1  Introduction

This  document  sets out  the policies and procedures that  AirXpanders, Inc.  (AirXpanders) will comply with in relation to continuous disclosure.

2  Objectives

The objectives of this policy are to:

  1. establish  procedures  for  the  reporting  of  price  sensitive  information  to  the  Chief Executive Officer and the Australian Company Secretary for review;
  2. establish procedures for the preparation, approval and release of  announcements  to  the ASX; and
  3. establish  procedures  to  enable  compliance  by  AirXpanders  with  its  continuous disclosure obligations under the Corporations Act and ASX Listing Rules.

This policy applies to:

  1. all directors of the Board of Directors of AirXpanders (Board); and
  2. all officers, employees, contractors and consultants of the AirXpanders group.

3  Continuous disclosure obligation

3.1  Disclosure obligation

(a)  Legal obligation of disclosure

AirXpanders has continuous disclosure obligations under the Corporations Act and ASX Listing Rules  to  keep  the  market  fully  informed  of  any  price  sensitive  information  relating  to AirXpanders. ASX Listing Rule 3.1 requires that AirXpanders immediately notify the ASX of any information of which AirXpanders becomes aware, concerning AirXpanders, that a reasonable person would expect to have a material effect on the price or value of any securities issued by  AirXpanders(including  CHESS  Depositary  Interests  (CDIs)  over  securities  issued  by  AirXpanders) (Material Information).

(b)  Material effect on the price of securities

A reasonable person is taken to expect information to have a material effect on the price or value of  securities  if  it  would,  or  would  be  likely  to,  influence  persons  who  commonly  invest  in securities in deciding whether or not to subscribe for, buy or sell the securities.In forming a view as to whether a reasonable person would consider information to be material, previous disclosure to the market should be considered, for example,  previously released profit expectations, commentary on likely results, or detailed business plans or strategies. A list of matters that may be considered material is set out in  Annexure A. This list is merely
indicative and should not be seen as an exhaustive list of the matters that should be considered for disclosure.

(c)  Information in AirXpanders’ knowledge

AirXpanders becomes aware of information if any of its officers has, or ought reasonably to have, come into possession of the information in the course of the performance of  their  duties as  an officer of AirXpanders.
An  officer  includes  a  director  or  secretary  of  AirXpanders  and  a  person  who  makes,  or participates  in  making,  decisions  that  affect  the  whole  or  a  substantial  part  of  the  business  of AirXpanders.

(d)  Release of information to others

Material  Information  must  not  be  released  to  any  person  (e.g.  brokers,  analysts,  the  media, professional bodies or any other person) until AirXpanders has given the information to the ASX and has received an acknowledgement that the ASX has released the information to the market

3.2  Requirement to disclose information ‘immediately’

Under ASX Listing Rule 3.1,  Material Information must be disclosed to  the  ASX immediately upon  AirXpanders  becoming  aware  of  the  information,  unless  it  falls  within  the  exception  to disclosure under ASX Listing Rule 3.1A (see section 3.3 below).ASX considers the  word “immediately” should not be read as meaning  “instantaneously”, but rather as meaning “promptly and without delay”.Factors that the  ASX will take into account in assessing whether AirXpanders has complied with its obligations to disclose information promptly and without delay include:

  1. where and when the information originated;
  2. the forewarning (if any)  AirXpanders had of the information;
  3. the amount and complexity of the information concerned;
  4. the need in some cases to verify the accuracy or bona fides of the information;
  5. the need for an announcement to be carefully drawn so that it is accurate, complete and not misleading;
  6. the  need  in  some  cases  for  an  announcement  to  comply  with  specific  legal  o r  ASX Listing Rule requirements; and
  7. the need in some cases for an announcement to be approved by the Board.

3.3  Exceptions to disclosure

ASX Listing Rule  3.1A provides that Material Information will not need to be provided to  the ASX in certain circumstances. The  application of ASX Listing Rule 3.1A  will be determined on a case-by-case basis.

Material Information will not need to be provided to  the  ASX if  all  of the following  exceptions apply in respect of the Material Information:

  1. one or more of the following five situations applies:
    • it would be a breach of the law to disclose the Material Information;
    • the Material Information concerns an incomplete proposal or negotiation;
    • the Material Information comprises matters of supposition or is insufficiently definite to warrant disclosure;
    • the Material Information is generated for the internal management purposes of AirXpanders; or
    • the Material Information is a trade secret; and
  2. the information is confidential and ASX has not formed the view that the information has ceased to be confidential; and
  3. a reasonable person would not expect the information to be disclosed.

3.4  Procedure for disclosure

The following procedures apply to the preparation, approval and release of continuous disclosure announcements to the ASX:

  1.  Executives  and  senior  management  must  notify  the  Chief  Executive  Officer and Chief Financial Officer as soon as they become aware of information that  may be Material Information (see below).
  2.  Chief Financial Officer will:
    • review the Material Information reported by executives and senior management with the Chief Executive Officer (or in his absence, the Chairman);
    • determine, in consultation with the Chief Executive Officer (or in his absence,the Chairman), whether any of the Material Information is required to be disclosed to the ASX;
    • if disclosure is required, request the Australian Company Secretary to prepare the form of announcement to the ASX, for approval by the Chief Financial Officer and, if the Chief Financial Officer considers it necessary, the Board;
    • once approved, authorize the Australian Company Secretary to lodge the announcement with the ASX; and
    • post the announcement on AirXpanders’ website after receiving confirmation from the ASX that it has been released to the market.
  3. (c) When assessing whether to approve a draft announcement, the Chief Executive Officer, Chief Financial Officer or the Board must ensure that the announcement is factual, complete, balanced and expressed in a clear and objective manner that allows investors to assess the impact of the information when making investment decisions. In this context, “balanced” means disclosing both positive and negative information.

3.5  Obligations of executives and senior managers

As soon as an executive or senior manager  becomes  aware of information that  may be Material Information,  the executive or senior manager  must provide to  the Chief Executive Officer and the Chief Financial Officer the following information:

  1. a general description of the matter;
  2. details of the parties involved;
  3. the relevant date of the event or transaction;
  4. the status of the matter (e.g.  final/negotiations still in progress/preliminary negotiations only);
  5. the estimated value of the transaction (if applicable);
  6. the estimated effect on AirXpanders’ finances or operations; and
  7. the names of any in-house or external advisers involved in the matter.Any change in the information  must be immediately  notified to  the Chief Executive Officer and the Australian Company Secretary.The determination of whether certain information is Material Information necessarily involves the  use  of  judgement.  Any  information  that  may  have  a  material  effect  on  the  price  of AirXpanders’ securities should be treated as if it is Material Information and the  Chief Executive Officer and the Australian Company Secretary  should be notified following the process outlined above.

3.6  Analyst/media communications

Information  provided  to,  and  discussions  with,  analysts  are  also  subject  to  the  continuous disclosure policy.
Only  the  Chairman  and  Chief  Executive  Officer  are  authorised  to  issue  statements  or  make comments to the media or to speak on behalf of  AirXpanders  to analysts or journalists. Other executives or members of senior management may speak on behalf of AirXpanders subject to prior approval from the  Chairman or  Chief Executive Officer.  The  Chief Financial Officer  is  authorised  to  speak  to  analysts  and  proxy  advisers  about  matters  specific  to  the financial reports of AirXpanders.Material Information must not be selectively disclosed (i.e. to analysts, the media or members of the medical community) before being announced to the ASX. All information that is proposed to be  presented  to  analysts,  journalists  or  members  of  the  medical  community  that  may  include Material  Information  should  be  provided  to  the  Chief  Executive  Officer  and  the  Chief Financial Officer before presenting that information externally. All inquiries from analysts must be referred to the Chief Executive Officer or the Chief Financial Officer (in the case of financial reports). All material to be presented at an analyst briefing must be approved by or referred through the  Chief Executive Officer  (or his or her delegate)  before the briefing.

All inquiries from the media must be referred to the  Chief Executive Officer. All media releases must  be  approved  by  or  referred  through  the  Chief  Executive  Officer  (or  his  or  her  delegate) before release to journalists.

3.7  Interview/briefing black-out period

During the period from the end of the financial year or half -year and the release to the ASX of the financial results of  AirXpanders  for the relevant period, no employee of  AirXpanders  maydiscuss  financial  performance  or  forecasts  with  any  analyst,  investor  or  the  media,  unless  the information has already been disclosed to the ASX.Any person who is given permission by the  Chief Executive Officer  to give a  media interview, speak with analysts, or make a presentation must notify the Australian Company Secretary of thedate  and  time  for  the  interview  and  must  give  a  copy  of  any  presentation  to  the  Australian Company Secretary, before the interview/presentation.

Additional periods in which interviews may not be given or in which presentations may not be made without the specific permission of the  Chief Executive Officer  may be imposed. Relevant persons will be notified of any such additional interview/briefing black-out period.

3.8  Market rumours and correcting a false market

Under  ASX  Listing  Rule  3.1B,  if  the  ASX  considers  that  there  is,  or  is  likely  to  be,  a  false market  in  AirXpanders’  securities,  and  requests  information  from  AirXpanders  to  correct  or prevent the false market AirXpanders must immediately give that information to the ASX.This obligation to give  information  applies  even where an exception described above in  section 3.3 applies. Unless disclosure is required to correct or prevent a false market, AirXpanders has a general “no comment” policy in relation to market speculation and rumours.

3.9  Trading halts and suspensions

In order to facilitate an orderly and informed market, it may be necessary to request a trading halt or voluntary suspension of trading in AirXpanders’ securities from the ASX, for example:

  1. to manage unexplained material price and/or volume change;
  2. if confidential information about AirXpanders is inadvertently disclosed;
  3. prior to a press conference or briefing being held in advance of a formal announcement; or
  4. to  prevent  an  uninformed  market  pending  the  announcement  of  price  sensitive information.

The  Chief Executive Officer  is authorised to request a trading halt or voluntary suspension. In the absence of the  Chief Executive Officer,  any two directors are together  authorised to make a decision to request a trading halt or voluntary suspension. In these circumstances the Chief Executive Officer will first consult with the Chairman (or in his absence,  the Lead Independent  Director, failing whom, another director)  regarding the decision to request a trading halt or a voluntary suspension. No  other  employees  are  authorised  to  request  a  trading  halt  or  suspension  on  behalf  of AirXpanders.

4  Relationship  between  continuous  disclosure  and  other  disclosure obligations

In addition to complying with its continuous disclosure obligations,  AirXpanders  is required to disclose other types of information under the ASX Listing Rules and  applicable securities laws. For example, AirXpanders must prepare and issue quarterly ASX releases and periodic financial reports and accounts.  AirXpanders acknowledges that compliance with its obligations to  prepare such documents  does not  affect  its  continuous disclosure obligations under  ASX  Listing Rules3.1 and 3.1B.

5  Communication with stockholders

AirXpanders  acknowledges  that  effective  communication  with  CDI  holders  and  stockholders assists  the  creation  and  maintenance  of  an  informed  market  in  AirXpanders’  securities  and enhances  corporate  governance  by  encouraging  a  culture  of  transparency  in  relation  to AirXpanders’ activities.  AirXpanders seeks to:

  1. provide a comprehensive and up-to-date website, which includes copies of all Material Information lodged with the ASX (including announcements and financial information) as  well  as  relevant  and  non-confidential  policies  and  charters  and  other  company information;
  2. place  all  relevant  announcements,  briefings  and  speeches  made  to  the  market  or  the media on the website; and
  3. place full text of annual reports, notices of meetings of stockholders and accompanying explanatory notes on the website. Stockholder  meetings  are  an  opportunity  for  CDI  holders  and  stockholders  and  other stakeholders to hear from and put questions to the Board, management and the external auditor. Stockholders and CDI holders may attend the meeting in  person or by proxy, representative or attorney. If stockholders or CDI holders are present at  stockholder meetings, the Chairman will provide  reasonable  time  following  the  consideration  of  reports  for  questions  and  comment  on these matters.

6  Management of the policy

AirXpanders  has  nominated  the  Australian  Company  Secretary  as  the  person  with  primary responsibility for all communication with the ASX. The Australian Company Secretary is responsible for:

  1. liaising with the ASX in relation to continuous disclosure issues;
  2. ensuring that the system for the disclosure of all  Material  Information to the ASX in a timely fashion is operating;
  3. co-ordinating  the  actual  form  of  disclosure,  including  reviewing  proposed announcements  by  AirXpanders  to  the  ASX  and  liaising  with  the  Chief  Executive Officer or Chairman in relation to the form of any ASX releases;
  4. liaising with the Board (where necessary) in relation to the disclosure of information;
  5. keeping a record of all ASX and other releases that have been made;
  6. periodically  reviewing  AirXpanders’  disclosure  procedures  in  light  of  changes  to  th ASX Listing Rules or  applicable securities laws  and recommending  to the Board  any necessary changes to the procedures; and
  7. preparing regular disclosure reports to the Board, which advise of:
    • material matters considered and the form of disclosure (if any); and
    • any material changes to AirXpanders’ continuous disclosure processes.

7  Contraventions and penalties

7.1  Contravention

AirXpanders takes continuous disclosure very seriously. AirXpanders contravenes its continuous disclosure  obligations  if  it  fails  to  notify  the  ASX  of  the  information  required  by  the  ASX Listing Rules.

7.2  Penalties for breach

If  AirXpanders  contravenes its continuous disclosure obligations under the  ASX  Listing Rules, the ASX may suspend trading in  AirXpanders’  securities  or may de-list  AirXpanders  from the ASX.
If  AirXpanders contravenes its continuous disclosure obligations, it may also be liable under the Corporations Act and may face:

  1. criminal liability, which attracts substantial monetary fines; and
  2. civil liability for any loss or damage suffered by any person as a result of  AirXpanders’failure to disclose relevant information to the ASX. However, if the court finds that  AirXpanders  has acted honestly and reasonably,  the court may, in its discretion, excuse AirXpanders from civil liability.

7.3  Persons involved in the contravention

AirXpanders’  directors,  officers,  employees,  contractors,  consultants  or  advisers  who  are involved in the contravention by  AirXpanders  of  its  continuous disclosure obligations  may also face criminal penalties and civil liability. Substantial  pecuniary penalties, imprisonment, or both, may apply.

7.4  “Due diligence” defence

A person  will not be considered to be involved in the contravention if the person proves that they:

  1. took  all  reasonable  steps  to  ensure  that  AirXpanders  complied  with  its  continuous disclosure obligations; and
  2. after doing so, believed on reasonable grounds that  AirXpanders  did comply  with its continuous disclosure obligations.

7.5  ASIC infringement notices

As an alternative to seeking the imposition of a civil penalty, ASIC may issue AirXpanders with an infringement notice for an alleged contravention of the continuous disclosure obligations. An infringement notice may be issued if ASIC has reasonable grounds to believe ( even if it cannot prove)  that  AirXpanders  has  contravened  its continuous  disclosure  obligations  and  ASIC  has followed specified procedures.

The risk of AirXpanders being issued with an infringement notice  despite  ASIC not being able to prove  that AirXpanders has contravened its continuous disclosure obligations underscores the importance of AirXpanders and its personnel complying with this policy.

8  Further information

Any  person  who  has  questions  about  this  policy,  or  who  requires  further  information,  should contact the Chief Executive Officer or the Chief Financial Officer.

9  Review of this policy

This policy may be amended by resolution of the Board of Directors.Approved by the Board of Directors of AirXpanders, Inc.

Annexure A – Material Information

Material Information may include:

  1. the  financial  condition,  results  of  operations,  AirXpanders-issued  forecasts  and  the  earning performance  of  AirXpanders  or  an  affiliate,  which  are  significantly  different  from  that anticipated by AirXpanders or the market;
  2. a  proposed  acquisition  or  disposition  of  material  assets  to  be  announced  by  AirXpanders,  an affiliate or joint venture partner;
  3. material  developments  in  regulatory  approval  processes,  including  in  relation  to  device reimbursement;
  4. material developments in relation to the intellectual property of AirXpanders and its affiliates;
  5. a transaction for which the consideration payable or receivable  is a significant proportion of the written down value of  AirXpanders’  consolidated assets. Normally, an amount of 5% or more would be significant, but a smaller amount may be significant in a particular case;
  6. events or occurrences that have an impact on the operations of AirXpanders or an affiliate;
  7. natural disasters or accidents that have particular relevance to the businesses of  AirXpanders  or its suppliers;
  8. significant changes in technology or the application of technology which could affect business ;
  9. a proposed announcement to alter pricing or tariff policies other than in the ordinary course of
  10. resolving to pay a dividend, or a recommendation that no dividend be paid;
  11. legal proceedings against or allegation of any breach of the law, whe ther civil or criminal, by AirXpanders  or any of its employees (other than debt recovery proceedings or insured workers’ compensation claims);
  12. any notification by a ratings agency that it will review the credit rating of AirXpanders;
  13. a change in AirXpanders’ financial forecast or expectation;
  14. the appointment of a receiver, manager, liquidator or administrator in respect of any loan, trade credit, trade debt, borrowing or securities held by AirXpanders or any affiliate;
  15. changes in AirXpanders’ senior management or auditors;
  16. entry  by  AirXpanders  or  an  affiliate  into  a  new  line  of  business  or  the  discontinuance  of  a particular line of business; and
  17. planning to undertake a significant financing or security issue (whether debt or equity) or to take other action with respect to outstanding securities (e.g. stock repurchase program, redemption of bonds) or any default on any securities.