MEMPHASYS LIMITED. — Regulatory Filings 2012

Dec 12, 2012

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Wednesday, 12 December 2012

Mr Elvis Onyura Adviser Listings ASX 20 Bridge Street Sydney, NSW 2000

Dear Mr Onyura,

NuSep Holdings Ltd

I refer to your letter of 6 December 2012.

In response to the queries contained in that letter we note:

1. Is the Company able to confirm that in the Directors’ opinion the Annual Report: (a) complies with Australian Accounting Standards; and

  - _(b) gives a true and fair view of the financial performance of the Company?_ 

• 1(a) Yes

• 1(b) Yes

1. Given the Disclaimer relates to an inability of the auditor to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion, what steps does the Company intend to take to obtain an unqualified audit report in future financial periods?

The Company will, as it has in previous years, comply with Australian Accounting Standards for all future financial periods. The Company will seek advice from independent experts (eg external valuers to determine the valuation of the intangible assets) as required in an attempt to ensure an unqualified audit report in future financial periods.

The Company believes that for the 30 June 2012 audit it has provided all information that was required by the auditors in a timely manner. This included seeking relevant independent experts reports on Intangible Assets that were required. The Directors are also seeking appropriate guidance from its auditors for all future financial periods.

3. Please explain how you have determined that the preparation of the financial statements on the going concern basis is appropriate given that this is dependent on the receipt of other debtors which have been fully impaired?

We understand that the reference to the Other Debtors in the accounts is a reference to amounts owing by a shareholder who had failed to fully pay for his shares. The receipt of

NuSep Holdings Ltd Postal Address Contact Details E info@nusep.com 324 Burns Bay Road P.O. Box 823 P +612 8415 7300 W nusep.com Lane Cove NSW 2066 Lane Cove NSW 1595 F +612 8415 7399 ABN 33 120 047 556

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amounts outstanding on those shares is only one source of funds available to the Company. Note 1 to the 30 June 2012 annual accounts sets out a number of additional funding options available to the Company. These options include:

• Raising of additional capital in the current financial year. As announced to the ASX on 30 October 2012, the Company has completed a share placement of $1,167,091. In this regard, the Company has received $940,000 to date with the balance of $227,091 due for payment by 31 December 2012.

• The Company expects to receive $1,543,479 from the Australian Tax Office for eligible research and development activities carried out by the Company in the 2012 financial year under the research and development tax credit scheme. The Company has been advised that this amount has been approved for payment on or about the 14 December 2012.

• The Company, through its Singapore subsidiary PrIME Biologics Pte Ltd, has access to a S$1m Singapore Economic Development Board loan facility.

• The Company is negotiating funding facilities to support the PrIME Biologics plasma operations in Singapore. In this regard a S$6m investment was finalised in August 2012 with the Singapore based Luye group.

In addition the Company notes:

• The consolidated result at 30 June 2012 included non cash $4.4m impairment charge against intangible assets and other receivables and a further non cash $690,955 in depreciation and amortisation charges.

• Management had reviewed the Company and consolidated entity’s cashflow requirements and had satisfied itself that there were adequate resources in place to meet the planned operational and development activities for at least 12 months following the date of the annual report.

• At 30 June 2012, the Company had net assets of $4,562,379.

• The Company has no long term external debt/liabilities.

• Three of Company’s Directors personally extended a $1.5m line of credit to the Company. As at the date of this letter the Company has only drawn down $28,000 against this facility and that drawdown occurred prior to the 30 October 2012 share placement.

• For the year to 30 June 2012, revenues had increased by 29% to $2,549,415 and an increase in the Gross Profit of 31%.

NuSep Holdings Ltd 324 Burns Bay Road Lane Cove NSW 2066

Postal Address Contact Details E info@nusep.com P.O. Box 823 P +612 8415 7300 W nusep.com Lane Cove NSW 1595 F +612 8415 7399 ABN 33 120 047 556

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• Three of the Directors agreed to convert a further $273,724 of Director loans into shares. This loan conversion was approved at the 2012 AGM held on 30 November 2012; and

• At the AGM on 30 November 2012 the Company refreshed issues made in the previous 12 months for the purpose of Listing Rule 7.1 allowing the Company to undertake further share capital raisings should additional funds be required.

The Directors firmly believe that the Company is and has always remained a going concern. In the Directors’ opinion, there are reasonable grounds to believe that the Company is able to, and will continue to be able to, pay its debts as and when they become due and payable.

4. Given the Disclaimer, on what basis do you believe that the Company’s directors’ assessment of the going concern basis is sufficient and that all relevant information has been provided to the auditors?

As noted in response (2) above, the Directors were of the view that they had properly disclosed to the Auditor all of the information required by the Auditor and the Company is consulting with the Auditor for the purpose of seeking guidance as to required future disclosures. In addition, as noted in response (3) above, the Company has sufficient funding to pay its debts as and when due and believes that the Company can continue to operate as a going concern.

5. Please provide an update on the status of the research and development tax incentive referred to in the Disclaimer in the Audit Report.

As noted in response (3) above, the Company has been advised that the R&D Tax incentive has been approved for payment on or about 14 December 2012.

6. Given the material uncertainty that may cast significant doubt as to the Company’s ability to continue as a going concern, what steps does the Company intend to take to:

  - _(a) Avoid the material uncertainty leading to an adverse or otherwise qualified audit opinion in future periods; and_ 

  - _(b) Remain a going concern for the next financial period, meeting the requirements of listing rules 12.1, 12.2 and 12.5._ 

• 6(a) As noted in response (2) above, the Company is consulting with the auditors as to required disclosures for future audits.

• 6(b) The Company maintains proper financial management to ensure that funds raised noted in response 3 above and revenues generated in its operations will be sufficient to pay its debts as and when due during the next financial period and beyond. This

NuSep Holdings Ltd Postal Address Contact Details E info@nusep.com 324 Burns Bay Road P.O. Box 823 P +612 8415 7300 W nusep.com Lane Cove NSW 2066 Lane Cove NSW 1595 F +612 8415 7399 ABN 33 120 047 556

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will ensure that the Company can continue to meet the requirements of Listing Rules 12.1, 12.2 & 12.5.

7. Is the Company of the view that the financial condition of the Company would be sufficient to warrant continued listing on ASX in accordance with the requirements of listing rule 12.2?

Yes.

8. If the answer to question 7 is “Yes”, please explain why the Company has formed the conclusion that the financial condition of the Company would be sufficient to warrant continued listing on ASX in accordance with the requirements of listing rules 12.2.

Please see responses 3 & 6 above.

9. If the answer to question 7 is “No”, please explain what steps the Company has taken, or proposes to take, to warrant continued listing on ASX in accordance with the requirements of listing rule 12.2. Specifically, the Company should submit the reasons (including any previous disclosures made to the market) it considers relevant given the matters outlined in the Auditor’s Report.

N/A

10. Please confirm that the Company is in compliance with the listing rules and, in particular, listing rule 12.2.

In the Company’s opinion, and for the reasons set out in this letter, the Company is in compliance with the ASX Listing Rules, particularly Listing Rule 12.2.

Please let me know if you require any further information in respect of this matter.

Yours sincerely,

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Prakash Patel Managing Director

Postal Address P.O. Box 823 Lane Cove NSW 1595

Contact Details E info@nusep.com P +612 8415 7300 W nusep.com F +612 8415 7399 ABN 33 120 047 556

NuSep Holdings Ltd 324 Burns Bay Road Lane Cove NSW 2066

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ASX Compliance ABN 26 087 780 489 20 Bridge Street Sydney NSW 2000 PO Box H224 Australia Square NSW 1215

www.asx.com.au

6 December 2012

Mr Prakash Patel / Ms Swapna Keskar Managing Director / Company Secretary Nusep Holdings Limited 324 Burns Bay Road Lane Cove NSW 2066

By Email

Dear Mr Patel & Ms Keskar

Nusep Holdings Limited (the “Company ”)

ASX refers to the following:

1. The Company’s Annual Financial Report for the period ended 30 June 2012 , lodged with ASX on 28 September 2012 (the “Annual Report”).

2. The Independent Audit Report to the Annual Report (“Audit Report”) which contains a Disclaimer of Opinion (the “Disclaimer”) which states the following:

Basis for Disclaimer of Opinion

Significant Uncertainty Regarding Going Concern

The financial statements have been prepared on the going concern basis, which indicates continuity of business activities and the realisation of assets and settlement of liabilities in the normal course of business. As at 30 June 2012 the group had net current liabilities of ($3,520,296). The group made a net loss of ($6,308,215) and incurred net cash outflows from operating activities of ($655,087), net cash outflows from investing activities of ($2,402,653) and cash inflows from financing activities of $3,202,178 for the year ended 30 June 2012.

As disclosed in Note 1(a) to the financial report, the ability of the group to continue as a going concern is dependent on the receipt of a research and development tax incentive from the Australian Taxation Office, the recovery of other debtors which have been fully impaired during the year, and the raising of sufficient capital over the coming 12 months to achieve projected cash flows.

These conditions, along with other matters as set forth in Note 1(a), indicate the existence of a material uncertainty which casts significant doubt on the group's ability to continue as a going concern. Therefore the group may be unable to realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

Disclaimer of Opinion

Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis

for an audit opinion. Accordingly, we do not express an opinion on the financial report.

Other Matters

Prior period Auditor's Review Report

We draw attention that for the half year ended 31 December 2011 the company's previous Auditor issued an independent Auditor's Review Report that contained a Disclaimer of Opinion. The disclaimer was based upon the previous auditor not being able to obtain sufficient appropriate evidence to provide a basis for a review conclusion. The basis for the disclaimer of conclusion included: unsatisfactory explanations from management in respect of capitalised expenditure recognised as intangible assets; doubt over the collectability of other receivables; and a significant uncertainty regarding going concern.

Relevant Listing Rules and Guidance

1. Listing Rule 12.2 – An entity's financial condition (including operating results) must, in ASX's opinion, be adequate to warrant the continued quotation of its securities and its continued listing .

2. Listing Rule 19.11A(b) – If a listing rule requires an entity to give ASX accounts, the following rules apply:

   • (b) The accounts must be prepared to Australian accounting standards. If the entity is a foreign entity the accounts may be prepared to other standards agreed by ASX .

3. Listing Rule 19.2 – An entity must comply with the listing rules as interpreted :

   • in accordance with their spirit, intention and purpose ;

   • by looking beyond form to substance; and

   • in a way that best promotes the principles on which the listing rules are based

Questions for Response

In light of the Audit Report, the information contained in the Annual Report and the application of the listing rules stated above, can the Company please respond to the following:

1. Is the Company able to confirm that in the Directors’ opinion the Annual Report:

   • (a) complies with Australian Accounting Standards; and

   • (b) gives a true and fair view of the financial performance of the Company?

2. Given the Disclaimer relates to an inability of the auditor to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion, what steps does the Company intend to take to obtain an unqualified audit report in future financial periods?

3. Please explain how you have determined that the preparation of the financial statements on the going concern basis is appropriate given that this is dependent on the receipt of other debtors which have been fully impaired?

4. Given the Disclaimer, on what basis do you believe that the Company’s directors’ assessment of the going concern basis is sufficient and that all relevant information has been provided to the auditors?

5. Please provide an update on the status of the research and development tax incentive referred to in the Disclaimer in the Audit Report.

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1. Given the material uncertainty that may cast significant doubt as to the Company’s ability to continue as a going concern, what steps does the Company intend to take to:

   • (a) Avoid the material uncertainty leading to an adverse or otherwise qualified audit opinion in future periods; and

   • (b) Remain a going concern for the next financial period, meeting the requirements of listing rules 12.1, 12.2 and 12.5.

2. Is the Company of the view that the financial condition of the Company would be sufficient to warrant continued listing on ASX in accordance with the requirements of listing rule 12.2?

3. If the answer to question 7 is “Yes”, please explain why the Company has formed the conclusion that the financial condition of the Company would be sufficient to warrant continued listing on ASX in accordance with the requirements of listing rules 12.2.

4. If the answer to question 7 is “No”, please explain what steps the Company has taken, or proposes to take, to warrant continued listing on ASX in accordance with the requirements of listing rule 12.2. Specifically, the Company should submit the reasons (including any previous disclosures made to the market) it considers relevant given the matters outlined in the Auditor’s Report.

5. Please confirm that the Company is in compliance with the listing rules and, in particular, listing rule 12.2.

Please note the ASX reserves its right under listing rule 18.7 to release this letter and the Company’s response to the market. Accordingly, the Company’s response should address each question separately and be in a format suitable for release to the market.

If you wish to provide submissions, unless the information is required to be released to the market immediately under listing rule 3.1, a response is requested as soon as possible and, in any event by no later than 9.30 am AEDT on Thursday, 13 December 2012 .

Any submissions or response should be sent to me by return email. It should not be sent to the ASX Market Announcements Office.

If you have any queries regarding any of the above, please contact me.

Yours sincerely

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Elvis Onyura

Adviser, Listings (Sydney)

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