_a._ CORTICAL TISSUE. In nearly all these squamules the cortex is of the “decomposed” type. In a few species there is a plectenchymatous formation—in _Cl. nana_, a Brazilian ground species, and in two New Zealand species, _Cl. enantia_ f. _dilatata_ and _Cl. Neo-Zelandica_. The principal growing area is situated all round the margins though generally there is more activity at the apex. Frequently there is a gradual perishing of the squamule at the base which counterbalances the forward increase. The upper surface in some species is cracked into minute areolae; the cracks, seen in section, penetrate almost to the base of the decomposed gelatinous cortex. They are largely due to alternate swelling and contraction of the gelatinous surface, or to extension caused, though rarely, by intercalary growth from the hyphae below. The surface is subject to weathering and peeling as in other lichens; but the loss is constantly repaired by the upward growth of the meristematic hyphae from the gonidial zone; they push up between the older cortical filaments and so provide for the expansion as well as for the renewal of the cortical tissue. _b._ GONIDIAL TISSUE. The gonidia consisting of Protococcaceous algae form a layer immediately below the cortex. Isolated green cells are not unfrequently carried up by the growing hyphae into the cortical region, but they do not long survive in this compact non-aerated tissue. Their empty membranes can however be picked out by the blue stain they take with iodine and sulphuric acid. Krabbe[390] has described the phases of development in the growing region: he finds that differentiation into pith, gonidial zone and cortex takes place some little way back from the edge. At the extreme apex the hyphae lie fairly parallel to each other; further back, they branch upwards to form the cortex, and to separate the masses of multiplying gonidia, by pushing between them and so spreading them through the whole apical tissue. The gonidia immediately below the upper cortex, where they are well-lighted, continue to increase and gradually form into the gonidial zone; those that lie deeper among the medullary hyphae remain quiescent, and before long disappear altogether. Where the squamules assume the upright position (as in _Cladonia cervicornis_), there is a tendency for the gonidia to pass round to the lower surface, and soredia are occasionally formed.