I hope someone can help me understand what is happening. Until now, I have held only common shares in my trading account. I have no experience with warrants.

I now read that there is a new offering coming available. If I read correctly, each new unit, priced at .28, will consist of one common share and half a warrant (.50) with some complicated provisos on the warrant. Since this release the share price has dropped like a stone, which is not hard to understand. I have several questions.

1. If a new unit is issued, I am surprised it is issued with the common share component below the previous value of the existing shares, unless, of course, they are attributing value to the warrants. Is this the way it is normally done?

2. Are people selling off in order to take the proceeds and purchase the new units, thereby possibly increasing their volume of shares and picking up the warrants as a bonus?

3. How does this impact on holders of existing shares? It seems to me that the market vlaue of the shares I am holding has dropped nearly 15% in the past couple of hours.

I called the brokerage with which I deal and the agent to whom I spoke said, among other things "this just doesn't make any sense."

Can anyone shed some light on this?

Oscar's Dad