Capital Raising subject to any conditions ASX may impose on the Capital Raising, including that Completion occurs under the Share Sale Agreement and that the shares to be issued and allotted pursuant to the Capital Raising are in accordance with the Corporations Act.
(b) Subject to the satisfaction (or waiver) of the Conditions, the total consideration for the purchase of the 3D Medical Shares comprises of:
(i) the issue and allotment of the Consideration Shares to the 3D Medical Vendors according to the 3D Medical Vendor Proportions;
(ii) the issue and allotment of the Advisory Shares to Ken Poutakidis or his nominee;
(iii) the issue and allotment of the Consideration Options to the 3D Medical Vendors; and
(iv) the payment of the Cost Repayment to 3D Medical or its nominee.
(c) The Company paid to 3D Medical and 3D Medical received 50% of the Cost Repayment on or about 24 July 2014 and the remainder 50% of the Cost Repayment on or about 12 August 2014.
(d) It is proposed to appoint the Mr Frank Pertile and Mr Matthew Morgan as Directors from the date on which the Proposed Transaction is completed. Following the appointment of the Proposed Directors, it is proposed that Messrs Christie and Jenkins will resign as directors.

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1.4 Placement, Share Purchase Plan and Loan Agreement

On 30 June 2014 the Company announced that it had completed a Placement to sophisticated investors raising $220,000 by offering 110,000,000 shares in the Company at $0.002 per share.

On 21 July 2014 the Company completed a Share Purchase Plan ( SPP ) raising $440,000 by the issue of 220,000,000 fully paid ordinary shares at $0.002 per share. The SPP was underwritten by Street Capital Partners Pty Ltd up to a maximum of $400,000.

On 17 August 2014 the Company entered into a Loan Agreement whereby:

(a) If the Placement raises $220,000 or more, then the Company must, within 3 Business Days of the receipt of cleared funds, subject to the Loan Agreement being executed, advance to 3D Medical the amount raised by the Placement at an interest-free loan repayable if the Proposed Transaction does not proceed for any reason other than the Heads of Agreement being terminated as a result of a breach by the Company; and
(b) If the Share Purchase Plan raises $150,000 or more, then the Company must, within 3 Business Days of the receipt of cleared funds, subject to the Loan Agreement being executed, advance to 3D Medical the amount raised by the Placement at an interest-free loan repayable if the Proposed Transaction does not proceed for any reason other than the Heads of Agreement being terminated as a result of a breach by the Company.

The Company has advanced a total of $510,000 under the Loan Agreement.

1.5 Advantages of the Proposed Transaction

The Directors are of the view that the following non-exhaustive list of advantages may be relevant to a Shareholder’s decision on how to vote on the proposed Resolutions:

(a) The Company will be significantly expanding its asset portfolio to include a company focused on the commercialisation and integration of 3D printing and holographic projection technology into the Australian medical industry.
(b) The change in nature of the Company’s activities could attract new investors and may allow the Company to more readily raise additional working capital (if required) and as such the Company may increase its ability to acquire further projects.
(c) The Company will acquire one hundred percent (100%) of 3D Medical and its business by the issue of shares.

1.6 Disadvantages of Proposed Transaction

The Directors are of the view that the following non-exhaustive list of disadvantages may be relevant to a Shareholder’s decision on how to vote on the proposed Resolutions:

(a) The Company will be changing the nature of its activities to include 3D printing and holographic projection technology, which may not be consistent with the objectives of the Shareholders.
(b) The proposed acquisition will result in the issue of shares to the Vendors, which will have a dilutionary effect on the current holdings of Shareholders.

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(c) There are risk factors associated with the change in nature of the Company’s activities and associated acquisition of 3D Medical. Some of these risks are set out in section 1.14 below.

1.7 Effect of the Proposed Transaction on the Company

By acquiring 100% of the issued capital of 3D Medical, the Company will be pursuing the commercialisation and integration of 3D printing and holographic projection technology into the Australian medical industry.

	Pro Forma Capital Structure	Pro Forma Capital Structure
Shares	Pre Consolidation		Post Consolidation
	$ 3,000,000	$ 5,000,000	$ 3,000,000	$ 5,000,000
Shares currently on issue	1,075,868,074	1,075,868,074	107,586,807	107,586,807
Shares to be issued to 3D Medical Vendors	1,750,000,000	1,750,000,000	175,000,000	175,000,000
Shares to be issued on Capital Raising	600,000,000	1,000,000,000	60,000,000	100,000,000
Advisory and facilitation shares to be issued	87,500,000	87,500,000	8,750,000	8,750,000
Total Shares on issue following completion and recompliance	3,513,368,074	3,913,368,074	351,336,807	391,336,807

1.8 Independent Expert’s Report

For the purposes of item 7 of section 611 of the Corporations Act and to assist Shareholders in considering the Resolutions in this Notice of Meeting, the Company has commissioned an Independent Expert’s Report on the fairness and reasonableness of the Proposed Transaction. The report concludes the Proposed Transaction is FAIR AND REASONABLE to the non-Associated Shareholders.

You should consider the Independent Expert’s Report in detail (see Annexure 2).

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1.9 Indicative timetable

Set out in the table below is the expected timing for completion of the Proposed Transaction and the matters contemplated by the Resolutions, subject to compliance with all regulatory requirements. These dates are indicative only and are subject to change. The Directors reserve the right to amend the timetable without notice.

Action	Date
Lodgement of Prospectus with ASIC	21 November 2014
Prospectus offer opens	1 December 2014
Suspension of the Company’s securities from trading on ASX at the openingof trading	17 December 2014
General Meeting	17 December 2014
Prospectus offer closes	18 December 2014
Securities registered on apost-Capital Consolidation basis	29 December 2014
Issue of all New Shares	29 December 2014
Completion of the Proposed Transaction	29 December 2014
Last day for dispatch of new holding statements to Existing Shareholders	6 January 2015
Satisfaction of ASX conditions for reinstatement	6 January2015
Commencement of tradingof New Shares on ASX	12 January2015

1.10 Relevant Interests and Voting Power

This section 1.10 sets out the effect of the issue of New Shares pursuant to Resolutions 3(a) and 4(a) (issue of consideration to 3D Medical Vendors) on Relevant Interests and Voting Power in relation to the Company.

(a) Identity of persons who will receive New Shares in the Company pursuant to Resolutions 3(a) and 4(a) and their Associates

If Resolutions 3(a) and 4(a) are passed (issue of consideration to the 3D Medical Vendors), both the Related 3D Medical Vendors and the Unrelated 3D Medical Vendors will receive the numbers of New Shares (and acquire a Relevant Interest in the number of New Shares) set out in Annexure A of this Explanatory Statement.

Each of the 3D Medical Vendors do not consider they will be Associates of one another after the New Shares have been issued to them, and therefore do not consider that their Voting Power in the Company will exceed 20% following completion of the Proposed Transaction. However, at the point in time when the New Shares are issued, upon completion of the Sale and Purchase Agreement, each of the 3D Medical Vendors will be considered Associates of one another as a consequence of their participating in the Proposed Transaction and agreeing to sell their shares in 3D Medical to the Company.

The following additional information is provided in relation to the 3D Medical Vendors:

(i) Frank Pertile

Mr Frank Pertile is a director of 3D Medical, and a Proposed Director of the Company.

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(ii) Perco Group Pty Ltd as trustee for the FSP Trust:

Mr Frank Pertile is a director of Perco Group Pty Ltd. Mr Frank Pertile is also a beneficiary of the FSP Trust, together with other family members. Mr Frank Pertile is a director and senior employee of 3D Medical, and a Proposed Director of the Company.

(iii) Olivab Pty Ltd as trustee for the Aboliv Discretionary Trust:

Mr Matthew Morgan is a director of Olivab Pty Ltd. Mr Matthew Morgan is also a beneficiary of the Aboliv Discretionary Trust, together with other family members. Mr Matthew Morgan is a director of 3D Medical, and a Proposed Director of the Company.

Each of the other 3D Medical Vendors are unrelated private investors in 3D Medical.

(b) Impact of the Proposed Transaction on the Voting Power in the Company’s Shares

(i) The Company’s capital structure

As at the date of this Explanatory Statement, the Company has 1,075,868,074 Existing Shares on issue, prior to the Consolidation.

Once the issue of securities as proposed in Resolutions 3(a), 4(a), 5, 0, 8 and 9 have been completed and New Shares are issued, the capital structure of the Company will consist of 351,336,807 New Shares (assuming $3,000,000 is raised under the Capital Raising) and 391,336,807 New Shares (assuming $5,000,000 is raised under the Capital Raising).

(ii) Current Voting Power of the 3D Medical Vendors

As at the date of the Notice of Meeting, the following 3D Medical Vendors have a Relevant Interest in Existing Shares:

Vendor	Existing Shares	Existing Voting Power
Perco Group Pty Ltd ATF FSP Trust	10,000,000	0.93%
Mr Kyriakos Poutakidis	5,000,000	0.46%
Dr Nigel Finch & Mrs Elizabeth Jane Finch	500,000	0.05%
Giokir PtyLtd	6,000,000	0.56%
Mr Jinesh Kiran Patel	10,000,000	0.93%

Except as disclosed above, none of the 3DM Vendors have any Relevant Interest in any Existing Shares. Accordingly, the 3D Medical Vendors combined Voting Power as at the date of the Notice of Meeting is 2.93%.

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(iii) Relevant Interests and maximum Voting Power of the 3D Medical Vendors after the issue of the New Shares pursuant to Resolutions 3(a), 4(a), 5, 0, 8 and 9

Once all of the New Shares referred to in Resolutions 3(a), 4(a), 5, 0, 8 and 9 have been issued, the number of Shares in which the 3D Medical Vendors will have a Relevant Interest will be as set out in Annexure A.

The maximum Voting Power of the 3D Medical Vendors set out below is provided based on the Company achieving:

A. the minimum Capital Raising of $3,000,000;
B. the Company raising a maximum of $5,000,000;

Based on the Company achieving the minimum Capital Raising of $3,000,000, the 3D Medical Vendors would together hold a maximum Voting Power equal to 52.5% upon issue of the New Shares pursuant to Resolutions 3(a), 4(a), 5, 0, 8 and 9.

Based on the Company raising $5,000,000, the 3D Medical Vendors would together hold a maximum Voting Power equal to 47.2% upon issue of the New Shares pursuant to Resolutions 3(a), 4(a), 5, 0, 8 and 9.

These numbers and percentages also assume that the Company does not issue any other Shares to any person prior to the completion of the Proposed Transaction.

1.11 Intentions as to the future of the Company

The Company understands that the present intentions of the 3D Medical Vendors regarding the future of the Company, if the Resolutions are approved by Shareholders, are that they:

(c) have no current intention of making any changes to the business of the Company following the acquisition of 3D Medical except as outlined in this Explanatory Statement or agreed to in the Company’s plans for the business following the acquisition of 3D Medical as set out in the Prospectus;
(d) do not propose to inject further capital into the Company;
(e) intend to change Company Secretary and providers of administration services to the Company (including the proposed changes to the Board, as described in section 1.3);
(f) do not propose that any assets be transferred from the Company to the 3D Medical Vendors or their Associates; and
(g) have no intention to otherwise re-deploy the fixed assets of the Company.

1.12 Financial and dividend policies of the Company

There is no immediate intention of the Existing Directors, the Proposed Directors or the 3D Medical Vendors to change the financial or dividend policies of the Company.

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1.13 Expenditure plans and use of funds

The Company intends to use the funds raised from the New Shares issued pursuant to the Prospectus, as contemplated by Resolution 5, as follows:

Proposed Application of funds raised	Proposed Application of funds raised	Proposed Application of funds raised
	Minimum Subscription ($3,000,000)		Full Subscription ($5,000,000)
	Amount ($)	%	Amount ($)	%
Expenses of the Capital Raising (including capital raising fees)	$430,000	14%	$550,000	11%
Sales and marketing	$920,000	31%	$1,840,000	37%
Corporate and administration	$1,000,000	33%	$1,000,000	20%
Travel and other	$150,000	5%	$300,000	6%
Working capital	$500,000	17%	$1,310,000	26%
Total	$3,000,000	100%	$5,000,000	100%

1.14 Risks – Change in Nature of Activities

Shareholders should be aware that if the Resolutions are approved, the Company will be changing the nature of its activities which will be subject to various risk factors. These risk factors are both specific to the commercialisation of 3D printing and holographic technology, and also relate to the general business and economic environment in which the Company will operate.

Shareholders should be aware that if the Resolutions are approved, the Company will be changing the nature and scale of its activities which will, because of its nature, be subject to various risk factors. These risks are both specific to the industry in which the Company operates and also relate to the general business and economic environment in which the Company will operate. An investment in the Company is not risk free and prospective new investors along with Existing Shareholders should consider the risk factors described below, together with information contained elsewhere in this Notice of Meeting. The following is not intended to be an exhaustive list of the risk factors to which the Company will be exposed to on the acquisition of 3D Medical.

Based on the information available, the principal risks facing the Company upon completion of the Proposed Transaction will be as follows:

(a) Commercialisation Risk

3D Medical is now in the process of commercialising its products, and will look to do this by commercialising and integrating its 3D printing and holographic projection technology into the Australian medical industry. There is a risk that 3D Medical will not be able to successfully sell its products, or be unable to attract sufficient customers to be sufficiently profitable to fund future operations.

(b) Competition and new technologies

The industry in which 3D Medical is involved is subject to increasing domestic and global competition which is fast-paced and fast-changing. While 3D Medical will undertake all reasonable due diligence in its business decisions and operations, 3D Medical will have no influence or control over the activities or actions of its competitors, whose activities or actions may positively, or negatively affect the

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operating and financial performance of 3D Medical’s business. For instance, new technologies could overtake the advancements made by 3D Medical’s products. In that case, 3D Medical’s revenues and profitability could be adversely affected.

(c)

Special Reputational Risks

3D Medical operates in a fast-changing environment, and negative publicity can spread quickly, whether true or false. Negative comments by disgruntled customers about 3D Medical may have a disproportionate affect on 3D Medical’s reputation and its ability to earn revenues and profits. Additionally, complaints by such customers can lead to additional regulatory scrutiny and a consequential increase compliance burden in responding to regulatory inquiries. This could negatively impact on 3D Medical’s profitability.

(d) Limited Trading History

The business of 3D Medical is set to be launched in the first quarter of 2015. Further, 3D Medical’s efforts in the past have been significantly focused towards the acquisition of exclusive supply rights of its products and establishing the necessary resources to sell the products in the Australasian medical market. There is therefore uncertainty in relation to the business of 3D Medical and investors should consider 3D Medical’s prospects in light of its limited financial history. In addition, there is no guarantee that 3D Medical will be able to successfully commercialise its products and if it is unable to do so it will not be able to realise significant revenues in the future.

(e)

Reliance on Key Personnel

The recent development of the business of 3D Medical has been in large part due to the talent, effort, experience and leadership of 3D Medical Directors Frank Pertile, and more recently Matthew Morgan. Frank Pertile will continue as a non executive Director and Matthew Morgan will continue as a non executive Chairman. 3D Medical is currently recruiting appropriately qualified senior management to oversee the operations of the business and the launch of the 3D Medical product suite in Q1 2015.

There is no assurance that such personnel will be secured and the contracts on which they will be secured will not be terminated or will be renewed on the expiry of their term. In addition, there is no assurance that Messrs Pertile and Morgan, or intended senior management would remain healthy and able to continue in their current roles. If such contracts were terminated or breached, or if the relevant Director and employees were no longer to continue in their current roles, 3D Medical would need to employ alternative staff, and 3D Medical’s operations and business would be adversely affected.

(f)

Customer Service Risk

Customers may need to engage with 3D Medical’s customer service personnel in certain circumstances, such as if they have a question about the services or if there is a dispute between a customer and 3D Medical. 3D Medical needs to recruit and retain staff with interpersonal skills sufficient to respond appropriately to customer services requests. Poor customer service experiences may result in the loss of customers. If 3D Medical loses key customer service personnel, fails to provide adequate training and resources for customer service personnel, this could lead to adverse publicity, litigation, regulatory inquiries and/or a decrease in customers, all of which may negatively impact on 3D Medical’s revenue.

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(g) Risks Associated with the Regulatory Environment

3D Medical’s main operating entities are based in Australia and subject to Australian laws and regulations. For example, 3D Medical is required to comply with Therapeutic Goods Act 1989 (Cth). Users, competitors, members of the general public or regulators could allege breaches of the legislation. This could result in remedial action or litigation, which could potentially lead to 3D Medical being required to pay compensation or a fine. 3D Medical’s operations may become subject to regulatory requirements, such as licensing and reporting obligations, which would increase the costs and resources associated with its regulatory compliance. Any such increase in the costs and resources associated with regulatory compliance could impact upon 3D Medical’s profitability. In addition, if regulators took the view that 3D Medical had failed to comply with regulatory requirements, this could lead to enforcement action resulting in public warnings, infringement notices or the imposition of a pecuniary penalty. This could lead to significant reputational damage to 3D Medical and consequent impact upon its revenue.

(h) Liquidity and Dilution Risk

There are currently 1,075,868,074 Shares on issue with between 17.1% and 25.6% of the total Shares on issue following requotation of the Company’s shares being offered to the public pursuant to the Prospectus. Upon requotation of the Company’s shares, a significant portion of the Shares on issue will be subject to escrow restrictions imposed by the Listing Rules. Some investors may consider that there is an increased liquidity risk as a large portion of the issued capital may not be able to be traded freely for a period of up to 24 months.

(i) Future Capital Needs

Further funding may be required by 3D Medical to support its ongoing activities and operations. There can be no assurance that such funding will be available on satisfactory terms or at all. Any inability to obtain funding will adversely affect the business and financial condition of 3D Medical and consequently its performance.

(j) Liability Claims

3D Medical may be exposed to liability claims if its services are provided in fault and/or cause harm to its customers. As a result, 3D Medical may have to expend significant financial and managerial resources to defend against such claims. If a successful claim is made against 3D Medical, 3D Medical may be fined or sanctioned and its reputation and brand may be negatively impacted, which could materially and adversely affect its reputation, business prospects, financial condition and results of operation.

(k) Foreign Exchange Risks

3D Medical’s costs and expenses in the United States of America are in US$. Accordingly, the depreciation and/or the appreciation of the US$ relative to the Australian currency would result in a translation loss on consolidation which is taken directly to shareholder equity. Any depreciation of the US$ relative to the Australian currency may result in lower than anticipated revenue, profit and earning. 3D Medical will be affected on an ongoing basis by foreign exchange

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risks between the Australian dollar and the US$, and will have to monitor this risk on an ongoing basis.

(l)

Low Barriers to Entry

There are relatively low barriers to entry in the fields of 3D printing and the market is experiencing the emergence of providers of these services. Potential risks relate to other providers of these services operating on a lower cost basis placing pressure on 3D Medical’s prices.

(m)

Insurance Coverage

3D Medical faces various risks in connection with its business and may lack adequate insurance coverage or may not have the relevant insurance coverage. 3D Medical maintains insurance coverage for its employees (as required by law in Australia) as well as insurance coverage for management liability, corporate liability, employment practices liability, crime protection and statutory liability. However, 3D Medical does not maintain insurance against various other liabilities. If 3D Medical incurs substantial losses or liabilities and its insurance coverage is unavailable or inadequate to cover such losses or liabilities, its financials may be adversely affected.

2. General Meeting

2.1 Action to be taken by Shareholders

In order to proceed with the acquisition of 3D Medical, the Company must convene a general meeting of its Shareholders for the purpose of passing the Resolutions in compliance with the requirements of the Corporations Act and the Listing Rules.

This Notice convening the General Meeting is included in the front of this booklet. Shareholders are encouraged to attend and vote in favour of each of the Resolutions to be put to the General Meeting.

If a Shareholder is unable to attend and vote at the General Meeting, the Shareholder is encouraged to complete the Proxy Form at the back of this booklet and return it to the Company by no later than 10.00am (WST) on 15 December 2014 2014.

2.2 Resolutions

There are 12 Resolutions to be put to the General Meeting, all of which are ordinary resolutions. Each Resolution relates to the acquisition of 3D Medical and is conditional on the passing of each of the other Resolutions so that the Resolutions will not have any effect unless all the Resolutions are passed. Accordingly, Shareholders should consider the Resolutions collectively, as well as individually.

Certain voting restrictions are imposed in relation to the Resolutions as detailed in the Notice under the “voting exclusion statement” section. This section 2 sets out a brief explanation of each Resolution.

A brief explanation of each Resolution is set out below in this section 2.

2.3 Resolution 1 – Capital Consolidation

Subject to the passing of Resolutions 2 to 12 (inclusive), Resolution 1 is an ordinary resolution that proposes that the issued capital of the Company be altered by consolidating the Existing Shares on a 1 for 10 basis. The Record Date for determining the consolidation

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of capital will be six (6) Business Days after the date of the General Meeting at which the Resolution is passed. Any fractional entitlements as a result of holdings not being evenly divisible by 10 will be rounded down to the nearest whole number.

Section 254H of the Corporations Act

Section 254H of the Corporations Act enables a company to convert all of its ordinary securities into a smaller number of securities by a resolution passed at a general meeting. The conversion proposed by Resolution 1 is permitted under section 254H of the Corporations Act.

The consolidation will not result in any change to the substantive rights and obligations of Existing Shareholders of the Company. The purpose of the consolidation of the existing issued capital of the Company is to reduce the number of existing shares on issue, which is considered to be a more appropriate capital structure for the Company going forward, and to enable the Company to satisfy Chapters 1 and 2 of the Listing Rules and obtain requotation of the Shares on ASX. For example, a Shareholder currently holding 100,000 Shares in the Company will as a result of the consolidation hold 10,000 New Shares.

The Company’s balance sheet and tax position will remain unaltered as a result of the consolidation. However, the Company’s issued capital shall be reduced to 107,586,807 New Shares as a result of the consolidation as set out below.

(a) Shares

At the date of the Explanatory Statement, the Company has 1,075,868,074 Existing Shares on issue. The consolidation on a 1 for 10 basis will reduce the number of fully paid Shares on issue to 107,586,807.

(b)

Holding Statements

Following the Consolidation, all holding statements for Existing Shares will cease to have any effect, except as evidence of entitlement to a certain number of Shares (on a post-Capital Consolidation basis).

After the Consolidation becomes effective, the Company will arrange for new holding statements for Shares to be issued to Shareholders. It is the responsibility of each Shareholder to check the number of Shares held prior to disposal.

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(c) Timetable for Capital Consolidation

If Resolution 1 is passed, and Resolutions 2 to 12 (inclusive), the Consolidation will take effect in accordance with the following timetable (as set out in Appendix 7A, paragraph 5, of the Listing Rules):

Event	Anticipated Date
Company notifies ASX that Shareholders have approved the Consolidation.	17 December 2014 (Business Day 0)
Trading would normally commence in the reorganised Shares on a deferred settlement basis.	19 December 2014 (Business Day 2)
Last day for the Company to register transfers on a pre- Consolidation basis.	29 December 2014 (Business Day 6)
Securities registered on a post-Consolidation basis.	30 December 2014 (Business Day 7)
Dispatch of new holding statements for consolidated shares.	6 January 2015 (Business Day 11)

The above dates are indicative only and are subject to change.

2.4 Resolution 2 – Change in nature and scale of activities of the Company

Subject to the passing of Resolution 1 and Resolutions 3(a) to 12 (inclusive), Resolution 2 is an ordinary resolution which seeks approval for the change of the Company’s nature and scale of activities as a result of the acquisition of 3D Medical.

Listing Rule 11.1 provides that where an entity proposes to make a significant change, either directly or indirectly, to the nature and scale of its activities, it must provide full details to ASX as soon as practicable. Listing Rule 11.1.2 provides, that, if ASX requires, the entity must get the approval of Shareholders and must comply with any requirements of ASX in relation to the Notice of Meeting.

ASX has indicated to the Company that it has exercised its discretion to require the Company to seek the approval of Shareholders under Listing Rule 11.1.2 for a change in the nature of its activities. For this reason, the Company is seeking Shareholder approval for the Company to change the nature of its activities under Listing Rule 11.1.1.

As a consequence of the change to the Company's nature and scale of activities, it is required to recomply with Chapters 1 and 2 of the ASX Listing Rules. Listing Rule 2.1 Condition 2 and Listing Rule 1.1 Condition 11 require that the offer price of securities, and exercise price of options, respectively, are a minimum of 20 cents. The Company applied to the ASX, and received, a waiver from Listing Rule 2.1 Condition 2 and Listing Rule 1.1 Condition 11 to allow the Company offer securities for 5 cents and for the exercise price of the Vendor Options to be 5 cents.

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Recommendation

Each of the Directors has no interest in the outcome of Resolution 2, other than as Existing Shareholders. Each of them recommends that Shareholders vote in favour of Resolution 2.

Shareholders should refer to the information in section 1.2 for information about the acquisition of 3D Medical and its impact on the Company.

2.5 Resolutions 3(a) and 3(b) – Issue of Consideration Shares and Consideration Options to Related 3D Medical Vendors

Subject to the passing of Resolutions 1 and 2 and Resolutions 3(b) to 12 (inclusive), Resolution 3(a) is an ordinary resolution which seeks the approval for the issue of 46,951,226 Consideration Shares to the Related 3D Medical Vendors, as part of consideration for the Proposed Transaction, as summarised in section 1.3.

Subject to the passing of Resolutions 1 to 3(a) (inclusive) and Resolutions 4(a) to 12 (inclusive), Resolution 3(b) is an ordinary resolution which seeks the approval for the issue of:

(a) 19,570,629 Consideration Options to Related 3D Medical Vendors, each Consideration Option having an exercise price of $0.05 per Share and expiring 18 months after Completion ( Tranche 1 Consideration Options ).
(b) 11,667,082 Consideration Options to Related 3D Medical Vendors, each Consideration Option having an exercise price of $0.05 per Share and expiring 24 months after Completion ( Tranche 2 Consideration Options ).

The terms of the Consideration Options are included at Annexures B and C of this Prospectus.

The Consideration Shares and Consideration Options proposed to be issued to Related 3D Medical Vendors under Resolutions 3(a) and 3(b) will be issued under the Prospectus.

Section 208 of the Corporations Act

In accordance with section 208 of the Corporations Act, to give a financial benefit to a related party, the Company must obtain Shareholder approval, unless the giving of the financial benefit falls within an exception in sections 210 to 216 of the Corporations Act. The Related 3D Medical Vendors are related parties of the Company, as they are controlled respectively by Frank Pertile and Matthew Morgan (the Proposed Directors). For further information on the Related 3D Medical Vendors, see section 1.10.

For the purposes of section 219 of the Corporations Act and ASIC Regulatory Guide 76, the following information is provided to Shareholders in respect of Resolution 3(a):

(a) Related parties to whom financial benefits are to be given

The related parties to whom Resolutions 3(a) and 3(b) would permit a financial benefit to be given are Frank Pertile, Perco Group Pty Ltd as trustee for the FSP Trust, and Olivab Pty Ltd as trustee for the Aboliv Discretionary Trust. The Related 3D Medical Vendors are related parties of the Company, as they are controlled respectively by Frank Pertile and Matthew Morgan (the Proposed Directors). For further details, see section 1.3.

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(b) Nature of the financial benefits

The nature of the financial benefit to be given is the issue of 46,951,226 New Shares to the Related 3D Medical Vendors pursuant to Resolution 3(a) and the 31,237,711 Consideration Options to the Related 3D Medical Vendors pursuant to Resolution 3(b). The number of New Shares that each Related 3D Medical Vendor will be issued is set out in the table below:

Name	New Shares	Consideration Options
Mr Frank Pertile	9	6
Perco Group Pty Ltd atf theFSP Trust	44,817,071	29,817,815
Olivab Pty Ltd atf Aboliv DiscretionaryTrust	2,134,146	1,419,896

The New Shares and Consideration Options are to be issued pursuant to the Share Sale Agreement as described in section 1.3, and under the Prospectus.

(c)

Valuation of the financial benefits

The quantum of the benefit of the New Shares to be issued to the Related 3D Medical Vendors pursuant to Resolution 3(a) will depend in part on the price at which the Shares trade on ASX (assuming the Shares are re-instated to official quotation).

The value of the benefit of the Consideration Options to be issued to the Related 3D Medical Vendors pursuant to Resolution 3(b) is determined by the BlackScholes. The Company has applied the Black-Scholes option pricing model in respect of the Consideration Options to be issued to the Related 3D Medical Vendors. Each option is valued at:

Tranche 1 Consideration Options	Tranche 2 Consideration options
$0.0183	$0.0209

This value has been calculated based on the following assumptions and variables.

Assumptions:

(i) The Options can be exercised at any time during the period after the issue date.
(ii) There are no transaction costs, options and shares are infinitely divisible, and information is available to all without cost.
(iii) Short selling is allowed without restriction or penalty.
(iv) The risk free interest rate is known and constant throughout the duration of the option contract.
(v) The underlying Shares do not currently pay a dividend.
(vi) Share prices behave in a manner consistent with a random walk in continuous time.

Variables:

(i) Share price of $0.05 (price of the Public Offer).

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(ii) A risk free interest rate of 2.48% assumed on the day of the General Meeting.
(iii) An expiry date for the Options of:
Tranche 1 Consideration Options - 18 Months.
Tranche 2 Consideration Options - 24 months.
(iv) An exercise price for the Options of
Tranche 1 Consideration Options $0.05.
Tranche 2 Consideration Options $0.05.
(v) Volatility of 75%.
(vi) Discount for non-transferability of 0%.

The aggregate values of the Options to be issued to the Related 3D Medical Vendors are set out below:

	Expiry date	Exercise price	Number	Value
Tranche 1	18 months from the date of issue	$0.05	19,570,629	$358,014
Tranche 2	24 months from the date of issue	$0.05	11,667,082	$244,382
Total				$602,396

Note: Any change in the variables applied in the B&S Model between the date of the valuation and the date that the Options are issued would have an impact on their value.

(d)

Terms of the securities

The New Shares that may be issued to the Related 3D Medical Vendors pursuant to Resolution 3(a) will rank equally in all respects with Existing Shares on issue.

Please refer to Annexures B and C for the terms of the Consideration Options issued to Related 3D Medical Vendors pursuant to 3(b).

(e)

Dilution

If all New Shares are issued pursuant to the Resolutions in this Notice and no other Shares are issued by the Company (including pursuant to the conversion of any Consideration Options), then the New Shares to be issued under Resolution 3(a) would dilute Shareholders by approximately 13.4% based on the Company achieving the minimum Capital Raising of $3,000,000 and 12.0% based on the Company achieving the maximum Capital Raising of $5,000,000.

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approximately 8.2% based on the Company achieving the minimum Capital Raising of $3,000,000 and 7.4% based on the Company achieving the maximum Capital Raising of $5,000,000.

(f) Directors’ voting recommendations

Please refer to section 3.2 for the Existing Directors’ voting recommendations.

(g) Directors’ interest in the outcome

Please refer to section 3.2 for the interests of the Existing Directors.

(h) Related parties’ existing interest

Please refer to section 3.5 for the Related 3D Medical Vendors interests in the Company.

Listing Rule 10.11

Unless one of the exceptions in Listing Rule 10.12 applies, Listing Rule 10.11 requires that an entity must not issue or agree to issue equity securities to a related party of the Company unless it obtains prior Shareholder approval. Listing Rule 10.12 exception 6 provides that where a person is only a related party by reason of the transaction which is the reason for the issue of the securities and the application of section 228(6) of the Corporations Act, Listing Rule 10.11 shall not apply. The Related 3D Medical Vendors are only related parties of the Company by reason of the Proposed Transaction which is the reason for the issue of New Shares to them and the application of section 228(6) of the Corporations Act. As a result, Shareholder approval under Listing Rule 10.11 is not required for the purposes of Resolutions 3(a) and 3(b).

Section 611 (item 7) of the Corporations Act

The Related 3D Medical Vendors do not consider they will be Associates of one another or the Unrelated 3D Medical Vendors after the Consideration Shares are issued to them pursuant to Resolution 3(a) and the Consideration Options are issued to them pursuant to Resolution 3(b), and therefore do not consider that their Voting Power in the Company will exceed 20% following completion of the Proposed Transaction. However, at the point in time when the Consideration Shares are issued pursuant to Resolution 3(a) and the Consideration Options are issued to them pursuant to Resolution 3(b), the Related 3D Medical Vendors may be considered Associates of one another and the Unrelated 3D Medical Vendors as a consequence of participating in the Proposed Transaction and agreeing to sell their shares in 3D Medical to the Company.

Accordingly, the Company is seeking the approval of Shareholders under item 7 of section 611 of the Corporations Act for the purposes of section 606 of the Corporations Act because, at the time of issue of the Consideration Shares under Resolutions 3(a) and 6 and the Consideration Options under Resolution 3(b), the Related 3D Medical Vendors may be considered Associates of one another and the Unrelated 3D Medical Vendors and it is anticipated that they will hold Voting Power in the Company of approximately 52.5% (assuming $3,000,000 is raised under the Capital Raising) and 47.2% (assuming $5,000,000 is raised under the Capital Raising).

In accordance with Appendix 9B of the Listing Rules, some of the New Shares issued under Resolutions 3(a) and Consideration Options issued under Resolution 3(b) will be classified by the ASX as “restricted securities” and unable to be traded for periods of up to 24 months. It is expected that of the total 46,951,226 New Shares to be issued under Resolution 3(a) that 46,951,226 New Shares will be escrowed for a period of 24 months

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from the date of the Company’s re-quotation on ASX. It is expected that of the total 31,237,711 Consideration Options to be issued under Resolution 3(b) that 31,237,711 Consideration Options will be escrowed for a period of 24 months from the date of the Company’s re-quotation on ASX.

Intentions as to the future of the Company

Other than an disclosed elsewhere in this Explanatory Statement and changes pursuant to the Proposed Transaction and the Resolutions, the Company understands that the 3D Medical Vendors and their associates (including the Proposed Directors):

(a) intend to conduct business in the fields of 3D printing and holographic projection, as described in section 1.2;
(b) do not propose to inject further capital into the Company;
(c) intend to retain the present employees of the Company (other than the proposed changes to the Board, as referred to in section 1.3(d));
(d) do not propose that any assets be transferred from the Company to the 3D Medical Vendors or their Associates; and
(e) have no intention to otherwise redeploy the fixed assets of the Company.

Financial and dividend policies of the Company

There is no immediate intention of the Existing Directors, the Proposed Directors or the 3D Medical Vendors to change the financial or dividend policies of the Company.

The identity, associations (with the 3D Medical Vendors) and qualifications of any person who is intended to or will become a Director

It is proposed that Mr Frank Pertile and Mr Matthew Morgan will join the Board effective only on and from the date on which the Proposed Transaction is completed. Contemporaneously with the appointment of the Proposed Directors, Mr Peter Christie and Mr Simon Jenkins will resign as Directors.

Mr Frank Pertile

Mr Frank Pertile is Managing Director of 3D Group Pty Ltd a supplier of 3D printed models and a director and owner of a privately held investment company that holds investments across property, listed and unlisted companies. Mr Pertile had followed the development and evolution of 3D printing and holographic projection for some time and held the view that the medical application of these technologies was and remains the highest order of use for these technologies. 3D Medical is the company manifestation of this view.

Mr Pertile previously held positions with ASX-listed wealth management companies in both client-facing and head office operational roles. Mr Pertile has undertaken studies in Applied Finance and is a Fellow of the Financial Services Institute of Australasia.

• Mr Matthew Morgan

Mr Matthew Morgan is an experienced advisor and non-executive director. He is currently the Principal of Millers Point Company, an advisory firm that works with

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management and shareholders of emerging companies advising on strategy, commercialisation and corporate transactions.

Prior to founding Millers Point Company Mr Morgan was a venture capitalist at QIC, a large institutional investor. He has spent the balance of his career working as an executive in the portfolio companies of various private equity investors. Throughout his career he has served on seed and venture capital stage investment committees and advised on a wide range of corporate transactions including licensing, debt and equity raisings and mergers and acquisitions.

Mr Morgan is a director of ASX listed companies Bluechiip Limited (Non-Executive Director), Diversa Limited (Non-Executive Director) and Leaf Resources Limited (Non-Executive Director).

Proposal is fair and reasonable

The report of the Independent Expert concludes that the proposed issue of New Shares pursuant to Resolutions 3(a), 4(a), 5, 0, 8 and 9 and the Proposed Transaction described in this Explanatory Statement, is fair and reasonable to non-associated Shareholders. Shareholders are urged to consider the Independent Expert’s Report in detail (see Annexure E).

2.6 Resolutions 4(a) and 4(b) – Issue of Consideration Shares and Consideration Options to Unrelated 3D Medical Vendors

Background

Subject to the passing of Resolutions 1 to 3(b) (inclusive) and Resolutions 4(b) to 12 (inclusive), Resolution 4(a) is an ordinary resolution which seeks the approval for the issue of 128,048,774 Consideration Shares to the Unrelated 3D Medical Vendors, as part of consideration for the Proposed Transaction, as summarised in section 1.3.

Subject to the passing of Resolutions 1 to 4(a) (inclusive) and Resolutions 5 to 12 (inclusive), Resolution 4(b) is an ordinary resolution which seeks the approval for the issue of:

(a) 53,374,431 Consideration Options to Unrelated 3D Medical Vendors, each Consideration Option having an exercise price of $0.05 per Share and expiring 18 months after Completion ( Tranche 1 Consideration Options ).
(b) 31,819,305 Consideration Options to Unrelated 3D Medical Vendors, each Consideration Option having an exercise price of $0.05 per Share and expiring 24 months after Completion ( Tranche 2 Consideration Options ).

The Consideration Shares and Consideration Options proposed to be issued to Unrelated 3D Medical Vendors under Resolutions 4(a) and 4(b) will be issued under the Prospectus.

The terms of the Consideration Options are included at Annexures B and C of this Prospectus.

Section 611 (item 7) of the Corporations Act

The Unrelated 3D Medical Vendors do not consider they will be Associates of one another or the Related 3D Medical Vendors after the Consideration Shares are issued to them pursuant to Resolution 4(a) and the Consideration Options are issued pursuant to Resolution 4(b), and therefore do not consider that their Voting Power in the Company will exceed 20% following completion of the Proposed Transaction. However, at the point in

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time when the Consideration Shares are issued pursuant to Resolution 4(a) and the Consideration, the Unrelated 3D Medical Vendors may be considered Associates of one another and the Related 3D Medical Vendors as a consequence of participating in the Proposed Transaction and agreeing to sell their shares in 3D Medical to the Company.

Accordingly, the Company is seeking the approval of Shareholders under item 7 of section 611 of the Corporations Act for the purposes of section 606 of the Corporations Act because, at the time of issue of the Consideration Shares under Resolution 4(a) and the Consideration Options under Resolution 4(b), the Unrelated 3D Medical Vendors may be considered Associates of one another and the Related 3D Medical Vendors and it is anticipated that they will hold Voting Power in the Company of approximately 52.5% (assuming $3,000,000 is raised under the Capital Raising) and 47.2% (assuming $5,000,000 is raised under the Capital Raising).

In accordance with Appendix 9B of the Listing Rules, some of the New Shares issued under Resolution 4(a) and Consideration Options issued under Resolution 4(b) will be classified by the ASX as “restricted securities” and unable to be traded for periods of up to 24 months. It is expected that of the total 128,048,774 New Shares to be issued under Resolution 4(a) that 5,121,951 New Shares will be escrowed for a period of 24 months from the date of the Company’s re-quotation on ASX, and 99,227,318 and 13,929,364 New Shares will be escrowed from the date of the Company’s re-quotation on ASX until 13 June 2015 and 23 June 2015 respectively. It is expected that of the total 64,024,389 Consideration Options to be issued under Resolution 4(b) that 3,407,749 Consideration Options will be escrowed for a period of 24 months from the date of the Company’s requotation on ASX, and 63,608,107 and 8,416,195 Consideration Options will be escrowed from the date of the Company’s re-quotation on ASX until 13 June 2015 and 23 June 2015 respectively. ASX has not made a determination in this regard but expects to do so prior to any final approval for the reinstatement of the Company’s securities on ASX.

2.7 Resolution 5 – Issue of New Shares pursuant to the Capital Raising

Subject to the passing of Resolutions 1 to 4(b) (inclusive) and Resolutions 6 to 12 (inclusive), Resolution 5 is an ordinary resolution which seeks approval for the issue of 60,000,000 New Shares at an issue price of $0.05 per share to raise a minimum of $3,000,000 with provision to accept oversubscriptions of up to 100,000,000 New Shares to raise up to a total of $5,000,00.

Shareholders of Capitol Health Limited will be offered a Priority Offer of 40,000,000 New Shares under the Capital Raising. The number of New Shares remaining following completion of the Priority Offer will be offered to the general public.

For the purposes of ASX Listing Rule 7.3, the following information is provided in relation to Resolution 5:

(a) Maximum number of securities the entity is to issue

The maximum number of securities to be issued by the Company under Resolution 5 is 100,000,000 New Shares.

(b) Date by which the entity will issue the securities

The New Shares will be issued no later than three (3) months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the Listing Rules), and it is intended that allotment will occur on the same date.

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(c) Issue price of the securities

The issue price of each New Share will be $0.05.

(d) Names of the persons to whom the entity will issue the securities (if known) or basis upon which those persons will be identified or selected

Participants in the Capital Raising (other than the Existing Directors or Proposed Directors) will be shareholders of Capitol Health Limited and members of the public who are not related parties of the Company being applicants under a Prospectus. The successful applicants will be determined at the sole discretion of the Company.

(e) Terms of the securities

The New Shares are ordinary fully paid shares and will rank equally in respect with the Existing Shares (post Capital Consolidation).

(f) Intended use of the funds raised

The intended use of the funds raised is set out at section 1.13.

Pursuant to and in accordance with Listing Rules 7.3 and 14.11 a voting exclusion statement is included in the Notice of Meeting.

2.8 Resolution 6 – Right to apply under the Prospectus by Proposed Directors

Subject to the passing of Resolutions 1 to 5 (inclusive) and Resolutions 0 to 12 (inclusive), Resolution 6 is an ordinary resolution which seeks approval for the right for the Proposed Directors to apply to be issued up to 2,000,000 New Shares of the 60,000,000 New Shares to be issued based on the Company achieving the minimum Capital Raising of $3,000,000 and 100,000,000 New Shares to be issued based on the Company achieving the maximum Capital Raising of $5,000,000 as detailed in Resolution 5.

As the Proposed Directors are related parties of the Company, Resolution 6 must be approved by Shareholders under section 208(1) of the Corporations Act and Listing Rule 10.11.

Section 208 of the Corporations Act

Section 208(1)(a) of the Corporations Act prohibits a company from giving a financial benefit (including an issues of shares) to a related party of the company without the approval of shareholders by a resolution passed at a general meeting at which no votes are cast in relation to the resolution in respect of any shares held by the related party or by an associate of the related party.

Mr Frank Pertile and Mr Matthew Morgan are related parties of the Company under section 228(6) of the Corporations Act as it is proposed that they will be directors of the Company from completion of the Proposed Transaction.

Section 219 of the Corporations Act requires the following information be provided to the Shareholders for approval to be granted under section 208(1) of the Corporations Act:

(a) Related parties to whom the financial benefit is given

The Related Parties to whom the Shares are to be issued under Resolution 6 are the Proposed Directors.

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(b) Nature of the financial benefits

The nature of the financial benefit to be given is the 1,000,000 New Shares that may be issued to each of Proposed Directors pursuant to Resolution 6, which are to be issued on the basis and terms set out in section 2.7.

(c) Valuation of the financial benefits

If each related party applies for and is issued 1,000,000 New Shares under the Capital Raising then the value of this parcel of Shares would be $50,000 upon issue. It should be noted, however, that in order to be issued 1,000,000 New Shares under the Capital Raising, the related party would need to pay $50,000 to the Company. The quantum of the benefit will depend in part on the price at which the Shares trade on ASX (assuming the Shares are re-instated to official quotation).

(d) Current remuneration and security interests

Please refer to section 3.5 for the Proposed Directors’ interests in the Company..

To date the Proposed Directors have not received any remuneration from the Company and as at the date of this Notice of Meeting no decision has been made as to what (if any) remuneration will or may be provided to the Existing Directors and (subject to any necessary approvals) any such decision will be announced at the relevant time.

(e)

Terms of the securities

The New Shares that may be issued to the Proposed Directors will rank equally in all respects with the Existing Shares on issue. Full terms and conditions of the Capital Raising will be set out in the Prospectus.

(f) Dilution

Shareholders should note, if Resolution 6 is approved and the New Shares are issued to the Existing Directors, Shareholders’ holdings will be diluted as compared to their holdings of Existing Shares as at the date of this Explanatory Statement. The potential effects of the Capital Raising on the capital structure of the Company are outlined in the table at section 1.6(c).

(g) Opportunity costs to the Company

The Directors do not consider that there are any opportunity costs to the Company or benefits foregone by the Company in issuing New Shares to the Proposed Directors under the Capital Raising.

(h) Intended use of funds

Funds raised by the issue of the New Shares under the Capital Raising are intended to be used in accordance with the table set out in section 1.13.

(i) Directors’ interests

The Existing Directors do not have an interest in the outcome of Resolution 6 and are unable to make a recommendation to Shareholders in relation to Resolution 6;

Please refer to section 3.5 for the Proposed Directors’ interests in the Company.

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(j) Directors’ Recommendations

The Existing Directors recommend that Shareholders vote in favour of Resolution 6 for the reasons set out in the Explanatory Statement and on the basis that, in their opinion, the proposed issue of New Shares:

will raise up to $100,000 of the $3,000,000 to $5,000,000 being sought under the Company’s Capital Raising;
is fair and reasonable in the circumstances as it is on the same terms as the proposed issue of New Shares to non-related parties under the Capital Raising; and
will further align the interests of the Proposed Directors with those of Shareholders.

(k) Other information

Other than as set out in this Explanatory Statement, there is no further information that is known to the Company or any of the Existing Directors which Shareholders would reasonably require in order to decide whether or not it is in the Company’s best interests to pass Resolution 6.

Listing Rule 10.11

Listing Rule 10.11 provides that a company must not issue equity securities to a “related party” without the approval of holders of ordinary securities. Further, Listing Rule 7.2 (Exception 14) states that approval pursuant to Listing Rule 7.1 is not required if shareholder approval is obtained under Listing Rule 10.11.

As set out above, the Proposed Directors are related parties of the Company for the purposes of section 228 of the Corporations Act. Accordingly, Shareholder approval is sought under Listing Rule 10.11 to permit the issue of New Shares under the Capital Raising to the Proposed Directors.

The issue of New Shares under Resolution 6 will not affect the capacity of the Company to issue securities in the next 12 months under Listing Rule 7.1, as those securities (once issued) will be excluded from the calculations under Listing Rule 7.1.

For the purposes of Listing Rule 10.13 the following information is provided to Shareholders in respect of Resolution 6:

(a) Name of the persons

The allottees under Resolution 6 are the Proposed Directors or their nominees who apply for New Shares under the Prospectus for the Capital Raising.

Name	New Shares
Mr Frank Pertile	Up to1,000,000
Mr Matthew Morgan	Up to1,000,000

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(b) Maximum number of securities that can be applied for and issued

The maximum number of New Shares to be issued under Resolution 6 is 2,000,000 New Shares. These New Shares form part of the New Shares that are being approved under Resolution 5, and are not in addition to those New Shares;

(c) Date by which the entity will issue the securities

It is proposed that the New Shares will be issued pursuant to the Capital Raising in accordance with the timetable set out in section 1.9. In any event, however, the New Shares will be issued under Resolution 6 no later than one (1) month after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the Listing Rules).

(d) Issue price of the securities

The issue price for the New Shares under Resolution 6 is $0.05 per Share.

(e) Terms of the issue

The Shares to be issued under Resolution 6 are ordinary fully paid shares which on issue will rank equally with the Existing Shares (post-Consolidation) in the Company.

A maximum of $100,000 will be raised by the issue of Shares under Resolution 6.

(f) Relationship that requires Shareholder approval

The Proposed Directors will be appointed as directors of the Company following Completion.

(g) Intended use of the funds raised

Funds raised by the issue of the New Shares under the Capital Raising are intended to be used in accordance with the table set out in section 1.13.

2.9 Resolution 0 – Issue of Facilitation Shares to Trident Capital

Subject to the passing of Resolutions 1 to 6 (inclusive) and Resolutions 8 to 12, Resolution 0 is an ordinary resolution and seeks Shareholder approval for the issue of 8,750,000 (preConsolidation) Facilitation Shares to Trident Capital (and/or its nominees) under the Prospectus.

Resolution 0 must be approved by Shareholders under Listing Rule 7.1. Information on Listing Rule 7.1 is provided in section 4.8.

The total number of New Shares that may be issued under Resolution 0 is 875,000.

Following the approval of the issue of the Shares under this Resolution 0, the Company will still have the capacity to issue fifteen percent (15%) of its expanded share capital over the next twelve (12) months as those Shares once issued will be excluded from the calculation under Listing Rule 7.1.

The 8,750,000 Facilitation Shares (875,000 New Shares) will, on issue, rank equally in all respects with the Existing Shares.

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For the purpose of Listing Rule 7.3 the following additional information is provided to Shareholders in respect of Resolution 0:

(a) Maximum number of securities the entity is to issue

The maximum number of New Shares to be issued is 875,000 New Shares.

(b) Date by which the entity will issue the securities

The New Shares will be issued no later than three (3) months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or notification of the Listing Rules), and it is intended that allotment will occur on the same date.

(c) Issue price of the securities

The New Shares will be issued for no cash consideration. The New Shares are being issued as consideration for corporate advisory services provided.

(d) Names of the persons to whom the entity will issue the securities (if known) or the basis upon which those persons will be identified or selected

The allotee is Trident Capital (and/or its nominees).

(e)

Terms of the securities

The New Shares to be issued are ordinary fully paid shares which on issue will rank equally with the Existing Shares in the Company.

(f)

Intended use of the funds raised

No funds will be raised by the issue of the New Shares.

Pursuant to, and in accordance with Listing Rule 7.3 and 14.11 a voting exclusion statement is included in the Notice of Meeting.

In accordance with Appendix 9B of the Listing Rules, it is likely that the ASX will apply escrow provisions to all securities issued under Resolution 0. As at the date of this Notice of Meeting, ASX has not made a determination in this regard but expects to do so prior to any final approval for the reinstatement of the Company’s securities on ASX.

2.10 Resolution 8 – Issue of Facilitation Shares to Taylor Collison

Subject to the passing of Resolutions 1 to 0 (inclusive) and Resolutions 9 to 12 (inclusive), Resolution 8 is an ordinary resolution and seeks Shareholder approval for the issue of 35,000,000 (pre-Consolidation) Facilitation Shares to Taylor Collison (and/or its nominees) under the Prospectus.

Resolution 8 must be approved by Shareholders under Listing Rule 7.1. Information on Listing Rule 7.1 is provided in section 4.8.

The total number of New Shares that may be issued under Resolution 8 is 3,500,000.

Following the approval of the issue of the Shares under this Resolution 8, the Company will still have the capacity to issue fifteen percent (15%) of its expanded share capital over the next twelve (12) months as those Shares once issued will be excluded from the calculation under Listing Rule 7.1.

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The 35,000,000 Facilitation Shares (3,500,000 New Shares) will, on issue, rank equally in all respects with the Existing Shares.

For the purpose of Listing Rule 7.3 the following additional information is provided to Shareholders in respect of Resolution 8:

(a) Maximum number of the securities the entity is to issue

The maximum number of New Shares to be issue by the Company under Resolution 8 is 3,500,000 New Shares.

(b) Date by which the entity will issue the securities

(c)

Issue price of the securities

The New Shares will be issued for no cash consideration. The New Shares are being issued as consideration for corporate advisory services provided.

(d) Names of the persons to whom the entity will issue the securities (if known) or basis upon which those persons will be identified or selected

The allottee will be Taylor Collison (and/or its nominees).

(e)

Terms of the securities

The Facilitation Shares rank equally in respect with the Existing Shares (postConsolidation).

(f)

Intended use of the funds raised

No funds will be raised by the issue of the New Shares; and

Pursuant to and in accordance with Listing Rules 7.3 and 14.11 a voting exclusion statement is included in the Notice of Meeting.

In accordance with Appendix 9B of the Listing Rules, it is likely that the ASX will apply escrow provisions to all securities issued under Resolution 8. As at the date of this Notice of Meeting, ASX has not made a determination in this regard but expects to do so prior to any final approval for the reinstatement of the Company’s securities on ASX.

2.11 Resolution 9 – Issue of Advisory Shares to Ken Poutakidis

Subject to the passing of Resolutions 1 to 8 (inclusive) and Resolutions 0 to 12 (inclusive), Resolution 9 is an ordinary resolution and seeks Shareholder approval for the issue of 43,750,000 (pre-Consolidation) Advisory Shares to Ken Poutakidis (and/or his nominees) under the Prospectus.

Resolution 9 must be approved by Shareholders under Listing Rule 7.1. Information on Listing Rule 7.1 is provided in section 4.8.

The total number of New Shares that may be issued under Resolution 9 is 4,375,000.

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Following the approval of the issue of the Shares under this Resolution 9, the Company will still have the capacity to issue fifteen percent (15%) of its expanded share capital over the next twelve (12) months as those Shares once issued will be excluded from the calculation under Listing Rule 7.1.

The 43,750,000 Advisory Shares (4,375,000 New Shares) will, on issue, rank equally in all respects with the Existing Shares.

Listing Rule 7.3 requires the following information be provided to Shareholders for the purpose of obtaining Shareholder approval pursuant to Listing Rule 7.1:

(a) Maximum number of securities the entity is to issue

The total number of New Shares to be issued to Ken Poutakidis is 4,375,000 New Shares.

(b) Date by which the entity will issue the securities

The New Shares will be issued no later than three (3) months after the date of the meeting (or such later date to the extent permitted by any ASX waiver or modification of the Listing Rules).

(c)

Issue price of the securities

The New Shares are being issued for no cash consideration as part of the consideration for the Proposed Transaction.

(d) Names of the persons to whom the entity will issue the securities (if known) or basis upon which those persons will be identified or selected

The New Shares will be issued to Ken Poutakidis (and/or his nominees), an Unrelated 3D Medical Vendor.

(e) Terms of the securities

The New Shares are ordinary fully paid shares and will rank equally in respect with the Existing Shares (post Capital Consolidation).

(f) Intended use of the funds raised

No funds will be raised by the issue of the New Shares.

Pursuant to, and in accordance with Listing Rule 7.3 and 14.11 a voting exclusion statement is included in the Notice of Meeting.

In accordance with Appendix 9B of the Listing Rules, it is likely that the ASX will apply escrow provisions to all securities issued under Resolution 9. As at the date of this Notice of Meeting, ASX has not made a determination in this regard but expects to do so prior to any final approval for the reinstatement of the Company’s securities on ASX.

2.12 Resolution 10 – Change of Company Name

Subject to the passing of Resolutions 1 to 9 (inclusive) and Resolutions 11 and 12 (inclusive), Resolution 0 is a special resolution which seeks approval to change the name of the Company. Consistent with the new focus and direction of the Company, upon completion of the Proposed Transaction the Company proposes to change its name from

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“Safety Medical Products Limited” to “3D Medical Limited”. This change will not, in itself, affect the legal status of the Company or any of its assets or liabilities.

Shareholder approval is required for Resolution 0 by special resolution under section 157(1)(a) of the Corporations Act.

On or about the date of completion of the Proposed Transaction, the Company will make an application to ASIC for the change of its name to “3D Medical Limited”. The new name will take effect upon a new certificate of registration being issued by ASIC. The Company will not change its name if completion of the Proposed Transaction does not occur.

2.13 Resolution 11 – Appointment of Frank Pertile

Subject to the passing of Resolutions 1 to 0 (inclusive) and Resolution 12, Resolution 11 is an ordinary resolution and provides for the approval of the appointment of the Mr Frank Pertile to the Board. The appointment of Mr Pertile will become effective only on and from the date on which the Proposed Transaction is completed. A profile of Mr Pertile set out at section 2.5.

2.14 Resolution 12 – Appointment of Matthew Morgan

Subject to the passing of Resolutions 1 to 11 (inclusive), Resolution 12 is an ordinary resolution and provides for the approval of the appointment of the Mr Matthew Morgan to the Board. The appointment of Mr Morgan will become effective only on and from the date on which the Proposed Transaction is completed. A profile of Mr Morgan set out at section 2.5.

3. OTHER INFORMATION

3.1 Scope of disclosure

The law requires that this Explanatory Statement sets out all other information that is reasonably required by the Existing Shareholders in order to decide whether or not it is in the Company’s interests to pass the Resolutions and which is known to the Company.

The Company is not aware of any relevant information that is material to the decision on how to vote on the Resolutions other than as is disclosed in this Explanatory Statement or previously disclosed to Existing Shareholders by the Company by notification to the ASX.

3.2 Existing Directors’ profiles

Mr Peter Christie, Chairman

Peter graduated from Curtin University with a Bachelor of Business in 1983 and is a qualified Accountant and Tax Agent. He has 27 years of commercial experience and in that time has developed extensive business, hospitality and property interests. Peter is also currently a non-executive director of Carnavale Resources Limited.

Mr Stephen Hewitt-Dutton, Non-Executive Director

Stephen has over 20 years of experience in corporate finance, accounting and company secretarial matters. He is an Associate Director of Trident Capital and holds a Bachelor of Business from Curtin University, is an affiliate of the Institute of Chartered Accountants.

Before joining Trident Capital, Stephen was an Associate Director of Carmichael Corporate where he assisted clients by providing equity market, IPO and M&A advice and

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assistance. He has also held Financial Controller and Company Secretary positions for both public and private companies for in excess of 15 years.

Mr Simon Jenkins, Non-Executive Director

Simon has been a director of Price Sierakowski Pty Ltd since 2005. He has a Bachelor of Laws from the University of Western Australia and is a recommended lawyer for mergers and acquisitions in the 2011 edition of Doyle’s Guide to the Australian Legal Profession.

Simon has experience in a broad range of corporate transactions including takeovers, mergers and capital raisings both in Australia and overseas. He has extensive experience in a range of industries including the resource, energy and telecommunications sectors. He has also acted for Australian and internationally listed companies as well as for a number of large private enterprises. Simon has held directorships in both ASX listed and client owned private companies. He is a member of AMPLA and the Petroleum Club of WA.

3.3 Voting intentions and interests of Existing Directors

The Existing Directors of the Company and their interests in the Company are set out in the table below. As at the date of this Explanatory Statement, the Existing Directors intend to vote in favour of the Resolutions set out in the Notice of General Meeting.

Except as otherwise disclosed or referred to in this section 3.2, the Existing Directors have no interest in the outcome of the Resolutions except as Existing Shareholders of the Company. In this regard, the table below sets out the details of the Shares held (directly or indirectly) by the Existing Directors and their Associates and the percentage ownership in the Existing Shares of the Company.

Name of Existing Director	Number of Existing Shares held (directly or indirectly)	Percentage interest in Existing Shares1
Mr Peter Christie	14,833,534	1.38%
Mr Stephen Hewitt-Dutton	3,000,000	0.28%
Mr Simon Jenkins	7,674,420	0.71%
TOTAL	25,507,954	2.37%

1 Based on the total number of 1,075,868,074 Existing Shares of the Company.
2 Peter Christie holds these Existing Shares indirectly through two entities, both of which he is a beneficiary of, being Waterbeach Investments Pty Ltd and Waterbeach Investments Pty Ltd .
3 Stephen Hewitt-Dutton holds these Existing Shares indirectly through SHD Nominees Pty Ltd of which he is a beneficiary.
4 Simon Jenkins holds 5,174,420 Existing Shares indirectly through two entities, both of which he is a director and shareholder, being Doctor’s Wallet Pty Ltd and Price Sierakowski Pty Ltd.

3.4 Taxation

The Proposed Transaction and/or the passing of the Resolutions (including the Consolidation) may give rise to income tax implications for the Company and Existing Shareholders.

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Existing Shareholders are advised to seek their own taxation advice on the effect of the Resolutions on their personal position and neither the Company, nor any Existing Director or advisor to the Company accepts any responsibility for any individual Existing Shareholder’s taxation consequences on any aspect of the Proposed Transaction or the Resolutions.

3.5 Interest of the Proposed Directors

The Proposed Directors are Mr Frank Pertile and Mr Matthew Morgan. Details of the Proposed Directors of the Company are set out in section 1.3(d).

Except as otherwise disclosed or referred to in this section 3.2, the Proposed Directors have no interest in the outcome of the Resolutions except as Existing Shareholders of the Company. In this regard, the table below sets out the details of the Shares held (directly or indirectly) by the Proposed Directors and their Associates and the percentage ownership in the Existing Shares of the Company.

Name of Proposed Director	Number of Existing Shares held (directly or indirectly)	Percentage interest in Existing Shares1
Mr Frank Pertile	10,000,000	0.93%
Mr Matthew Morgan	Nil	Nil
TOTAL	10,000,000	0.93%

3.6 Indicative value of New Shares

The quantum of benefit to be received by the holders of the New Shares proposed to be issued pursuant to Resolutions 3(a), 4(a), 5, 7, 8 and 9 (inclusive) will depend on the price at which the New Shares may trade on ASX.

3.7 Existing Director’s recommendations in respect of the Resolutions

The Existing Directors recommend that Shareholders vote in favour of the Resolutions for the reasons outlined in section 2.

4. REGULATORY REQUIREMENTS

4.1 Section 254H of the Corporations Act

In Resolution 1, the Company proposes to consolidate its existing issued capital on a 1 for 10 basis in accordance with section 254H of the Corporations Act. Under section 254H of the Corporations Act, a company may convert all or any of its shares into a larger or smaller number of shares by resolution passed at a general meeting of the Company.

4.2 Listing Rule 11.1

Under Listing Rule 11.1, if a Company wishes to make a significant change to the nature or scale of its activities it must provide ASX full details regarding the change and if ASX requires, it must obtain Shareholder approval.

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ASX has informed the Company that the acquisition of 3D Medical constitutes a significant change in the nature and scale of activities of the Company and it requires the Company to:

(f) obtain Shareholder approval for the proposed change of activities; and
(g) re-comply with the requirements set out in Chapters 1 and 2 of the Listing Rules.

Accordingly, the Company is seeking Shareholder approval under Listing Rule 11.1.2 in relation to Resolution 1.

The acquisition of 3D Medical will result in a change to the nature of the Company’s activities from development of medical devices, namely the SecureTouch syringe, to the provision of 3D printing and holographic projection equipment and services to the medical industry. The Company will seek to relist on the ASX, and ASX has confirmed that it will require the Company to re-comply with the requirements of Chapters 1 and 2 of the Listing Rules.

ASX may suspend quotation of the Shares until the Company has satisfied the requirements of Listing Rule 11.1. The Company will require a trading halt on the day of the General Meeting in respect of the approval of the Proposed Transaction. If Shareholders approve the Proposed Transaction by passing Resolutions 1 to 12 (inclusive), trading in the Company’s securities will be suspended until the Company satisfies the requirements of Chapters 1 and 2 of the Listing Rules in accordance with Listing Rule 11.1.3. It is anticipated that the re-quotation of the Company’s securities will occur on or around 12 January 2015.

If all the Resolutions are approved and implemented, re-quotation of the Company on ASX will be subject to the Company meeting these requirements. The Company intends to meet these requirements as soon as practicable after the General Meeting. A copy of the Prospectus will be available to Existing Shareholders once lodged with ASIC.

If Shareholders reject the Resolutions or completion of the acquisition does not occur in accordance with the terms (including the approval of ASX for reinstatement of the Company’s securities to quotation), the Company will not issue the securities contemplated in the Resolutions.

Accordingly, Shareholders should carefully consider all of the information contained in this Explanatory Statement before making a decision as to whether to vote in favour of the change in the nature and scale of the Company’s activities. In particular, Shareholders should carefully consider the advantages, disadvantages and risks of the proposed acquisition of 3D Medical set out in section 1.2.

4.3 Listing Rule 10.11

Chapter 10 of the Listing Rules contains certain provisions in relation to transactions between a company and “persons in a position of influence”. Listing Rule 10.11 provides that a company must not issue equity securities to a “related party” without the approval of holders of ordinary securities by ordinary resolution. The terms “related party” is defined in for these purposes to include a related party within the meaning of section 228 of the Corporations Act and a person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained.

The Proposed Directors are “related parties” of the Company within the terms of the Listing Rules. As a result Resolution 6 must be approved by Shareholders under Listing Rule 10.11.

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For the purposes of Listing Rule 10.13, the information set out at section 2.8 is provided to Shareholders in respect of Resolution 6.

4.4 Section 208 of the Corporations Act

The Proposed Directors are “related parties” of the Company for the purposes of section 208 of the Corporations Act. Accordingly, approval is sought for the issue of New Shares as contemplated by Resolution 6 under section 208 of the Corporations Act.

For the purposes of ASIC Regulatory Guide 76, the information set out at section 2.8 is provided to Shareholders in respect of Resolution 6.

4.5 Section 611 of the Corporations Act

Resolutions 3(a) and 4(a) seek Shareholder approval under item 7 of section 611 of the Corporations Act to the acquisition by the 3D Medical Vendors of a relevant interest in up to 184,525,000 New Shares upon the issue of those securities.

Except as provided by Chapter 6 of the Corporations Act, section 606(1) of the Corporations Act prohibits a person from acquiring shares in a company if, after the acquisition, that person or any other person would have a relevant interest or voting power in excess of 20% of the voting shares in that company.

Item 7 of section 611 of the Corporations Act provides that section 606(1) of the Corporations Act does not apply to an acquisition of a relevant interest in the voting shares in a company if the company has agreed to the acquisition by resolution passed at a general meeting at which no votes are cast in relation to the resolution by the person to whom the shares are to be issued or by an Associate of that person.

Under section 610 of the Corporations Act, a person’s voting power is defined as the percentage of the total voting shares in the Company held by the person and the person’s Associates.

As set out in the Voting Exclusion Statements in the Notice of Meeting and in accordance with the Listing Rules, the Related 3D Medical Vendors and their Associates, and the Unrelated 3D Medical Vendors and their Associates are precluded from voting on Resolutions 3(a) and 4(a).

4.6 ASIC Regulatory Guide 74

The information set out in section 1.10 is included in accordance with the requirements of item 7 of section 611 of the Corporations Act and ASIC Regulatory Guide 74.

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4.7 ASIC Regulatory Guide 76

The information set out in section 2.8 is included in accordance with the requirements of section 219 of the Corporations Act and ASIC Regulatory Guide 76.

4.8 ASX Listing Rule 7.1

Shareholder approval is being sought pursuant to Resolutions 5, 7, 8 and 9 for the issue of up to 108,750,000 New Shares for the purposes of Listing Rule 7.1. The New Shares proposed to be issued pursuant to Resolutions 5, 7, 8 and 9 will not be included in the Company’s 15% calculation for the purposes of ASX Listing Rule 7.1.

Under Chapter 7 of the Listing Rules there are limitations on the capacity of a company to enlarge its capital by the issue of equity securities without shareholder approval. The limitation is to 15% of a company’s capital in any 12 month period.

Listing Rule 7.1 provides that a company must not, without shareholder approval, subject to certain exceptions, issue during any 12 month period any equity securities, or other securities with rights of conversion to equity (such as an option), if the number of those securities exceeds 15% of the number of securities in the same class on issue at the commencement of that 12 month period.

For the purposes of ASX Listing Rule 7.3, the information set out at sections 2.7, 2.9, 2.10 and 2.11 is provided in relation to Resolutions , 5, 7, 8 and 9 respectively.

4.9 ASIC and ASX’s Role

For the purposes of Resolutions 3(a) and 4(a), in accordance with Regulatory Guide 74, the Company must lodge the Notice of Meeting and the Explanatory Statement with ASIC before the Notice of Meeting can be dispatched.

Approval under Listing Rule 7.1 for the issue of the New Shares under Resolutions 3(a) and 4(a) are not required by virtue of Exception 16 of Listing Rule 7.2, because approval is being sought under item 7 of section 611 of the Corporations Act.

The fact that the Notice of Meeting, Explanatory Statement and other relevant documentation has been received by ASX and the ASIC is not to be taken as an indication of the merits of the Resolutions or the Company. The ASIC, ASX and its respective officers take no responsibility for any decision a Shareholder may make in reliance on any of that documentation.

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Glossary

In this Explanatory Statement, the following terms have the following meaning unless the context otherwise requires:

3D Medical or 3DM 3D Medical Limited (ACN 166 963 864).

3D Medical Vendors the holders of all the issued capital of 3D Medical, details of which are set out in Annexure A.

3D Medical Vendor Proportions in respect of a 3D Medical Vendor, the number and proportion of Consideration Shares set out next to that Vendor’s name in Schedule 1 of the Share Sale Agreement. Advisory Shares the (pre-Consolidation) 43,750,000 fully paid ordinary shares in the capital of the Company to be issued to Ken Poutakidis or his nominee, subject to consolidation in the same ratio which applies to the Consolidation, at the deemed issue price of $0.002 per share.

Annexure annexure to this Explanatory Statement. ASIC Australian Securities and Investments Commission. Associate

in the following sections has the following meanings:

(i) in sections 1.8, 1.10, 1.11, 2.5, 2.6, 3.3, and 4.5, has the meaning set out in section 12 of the Corporations Act;
(ii) in section 4.4, has the meaning the sections 11 to 17 of the Corporations Act; and
(iii) in the Voting Exclusion Statements of the Notice of Meeting, has the meaning set out in section 11 and sections 13 to 17 of the Corporations Act, applied in accordance with the note to Listing Rule 14.11.

ASX ASX Limited (ABN 98 008 624 691) or the Australian Securities Exchange, as the context requires. Board board of Directors. Business Day a day that is not a Saturday, Sunday, public holiday or bank holiday in Melbourne, Victoria or Perth, Western Australia. Capital Raising the proposed Issue of New Shares under the Prospectus, as contemplated by Resolution 5. Capitol Health Limited Capitol Health Limited (ACN 117 391 812) Chairman Peter Christie. Company Safety Medical Products Limited (ACN 007 817 192). Company Approvals the approvals of the Company’s Shareholders required pursuant to the Corporations Act and the Listing Rules for the purpose of implementing the Proposed Transaction. Completion Date the latest of the date that is 7 Business Days after the date on which the Conditions are satisfied; or any other date, which is agreed in writing between the parties.

Consideration Shares the (pre-Consolidation) 1,750,000,000 fully paid ordinary shares in the capital of the Company to be issued to the 3D Medical Vendors, subject to consolidation in the same ratio which applies to the Consolidation.

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Consideration Options collectively, the Tranche 1 Consideration Options and the Tranche 2 Consideration Options. Consolidation the consolidation of the Existing Shares of the Company on the basis of 1:10, as proposed under Resolution 1 and detailed in section 2.3.

Constitution constitution of the Company. Corporations Act Corporations Act 2001 (Cth). Cost Repayment payment of $100,000 as set out in section 1.3(b)(iv). Director a director of the Company. EchoPixel EchoPixel, Inc., a Delaware corporation based in the USA. Execution Date the date the Heads of Agreement between the parties is executed, being 19 June 2014. Existing Directors Mr Peter Christie, Mr Stephen Hewitt-Dutton and Mr Simon Jenkins. Existing Shareholders the holder of an Existing Share. Existing Shares the issued shares in the Company as at the date of this Notice of Meeting being 1,075,868,074 fully paid ordinary shares. Explanatory Statement this explanatory statement accompanying the Notice of Meeting. Facilitation Cash the sum of $100,000. Facilitation Shares the Shares to be issued to Trident Capital and Taylor Collison under Resolutions 0 and 8.

Formalisation Date the date on which the parties execute the Share Sale Agreement, being no later than 15 September 2014 or such later date as may be agreed by the parties in writing.

General Meeting

the general meeting of the Company to be held on 17 December 2014at 10.00am WST.

GestSure GestSure Technologies, Ltd., a corporation based in Cambridge, MA USA.

Heads of Agreement the Heads of Agreement between 3D Medical, 3D Medical Vendors and the Company.

Independent Expert

Independent Expert’s Report

BDO Corporate Finance (WA) Pty Ltd (ABN 27 124 031 045).
the report of the Independent Expert attached to Annexure 2 and forming part of the Explanatory Statement.

Listing Rules the official listing rules of the ASX from time to time.

Loan Agreement

New Shares

Notice of Meeting

Placement

the loan agreement consistent with the terms outlined in section 1.4.

fully paid ordinary shares in the Company after the Consolidation.
the notice convening the General Meeting which accompanies this Explanatory Statement.

the placement undertaken by the Company to sophisticated investors to raise $220,000 by offering 110,000,000 pre-

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Consolidation shares in the Company at $0.002 per share as outlined in section 1.4.

Proposed Directors Frank Pertile and Matthew Morgan. Proposed Transaction the proposal for the acquisition of shares in 3D Medical pursuant to the Share Sale Agreement, as described in section 1.3.

Prospectus the prospectus to be issued by the Company as referred to in Resolutions 3(a), 4(a), 5, 6, 0, 8 and 9. Quotation official quotation as defined in the Listing Rules.

Recompliance the reinstatement of fully paid ordinary shares in the Company to Quotation (except for any shares that may be designated as “restricted securities” under the Listing Rules) if required by ASX following the Company recomplying with Chapters 1 and 2 of the Listing Rules to the satisfaction of ASX.

Record Date 23 December 2014.
Regulatory Authority any government or local authority and any department, minister or agency of any government; and any other authority, agency, commission or similar entity having powers or jurisdiction under any law or regulation or the listing rules of any recognised stock or securities exchange (including ASX).
Related 3D Medical Vendors Frank Pertile, Perco Group Pty Ltd as trustee for the FSP Trust and Olivab Pty Ltd as trustee for Aboliv Discretionary Trust.
Relevant Interest the meaning given to that term in the Corporations Act. Resolutions the resolutions set out in the Notice of Meeting. Share and Shares fully paid ordinary share in the capital of the Company. Shareholder shareholder of the Company. Share Sale Agreement the Share Sale and Purchase Agreement entered into between the Company, the 3D Medical Vendors and 3D Medical dated 6 October 2014.

SPP the Share Purchase Plan to be implemented by the Company and offered to all eligible shareholders of the Company.

Taylor Collison Taylor Collison Limited (ACN 008 172 450).

Tranche 1 Consideration Options the 72,945,060 options to acquire a Share in the Company on the terms set out in Annexure B.

Tranche 2 Consideration Options the 43,486,387 options to acquire a Share in the Company on the terms set out in Annexure C. Trident Capital Trident Capital Pty Ltd (ACN 100 561 733). Unrelated 3D Medical Vendors the 3D Medical Vendors other than the Related 3D Medical Vendors. USA United States of America. Voting Power the meaning given to that term in the Corporations Act. WST Western Standard Time in Australia.

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Safety Medical Products Limited

ACN 007 817 192

PROXY FORM

Appointment of Proxy

I/We being a shareholder/s of Safety Medical Products Limited and entitled to attend and vote hereby appoint the following proxy/proxies to attend and act on my/our behalf and to vote in accordance with my/our following directions at the General Meeting of Safety Medical Products Limited to be held at Trident Capital, Level 24, 44 St Georges Terrace, Perth, Western Australia on 17 December 2014 at 10.00am (WST) and at any adjournment of that meeting. The Chairman IMPORTANT:

of the meeting If the Chairman of the meeting is your proxy, or if appointed your proxy by default and you do not wish to direct him/her how to vote on any of these resolutions, you must mark this box with an “X”. By marking this box, you (mark with an ‘X’) acknowledge that the Chairman of the meeting may exercise your proxy on those resolutions (for which you have not given a direction) even if he/she has an interest in the outcome of the resolution and that votes cast by him/her, other than as proxy holder, will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote on any of these resolutions, the Chairman of the meeting will not cast your votes on the resolutions (for which you have not given a direction) on a show of hands or on a poll. The Chairman of the meeting intends to vote undirected proxies in favour of each resolution.

If the person you are appointing as your proxy is someone other than the Chairman of the meeting: Write the name of that person in the box below.

You must specify the % of your votes that you % authorise your proxy to exercise if: (a) you have only appointed 1 proxy and do not want him/her to exercise all of your votes;or (b) if you have appointed 2 proxies under this % proxy form.

If you hold 2 or more Shares in #full company name#, you may appoint a second proxy: Write the name of your second proxy in the box below. %

If you do not name a proxy or your named proxy fails to attend the meeting, the Chairman of the meeting will be appointed as your proxy to attend and act on your behalf and to vote in accordance with the following directions at the General Meeting of Safety Medical Products Limited to be held at Trident Capital, Level 24, 44 St Georges Terrace, Perth, Western Australia on 17 December 2014 at 10.00am (WST) and at any adjournment of that meeting.

Voting directions to your proxy- Please mark only one of the boxes with an “X” for each resolution to indicate your directions.	Voting directions to your proxy- Please mark only one of the boxes with an “X” for each resolution to indicate your directions.	Voting directions to your proxy- Please mark only one of the boxes with an “X” for each resolution to indicate your directions.	Voting directions to your proxy- Please mark only one of the boxes with an “X” for each resolution to indicate your directions.	Voting directions to your proxy- Please mark only one of the boxes with an “X” for each resolution to indicate your directions.
Special Business		For	Against	Abstain
Resolution 1.	Capital Consolidation
Resolution 2.	Change in nature and scale of activities of the Company
Resolution 3(a).	Issue of Consideration Shares to Related 3D Medical Vendors
Resolution 3(b).	Issue of Consideration Options to Related 3D Medical Vendors
Resolution 4(a).	Issue of Consideration Shares to Unrelated 3D Medical Vendors
Resolution 4(b).	Issue of Consideration Options to Unrelated 3D Medical Vendors
Resolution 5.	Issue of New Shares pursuant to the Capital Raising
Resolution 6.	Proposed Directors’ right to apply for Shares under Prospectus
Resolution 7.	Issue of Facilitation Shares to Trident Capital
Resolution 8.	Issue of Facilitation Shares to Taylor Collison
Resolution 9.	Issue of Advisory Shares to Ken Poutakidis
Resolution 10.	Change of Company Name
Resolution 11.	Appointment of Frank Pertile
Resolution 12.	Appointment of Matthew Morgan
If you mark the “Abstain” box with an “x” for a particular resolution, you are directing your proxy not to vote on your behalf on a show
of hands or on a poll.
PLEASE SIGN	HEREThis section_must_be signed in accordance with the instructions overleaf to enable your directions to be implemented
Individual or Shareholder 1 Shareholder 2			Shareholder 3

Sole Director and	Director		Director/Company Secretary
Sole Company Secretary

How to complete this Proxy Form

1. Your Name and Address

Please print your name and address as it appears on your holding statement and the Company’s share register. If Shares are jointly held, please ensure the name and address of each joint shareholder is indicated. Shareholders should advise the Company of any changes. Shareholders sponsored by a broker should advise their broker of any changes. Please note, you cannot change ownership of your securities using this form.

2. Appointment of a Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If the person you wish to appoint as your proxy is someone other than the Chairman of the Meeting please write the name of that person. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a shareholder of the Company.

3. Votes on Resolutions

You may direct your proxy how to vote by placing a mark in one of the boxes opposite each Resolution. All your shareholding will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any Resolution by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given Resolution, your proxy may vote as he or she chooses. If you mark more than one box on a Resolution your vote on that Resolution will be invalid.

4. Appointment of a Second Proxy

You are entitled to appoint up to two persons as proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy please write the name of that person.

To appoint a second proxy you must state (in the appropriate box) the percentage of your voting rights which are the subject of the relevant proxy. If the Proxy Form does not specify a percentage, each proxy may exercise half your votes. Fractions of votes will be disregarded.

5. Signing Instructions

You must sign this form as follows in the spaces provided:

Individual: where the holding is in one name, the holder must sign. Joint Holding: where the holding is in more than one name, all of the shareholders should sign.

Power of Attorney: to sign under Power of Attorney, you must have already lodged this document with the company’s share registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

If a representative of the corporation is to attend the meeting a “Certificate of Appointment of Corporate Representative” should be produced prior to admission.

6. Lodgment of a Proxy

This Proxy Form (and any Power of Attorney under which it is signed) must be received at the address given below not later than 48 hours before the commencement of the meeting ie. no later than 10.00am (WST) on 15 December 2014. Any Proxy Form received after that time will not be valid for the scheduled meeting.

This Proxy Form (and any Power of Attorney and/or second Proxy Form) may be sent or delivered to the Company’s registered office at c/- Trident Capital, Level 24, 44 St Georges Terrace, Perth, WA 6000 or sent by facsimile to the registered office on (08) 6211 5099.

ANNEXURE A – 3D MEDICAL VENDORS

Name	Number of Consideration Shares	Number of Tranche 1 Options	Number of Tranche 2 options
Sally Anne Kucera	11,951,219	4,981,614	2,969,803
Capitol Health Limited	21,341,462	8,895,739	5,303,219
Frank Pertile	9	4	2
Perco Group Pty Ltd as trustee for the FSP Trust	44,817,071	18,681,051	11,136,758
Ty Webb Pty Ltd as trustee for the Ty Webb Trust	38,414,633	16,012,329	9,545,793
Anthony Viglietti	426,829	177,915	106,064
Margaret Wright	853,658	355,830	212,129
Hemisphere Organisation Pty Ltd	853,658	355,830	212,129
Poutakidis Super Fund Pty Ltd as trustee for the Poutakidis Super Fund	2,134,146	889,574	530,322
Nick Conidi Pty Ltd	6,402,439	2,668,722	1,590,965
Idinoc Pty Ltd as trustee for the J&R Conidi Family Trust	6,402,439	2,668,722	1,590,965
Brigid Robertson	1,280,488	533,744	318,193
Emma Jane Baxter	1,280,488	533,744	318,193
Natalie Rosenbloom	853,658	355,830	212,129
JEEL Pty Ltd as trustee for the Riley Family Trust	1,707,317	711,659	424,257
Lidio Padula	426,829	177,915	106,064
Christopher Germon	1,109,756	462,578	275,767
Marie Ann Gibson	1,109,756	462,578	275,767
Karla Handley	1,109,756	462,578	275,767
Julsan Pty Ltd as trustee for the Ponte Super Fund	1,109,756	462,578	275,767
MOFLOCS Pty Ltd as trustee for the KAJE Pty Ltd Staff Super Fund	1,280,488	533,744	318,193
Joanne Upton	1,280,488	533,744	318,193
Adam Lennen	1,707,317	711,659	424,257
Nigel Finch and Elizabeth Jane Finch	1,707,317	711,659	424,257
Giokir Pty Ltd	1,707,317	711,659	424,257
Super Impose Investments Pty Ltd	1,707,317	711,659	424,257
Shichi Pty Ltd as trustee for the Shichi Investment Trust	1,707,317	711,659	424,257
Bosox Pty Ltd as trustee for the Ministry Trust	1,707,317	711,659	424,257
Jordan Mason	2,134,146	889,574	530,322
Jinesh Patel	2,134,146	889,574	530,322
Sagrada Familia Holdings Pty Ltd as trustee for the Sagrada Familia Trust	2,987,805	1,245,403	742,450
Clemenza Pty Ltd	3,414,634	1,423,318	848,515
Susan & M.E. Pty Ltd as trustee for Susan & M.E. Super Fund	4,097,561	1,707,982	1,018,218
Canela Holdings Pty Ltd as trustee for the Charles Caskey Super Fund	1,707,317	711,659	424,257
Olivab Pty Ltd as trustee for Aboliv Discretionary Trust	2,134,146	889,574	530,322
TOTAL	175,000,000	72,945,060	43,486,387

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ANNEXURE B – TRANCHE 1 CONSIDERATION OPTION TERMS

a) Each Option shall entitle the holder the right to subscribe for one (1) fully paid ordinary share in the capital of the Company.
b) The exercise price of each Option is 5 cents ($0.05) per share subscribed for on exercise of each Option.
c) Each Option will expire 18 months from the date of issue (“Option Expiry Date”). Each Option may be exercised at any time prior to 5.00pm WST on the Option Expiry Date and any Option not so exercised shall automatically expire on the Option Expiry Date.
d) Each ordinary share allotted as a result of the exercise of an Option will, subject to the Constitution of the Company, rank in all aspects pari passu with the existing ordinary fully paid shares in the capital of the Company on issue at the date of allotment.
e) A registered owner of an Option (“Option Holder”) will be entitled to receive and will be sent all reports, accounts and notices required to be given to members of the Company but will not be entitled to attend or vote at any meetings of the members of the Company unless they are members of the Company.
f) A certificate or holding statement will be issued by the Company with respect to Options held by an Option Holder. Attached to these terms and attached or endorsed on the reversed side of each certificate or holding statement will be a notice that is to be completed when exercising the Options the subject of the certificate or holding statement (“Notice of Exercise of Options”). Options may be exercised by the Option Holder completing the Notice of Exercise of Options and forwarding the same to the Secretary of the Company. The Notice of Exercise of Options must state the number of Options exercised and the consequent number of ordinary shares in the capital of the Company to be allotted.

The Notice of Exercise of Options by an Option Holder must be accompanied by payment in full of the relevant number of shares being subscribed, being an amount of $0.05 per share.

On exercise of Options, the Option Holder must surrender to the Company the Option Holder’s option certificate or holding statement with respect to those Options being exercised.

Within 14 days from the date the Option Holder properly exercised Options held by the Option Holder, the Company shall issue and allot to the Option Holder that number of fully paid ordinary shares in the capital of the Company so subscribed for by the Option Holder.

g) In the event of a reconstruction (including a consolidation, sub-division, reduction, return or pro-rata cancellation) of the issued capital of the Company, the number of Options or the exercise price of the Options or both shall be reconstructed in such that there will not result in any benefits being conferred on the Option Holders which are not conferred on shareholders (subject to the provision with the respect to rounding of entitlements sanctioned by the meeting of shareholders approving the reconstruction of capital) but in all other respects the terms of the exercise of Options shall remain unchanged.
h) There are no participating rights or entitlements inherent in the Options to participate in any new issues of capital which may be made or offered by the Company to its shareholders from time to time prior to the Option Expiry Date unless and until Options are exercised. The Company will ensure that during the exercise period of the Options, the record date for the purposes of determining entitlement to any new such issue, will be at least 9 Business Days after such new issues are announced in order to afford the Option Holder an opportunity to exercise the Options held by the Option Holder.
i) Subject to the Corporations Law, the Listing Rules and the Constitution of the Company, the Options are freely transferable and will only be quoted on ASX if a sufficient spread of option holders exists in compliance with the ASX Listing Rules.
j) If the Company is listed on ASX and makes a pro rata issue (except a bonus issue) to the holders of ordinary shares, the exercise price of each Option shall be amended in accordance with the following formula:
O’ = O – E [P – (S +D)]

N + 1

Where:

O’ = the new exercise price of the Option.
O = the old exercise price of the Option.
E = the number of underlying shares into which one Option is exercisable.
P = the average market price per share (weighed by reference to volume) of the underlying shares to which the Option Holder is entitled.
S = the subscription price for a share under the pro rata issue.
D = any dividend due but not yet paid on the existing underlying share (except those to be issued under the pro rata issue).
N = the number of shares with rights or entitlements that must be held to receive a right to one new share.

No change will be made pursuant to the application of the above formula to the number of shares to which the Option Holder is entitled.

If the Company is listed upon ASX, the reduction of the exercise price of each Option in accordance with the above formula shall be subject to the provision of the Listing Rules of ASX.

If the Company makes a bonus issue or other securities convertible into ordinary shares pro rata to holders of ordinary shares the number of shares issued on exercise of each Option will include the number of bonus shares that would have been issued if the Option had been exercised by the Option Holder prior to the books closing date for bonus shares. No change will be made in such circumstances to the exercise price of each Option.

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ANNEXURE C – TRANCHE 2 CONSIDERATION OPTION TERMS

a) Each Option shall entitle the holder the right to subscribe for one (1) fully paid ordinary share in the capital of the Company.
b) The exercise price of each Option is 5 cents ($0.05) per share subscribed for on exercise of each Option.
c) Each Option will expire 24 months from the date of issue (“Option Expiry Date”). Each Option may be exercised at any time prior to 5.00pm WST on the Option Expiry Date and any Option not so exercised shall automatically expire on the Option Expiry Date.
d) Each ordinary share allotted as a result of the exercise of an Option will, subject to the Constitution of the Company, rank in all aspects pari passu with the existing ordinary fully paid shares in the capital of the Company on issue at the date of allotment.
e) A registered owner of an Option (“Option Holder”) will be entitled to receive and will be sent all reports, accounts and notices required to be given to members of the Company but will not be entitled to attend or vote at any meetings of the members of the Company unless they are members of the Company.
f) A certificate or holding statement will be issued by the Company with respect to Options held by an Option Holder. Attached to these terms and attached or endorsed on the reversed side of each certificate or holding statement will be a notice that is to be completed when exercising the Options the subject of the certificate or holding statement (“Notice of Exercise of Options”). Options may be exercised by the Option Holder completing the Notice of Exercise of Options and forwarding the same to the Secretary of the Company. The Notice of Exercise of Options must state the number of Options exercised and the consequent number of ordinary shares in the capital of the Company to be allotted.
The Notice of Exercise of Options by an Option Holder must be accompanied by payment in full of the relevant number of shares being subscribed, being an amount of $0.05 per share.

On exercise of Options, the Option Holder must surrender to the Company the Option Holder’s option certificate or holding statement with respect to those Options being exercised.

g) In the event of a reconstruction (including a consolidation, sub-division, reduction, return or pro-rata cancellation) of the issued capital of the Company, the number of Options or the exercise price of the Options or both shall be reconstructed in such that there will not result in any benefits being conferred on the Option Holders which are not conferred on shareholders (subject to the provision with the respect to rounding of entitlements sanctioned by the meeting of shareholders approving the reconstruction of capital) but in all other respects the terms of the exercise of Options shall remain unchanged.
h) There are no participating rights or entitlements inherent in the Options to participate in any new issues of capital which may be made or offered by the Company to its shareholders from time to time prior to the Option Expiry Date unless and until Options are exercised. The Company will ensure that during the exercise period of the Options, the record date for the purposes of determining entitlement to any new such issue, will be at least 9 Business Days after such new issues are announced in order to afford the Option Holder an opportunity to exercise the Options held by the Option Holder.
i) Subject to the Corporations Law, the Listing Rules and the Constitution of the Company, the Options are freely transferable and will only be quoted on ASX if a sufficient spread of option holders exists in compliance with the ASX Listing Rules.
j) If the Company is listed on ASX and makes a pro rata issue (except a bonus issue) to the holders of ordinary shares, the exercise price of each Option shall be amended in accordance with the following formula:
O’ = O – E [P – (S +D)]

N + 1

Where:

O’ = the new exercise price of the Option.
O = the old exercise price of the Option.
E = the number of underlying shares into which one Option is exercisable.
P = the average market price per share (weighed by reference to volume) of the underlying shares to which the Option Holder is entitled.
S = the subscription price for a share under the pro rata issue.
D = any dividend due but not yet paid on the existing underlying share (except those to be issued under the pro rata issue).
N = the number of shares with rights or entitlements that must be held to receive a right to one new share.

No change will be made pursuant to the application of the above formula to the number of shares to which the Option Holder is entitled.

If the Company is listed upon ASX, the reduction of the exercise price of each Option in accordance with the above formula shall be subject to the provision of the Listing Rules of ASX.

AR164626

ANNEXURE D – PRO FORMA STATEMENT OF FINANCIAL POSITION

This section contains the Pro Forma Statement of Financial Position for the Company as a merged group with 3D Medical ( Merged Group ), reflecting the combined business of the Company and 3D Medical. The Pro Forma Statement of Financial Position is presented to provide Shareholders with an indication of the Merged Group’s consolidated financial position as if the Proposed Transaction had been implemented as at 30 June 2014.

As the Proposed Transaction, if implemented, will be effected at a future date, the actual financial position of the Merged Group post implementation of the Proposed Transaction will differ from that presented below.

References to notes in the table presented below refer to the notes to pro forma adjustments set out in this section.

Basis of preparation

The Pro Forma Statement of Financial Position is provided for illustrative purposes and is prepared in accordance with the recognition and measurement requirements of applicable Australian Accounting Standards on the assumption that the proposed transaction occurred on 30 June 2014.

The Pro Forma Statement of Financial Position is presented in an abbreviated form insofar as it does not contain all of the disclosures, statements or comparative information as required by Australian Accounting Standards applicable to annual financial reports usually provided in an annual report prepared in accordance with the Corporations Act.

The Company is the legal acquirer (i.e. the parent company) and will be the reporting entity of the Merged Group. The accounting policies of the Merged Group used in the compilation of the Pro Forma Financial Information are based on those of the Company. A summary of the significant accounting policies of the Company is disclosed in the audited financial statements of the Company for the year ended 30 June 2014, available on ASX’s website at www.asx.com.au or on the “Investor Centre” section of the Company’s website at www.safemed.com.au.

Upon completion of the Proposed Transaction, the business purpose of the Company will have changed to that of the Merged Group resulting in the need to consider and/or adopt new accounting policies. Significant new accounting policies to be adopted by the Merged Group are outlined below.

No adjustments have been made in the Pro Forma Statement of Financial Position for any expected synergies or integration costs following the completion of the Proposed Transaction. Nor have any adjustments been made in the Pro Forma Statement of Financial Position for any one-off or nonrecurring costs, other than those set out in the pro forma adjustments.

The functional and presentation currency of the Company (the reporting entity) is Australian dollars.

AR164626

New accounting policies of the Merged Group

1. Revenue recognition

Sale of goods and disposal of assets

Revenue from the sale of goods and disposal of other assets is recognised when the consolidated entity has passed control of the goods or other assets to the buyer, the fee is fixed or determinable and collectability is probable.

Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and cessation of all involvement in those goods.

Rendering of services

Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at reporting date and where outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable.

AR164626

Pro Forma Balance Sheet

Pro Forma Balance Sheet
	Safety Medical
	Products	3D Medical	Audited	Pro Forma
	Limited	Limited	30 June 2014	Consolidated
	Audited	Audited	($3m capital	($5m capital
	30 June 2014	30 June 2014	raising)	raising)
	$		$	$
Current Assets
Cash and Cash Equivalents	566,836	208,160	3,541,193	5,421,173
Trade and other receivables	57,469	80,153	137,622	137,622
TotalCurrentAssets	624,305	288,313	3,678,795	5,558,795
Non-Current Assets
Other Receivables	-	167,669	167,669	167,669
	-	167,669	167,669	167,669
Total Assets	624,305	455,982	3,846,464	5,726,464
Current Liabilities
Trade and otherpayables	85,799	143,293	229,092	229,092
TotalCurrentLiabilities	85,799	143,293	229,092	229,092

Total Liabilities	85,799	143,293	229,092	229,092

Net Assets	538,506	312,689	3,617,372	5,497,372
Equity
Issued Capital	3,151,893	595,501	5,562,237	7,442,237
Accumulated Losses	(2,613,387)	(282,812)	(1,944,865)	(1,944,865)
Total Equity	538,506	312,689	3,617,372	5,497,372

Notes:

A. The Company completed a capital raising by way of a share placement plan on 21 July 2014.
B. The Company loaned $510k to 3D Medical between Jul and August 2014 to fund the working capital requirements of 3D Medical. This loan was made pursuant to the Loan Agreement.
C. Elimination of the working capital loan from the Company to 3D Medical upon consolidation of the Merged Group. D. The issue of 175,000,000 Shares to acquire 100% of the share capital of 3D Medical. Note that this transaction has been accounted for under reverse acquisition accounting.
E. The Pro Forma Statement of Financial Position assumes that the Capital Raising will be fully subscribed.
i. A Capital Raising of 60,000,000 shares at $0.05, net of transaction costs of $0.36m for the minimum amount of $3m and 100,000,000 shares at $0.05, net of transaction costs of $0.48m for the maximum amount of $5m.
ii. 8,750,000 Shares issued to advisors as remuneration for facilitating the Proposed Transaction capital raising services under this Prospectus.

AR164626

ANNEXURE E – INDEPENDENT EXPERT'S REPORT

AR164626

SAFETY MEDICAL PRODUCTS LIMITED Independent Expert’s Report

14 November 2014

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Financial Services Guide

14 November 2014

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 (‘ we ’ or ‘ us ’ or ‘ ours ’ as appropriate) has been engaged by Safety Medical Products Limited (‘ SFP ’) to provide an independent expert’s report on the proposal to acquire100% of 3D Medical Limited through the issue of SFP shares. You will be provided with a copy of our report as a retail client because you are a shareholder of SFP.

Financial Services Guide

In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (‘ FSG ’). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees.

This FSG includes information about:

Who we are and how we can be contacted;
The services we are authorised to provide under our Australian Financial Services Licence, Licence No. 316158;
Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice;
Any relevant associations or relationships we have; and
Our internal and external complaints handling procedures and how you may access them.

Information about us

BDO Corporate Finance (WA) Pty Ltd is a member firm of the BDO network in Australia, a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International). The financial product advice in our report is provided by BDO Corporate Finance (WA) Pty Ltd and not by BDO or its related entities. BDO and its related entities provide services primarily in the areas of audit, tax, consulting and financial advisory services.

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and BDO (and its related entities) might from time to time provide professional services to financial product issuers in the ordinary course of business.

Financial services we are licensed to provide

We hold an Australian Financial Services Licence that authorises us to provide general financial product advice for securities to retail and wholesale clients.

When we provide the authorised financial services we are engaged to provide expert reports in connection with the financial product of another person. Our reports indicate who has engaged us and the nature of the report we have been engaged to provide. When we provide the authorised services we are not acting for you.

General Financial Product Advice

We only provide general financial product advice, not personal financial product advice. Our report does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice.

BDO CORPORATE FINANCE (WA) PTY LTD

Financial Services Guide

Page 2

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Fees, commissions and other benefits that we may receive

We charge fees for providing reports, including this report. These fees are negotiated and agreed with the person who engages us to provide the report. Fees are agreed on an hourly basis or as a fixed amount depending on the terms of the agreement. The fee payable to BDO Corporate Finance (WA) Pty Ltd for this engagement is approximately $25,000.

Except for the fees referred to above, neither BDO, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report.

Remuneration or other benefits received by our employees

All our employees receive a salary. Our employees are eligible for bonuses based on overall productivity but not directly in connection with any engagement for the provision of a report. We have received a fee from SFP for our professional services in providing this report. That fee is not linked in any way with our opinion as expressed in this report.

Referrals

We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide.

Complaints resolution

Internal complaints resolution process

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing addressed to The Complaints Officer, BDO Corporate Finance (WA) Pty Ltd, PO Box 700 West Perth WA 6872.

When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination.

Referral to External Dispute Resolution Scheme

A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service (‘ FOS ’). FOS is an independent organisation that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial service industry. FOS will be able to advise you as to whether or not they can be of assistance in this matter. Our FOS Membership Number is 12561. Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly via the details set out below.

Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Toll free: 1300 78 08 08 Facsimile: (03) 9613 6399 Email: [email protected]

Contact details

You may contact us using the details set out on page 1 of the accompanying report.

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1.	Introduction	1
2.	Summary and Opinion	2
3.	Scope of the Report	4
4.	Outline of the Acquisition	7
5.	Profile of SFP	10
6.	Profile of 3D	15
7.	Economic analysis	18
8.	Industry analysis	19
9.	Valuation Approach Adopted	22
10.	Valuation of SFP prior to the Acquisition	24
11.	Valuation of SFP following the transaction	31
12.	Is the Acquisition fair?	36
13.	Is the Acquisition reasonable?	36
14.	Conclusion	38
15.	Sources of information	39
16.	Independence	39
17.	Qualifications	39
18.	Disclaimers and consents	40

Appendix 1 – Glossary

Appendix 2 – Valuation Methodologies

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14 November 2014

The Directors Safety Medical Products Limited Level 24, 44 St Georges Terrace PERTH WA 6000

Dear Directors

INDEPENDENT EXPERT’S REPORT

1. Introduction

On 19 June 2014, Safety Medical Products Limited (‘ SFP ’ or ‘ the Company ’) announced that it had entered into a Heads of Agreement (‘ HOA ’) to acquire all of the issued share capital of 3D Medical Limited (‘ 3D Medical ’), subject to a number of conditions precedent (‘ the Acquisition’ ). A formal Share Sale Agreement (‘ SSA ’) was executed on 6 October 2014, which replaced the HOA.

Under the terms of the SSA, the consideration payable by the Company for the Acquisition is (prior to capital consolidation):

1,750,000,000 fully paid ordinary consideration shares to the 3D Medical Shareholders (‘ 3D Medical Vendors’ or ‘ Vendors ’);
43,750,000 fully paid ordinary advisory shares;
72,945,060 consideration options (‘ Tranche 1 Consideration Options’ ) and 43,486,387 consideration options share (‘ Tranche 2 Consideration Options ’) exercisable at $0.05 per share, collectively referred to as ‘ Consideration Options ’; and
Cash payment of $100,000

Section 4 of our report details the conditions precedent to the Acquisition.

Completion of the Acquisition requires the approval of SFP’s shareholders. Shareholder approval pursuant to Section 611 Item 7 of the Corporations Act 2001(Cth) (the ‘Act’ ) is required for a person (including their associates) to acquire voting power in a company of greater than 20%. The Company is seeking shareholder approval for the Acquisition pursuant to Section 611 Item 7 of the Act as the Vendors are considered to be associates of one another for the purposes of completion of the Acquisition.

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 AFS Licence No 316158 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Corporate Finance (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory.

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2. Summary and Opinion

2.1 Purpose of the report

The directors of SFP have requested that BDO Corporate Finance (WA) Pty Ltd (‘ BDO ’) prepare an independent expert’s report (‘ our Report ’) to express an opinion as to whether or not the Acquisition is fair and reasonable to the non associated shareholders of SFP (‘ Shareholders ’).

Our Report is prepared pursuant to section 611 of the Act and is to be included in the Explanatory Memorandum for SFP in order to assist the Shareholders in their decision whether to approve the Acquisition.

2.2 Approach

Our Report has been prepared having regard to Australian Securities and Investments Commission (‘ ASIC ’) Regulatory Guide 74 ‘Acquisitions Approved by Members’ ( ‘RG 74’ ) , Regulatory Guide 111 ‘Content of Expert’s Reports’ (‘ RG 111 ’) and Regulatory Guide 112 ‘Independence of Experts’ (‘ RG 112 ’).

In arriving at our opinion, we have assessed the terms of the Acquisition as outlined in the body of this report. We have considered:

How the value of a SFP share prior to the Acquisition on a controlling basis compares to the value of a SFP share following the Acquisition on a minority basis;
Other factors which we consider to be relevant to the Shareholders in their assessment of the Acquisition; and
The position of Shareholders should the Acquisition not proceed.

2.3 Opinion

We have considered the terms of the Acquisition as outlined in the body of this report and have concluded that the Acquisition is fair and reasonable to Shareholders.

In our opinion, the Acquisition is fair because the value of a SFP share following the Acquisition is greater than the value of a SFP share prior to the Acquisition.

We consider the Acquisition to be reasonable because the advantages of the Acquisition to Shareholders are greater than the disadvantages. In particular, the Acquisition will provide the Company with the opportunity to enter a growth industry and to potentially capitalise on 3D Medical’s expertise in diagnostic imaging services.

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2.4 Fairness

In section 12 we determined that the value of a SFP share following the Acquisition on a minority interest basis is greater than the value of a SFP share prior to the Acquisition on a controlling basis. This has been determined on both an undiluted basis and diluted basis as detailed below:

	Ref	Low	Preferred	High
		$	$	$
Value of a SFP share prior to the Acquisition on a	10.3	0.0091	0.0091	0.0091
controlling interest basis
Value of a SFP share following the Acquisition on	11.7	0.0090	0.0110	0.0129
a minority interest basis (undiluted)
Value of a SFP share following the Acquisition on	11.8	0.0160	0.0175	0.0191
a minority interest basis (diluted)

Source: BDO analysis

The above valuation ranges are graphically presented below:

Value of a SFP share following the Transaction on a Value of a SFP share prior to the Transaction on a control basis
minority basis (undiluted)
Value of a SFP share following the Transaction on a
minority basis (diluted)
$0.0050		$0.0100 $0.0150 $0.0200

The above pricing indicates that, in the absence of any other relevant information, the Acquisition is fair for Shareholders.

We note that the value of a SFP share following the Acquisition on a diluted basis is greater than the value of a SFP share on an undiluted basis. The diluted scenario is dilutive to the existing Shareholders on a percentage held basis, but is not dilutive in terms of value. This is a result of the percentage increase in the value of SFP following the exercise of the options being greater than the percentage increase in number of shares and therefore the cash generated from the exercise of options more than offsets the dilution arising from the issue of shares.

2.5 Reasonableness

We have considered the analysis in section 13 of this report, in terms of both:

advantages and disadvantages of the Acquisition; and
other considerations, including the position of Shareholders if the Acquisition does not proceed and the consequences of not approving the Transaction.

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In our opinion, the position of Shareholders if the Acquisition is approved is more advantageous than the position if the Acquisition is not approved. Accordingly, in the absence of any other relevant information, we believe that the Acquisition is reasonable for Shareholders.

The respective advantages and disadvantages considered are summarised below:

ADVANTAGES AND DISADVANTAGES	ADVANTAGES AND DISADVANTAGES
Section	Advantages	Section	Disadvantages
13.1.1	The Acquisition is fair	13.2.1	Change in business model
13.1.2	Greater commercial opportunities	13.2.2	Dilution of existing Shareholder interests
13.1.3	Additional sources of financing	13.2.3	Absence of significant revenues
		13.2.4	Competitive market

Other key matters we have considered include:

Section	Description
13.3.1	Alternative Proposals
13.3.2	Practical level of Control
13.3.3	Consequences of not approving the Acquisition

3. Scope of the Report

3.1 Purpose of the Report

Section 606 of the Act expressly prohibits the acquisition of shares by a party if that acquisition will result in that person (or someone else) holding an interest in 20% or more of the issued shares of a public company, unless a full takeover offer is made to all shareholders.

As at the date of the report, the Vendors own 2.93% of the share capital of SFP. However, if the Acquisition is completed, the Vendors will receive approximately 179.4 million shares giving them a maximum interest of 52.5%, if a capital raise of $3 million is achieved (with an additional 2 million shares issued as a part of the capital raising to the Directors of 3D Medical).

Further, if the Company achieves a capital raise of $5 million, the Vendors’ interest would decline to 47.2%. Additionally, should the 116.43 million Consideration options be exercised, the 3D Medical Vendors would hold a minimum interest of 59.3% (based on a capital raise of $ 5 million) and a maximum interest of 64.3% (based on a capital raise of $ 3 million).

Although no individual Vendor is acquiring a relevant interest in the Company of greater than 20% as a result of the Acquisition, the Vendors are considered associates of each other and therefore they will be acquiring voting power in the Company of greater than 20% at completion of the Acquisition. The Company

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is seeking shareholder approval for the Acquisition pursuant to Section 611 Item 7 of the Act, as the Vendors are considered to be associates of one another for the purposes of the completion of the Acquisition.

Section 611 permits such an acquisition if the shareholders of that entity have agreed to the issue of such shares. This agreement must be by resolution passed at a general meeting at which no votes are cast in favour of the resolution by any party who is associated with the party acquiring the shares, or by the party acquiring the shares. Section 611 states that shareholders of the company must be given all information that is material to the decision on how to vote at the meeting.

RG 74 states that the obligation to supply shareholders with all information that is material can be satisfied by the non-associated directors of SFP, by either:

undertaking a detailed examination of the Acquisition themselves, if they consider that they have sufficient expertise; or
by commissioning an Independent Expert's Report.

The directors of SFP have commissioned this Independent Expert's Report to satisfy this obligation.

3.2 Regulatory guidance

Neither the Listing Rules nor the Act defines the meaning of ‘fair and reasonable’. In determining whether the Acquisition is fair and reasonable, we have had regard to the views expressed by ASIC in RG 111. This regulatory guide provides guidance as to what matters an independent expert should consider to assist security holders to make informed decisions about transactions.

This regulatory guide suggests that where the transaction is a control transaction, the expert should focus on the substance of the control transaction rather than the legal mechanism to affect it. RG 111 suggests that where a transaction is a control transaction, it should be analysed on a basis consistent with a takeover bid.

In our opinion, the Acquisition is a control transaction as defined by RG 111 and we have therefore assessed the Acquisition as a control transaction to consider whether, in our opinion, it is fair and reasonable to Shareholders.

3.3 Adopted basis of evaluation

RG 111 states that a transaction is fair if the value of the offer price or consideration is greater than the value of the securities 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. When considering the value of the securities subject of the offer in a control transaction, the expert should consider this value inclusive of a control premium. Further to this, RG 111 states that a transaction is reasonable if it is fair. It might also be reasonable if despite being ‘not fair’, the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher bid.

Having regard to the above, BDO has completed this comparison in two parts:

A comparison between value of a SFP share prior to the Acquisition on a controlling interest basis and the value of a SFP share following the Acquisition on a minority interest basis (fairness – see Section 12 ‘Is the Acquisition Fair?’); and

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An investigation into other significant factors to which Shareholders might give consideration, prior to approving the resolution, after reference to the value derived above (reasonableness – see Section 13 ‘Is the Acquisition Reasonable?’).

This assignment is a Valuation Engagement as defined by Accounting Professional & Ethical Standards Board professional standard APES 225 ‘Valuation Services’ (‘ APES 225 ’).

A Valuation Engagement is defined by APES 225 as follows:

‘an Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Valuer at that time.’

This Valuation Engagement has been undertaken in accordance with the requirements set out in APES 225.

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4. Outline of the Acquisition

4.1. The Proposal

On 19 June 2014, Safety Medical Products Limited (‘ SFP ’ or ‘ the Company ’) announced that it had entered into a Heads of Agreement (‘ HOA ’) to acquire all of the issued share capital of 3D Medical Limited (‘ 3D Medical ’), subject to a number of conditions precedent (‘ the Acquisition’ ). A formal Share Sale Agreement (‘ SSA’ ) was executed on 6 October 2014, which replaces the HOA.

Under the terms of the SSA, the consideration payable by the Company for the Acquisition is (prior to Capital consolidation):

1,750,000,000 fully paid ordinary Consideration shares to the 3D Medical Vendors;
43,750,000 fully paid ordinary Advisory shares;
116.43 million Consideration Options; and
Cash payment of $100,000

The SSA is subject to number of conditions precedent as follows:

3D Medical shall facilitate and SFP shall complete the Capital Raising (between $3 million and $5 million) subject to any conditions that the ASX may impose on the Capital Raising, including that Completion occurs under the Share Sale Agreement and that the shares to be issued and allotted pursuant to the Capital Raising are in accordance with the Corporations Act;
SFP and 3D Medical obtaining all required shareholder and regulatory approvals; and
SFP and 3D Medical completing their due diligence on the other, to their absolute satisfaction.

Following the Acquisition, 3D Medical will be entitled to nominate upto 3 people for appointment to the Board of SFP.

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4.2. Shareholding in SFP following the Acquisition

The following table shows the minimum number of shares that may be issued to the Vendors if the Acquisition is approved. If the Acquisition is approved, the existing Shareholders’ interests may be diluted to 29.7%. We have considered that the capital consolidation would be approved by the shareholders, given that the resolutions forming a part of the Notice of meeting are inclusive and are subject to and conditional on each of those resolutions being passed (which includes a resolution for capital consolidation).

Further, it should be noted that Scenario 1 considers a minimum capital raise of $3 million and Scenario 2 considers a maximum capital raise of $5 million. The below table does not consider the impact of dilution with regard to issue of shares on exercise of 116.43 million Consideration options.

		Scenario 1 1,075,868,074 2.93% 97.07% (10:1) 107,586,807 46,951,226 128,048,774 175,000,000 4,375,000 4,375,000 60,000,000 351,336,807 52.5% 29.7% 17.8% 100.0%		Scenario 2
	Shares on issue post-Proposal (undiluted)
	Current number of shares on issue pre Proposal			1,075,868,074
	% held by 3D Medical vendors			2.93%
	% held by existing Shareholders			97.07%
	Share Consolidation ratio (10:1)			(10:1)
	Post consolidation number of shares, pre Proposal			107,586,807


	Adjustments post Proposed Consolidated Shares
	Consideration shares to be issued to Related 3D Medical Vendors			46,951,226
	Consideration shares to be issued to Unrelated 3D Medical Vendors			128,048,774
	Consideration shares issued			175,000,000
	Advisory shares			4,375,000
	Facilitation fees			4,375,000
	Post consolidation capital raising			100,000,000
	Total Shares on issue post-Proposal			391,336,807


	% held by 3D Medical Vendors post-Proposal			47.2%
	% held by existing Shareholders post-Proposal			26.7%
	% held by Shareholders of New shares and Advisors post-Proposal			26.2%
	Total			100.0%

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Maximum dilution scenario

The following table reflects the dilutionary impact on existing Shareholders if the 116.43 million Consideration options are exercised at $0.05 per share.

	Shares on issue post-Proposal (diluted) Scenario 1 Issued shares following the completion of the Acquisition (undiluted) 351,336,807 % holdings by existing shareholders following the Acquisition (undiluted) 29.7% Shares issued under Tranche 1 Consideration Options to Related 3D Medical Vendors 19,570,629 Shares issued under Tranche 1 Consideration Options to Unrelated 3D Medical Vendors 53,374,431 Issued shares following completion of the Acquisition and exercise of Tranche 1 options(diluted) 424,281,867 % holdings by existing shareholders following completion of the Acquisition and exercise of Tranche 1 options (diluted) 24.6% Shares issued under Tranche 2 Consideration Options to Related 3D Medical Vendors 11,667,082 Shares issued under Tranche 2 Consideration Options to Unrelated 3D Medical Vendors 31,819,305 Issued shares following completion of the Acquisition and exercise of Tranche 2 options(diluted) 467,768,254 % holdings by existing shareholders following completion of the Acquisition and exercise of Tranche 2 options (diluted) 22.3%		Scenario 2
			391,336,807 26.7% 19,570,629 53,374,431
			464,281,867
			22.5%
			11,667,082 31,819,305
			507,768,254
			20.6%

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5. Profile of SFP

5.1 History

SFP is a company domiciled in Australia and listed on the Australian Securities Exchange (‘ ASX’ ) on 30 November 2005. The Company is primarily involved in the research and development of medical syringe technology. In this regard, the Company has two ongoing patent applications in the USA and Australia as well as registered trademarks associated with the ‘ SecureTouch ’ syringe in Australia and New Zealand.

As a part of its recapitalisation and reinstatement to the ASX in 2011, a portion of the Company’s funds were allocated towards mineral exploration. These entailed costs incurred with regard to the proposed acquisition of tenements in the Three Rivers region of north Western Australia (via an option agreement) and in Brazil through the acquisition of Kisara Gold Pty Ltd (‘ Kisara’) and its wholly owned Brazilian subsidiary, Mineraco Caicara Ltda.

However, during FY13, the Company allowed its option to acquire tenements in the Three Rivers Area of north Western Australia to lapse, as it did not wish to proceed with the acquisition. Similarly, the Company decided to withdraw its agreement to acquire Kisara during FY14.

The Company’s current board members and senior management are shown below:

Mr Peter Christie – Director;
Mr Stephen Hewitt-Dutton – Director;
Mr Simon Jenkins – Director; and
Ms Deborah Ho – Company Secretary.

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5.2 Historical Balance Sheet

Statement of Financial Position	Audited as at Reviewed as at
	30-Jun-14 31-Dec-13
	$ $
CURRENT ASSETS
Cash and cash equivalents	566,836 189,131
Trade and other receivables	7,469 28,905
TOTAL CURRENT ASSETS	574,305 218,036

NON-CURRENT ASSETS
Deferred Acquisition cost	50,000 664,047
TOTAL NON- CURRENT ASSETS	50,000 664,047
TOTAL ASSETS	624,305 882,083

CURRENT LIABILITIES
Trade and other payables	85,799 220,227
TOTAL CURRENT LIABILITIES	85,799 220,227
TOTAL LIABILITIES	85,799 220,227

NET ASSETS	538,506 661,856

EQUITY
Issued capital	3,151,893 3,126,691
Accumulated losses	(2,613,387) (2,464,835)
TOTAL UNIT HOLDERS EQUITY	538,506 661,856

Source: SFP's audited financial statements for the year ended 30 June 2014 and the reviewed financial statements as at 31 December 2013

We note the following in relation to SFP’s recent financial position:

SFP’s auditor, Bentleys, included an emphasis of matter paragraph in their audit report for the year ended 30 June 2014, stating that there exists “a material uncertainty which may cast significant doubt about the ability of the Entity to continue as a going concern and whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report”.
The increase in Cash and cash equivalents from $189k as at 31 December 2013 to $567k as at 30 June 2014 is attributable to the following capital raisings which were undertaken at $0.002 per share:
Issue of 74 million fully paid ordinary shares to Sophisticated and Professional Investors under a Tranche 1 Placement;
Issue of 176 million fully paid ordinary shares to Sophisticated and Professional Investors under a Tranche 2 placement; and

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Issue of 110 million fully paid ordinary shares to enable the Company to advance loan funds as per the HOA to 3D Medical.
The Deferred Acquisition Costs as at 31 December 2013 represent the costs involved in evaluating potential mineral exploration assets. These costs are capitalised until a decision is made on whether the transaction will proceed. Given that the Company did not proceed with the acquisition of tenements in the Three Rivers Area of Western Australia, the costs previously capitalised, had been written off during FY13 (as discussed in section 5.3 below). Accordingly, the deferred acquisition costs as at 31 December 2013 are primarily in relation to the funds advanced towards the potential acquisition of Kisara.

The company withdrew from its agreement to acquire Kisara and accordingly, SFP capitalised the funds forwarded into equity in Kisara. Further, the Company held a general meeting on 17 February 2014, where the SFP shareholders approved a reduction in share capital, without cancelling any shares, by the distribution of shares in Kisara. Further, the deferred acquisition costs of $50,000 as at 30 June 2014 represent the non refundable payment due to 3D Medical, towards the repayment of transaction expenses associated with the latter’s terminated initial public offering (‘IPO’).

Trade payables as at 31 December 2013 of $220k included $148k received from Taylor Collison as part of a share placement amounting to $500k. The monies received were in respect of the issue of 74 million shares which were pending allotment as at 31 December 2013, and were issued subsequently on 3 January 2014.
The increase in issued share capital between 31 December 2013 and 30 June 2014 was primarily attributable to the capital raisings as discussed in Cash and cash equivalents above, adjusted for the reduction in share capital.

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5.3 Historical Statement of Comprehensive Income

Statement of Comprehensive Income	Audited for the Audited for the
	year ended 30-Jun-14 year ended 30-Jun-13
	$ $
Revenue
Financial income	3,220 13,448
Other income	- 2,492
Expenses
Directors' and company secretarial fees	(154,001) (160,000)
Consultancy and corporate advisory fees	- (223,379)
Exploration expenses	- (356,836)
Audit and accounting fees	(44,663) (62,537)
Legal fees	(575) (82,325)
Administrative expenses	(89,136) (53,707)
Bad debts	(16,390) -
Business development, marketing & IP expenses	- (15,522)
Finance costs	(727) (447)
Loss from continuing operations before income tax	(302,272) (938,813)
Income tax expense	- -
Loss from continuing operations after income tax	(302,272) (938,813)
Total comprehensive loss for the year	(302,272) (938,813)

Source: Audited financial statements of SFP for the year ended 30 June 2013 and 30 June 2014

We note the following with regard to SFPs financial position for the 2 years ended 30 June 2014:

Per management, owing to the limited cash position of the company, expenditure towards consultancy and corporate advisory related fees has been kept to a minimum during FY14 as evidenced by the absence of any expenditure as compared to the corresponding amount of $223k incurred during FY13.
The Company terminated its proposed acquisition of tenements in the Three Rivers Area during FY13 and accordingly, wrote off the associated costs of $330k forming a part of the exploration expenses of $357k incurred during the year ended 30 June 2013.
The decline in legal fees during FY14 reflects the one off fees incurred during FY13 in relation to the Kisara acquisition, towards the drafting of the Share Sale Agreement.

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5.4 Capital Structure

The share structure of SFP as at 30 September 2014 is outlined below:

	Share structure Number
	Total ordinary shares on issue 1,075,868,074
	Top 20 shareholders 353,089,926
	Top 20 shareholders - % of shares on issue 32.82%

Source: Share registry information

The range of shares held in SFP as at 30 September 2014 is as follows:

	Number of	Number of	Percentage of
Range of Shares Held	Ordinary Shareholders	Ordinary Shares	Issued Shares (%)
1 - 1,000	345	163,170	0.02%
1,001 - 5,000	503	1,334,411	0.12%
5,001 - 10,000	179	1,290,968	0.12%
10,001 - 100,000	228	9,064,811	0.84%
100,001 - and over	479	1,064,014,714	98.90%
TOTAL	1,734	1,075,868,074	100.00%

Source: Share registry information

The ordinary shares held by the most significant shareholders as at 30 September 2014 are detailed below:

	Number of	Percentage of
Name	Ordinary Shares Held	Issued Shares (%)
IML Holdings Pty Ltd	34,900,000	3.24%
Livale Pty Ltd	18,600,000	1.73%
Octifil Pty Ltd	16,766,918	1.56%
HSBC Custody Nominees Australia Ltd	16,319,200	1.52%
Milwal Pty Ltd	16,250,000	1.51%
Yelwac Pty Ltd	16,000,000	1.49%
ComSec Nominees Pty Ltd	15,505,946	1.44%
Aegean Capital Pty Ltd	15,000,000	1.39%
Subtotal	149,342,064	13.88%
Others	926,526,010	86.12%
Total ordinary shares on Issue	1,075,868,074	100.00%

Source: Share registry information

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6. Profile of 3D Medical

6.1 History

3D Medical was incorporated on 26 November 2013 and is focussed on the commercialisation and integration of 3D printing and holographic projection technology in the Australian medical industry. 3D Medical’s services such as Touch, Visualise and MediDATA provide healthcare professionals with patient information in 3D.

3D Medical expects its revenue streams to arise from marketing of its technical expertise in 3D printing and from the distribution of holographic projection viewers to radiology providers and medical specialists such as cardiology, neurology, gastroenterology and orthopaedics.

Presently, 3D Medical has secured the exclusive marketing and distribution rights for the sale of the EchoPixel viewer (a holographic viewer) in Australia and New Zealand via a Memorandum of Understanding (‘ MoU ’). Additionally, 3D Medical has also secured the exclusive marketing and distribution rights for the sale of the GestSure System, which is a digital imagery technology in Australia and New Zealand.

The current directors of the Company are:

Mr Frank Pertile – Managing Director;
Mr Matthew Morgan – Director; and
Mr Ken Poutakidis – Director.

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6.2 Historical Balance Sheet

Statement of Financial Position	Audited as at
	30-Jun-14
	$
CURRENT ASSETS
Cash and cash equivalents	208,160
Other receivables	80,153
Other current assets	167,669
TOTAL CURRENT ASSETS	455,982

NON-CURRENT ASSETS
Intangible Assets	-
TOTAL NON-CURRENT ASSETS	-
TOTAL ASSETS	455,982

CURRENT LIABILITIES
Trade and other payables	143,293
TOTAL CURRENT LIABILITIES	143,293
TOTAL LIABILITIES	143,293

NET ASSETS	312,689

EQUITY
Issued capital	595,501
Accumulated losses	(282,812)
TOTAL UNIT HOLDERS EQUITY	312,689

Source: Audited financial report for the year ended 30 June 2014

As discussed in section 6.1 above, 3D Medical was incorporated during FY14 and hence, there is no comparable information with regard to the statement of financial position as at 30 June 2013.

We note the following with regard to the recent financial position of 3D Medical as at 30 June 2014:

The Cash and cash equivalents as at 30 June 2014 primarily pertains to the Operating account held by the Company with Westpac. We have reviewed the closing balance as at 30 June 2014 as per the statement received from Westpac and the corresponding bank reconciliation statement and note that there are no long outstanding unreconciled items.
Other current assets pertain to the license fees paid to EchoPixel Inc towards securing the exclusive marketing and distribution rights for the t3D-Viewer products in Australia and New Zealand. In this regard, we have reviewed the MoU with EchoPixel Inc, and note that the total fee for the licensing arrangement is US$250,000.
Trade and other payables primarily include an amount of $69k outstanding towards K&L Gates towards legal support and review of contracts/due diligence related work. Additionally, there is

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an amount of $40k outstanding as at 30 June 2014, in relation to business travel related expenses and customer deposits of $11,750 pertaining to amounts pending to be returned to investors towards overpayment on application of shares.

6.3 Historical Statement of Comprehensive Income

Statement of Comprehensive Income	Audited for the
	year ended 30-Jun-14
	$
Revenue
Other income	-
Expenses
Consulting fees	(100,500)
Corporate fees	(103,000)
Travelling expenses	(31,009)
Office expenses	(7,025)
Accounting and secretarial fees	(4,735)
Audit fees	(6,500)
Other expenses	(30,043)
Loss from continuing operations before income tax	(282,812)
Income tax expense	-
Loss from continuing operations after income tax	(282,812)
Total comprehensive loss for the year	(282,812)

Source: Audited financial report for the year ended 30 June 2014

As discussed in Section 6.2, there is no comparable information with regard to the operating performance of 3D Medical for the period ended 30 June 2013. Further, we note the following with regard to the income statement for the period ended 30 June 2014:

The Company entered into a MoU for the exclusive distribution and marketing of the EchoPixel holographic projector during May 2014 and was unable to commercialise the same for the year ended 30 June 2014. Accordingly, there are no significant sources of revenue as yet.
The Consulting fees of $100,500 are towards the management services received from Frank Pertile and Ken Poutakidis (who are also directors of 3D Medical). The consideration for the same was in the form of fully paid shares in 3D Medical.
Corporate fees of $103k primarily pertains to the legal fees of $98k paid to K&L Gates towards services received in the form of legal support and advice, review of contracts and due diligence related advice.
Travelling expenses of $31k were towards airfare and accommodation related expenses in connection with industry conferences, seminars and meetings held in the USA.

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7. Economic analysis

Growth in the global economy is continuing at a moderate pace. China's growth has generally been in line with policymakers' objectives, though some data suggest a slowing in recent months. Weakening property markets present a challenge in the near term. Commodity prices in historical terms remain high, but some of those important to Australia have declined further in recent months.

Volatility in some financial markets has picked up in recent weeks. Overall, however, financial conditions remain very accommodative. Long-term interest rates and risk spreads remain very low. Markets still appear to be attaching a low probability to any rise in global interest rates or other adverse event over the period ahead.

In Australia, most data are consistent with moderate growth in the economy. Resources sector investment spending is starting to decline significantly, while some other areas of private demand are seeing expansion, at varying rates. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend for the next several quarters.

Labour market data have been unusually volatile of late. The Bank's assessment remains that although some forward indicators of employment have been firming this year, the labour market has a degree of spare capacity and it will probably be some time yet before unemployment declines consistently. Growth in wages has declined noticeably and is expected to remain relatively modest over the period ahead, which should keep inflation consistent with the target even with lower levels of the exchange rate.

Monetary policy remains accommodative. Interest rates are very low and have continued to edge lower over recent months as competition to lend has increased. Investors continue to look for higher returns in response to low rates on safe instruments. Credit growth is moderate overall, but with a further pick-up in recent months in lending to investors in housing assets. Dwelling prices have continued to rise over recent months.

The exchange rate has declined recently, in large part reflecting the strengthening US dollar, but remains high by historical standards, particularly given the further declines in key commodity prices in recent months. It is offering less assistance than would normally be expected in achieving balanced growth in the economy.

Source: www.rba.gov.au Statement by Glenn Stevens, Governor: Monetary Policy Decision dated 7 October 2014

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8. Industry analysis

8.1 3D Printing and Rapid Prototyping Services Industry

The 3D Printing and Rapid Prototyping services industry has grown rapidly in recent years through technological developments, declining costs and new applications for 3D printing technology. The industry’s performance is linked to the manufacturing sector as most companies are increasingly 3D printing to create prototypes, which is an essential part of product development. The industry is dependent on the economy, given its close links to the manufacturing sector.

There has been an increasing demand for products of the industry in the medical arena, where they are used to create customised medical devices that replicate the human form more accurately. The products include hearing aids, dental implants, orthopaedics etc.

The primary drivers of the industry are:

Demand from medical device manufacturing : Medical device manufacturers use 3D printing services to create prosthetic devices such as limbs, teeth, artificial organs, blood vessels etc, demand for which is expected to increase in the near future.
Demand from manufacturing : Manufacturers in various fields such as aerospace, automobiles etc are using 3D printing services to create prototypes and other customised products for customers.
Changes in technology : The rapid technological developments that are taking place enable 3D printing to be used for a variety of applications, lowering the cost of using 3D printing services.
Growth in Research & Development (‘R&D’) expenditure : R&D expenditure drives demand for 3D printing services, because it is used to create prototypes, when developing new products.
Increased consumer spending : The increasing trend towards customisation of products and models is driving the demand for 3D printing. Growth in consumer spending would positively benefit the industry as consumers would also spend on customised 3D products.

In the US, the industry has witnessed an annual growth of 17.9% for the period 2009-14 with forecast growth rates of 13.3% during 2014-19. The industry is in the growth phase of its lifecycle, driven by companies such as 3D Systems Corporation and Stratasys Inc, which have approximately 18% and 8% of the market share respectively. These two companies cater to a number of industrial and commercial markets and the smaller players such as Shapeways, Applied Rapid Technologies, Ponoko etc are catering to niche consumer segments and primarily generate revenues from services to the general public such as enabling customers to design, price and order their own 3D products.

8.2 Specialist Medical Services in Australia

8.2.1 Overview

The Specialist Medical Services industry has witnessed strong growth over the past five years owing to strong government assistance and Australia’s ageing population. Industry revenue has grown at an estimated compound annual rate of 6.5% over the five years to 2013/14 and is forecast to increase to $11.9 billion in 2013/14, being an increase of 5.5% over 2012/13.

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Industry demand has increased as Australia’s population has both grown and aged, given that older people use the services of specialists at a much higher rate than the younger population. Further, there is a trend of older people being more susceptible to chronic diseases or disorders such as cancer, heart disease, hypertension, diabetes and arthritis. Additionally, technological developments such as robotic surgery has also driven revenue growth as patients have lesser concerns about surgery when there is greater precision involved.

Despite a lessening of government assistance, organic growth is forecast to result in revenue growth of 4.5% annualised over the next five years, to reach $14.9 billion in 2018/19.

The key drivers of the industry are:

Median age of the population : Older people tend to utilise a higher volume of specialist medical services per capita than younger people, due to higher incidences of age-related diseases and disorders.
Age profile of the female population : Women are a substantial market for specialist medical services such as gynaecology and obstetrics services during pregnancy. Accordingly, an increase in the percentage of women in the relevant age group would have a bearing on the growth prospects of the industry.
Federal assistance for Medicare : The federal government subsidises the services of specialist medical practitioners through Medicare. In 2013/14, an increase in federal funding for Medicare, due to indexation of schedule fees and coverage of a greater volume of consultations, contributed towards higher industry revenue.
Visits to a general practitioner : General practitioners often refer their patients to specialists for getting an expert opinion. An increase in total number of visits to general practitioners may result in a corresponding increase in demand for specialist medical services.
Growth of health insurance: An increase in the uptake of private health insurance can increase demand for private hospitals, which offer a greater range of specialists. Accordingly, this would result in a greater demand for specialist’s services, given that private health insurance generally covers such costs.
8.2.2 Current performance

The rising age profile of Australia’s population has led to chronic diseases and illnesses being increasingly attended to by specialists. The growth in demand has led to an increase in industry revenue given that the Federal Government is offering subsidies via Medicare coupled with the change in the revenue mix towards more expensive services.

The industry comprises of a number of specialised offerings, each of which have their own characteristics which are variably affected by changing economic conditions and demographics. The increase in the number of establishments has lagged growth in overall revenue. Consequently, there has been a steady increase in earnings per establishment, supported by strong demand. Further, an increase in demand has been serviced by a larger workforce, being largely administrative in nature. Additionally, the spurt in demand has enabled specialist clinics to charge higher prices and this additional revenue has been equally shared between profit and wages, resulting in an increase in profit margins.

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8.2.3 Major markets

Individuals generally use a greater proportion of specialist services as they age, and therefore, patients seeking specialist medical services can be classified based on the relevant age groups to which they pertain. The graph below displays the major market segmentation for the industry during 2014.

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

Major market segmentation - 2014
15%
32%
Aged 24 and under
Aged 25 to 44
Aged 45 to 64
28%
Aged 65 and over
26%
Source : IBISWorld
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8.2.4 Industry outlook

The Specialist Medical Services industry is expected to continue its good performance, given that the trends that contributed to industry growth over the past five years are expected to continue for the next five years. As Australia’s population continues to age, it will result in a greater proportion becoming dependent on specialist medical services, contributing to strong revenue growth. Additionally, continued support from the Federal Government through Medicare payments will suppress demand fluctuations arising on account of an increase in consultation fees. The industry is forecast to attain revenues of $14.9 billion in 2018/19 following compound annual growth of 4.5% over the following five years.

The significant threat that remains is the scheduled increase to the Extended Medicare Safety Net Threshold ( ‘EMSN’ ), which could transfer a substantial component of the cost burden onto patients and thereby, cause demand to decline.

The growth in the number of establishments is projected to continue at a slow pace owing to high barriers to entry arising from the educational and regulatory qualifications required to become a specialist medical services provider. Employment trends are expected to continue to grow and the average wage rate is also expected to increase following the expected rise in consultation prices. Additionally, profit margins are expected to remain stable over the next five years as the benefits of consolidation within the industry are offset by an increase in the EMSN threshold.

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9. Valuation approach adopted

There are a number of methodologies which can be used to value a business or the shares in a company. The principal methodologies which can be used are as follows:

Capitalisation of future maintainable earnings (‘ FME ’)
Discounted cash flow (‘ DCF ’)
Quoted market price basis (‘ QMP ’)
Net asset value (‘ NAV ’)
Market based assessment

A summary of each of these methodologies is outlined in Appendix 2.

Different methodologies are appropriate in valuing particular companies, based on the individual circumstances of that company and available information.

9.1 Value of a SFP share prior to the Acquisition

In our assessment of the value of SFP shares, we have chosen to employ the following methodologies:

NAV as our primary methodology; and
QMP as a secondary methodology

We have chosen these methodologies for the following reasons:

The FME approach is not considered appropriate as the Company has been operating at a loss from continuing operations in the last three financial years, meaning that we do not have reasonable grounds on which to base a forecast future maintainable earnings figure.
The QMP basis is a relevant methodology to consider as SFP’s shares are listed on the ASX. This means there is a regulated and observable market share where SFP’s shares can be traded. However, in order for the QMP methodology to be considered appropriate, the Company’s shares should be liquid and the market should be fully informed as to SFP’s activities. We have considered these factors in section 10.2 of our Report.
The DCF approach has not been considered as the Company has not provided us with suitable or extended forecast cash flows.
We also consider the NAV methodology to be an appropriate valuation approach to undertake.
It should be noted that asset based methods ignore the possibility that the entity’s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. This is particularly significant if the growth potential of a company is substantial.
Alternatively, if the company is making losses and earnings are deteriorating, asset based methods ignore the deteriorating financial performance of a company, which may result in the entity’s value trading below the realisable value of its assets.

9.2 Value of a SFP share following the Acquisition

In our assessment of the value of a SFP share following the Acquisition, we have chosen to employ the following methodology:

Sum-of-parts as our primary methodology

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The value of SFP shares following the Acquisition involves the sum of the following items:

The value of SFP prior to the Acquisition;
The value of 3D Medical;
In our valuation of 3D Medical we have considered the NAV methodology. We have disregarded the FME, QMP and DCF methodologies as a result of the following:
- The FME approach is not considered appropriate as 3D Medical is currently loss making and has been operational for less than a year, meaning that we do not have reasonable grounds on which to base a forecast future maintainable earnings figure;
- 3D Medical is a privately owned company which means there is no regulated and observable market where 3D Medical’s shares can be traded; and
- The DCF approach is an appropriate methodology to use for businesses with limited lives, experiencing growth, that are in a start up phase, or experience irregular cash flows, such as 3D Medical which was incorporated in November 2013. However, under RG111 and RG170, certain requirements must be met in relation to the inclusion of prospective financial information, and therefore we are unable to value 3D Medical using this methodology as we do not have reasonable grounds to support the assumptions and cash flows in the forecast.
The number of shares on issue following the Acquisition will include the issue of shares to the Vendors as consideration for the Acquisition, facilitation shares to be issued to the Advisors, the consideration options to be issued to the Vendors and the issue of shares pursuant to the capital raising.
A minority discount is applied to the net asset value to arrive at the value of a SFP share following the Acquisition on a minority interest basis.
We have assessed the value of a SFP share following the Acquisition on both an undiluted and diluted basis. The undiluted basis assumes that the Consideration options to be issued to the Vendors are not exercised. The valuation on a diluted basis assumes that the Consideration options are exercised.

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10. Valuation of SFP prior to the Acquisition

10.1 Net Asset Valuation of SFP

The value of SFP assets on a going concern basis is reflected in our valuation below:

Net Asset Value	Note	Audited as at 30 June 2014	Low value	Preferred value	High value
		$	$	$	$
CURRENT ASSETS
Cash and cash equivalents	1	566,836	396,836	396,836	396,836
Trade and other receivables		7,469	7,469	7,469	7,469
TOTAL CURRENT ASSETS		574,305	404,305	404,305	404,305
NON-CURRENT ASSETS
Unsecured loan	2	-	510,000	510,000	510,000
Deferred Acquisition cost	3	50,000	100,000	100,000	100,000
TOTAL NON- CURRENT ASSETS		50,000	610,000	610,000	610,000
TOTAL ASSETS		624,305	1,014,305	1,014,305	1,014,305
CURRENT LIABILITIES
Trade and other payables		85,799	35,799	35,799	35,799
TOTAL CURRENT LIABILITIES		85,799	35,799	35,799	35,799
TOTAL LIABILITIES		85,799	35,799	35,799	35,799

NET ASSETS		538,506	978,506	978,506	978,506
Shares on issue (number)			107,586,807	107,586,807	107,586,807
Value per share ($)			$0.0091	$0.0091	$0.0091

Source: Audited financial statements for the year ended 30 June 2014 and BDO analysis

There have not been significant changes in the net assets of SFP since 30 June 2014, other than those noted below.

Note 1: Cash and cash equivalents

The cash and cash equivalents as at 30 June 2014 does not reflect the cash inflows arising from the issue of 220 million shares as part of a Share Purchase Plan which was completed on 21 July 2014, the subsequent outflows in the nature of a working capital loan to 3D Medical (discussed in Note 2 below) and also the cost repayment forming a part of the purchase consideration for the Acquisition (discussed in Note 3 below). The table below sets out the adjusted cash balance:

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Cash assets $ Cash balance at 30 June 2014 566,836 Add: Cash inflow from issue of 220 million shares under a Share Purchase Plan 440,000 Less: Cash outflow from grant of interest free loan to 3D Medical (510,000) Less: Cash outflow to 3D Medical as part of the purchase consideration (100,000) Adjusted Cash balance 396,836

Note 2: Unsecured loan granted to 3D Medical

On 17 August 2014, the Company entered into a loan agreement amounting to $510,000 with 3D Medical for meeting its working capital requirements, which is interest free and repayable if the Acquisition does not proceed for any other reason, other than the SSA being terminated as a result of a breach by SFP.

Note 3: Deferred Acquisition costs

As part of the purchase consideration for the proposed acquisition, SFP has agreed to pay an amount of $100,000 towards the repayment of transaction expenses associated with the 3D Medical IPO, which was terminated.

10.2 Quoted Market Prices for SFP Securities

To provide a comparison to the valuation of SFP in Section 10.1, we have also assessed the quoted market price for a SFP share.

The quoted market value of a company’s shares is reflective of a minority interest. A minority interest is an interest in a company that is not significant enough for the holder to have an individual influence in the operations and value of that company.

RG 111.11 suggests that when considering the value of a company’s shares for the purposes of approval under Item 7 of s611, the expert should consider a premium for control. An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain 100% control of another company. These advantages include the following:

control over decision making and strategic direction;
access to underlying cash flows;
control over dividend policies; and
access to potential tax losses.

Whilst the Vendors will not be obtaining 100% of SFP, RG 111 states that the expert should calculate the value of a target’s shares as if 100% control were being obtained. RG 111.13 states that the expert can then consider an acquirer’s practical level of control when considering reasonableness. Reasonableness has been considered in Section 13.

Therefore, our calculation of the quoted market price of a SFP share including a premium for control has been prepared in two parts. The first part is to calculate the quoted market price on a minority interest basis. The second part is to add a premium for control to the minority interest value to arrive at a quoted market price value that includes a premium for control.

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Minority interest value

Our analysis of the quoted market price of a SFP share is based on the pricing prior to the announcement of the Acquisition. This is because; the value of a SFP share after the announcement may include the effects of any change in value as a result of the Acquisition. However, we have considered the value of a SFP share following the announcement when we have considered reasonableness in Section 13.

Information on the Acquisition was announced to the market on 23 June 2014; however, the Company’s shares were placed into a trading halt on 18 June 2014 pending this initial announcement. Therefore, the following chart provides a summary of the share price movement over the 12 months to 17 June 2014, which was the last trading day prior to the announcement.

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

SFP share price and trading volume history
0.006 8.0
0.005 6.0
0.004
4.0
0.003
2.0
0.002
0.001 -
Volume Closing share price
Share Price ($)
Volume (millions)
----- End of picture text -----

Source: Bloomberg & BDO Analysis

The daily price of SFP shares from 18 June 2013 to 17 June 2014 has ranged from a low of $0.001 on 19 June 2013 to a high of $0.005 on 8 July 2013.

There was a spike in trading volumes on 29 May 2014, with approximately 6 million shares traded, representing 0.56% of the Company’s current issued capital. The share price around this time was $0.002 and has remained stable at the same price thereafter. There were no Company announcements made during the period, and therefore, we consider this an unexplained spike in trading volume.

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During this period a number of announcements were made to the market. The key announcements are set out below:

Date	Announcement	Closing Share Price Following Announcement
		$ (movement)	$ (movement)
21/05/2014	Director Appointment/Resignation	0.001 � 0.0%	0.001	�	0.0%

30/04/2014	Appendix 4C - quarterly 31 March 2014	0.002 � 0.0%	0.002	�	0.0%

28/02/2014	Half Yearly Report and Accounts 31 December 2013	0.002 � 0.0%	0.003	�	50.0%

17/02/2014	Results of General Meeting	0.002 � 0.0%	0.002	�	0.0%

24/01/2014	Appendix 4C - quarterly	0.002 � 0.0%	0.002	�	0.0%

30/12/2013	Placement Funds Received	0.002 � 0.0%	0.002	�	0.0%

19/12/2013	Withdrawal from Kisara Acquisition	0.002 � 0.0%	0.002	�	0.0%

16/12/2013	Trading Halt	0.002 � 0.0%	0.002	�	0.0%

29/11/2013	Results of Annual General Meeting	0.002 � 0.0%	0.002	�	0.0%

30/09/2013	Annual Report to shareholders	0.002 � 0.0%	0.002	�	0.0%

11/09/2013	Capital Raising and Section 708A Notice	0.002 � 0.0%	0.002	�	0.0%

Source: Bloomberg & BDO analysis

The significant movement in share price, post announcement of the half yearly performance for the year ended 31 December 2013, was primarily attributable to the decision of the Company to terminate its proposed acquisition of Kisara and the capitalisation of funds forwarded as part of its original agreement into equity in Kisara. Additionally, the Company was also able to successfully raise $500,000 by way of issue of 250 million shares to Taylor Collison as part of a capital assistance scheme.

To provide further analysis of the market prices for a SFP share, we have also considered the weighted average market price for 10, 30, 60 and 90 day periods to 17 June 2014.

	Share Price per unit		17-Jun-14		10 Days		30 Days		60 Days		90 Days
	Closing price		$0.002
	Volume weighted average price (VWAP)				$0.002		$0.002		$0.002		$0.002

Source: Bloomberg & BDO analysis

The above weighted average prices are prior to the date of the announcement of the Acquisition, to avoid the influence of any increase in price of SFP shares that has occurred since the Acquisition was announced.

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An analysis of the volume of trading in SFP shares for the twelve months to 17 June 2014 is set out below:

			Cumulative
Trading days	Share price	Share price	volume	As a % of
				Issued
	low	high	traded	capital
1 Day	$0.002	$0.002	-	0.00%
10 Days	$0.002	$0.003	2,057,346	0.19%
30 Days	$0.001	$0.003	11,982,999	1.11%
60 Days	$0.001	$0.003	30,289,788	2.82%
90 Days	$0.001	$0.003	39,935,843	3.71%
180 Days	$0.001	$0.003	49,891,619	4.64%
1 Year	$0.001	$0.005	57,646,062	5.36%

Source: Bloomberg, BDO analysis

This table indicates that SFP’s shares display a low level of liquidity, with 5.36% of the Company’s current issued capital being traded in a twelve month period. For the quoted market price methodology to be reliable there needs to be a ‘deep’ market in the shares. RG 111.69 indicates that a ‘deep’ market should reflect a liquid and active market. We consider the following characteristics to be representative of a deep market:

Regular trading in a company’s securities;
Approximately 1% of a company’s securities are traded on a weekly basis;
The spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and
There are no significant but unexplained movements in share price.

A company’s shares should meet all of the above criteria to be considered ‘deep’, however, failure of a company’s securities to exhibit all of the above characteristics does not necessarily mean that the value of its shares cannot be considered relevant.

In the case of SFP, we do not consider there to be a deep market for the Company’s shares, with only 5.36% of the current issued capital traded on a twelve month period. The assessment is also based on the significant and unexplained volume movements that occurred on 29 May 2014, wherein the volume of shares traded spiked to 6 million shares.

Our assessment is that a range of values for SFP shares based on market pricing, after disregarding post announcement pricing, is between $0.001 and $0.002.

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Control Premium

We have reviewed the control premiums paid by acquirers of companies listed on the ASX. We have summarised our findings below:

	Number of	Average Deal Value	Average Control Premium
Year	Transactions	(AU$m)	(%)
2014	1	583.15	31.78
2013	36	143.63	50.86
2012	48	364.43	41.32
2011	64	799.28	45.07
2010	63	794.58	40.23
2009	61	328.42	44.87
2008	39	827.80	40.83
2007	81	1045.80	22.20
2006	90	688.47	25.12
	Mean	619.51	38.03
	Median	688.47	40.83

Source: Bloomberg & BDO Analysis

In arriving at an appropriate control premium to apply, we note that observed control premiums can vary due to the:

Nature and magnitude of non-operating assets;
Nature and magnitude of discretionary expenses;
Perceived quality of existing management;
Nature and magnitude of business opportunities not currently being exploited;
Ability to integrate the acquiree into the acquirer’s business;
Level of pre-announcement speculation of the transaction; and
Level of liquidity in the trade of the acquiree’s securities.

The table above indicates that the long term average control premium paid for ASX-listed companies is in the order of 30% to 40%. However, given that SFP has been historically loss making and given the lack of liquidity for the Company’s shares, we consider an appropriate control premium to be in the range of 25% to 35%.

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Quoted market price including control premium

Applying a control premium to SFP’s quoted market share price results in the following quoted market price value including a premium for control:

	Low	Preferred	High
	$	$	$
Quoted market price value	0.0010	0.0015	0.0020
Control premium	25%	30%	35%
Quoted market price valuation including a premium for control	0.0013	0.0020	0.0027

Source: BDO analysis

Therefore, our valuation of a SFP share based on the quoted market price method and including a premium for control is between $0.0013 and $0.0027, with a midpoint value of $0.0020.

10.3 Assessment of SFP Value

The results of the valuations performed are summarised in the table below:

	Low	Preferred	High
	$	$	$
Net assets value (Section 10.1)	0.0091	0.0091	0.0091
ASX Market prices (Section 10.2)	0.0013	0.0020	0.0027

Source: BDO analysis

We note that the value obtained under the NAV methodology is higher than the values obtained under the QMP methodology in our low, preferred and high scenarios. The difference between the valuations obtained under the NAV and QMP approaches can be explained by the following:

Post 30 June 2014, the Company issued 220 million shares at $0.002 per share under a Share Purchase plan. These were issued at a premium to the existing QMP, which has contributed towards the value per share derived under the NAV methodology being higher; and
Our share price analysis in section 10.2 indicates that there is not a deep market for the Company’s shares with only 5.36% of the Company’s share capital traded in the 12 months prior to the announcement of the Acquisition. As a result of the lack of liquidity, we have not relied on the QMP value in assessing the value of a SFP share prior to the Acquisition.

For the reasons described above, we conclude that the value obtained under the NAV approach is more reflective of the value of a SFP share prior to the Acquisition. Therefore, we consider the value of a SFP share to be $ 0.0091 per share.

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11. Valuation of SFP following the Acquisition

11.1 Net asset valuation of 3D Medical

The value of 3D Medical’s net assets on a going concern basis is reflected in our valuation below:

Statement of Financial Position Note	Audited as at 30 June 2014 Low value Preferred value High value
	$ $ $ $
CURRENT ASSETS
Cash and cash equivalents 1	208,160 714,481 714,481 714,481
Other receivables	80,153 80,153 80,153 80,153
Other current assets	167,669 167,669 167,669 167,669
TOTAL CURRENT ASSETS	455,982 962,303 962,303 962,303

NON-CURRENT ASSETS
Property, Plant & Equipment 2	- 103,679 103,679 103,679
TOTAL NON- CURRENT ASSETS	- 103,679 103,679 103,679
TOTAL ASSETS	455,982 1,065,982 1,065,982 1,065,982

CURRENT LIABILITIES
Trade and other payables	143,293 143,293 143,293 143,293
TOTAL CURRENT LIABILITIES	143,293 143,293 143,293 143,293

NON-CURRENT LIABILITIES
Unsecured loan 3	- 510,000 510,000 510,000
Purchase consideration from SFP 4	- 100,000 100,000 100,000
TOTAL NON- CURRENT LIABILITIES	- 610,000 610,000 610,000
TOTAL LIABILITIES	143,293 753,293 753,293 753,293

NET ASSETS	312,689 312,689 312,689 312,689

Source : Audited financial statements for the year ended 30 June 2014

We have been advised that there have not been significant changes to the net assets of 3D Medical since 30 June 2014, with the exception of the adjustments outlined below.

Note 1: Cash and cash equivalents

Pursuant to the capital raised by SFP as part of its Share Purchase Plan, an amount of $510,000 was advanced to 3D Medical as an interest free loan towards meeting its working capital requirements. Additionally, the amount of $100,000 being the cost repayment as discussed in Section 10.1 was also paid by SFP. The table below sets out the basis of the adjusted cash balance:

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Cash assets $ Cash balance at 30 June 2014 208,160 Add: Proceeds from interest free loan advanced by SFP 510,000 Add: Consideration received towards cost repayment from SFP 100,000 Less: Purchase of 3D Printers and computers (103,679) Adjusted Cash balance 714,481

Note 2: Additions to Property, Plant & Equipment

The additions to Property, Plant & Equipment are primarily in the nature of 3D printers amounting to $102k. The remaining additions were towards computers purchased at cost.

Note 3: Unsecured loan

As discussed in Section 10.1, on 17 August 2014, SFP entered into a loan agreement amounting to $510,000 with 3D Medical for meeting its working capital requirements which is interest free and repayable if the Acquisition does not proceed for any other reason other than the SSA being terminated as a result of a breach by SFP.

Note 4: Purchase consideration from SFP

As a part of the consideration for the Acquisition, SFP has agreed to pay $100,000, being in the nature of cost repayment towards the expenses incurred as part of 3D Medical’s terminated IPO.

11.2 Cash raised from issue of new shares

The Directors of SFP have advised that the Company will be conducting a capital raise for the issue of up to 60 million shares at an issue price of $0.05 per share to raise a minimum of $3 million, with a provision to accept oversubscriptions of upto 100 million shares to raise up to a total of $5 million. We have therefore increased the net asset position of SFP following the Acquisition to reflect both scenarios.

11.3 Facilitation shares to be issued

The terms of the SSA provide for an issue of 4,375,000 fully paid ordinary Facilitation shares (post capital consolidation) in the manner of 875,000 shares each to Trident Capital and 3.5 million shares to Taylor Collison respectively.

11.4 Consideration options to be issued

The consideration for the Acquisition includes an issue of Tranche 1 Consideration Options and Tranche 2 Consideration Options with an exercise price of $0.05 per share. We have considered the impact of these options on the existing shareholders in 2 scenarios, namely:

On a undiluted basis (i.e., where the options are not exercised); and
On a diluted basis (i.e., where the options are exercised)

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11.5 Discount for minority interest

The net asset value of a SFP share following the Acquisition is reflective of a controlling interest. This suggests that the acquirer obtains an interest in the company which allows them to have an individual influence in the operations and value of that company. Therefore, if the Acquisition is completed, Shareholders may become minority shareholders in SFP as the Vendors will hold a controlling interest, meaning that their individual holding will not be considered significant enough to have an individual influence in the operations and value of the Company.

Therefore, we have adjusted our valuation of a SFP share following the Acquisition, to reflect a minority interest holding. A minority interest discount is the inverse of a premium for control and is calculated using the formula 1-(1/1+control premium). As discussed in section 10.2, we consider an appropriate control premium for SFP to be in the range of 25% to 35%, giving rise to a minority interest discount in the range of 20% to 26%.

11.6 Number of shares on issue

Our adjustment to the number of shares on issue following the approval of the Acquisition is set out in the below table.

		Scenario 1 1,075,868,074 2.93% 97.07% (10:1) 107,586,807 46,951,226 128,048,774 175,000,000 4,375,000 4,375,000 60,000,000 351,336,807 52.5% 29.7% 17.8% 100.0%		Scenario 2
	Shares on issue post-Proposal (undiluted)
	Current number of shares on issue pre Proposal			1,075,868,074
	% held by 3D Medical vendors			2.93%
	% held by existing Shareholders			97.07%
	Share Consolidation ratio (10:1)			(10:1)
	Post consolidation number of shares, pre Proposal			107,586,807


	Adjustments post Proposed Consolidated Shares
	Consideration shares to be issued to Related 3D Medical Vendors			46,951,226
	Consideration shares to be issued to Unrelated 3D Medical Vendors			128,048,774
	Consideration shares issued			175,000,000
	Advisory shares			4,375,000
	Facilitation shares			4,375,000
	Post consolidation capital raising			100,000,000
	Total Shares on issue post-Proposal			391,336,807


	% held by 3D Medical Vendors post-Proposal			47.2%
	% held by existing Shareholders post-Proposal			26.7%
	% held by Shareholders of New shares and Advisors post-Proposal			26.2%
	Total			100.0%

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Maximum dilution scenario

Further, if the Consideration options as referred to in section 4.1 above are exercised, the existing Shareholders’ interests will further dilute to 22.3% under Scenario 1, and 20.6% under Scenario 2.

	Shares on issue post-Proposal (diluted) Scenario 1 Issued shares following the completion of the Acquisition (undiluted) 351,336,807 % holdings by existing shareholders following the Acquisition (undiluted) 29.7% Shares issued under Tranche 1 Consideration Options to Related 3D Medical Vendors 19,570,629 Shares issued under Tranche 1 Consideration Options to Unrelated 3D Medical Vendors 53,374,431 Issued shares following completion of the Acquisition and exercise of Tranche 1 options(diluted) 424,281,867 % holdings by existing shareholders following completion of the Acquisition and exercise of Tranche 1 options (diluted) 24.6% Shares issued under Tranche 2 Consideration Options to Related 3D Medical Vendors 11,667,082 Shares issued under Tranche 2 Consideration Options to Unrelated 3D Medical Vendors 31,819,305 Issued shares following completion of the Acquisition and exercise of Tranche 2 options(diluted) 467,768,254 % holdings by existing shareholders following completion of the Acquisition and exercise of Tranche 2 options (diluted) 22.3%		Scenario 2
			391,336,807 26.7% 19,570,629 53,374,431
			464,281,867
			22.5%
			11,667,082 31,819,305
			507,768,254
			20.6%

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11.7 Valuation of SFP following the Acquisition on an undiluted basis

The value of a SFP share following the Acquisition on an undiluted basis is set out below:

Value of SFP following the Acquisition Ref	Low Preferred High
(undiluted basis)	$ $ $
Net assets of SFP prior to the Acquisition 10.1 Value of 3D Medical 11.1 Cash raised from Capital Raising 11.2 Value of SFP following the Acquisition (undiluted) Discount for minority interest 11.5	978,506 978,506 978,506 312,689 312,689 312,689 3,000,000 4,000,000 5,000,000
	4,291,195 5,291,195 6,291,195 26% 23% 20%
Value of SFP following the Acquisition	3,175,484 4,074,220 5,032,956
(minority interest basis)

Number of shares on issue (undiluted) 11.6	351,336,807 371,336,807 391,336,807
Value per share ($)	0.0090 0.0110 0.0129

The table above shows our assessed value of a SFP share on an undiluted basis is between $0.009 and $0.0129, with a preferred value of $0.011.

11.8 Valuation of SFP following the Acquisition on a diluted basis

Value of SFP following the Acquisition Ref	Low Preferred High
(diluted basis)	$ $ $
Value of SFP following the Acquisition (undiluted) 11.7 Cash raised from exercise of Tranche 1 options 11.4 Cash raised from exercise of Tranche 2 options 11.4 Value of SFP following the Acquisition (diluted) Discount for minority interest 11.5	4,291,195 5,291,195 6,291,195 3,647,253 3,647,253 3,647,253 2,174,319 2,174,319 2,174,319
	10,112,767 11,112,767 12,112,767 26% 23% 20%
Value of SFP following the Acquisition	7,483,448 8,556,831 9,690,214
(diluted minority interest basis)

Number of shares on issue (diluted) 11.6	467,768,254 487,768,254 507,768,254
Value per share ($) (diluted)	0.0160 0.0175 0.0191

The table above shows our assessed value of a SFP share on a diluted basis is between $0.0160 and $0.0191, with a preferred value of $0.0175.

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12. Is the Acquisition fair?

We have compared the value of a SFP share prior to the Acquisition on a controlling interest basis with the value of a SFP share following the Acquisition on a minority basis on both an undiluted and diluted basis as detailed below:

	Ref	Low	Preferred	High
		$	$	$
Value of a SFP share prior to the Acquisition on a	10.3	0.0091	0.0091	0.0091
controlling interest basis
Value of a SFP share following the Acquisition on	11.7	0.0090	0.0110	0.0129
a minority interest basis (undiluted)
Value of a SFP share following the Acquisition on	11.8	0.0160	0.0175	0.0191
a minority interest basis (diluted)

We note from the table above that the value of a share in SFP following the acquisition is greater than the value of a share in SFP prior to the Acquisition on a controlling interest basis. Therefore, we consider that the Acquisition is fair for the Shareholders.

We note that the value of a SFP share following the Acquisition on a diluted basis is greater than the value of a SFP share on an undiluted basis. The diluted scenario is dilutive to the existing Shareholders on a percentage held basis, but is not dilutive in terms of value. This is a result of the percentage increase in the value of SFP following the exercise of the options being greater than the percentage increase in number of shares, implying that the cash generated from the exercise of options more than offsets the dilution arising from the issue of shares.

13. Is the Acquisition reasonable?

13.1 Advantages of approving the Acquisition

We have considered the following advantages when assessing whether the Acquisition is reasonable:

13.1.1 The Acquisition is Fair

As set out in section 12, the Acquisition is fair. RG 111 states that an offer is reasonable if it is fair.

13.1.2 Greater commercial opportunities

Given that SFP has yet to commercialise its existing patents and trademarks held, the proposed acquisition of 3D Medical would provide the Company with significant opportunities for commercialisation and integration of 3D printing and holographic projection technology into the Australian medical industry. In this regard, 3D Medical has already entered into a Service Level Agreement with Capitol Health Limited for providing exclusive 3D printing services towards printing of patient specific anatomical models, thereby indicating the push towards commercialisation. Additionally, 3D Medical has also commenced sale of its EchoPixel viewer and has received its first order from a leading radiology group during August 2014.

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13.1.3 Additional sources of financing

The change in nature of activities could enable SFP to attract new investors and raise additional working capital and may also increase its ability to acquire further projects.

13.2 Disadvantages of approving the transaction

We have considered the following disadvantages when assessing whether the Acquisition is reasonable:

13.2.1 Change in business model

The change in the Company’s core operation from being engaged in medical syringe technology to 3D printing and holographic projection technology may be inconsistent with the objectives of Shareholders.

13.2.2 Dilution of existing Shareholder interests

If the Acquisition is completed, then existing Shareholder interests will be diluted from holding 100% of the Company to holding an interest of 26.7% on an undiluted basis and 20.6% on a diluted basis, assuming a $5 million capital raise.

13.2.3 Absence of significant revenues

In the case of 3D Medical, the Company is still in the early stages of commercialising and integrating its 3D printing and holographic projection technology into the Australian medical industry. Therefore, there exists a higher degree of uncertainty in relation to the future prospects of 3D Medical. Additionally, there is no guarantee that 3D Medical will be able to successfully commercialise its products and realise significant revenues going forward.

13.2.4 Competitive market

The Australian healthcare market is subject to a high degree of competition, both domestic and global. Therefore, 3D Medical could be adversely affected by newer technologies developed, rendering its products obsolete.

13.3 Other Considerations

13.3.1 Alternative Proposals

We are unaware of any alternative proposal that might offer the Shareholders of SFP a premium over the value ascribed to, resulting from the Acquisition.

13.3.2 Practical Level of Control

If the Acquisition is approved then the Vendors will hold an interest of approximately 64% in SFP, should there be a capital raise of $3 million and approximately 59% if the capital raise amounts to $5 million (assuming that the Consideration Options are exercised under both Scenarios). In addition to this, 3D Medical is entitled to nominate 3 persons to the Board.

When shareholders are required to approve an issue that relates to a company, there are two types of approval levels. These are general resolutions and special resolutions. A general resolution requires 50% of shares to be voted in favour to approve a matter and a special resolution required 75% of shares on issue to be voted in favour to approve a matter. If the Acquisition is approved, then the Vendors will be able to block general and special resolutions.

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SFP’s Board currently comprises of three directors, who will not continue if the Acquisition is approved. Therefore, the three directors nominated by 3D Medical will constitute the Board of directors.

13.3.3 Consequences of not approving the Acquisition

We have analysed movements in SFP’s share price since the Acquisition was announced. A graph of SFP’s share price since the announcement is set out below.

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

SFP share price and trading volume history
0.011 100.0
0.009 80.0
Announcement date
0.007 60.0
0.005 40.0
0.003 20.0
0.001 -
Volume Closing share price
Share Price ($)
Volume (millions)
----- End of picture text -----

Source: Bloomberg

The Acquisition was announced to the market on 23 June 2014. On that date, approximately 87 million shares were traded and SFP’s shares doubled in value and closed at $0.004. Since the announcement, the price of SFP’s shares has steadily increased and has traded between $0.005 and $0.008.

Given the above analysis, it is possible that if the Acquisition is not completed then SFP’s share price may decline to its pre announcement level.

14. Conclusion

We have considered the terms of the Acquisition as outlined in the body of this report and have concluded that the Acquisition is fair and reasonable to the Shareholders of SFP.

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15. Sources of information

This report has been based on the following information:

Draft Notice of General Meeting and Explanatory Statement on or about the date of this report;
Audited financial statements of SFP for the year ended 30 June 2013 and 30 June 2014;
Audited accounts of 3D Medical for the period ended 30 June 2014;
Share registry information;
Information in the public domain; and
Discussions with Directors and Management of SFP and 3D Medical.

16. Independence

BDO Corporate Finance (WA) Pty Ltd is entitled to receive a fee of $25,000(excluding GST and reimbursement of out of pocket expenses). The fee is not contingent on the conclusion, content or future use of this Report. Except for this fee, BDO Corporate Finance (WA) Pty Ltd has not received and will not receive any pecuniary or other benefit whether direct or indirect in connection with the preparation of this report.

BDO Corporate Finance (WA) Pty Ltd has been indemnified by SFP in respect of any claim arising from BDO Corporate Finance (WA) Pty Ltd's reliance on information provided by SFP, including the non provision of material information, in relation to the preparation of this report.

Prior to accepting this engagement, BDO Corporate Finance (WA) Pty Ltd has considered its independence with respect to 3D Medical and SFP and any of their respective associates with reference to ASIC Regulatory Guide 112 ‘Independence of Experts’. In BDO Corporate Finance (WA) Pty Ltd’s opinion it is independent of 3D Medical and SFP and their respective associates.

A draft of this report was provided to SFP and its advisors for confirmation of the factual accuracy of its contents. No significant changes were made to this report as a result of this review.

BDO is the brand name for the BDO International network and for each of the BDO Member firms.

BDO (Australia) Ltd, an Australian company limited by guarantee, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of Independent Member Firms. BDO in Australia, is a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International).

17. Qualifications

BDO Corporate Finance (WA) Pty Ltd has extensive experience in the provision of corporate finance advice, particularly in respect of takeovers, mergers and acquisitions.

BDO Corporate Finance (WA) Pty Ltd holds an Australian Financial Services Licence issued by the Australian Securities and Investment Commission for giving expert reports pursuant to the Listing rules of the ASX and the Corporations Act.

The persons specifically involved in preparing and reviewing this report were Sherif Andrawes and Adam Myers of BDO Corporate Finance (WA) Pty Ltd. They have significant experience in the preparation of

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independent expert reports, valuations and mergers and acquisitions advice across a wide range of industries in Australia and were supported by other BDO staff.

Sherif Andrawes is a Fellow of the Institute of Chartered Accountants in England & Wales and a Member of the Institute of Chartered Accountants in Australia. He has over twenty five years’ experience working in the audit and corporate finance fields with BDO and its predecessor firms in London and Perth. He has been responsible for over 250 public company independent expert’s reports under the Corporations Act or ASX Listing Rules. These experts’ reports cover a wide range of industries in Australia with a focus on companies in the natural resources sector. Sherif Andrawes is the Chairman of BDO in Western Australia, Corporate Finance Practice Group Leader of BDO in Western Australia and the Natural Resources Leader for BDO in Australia.

Adam Myers is a member of the Institute of Chartered Accountants of Australia. Adam’s career spans 16 years in the Audit and Assurance and Corporate Finance areas. Adam has considerable experience in the preparation of independent expert reports and valuations in general for companies in a wide number of industry sectors.

18. Disclaimers and consents

This report has been prepared at the request of SFP for inclusion in the Notice of Meeting which will be sent to all SFP Shareholders. SFP engaged BDO Corporate Finance (WA) Pty Ltd to prepare an independent expert's report to consider the proposed acquisition of 3D Medical through the issue of greater than 20% of the issued capital of SFP.

BDO Corporate Finance (WA) Pty Ltd hereby consents to this report accompanying the above Notice of Meeting. Apart from such use, neither the whole nor any part of this report, nor any reference thereto may be included in or with, or attached to any document, circular resolution, statement or letter without the prior written consent of BDO Corporate Finance (WA) Pty Ltd.

BDO Corporate Finance (WA) Pty Ltd takes no responsibility for the contents of the Notice of Meeting other than this report.

We have no reason to believe that any of the information or explanations supplied to us are false or that material information has been withheld. It is not the role of BDO Corporate Finance (WA) Pty Ltd acting as an independent expert to perform any due diligence procedures on behalf of the Company. The Directors of the Company are responsible for conducting appropriate due diligence in relation to 3D Medical. BDO Corporate Finance (WA) Pty Ltd provides no warranty as to the adequacy, effectiveness or completeness of the due diligence process.

The opinion of BDO Corporate Finance (WA) Pty Ltd is based on the market, economic and other conditions prevailing at the date of this report. Such conditions can change significantly over short periods of time.

With respect to taxation implications, it is recommended that individual Shareholders obtain their own taxation advice, in respect of the Acquisition, tailored to their own particular circumstances. Furthermore, the advice provided in this report does not constitute legal or taxation advice to the Shareholders of SFP, or any other party.

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The statements and opinions included in this report are given in good faith and in the belief that they are not false, misleading or incomplete.

The terms of this engagement are such that BDO Corporate Finance (WA) Pty Ltd has no obligation to update this report for events occurring subsequent to the date of this report.

Yours faithfully

BDO CORPORATE FINANCE (WA) PTY LTD

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Sherif Andrawes Director

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Adam Myers Director

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A endix 1 – Glossar of Terms pp y

Reference	Definition
3D Medical	3D Medical Limited
Act	The Corporations Act
APES 225	Accounting Professional & Ethical Standards Board professional standard APES 225
	‘Valuation Services’
ASIC	Australian Securities and Investments Commission
ASX	Australian Securities Exchange
BDO	BDO Corporate Finance (WA) Pty Ltd
Consideration Options	The proposal to issue 87.5 million options to the Vendors as consideration for the
	Acquisition
DCF	Discounted Future Cash Flows
EBIT	Earnings before interest and tax
EBITDA	Earnings before interest, tax, depreciation and amortisation
EMSN	Extended Medicare Safety Net Threshold
FME	Future Maintainable Earnings
FYXX	12 month period ended 30 June 20XX
HOA	Heads of Agreement
Kisara	Kisara Gold Pty Ltd
MoU	Memorandum of Understanding
NAV	Net Asset Value
Our Report	This Independent Expert’s Report prepared by BDO
QMP	Quoted Market Price basis
R&D	Research & Development
RG 74	Acquisitions approved by Members (December 2011)

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RG 111	Content of expert reports (March 2011)
RG 112	Independence of experts (March 2011)
The Acquisition	The proposal to issue shares in SFP to the Vendors of 3D Medical
The Company or SFP	Safety Medical Products Limited
Shareholders	Shareholders of SFP not associated with 3D Medical
Valuation Engagement	An Engagement or Assignment to perform a Valuation and provide a Valuation Report
	where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and
	Valuation Procedures that a reasonable and informed third party would perform taking
	into consideration all the specific facts and circumstances of the Engagement or
	Assignment available to the Valuer at that time.
3D Medical Vendors/Vendors	Frank Pertile, Mick Catanzariti, Nick Conidi and Ken Poutakidis
VWAP	Volume Weighted Average Price

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A endix 2 – Valuation Methodolo ies pp g

Methodologies commonly used for valuing assets and businesses are as follows:

1 Net asset value (‘NAV’) Asset based methods estimate the market value of an entity’s securities based on the realisable value of its identifiable net assets. Asset based methods include:

Orderly realisation of assets method
Liquidation of assets method
Net assets on a going concern method

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to entity holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the entity 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 entity may not be contemplated, these methods in their strictest form may not be appropriate. The net assets on a going concern method estimates the market values of the net assets of an entity but does not take into account any realisation costs.

Net assets on a going concern basis are usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. All assets and liabilities of the entity are valued at market value under this alternative and this combined market value forms the basis for the entity’s valuation.

Often the FME and DCF methodologies are used in valuing assets forming part of the overall Net assets on a going concern basis. This is particularly so for exploration and mining companies where investments are in finite life producing assets or prospective exploration areas.

These asset based methods ignore the possibility that the entity’s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. Asset based methods are appropriate when an entity is not making an adequate return on its assets, a significant proportion of the entity’s assets are liquid or for asset holding companies.

2 Quoted Market Price Basis (‘QMP’) A valuation approach that can be used in conjunction with (or as a replacement for) other valuation methods is the quoted market price of listed securities. Where there is a ready market for securities such as the ASX, through which shares are traded, recent prices at which shares are bought and sold can be taken as the market value per share. Such market value includes all factors and influences that impact upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume trading, creating a ‘deep’ market in that security.

3 Capitalisation of future maintainable earnings (‘FME’) This method places a value on the business by estimating the likely FME, capitalised at an appropriate rate which reflects business outlook, business risk, investor expectations, future growth prospects and other entity specific factors. This approach relies on the availability and analysis of comparable market data.

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The FME approach is the most commonly applied valuation technique and is particularly applicable to profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and non-finite lives.

The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings before interest and tax (‘ EBIT ’) or earnings before interest, tax, depreciation and amortisation (‘ EBITDA ’). The capitalisation rate or ‘earnings multiple’ is adjusted to reflect which base is being used for FME.

4 Discounted future cash flows (‘DCF’)

The DCF methodology is based on the generally accepted theory that the value of an asset or business depends on its future net cash flows, discounted to their present value at an appropriate discount rate (often called the weighted average cost of capital). This discount rate represents an opportunity cost of capital reflecting the expected rate of return which investors can obtain from investments having equivalent risks.

Considerable judgement is required to estimate the future cash flows which must be able to be reliably estimated for a sufficiently long period to make this valuation methodology appropriate.

A terminal value for the asset or business is calculated at the end of the future cash flow period and this is also discounted to its present value using the appropriate discount rate.

DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are in a start up phase, or experience irregular cash flows.

5 Market Based Assessment

The market based approach seeks to arrive at a value for a business by reference to comparable transactions involving the sale of similar businesses. This is based on the premise that companies with similar characteristics, such as operating in similar industries, command similar values. In performing this analysis it is important to acknowledge the differences between the comparable companies being analysed and the company that is being valued and then to reflect these differences in the valuation.

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