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1 ASX RELEASE 28 October 2013 Spencer Resources Ltd ( Spencer or The Company ) ASX Code: SPA ABN Level 4, 66 Kings Park Road West Perth WA 6005 Phone Fax info@spencerresources.com.au Inquiries regarding this report and company business may be directed to : David Paterson Chairman Anthony Woodward Bulletproof CEO BOARD OF DIRECTORS David Paterson Chairman Benjamin Miels Director Jay Stephenson Director & Secretary EXPLORATION PROJECTS South Australia Mt Double Pandurra Block ISSUED CAPITAL Shares on Issue: 19,933,000 Quoted shares: 16,013,000 Unlisted Options: 6,475,000 Investor Inquiries info@spencerresources.com.au BULLETPROOF NETWORKS PTY LTD SIGNIFICANT ACQUISITION, CHANGE of Business and Name and Capital Raising Spencer has signed an agreement with Bulletproof Networks Pty Ltd (Bulletproof) that will see Spencer acquire 100% of the issued capital of Bulletproof. Consideration involves 41,666,667 Spencer ordinary shares, 16,666,667 Class A Performance Shares and 25,000,000 Class B Performance Shares (subject to ASX and other regulatory approval). There is no cash consideration and the performance shares are linked to financial hurdles. The Bulletproof transaction is subject to a Spencer shareholders meeting approval and a number of other matters including a capital raising, compliance with Chapters 1 & 2 of the ASX Listing Rules and re admission to the official list of ASX. Bulletproof is a very successful Sydney based company involved in Information Technology (IT) and Cloud Computing locally and overseas. Bulletproof s focus on technical expertise, highly reliable and secure infrastructure and world class managed services has seen the company achieve over 40 per cent compound annual growth over the last five years. This impressive sustained growth has seen Bulletproof recognised as a Deloitte Fast 50 technology company every year since 2010 as well as being named in the CRN Fast 50 in 2012 and the BRW Fast 100 in Over the last 12 years, Bulletproof has consistently been first to market with public and private IT managed cloud based services and innovations. Bulletproof was the first company in Australia to launch a public managed cloud IT service in 2006 and the first to launch a managed Amazon Web Services (AWS) offering in AWS is the world s largest and fastest growing unmanaged cloud provider. Additional background on Bulletproof accompanies this announcement. The transaction includes the appointment of two new executive directors, being the founders of Bulletproof, Anthony Woodward (CEO elect) and Lorenzo Modesto (COO elect). In addition, there will be an appointment of a new independent Chairman. Mr Stephe Wilks has agreed to take on this role post transaction completion. Mr Wilks brings with him a wealth of experience in publicly listed companies, particularly those in a high growth phase, including as chair of EFTEL Limited, which recently sold to M2 Communications Limited. Additional background on each of the proposed new directors is provided later in this release. Spencer will change its name to Bulletproof Limited. 1

2 Spencer will also undergo a capital consolidation after the acquisition of Bulletproof and will then raise additional capital of at least 1,600,000 with share brokers Taylor Collison as lead manager. This will provide cash reserves in excess of 3.0 million. A post transaction pro forma balance sheet (subject to shareholder approval) is provided as part of this release and includes an indicative share consolidation. Following a change in name to Bulletproof a process will begin that sees your company actively but prudently divest its exploration interests. The Company will seek to maximize its position from the exit process, possibly via joint venture or outright sale should market conditions allow. It is envisaged that in the first half of 2014 the Company will have a single focus and primarily be involved in Information Technology (IT) infrastructure and the managed cloud computing IT environment in which Bulletproof is an Australian leader. The board believes the proposed acquisition and change of business post transaction are both very positive and in the interest of shareholders. An Independent Expert Report has been commissioned to assist all shareholders in understanding and voting on the proposed acquisition. This will be mailed to all Spencer shareholders and form part of a notice for an extraordinary general meeting. Funds (net of costs) raised from the capital raising being supported by Taylor Collison will be used as follows: Working capital to underpin the company s growth over the next 1 2 years To accelerate the company s growth by funding additional sales and marketing activities Continued product and service development to maintain market leadership Full details and terms relating to the issue of 16,666,667 Class A Performance Shares and 25,000,000 Class B Performance Shares referred to earlier will be provided in the Notice of Meeting sent to all shareholders. The financial hurdles that must be achieved for the Performance Shares to be converted to Ordinary Shares in Spencer relate to earnings before interest, tax, depreciation and amortisation (EBITDA). The hurdles apply for the years ending 30 June 2014 and 2015 and involve EBITDA trigger targets substantially in excess of the audited number of 2.21million achieved by Bulletproof for the year ending 30 June In addition there are debt restrictions that apply and if breached they significantly limit conversion of Performance Shares to Ordinary Shares in Spencer. The performance based purchase consideration model applying to the proposed acquisition of Bulletproof is seen to be prudent and a way to achieve mutual shareholder benefit going forward. David Paterson Chairman 2

3 Information on Bulletproof Bulletproof Networks Pty Ltd (Bulletproof) is an Australian leader in providing managed cloud computer Infrastructure Technology (IT) services to Australian business, enterprise and Government customers. Over the last 12 years, Bulletproof has consistently been first to market with public and private IT cloud based services and innovations. Bulletproof was the first company in Australia to launch a public cloud IT service in 2006 and the first to launch a managed Amazon Web Services (AWS) offering in AWS is the world s largest and fastest growing unmanaged cloud provider. Bulletproof s focus on technical expertise and highly reliable and secure infrastructure supporting world class IT managed services has seen the company secure more than 40 per cent compound annual growth over the last five years. This impressive sustained growth has seen Bulletproof recognised as a Deloitte Fast 50 technology company every year since 2010 as well as being named in the CRN Fast 50 in 2012 and the BRW Fast 100 in Bulletproof has a large number of blue chip clients with contracted services and hosts a number of high profile web sites on its cloud platform including: A global website with more than 1,120,000+ members, collecting A135+ million in One of Australia s largest radio networks with more than 790,000 listeners The official Australian website of London 2012 Olympics, with more than 2.85 million unique visitors during the event Australia s eighth highest traffic website with 275,000 members Bulletproof consistently delivers 100% uptime during peak periods for large online campaigns, including Movember.com, Olympics.com.au and Budget.gov.au in Bulletproof is also trusted by some of Australia s largest retailers, hosting ecommerce sites for Aldi, Quiksilver, Universal Music Australia and many more. Over 1 billion of ecommerce revenue is transacted through Bulletproof supported platforms each year. Bulletproof has established a culture of technical and service based innovation by dedicating 25 per cent of its workforce entirely to service development and enhancement. This approach has seen the company recognised by its nomination as a finalist in the BRW Digital Innovation Awards in Bulletproof achieved earnings before interest, tax, depreciation and amortisation (EBITDA) of over 2.2 million on revenues of million for FY2013, of which more than 80% was recurring, annuity based. Financial Performance History Year end June FY11 (unaudited) FY12 (unaudited) FY13 (audited) Revenue 6.29m 10.13m 14.83m EBITDA 1.06m 1.16m 2.21m 3

4 Background information on proposed new directors Incoming independent chairman Mr. Stephe Wilks BSc LLM Stephe Wilks has over 20 years experience in the telecommunications industry both within Australia and overseas. He has held CxO and senior executive positions with BT Asia Pacific, Optus, Hong Kong Telecom, Nextgen Networks and Personal Broadband Australia. He was also a consulting director with investment bank NM Rothschild. Stephe was Chair of Eftel Limited until June 2013 when the company was sold, and is currently a Non Executive Director of Service Stream Limited, Tel.Pacific Limited and 3Q Holdings Limited. Stephe is on the advisory board of the Network Insight Group and consults to a number of companies in the media and technology industries. Incoming executive director Anthony Woodward BSc Anthony Woodward, BSc., is a Computer Science graduate with a background in software engineering and Internet Service Provider technology, and business experience gained first hand from the Internet Service Provider and Managed Cloud Services industries. In 1995, Anthony started an Internet Service Provider (ISP), which after merging with a competitor and having grown to 15,000 users, was sold to Singapore based, NASDAQ listed company Pacific Internet (now Pacnet) in In 2000, Anthony started Bulletproof Networks, providing Managed Services for corporate Australia. Anthony has led Bulletproof through several years of rapid growth, and it is now the fastest growing Tier 1 Managed Hosting and Cloud Services provider in the Australian market. Anthony oversees the strategy, corporate vision and direction of Bulletproof. Anthony continues to grow his expertise through experience at Bulletproof and his membership of the CEO Institute. Incoming executive director Lorenzo Modesto Lorenzo Modesto started in the Internet industry in 1996 after 8 years experience in Customer Service. After joining Zip Internet Professionals as Director of Sales and Marketing in January 1997, Lorenzo helped develop Zip s brand, public relations presence and customer base, seeing the company grow from 2,000 to nearly 15,000 subscribers and establishing Zip as a wholesale supplier of bandwidth in Australia during a period of consolidation in the industry. During this time, Zip also won the inaugural Best ISP in Australia award from Internet magazine Internet.au, significantly boosting monthly subscriptions. When Zip Internet Professionals merged with another ISP (World Reach) in 1998, as Director of Marketing for the new entity Lorenzo oversaw its rebranding and establishment of the company as a high profile premier home and corporate ISP. When Zip World was sold to Pacific Internet in 1999, Lorenzo took on the role of Director of Business Development as well as being the spokesman for the local entity. During this time, he was pivotal to Pacific establishing itself as one of the first DSL providers with Australia s first commercial DSL offering. In August 2001, Lorenzo joined Bulletproof as Director of Sales and Marketing, with the establishment of Bulletproof s growth with key customers including Telstra and BlueScope Steel. Lorenzo has contributed to the positioning of Bulletproof Networks as a leader in the emerging Australian Managed Cloud Services industry. 4

5 Indicative timetable Spencer has made application to Australian Securities Exchange (ASX) for determinations on the relevant transaction approvals which will be required for the acquisition of Bulletproof. The significant change to the nature and scale of the Company s main business activity arising from the Bulletproof acquisition will require re compliance with ASX s admission requirements in chapters 1 and 2, including the lodgement of a prospectus with the Australian Securities and Investments Commission (ASIC) to facilitate, amongst other matters, the capital raising referred to above. An indicative timetable for re compliance with the admission requirements is set out in the following table: Event Date Despatch Notice of Meeting and Independent Expert Report 5 November 2013 Lodge Prospectus with ASIC and ASX 22 November 2013 General Meeting 6 December 2013 Suspension of trading in the Company s securities 6 December 2013 Offer under Prospectus opens 1 December 2013 Offer under Prospectus closes 9 December 2013 Consolidation record date 17 December 2013 Completion of Bulletproof acquisition and issue of shares under the Prospectus 20 December 2013 Expected date for re quotation of the Company s shares on ASX 23 December 2013 Proforma capital structure on completion of the transaction The effect of the Bulletproof Acquisition on the pre consolidation capital structure of the Company is set out in note (e) of the Unaudited Pro Forma Balance Sheet that forms part of this ASX release. 5

6 Pro forma balance sheet 1.1 UNAUDITED PRO FORMA BALANCE SHEET CURRENT ASSETS Notes Actual Pro forma Group 30 June 2013 (Audited) Bulletproof 30 June 2013 (Audited) Spencer (Unaudited) Merged Bulletproof / Spencer Cash and cash equivalents (b) 679,076 1,639,325 3,768,401 Trade and other receivables 889,667 6, ,392 Other Current Assets 333,374 8, ,883 TOTAL CURRENT ASSETS 1,902,117 1,654,559 5,006,676 NON CURRENT ASSETS Property, plant and equipment 5,484,452 5,484,452 Intangible assets 201, ,578 Exploration and evaluation assets (c) 582, ,474 Other non current assets 106,692 2, ,192 Deferred tax asset 29,090 29,090 Goodwill (d) 1,000,000 TOTAL NON CURRENT ASSETS 5,821, ,261 7,539,786 TOTAL ASSETS 7,723,929 2,239,820 12,546,462 CURRENT LIABILITIES Trade and other payables 1,373,256 39,200 1,412,456 Borrowings 2,291,295 2,291,295 Current tax liabilities 49,514 49,514 Provisions 222, ,505 Income received in advance 1,637,724 1,637,724 TOTAL CURRENT LIABILITIES 5,574,294 39,200 5,613,494 NON CURRENT LIABILITIES Borrowings 1,714,406 1,714,406 Provisions 62,850 62,850 TOTAL NON CURRENT LIABILITIES 1,777,256 1,777,256 TOTAL LIABILITIES 7,351,550 39,200 7,390,750 NET ASSETS 372,379 2,200,620 5,155,712 EQUITY Issued capital (e) 648 2,806,674 3,783,981 Capital contribution reserve 279, ,406 Foreign currency translation reserve 61,771 61,771 Retained earnings (f) 30,554 (606,054) 1,030,554 TOTAL EQUITY 372,379 2,200,620 5,155,712 6

7 (a) (b) Pro forma Adjustments (1) Indicative Share consolidation Indicative restructure of Spencer's share capital by way of a consolidation of the issued capital on a 12 for 20 bases. This transaction has no impact on the Pro forma Balance Sheet. (2) Acquisition of Bulletproof Networks Pty Limited The acquisition of Bulletproof Networks Pty Limited by the issue of 41,666,667 ordinary shares in Spencer Resources Limited and 16,666,667 Unlisted Class A Performance Shares and 25,000,000 Unlisted Class B Performance Shares in Spencer Resources Limited to Bulletproof shareholders in accordance with the Share Sale Agreement. (3) For accounting purposes, the acquirer has been identified as Bulletproof Networks Pty Limited and the business combination referred to as a reverse acquisition. Accordingly, the pro forma Group incorporates the assets and liabilities of Spencer Resources Limited and of Bulletproof Networks Pty Limited as if the Group was headed by Bulletproof Networks Pty Limited. At acquisition date the assets and liabilities of Bulletproof Networks Pty Limited (being the acquirer for accounting purposes) are recorded at their book value and the assets and liabilities of Spencer Resources Limited (being the acquiree for accounting purposes) are recorded at fair value. Furthermore, for pro forma purposes, the 16,666,667 Unlisted Class A Performance Shares and 25,000,000 Unlisted Class B Performance Shares in Spencer Resources Limited have been treated as issued capital for the purpose of determining the notional purchase price of Spencer Resources Limited. The 6,475,000 issued options in Spencer Resources have also been treated as issued capital for the purposes of the pro forma. (4) Shares issued under the Prospectus As part of Spencer Resources' re compliance with Chapters 1 and 2 of the ASX Listing rules, the Company is seeking shareholder approval to conduct a capital raising by offering under a Prospectus 8,000,000 Shares at a price of 0.20 per share to no less than the number of new investors in the Company required by ASX, to raise 1,600,000. (5) The Directors estimate that costs for the preparation and implementation of the Prospectus will be 150,000 and this estimated cost has been deducted from the capital raising of 1,600,000. (6) Costs associated with the acquisition of Bulletproof Networks Pty Limited For pro forma purposes the costs of acquisition for due diligence, preparation of the explanatory memorandum, etc. are assumed to have been incurred and expensed in the pro forma Group balance sheets. (7) No pro forma adjustment has been made for any capital raised as a result of the exercise of any options. Cash and cash equivalents The movement in cash and cash equivalents as reflected in the pro forma balance sheet at 30 June 2013 is shown as follows: Cash and cash equivalents at 30 June 2013 Actual 2,318,401 Pro forma adjustments Net proceeds from Prospectus 1,450,000 3,768,401 (c) Exploration and evaluation assets The movement in Exploration and evaluation assets as reflected in the pro forma balance sheet at 30 June 2013 is shown as follows: Exploration and evaluation assets at 30 June 2013 Actual 582,761 Pro forma adjustments Fair value adjustment for acquisition 132, ,474 7

8 (d) Goodwill Goodwill represents the fair value of the Australian Securities Exchange status of Spencer Resources Limited as follows: Goodwill at 30 June 2013 Actual Pro forma adjustments Acquisition of Spencer Resources (accounted for as a reverse acquisition) 1,000,000 1,000,000 (e) Issued Capital The movement in issued capital as reflected in the pro forma balance sheets at 30 June 2013 is shown below: Notes Issued ordinary Options over Performance Merged No. No. No. Bulletproof / Spencer Spencer Resources 30 June 13 Actual (1) 19,933,000 6,475,000 2,806,674 Opening: Bulletproof 30 June Existing shares of Bulletproof (648) Existing shares of Spencer 19,933,000 6,475,000 Issued as part of reverse acquisition (2) 41,666,667 41,666,667 2,333,333 Share and option reconstruction (3) (24,639,866) (2,590,000) (16,666,666) Issued pursuant to prospectus 8,000,000 1,600,000 Transaction Costs (150,000) 44,959,801 3,885,000 25,000,001 4,783,981 (f) (1) Spencer Issued Capital As at 30 June 2013, Spencer had on issue 19,933,000 fully paid ordinary shares and 6,475,000 unlisted options. (2) Bulletproof Networks Spencer is to acquire Bulletproof in exchange for the issue of 41,666,667 ordinary shares and 16,666,667 Unlisted Class A Performance Shares and 25,000,000 Unlisted Class B Performance Shares in Spencer Resources Limited to Bulletproof shareholders. The acquisition has been accounted for as a reverse acquisition in accordance with AASB 3 Business Combinations. (3) The shares and options of Spencer Resources are to be consolidated on a 12 for 20 basis after the acquisition, resulting in Spencer having 36,959,801 shares, 3,885,000 options and 25,000,001 performance shares on issue immediately prior to the capital raise of this prospectus (4) Reverse Acquisition Spencer The pro forma adjustment reflects the deemed issue of shares to acquire Spencer. The fair value of Spencer s net assets at 30 June 2013, per the audited balance sheet was 2,239,820 and the fair value of the deemed consideration was assessed at 2,200,260. The difference between the deemed purchase price (3,333,333) and fair value of net assets acquired (2,200,260) represents 133,073 as the estimated fair value of exploration and evaluation assets and the balance of 1,000,000 as goodwill for the estimated fair value of the listing status. Retained Profits / (Accumulated losses) The movement in retained profits / (accumulated losses) as reflected in the pro forma balance sheets at 30 June 2013 is shown below: Retained profits / (Accumulated Losses) at 30 June 2013 Actual (575,500) Pro forma adjustments Reverse acquisition of Spencer Resources (1,606,054) 1,030,554 8