Corac Group plc. (Incorporated and registered in England and Wales with registered number )

Transcription

1 Proof 4: THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or as to the action you should take you should seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 (as amended) if you are resident in the United Kingdom or, if not, another appropriately authorised independent professional adviser. If you have sold or otherwise transferred all of your Ordinary Shares in Corac Group plc prior to the date on which the Shares are marked ex-entitlement please forward this document, together with the accompanying Form of Proxy and, if relevant, the Application Form, as soon as possible, to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for onward transmission to the purchaser or transferee. However, this document and any accompanying documents should not be sent or transmitted in, or into, any jurisdiction where to do so might constitute a violation of local securities law or regulations. It you have sold or otherwise transferred only part of your holding of your Ordinary Shares, please consult the stockbroker, bank or other agent through whom the sale or transfer was effected and refer to the instructions regarding split applications which will be set out in the Application Form (if relevant). This document is not a prospectus for the purposes of the Prospectus Rules and has not been approved by the UK Financial Conduct Authority (in its capacity as the UK Listing Authority or otherwise) pursuant to sections 85 and 87 of FSMA. In issuing this document the Company is relying on the exemption from issuing a prospectus in section 85(5) and paragraph 9 of Schedule 11A of FSMA and on paragraphs 43 and 60 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended). Applications in respect of the Open Offer from persons not falling within such exemptions will be rejected and the Open Offer contained in this document is not capable of acceptance by such persons. In addition, this document does not constitute an admission document drawn up in accordance with the AIM Rules. The Existing Ordinary Shares are admitted to trading on AIM. Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. It is expected that admission to AIM will become effective and dealings in the New Ordinary Shares will commence at 8.00 a.m. on 20 December AIM is a market designed primarily for emerging and smaller companies to which a higher investment risk tends to be attached than to larger or more established companies. AIM securities are not admitted to the Official List of the UK Listing Authority. A prospective investor should be aware of the risks of investing in such companies and should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser. Neither the London Stock Exchange nor the UK Listing Authority have examined or approved the contents of this document. This document does not constitute a recommendation regarding securities of the Company. Corac Group plc (Incorporated and registered in England and Wales with registered number ) Firm Placing of 110,010,232 New Ordinary Shares at 10 pence per share Open Offer of up to 20,528,694 New Ordinary Shares at 10 pence per share Notice of General Meeting Cenkos Securities plc, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, acts exclusively for the Company as nominated adviser and broker to the Company in connection with the Firm Placing and Open Offer and Admission and will not be responsible to any person other than the Company under the Financial Services and Markets Act 2000, the rules of the Financial Conduct Authority or otherwise for providing the protections afforded to its clients or for advising any other person in relation to the contents of this document or any matter, transaction or arrangement referred to in this document. The responsibilities of Cenkos Securities plc as the Company s nominated adviser, under the AIM Rules for Nominated Advisers, are owed solely to London Stock Exchange plc and are not owed to the Company or to any Director, shareholder or any other person, in respect of his decision to acquire shares in the Company in reliance on any part of this document, or otherwise. Cenkos Securities plc is not making any representation or warranty, express or implied, as to the contents of this document. This document should be read as a whole. Your attention is drawn to the letter from the Chairman of the Company which is set out in Part I of this document and in which the Directors recommend that Shareholders vote in favour of the Resolutions and to the section headed Risk Factors in Part III of this document. Notice of General Meeting to be held at the offices of Nabarro LLP at Lacon House, 84 Theobald s Road, London WC1X 8RW at a.m. on 19 December 2013 is set out at the end of this document. The Form of Proxy for use at the General Meeting which accompanies this document should be returned, together with the power of attorney or other authority (if any) under which the Form of Proxy is signed or a certified copy of such power or authority, to Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA

2 c109184pu010 Proof 4: _16:52 B/L Revision: by hand or by post so as to be received not less than 48 hours (excluding any part of a day that is not a working day) before the time fixed for the holding of the meeting or any adjournment of it (as the case may be). Completion and return of the Form of Proxy will not preclude Shareholders from attending and voting in person at the General Meeting should they wish to do so. The latest time and date for acceptance and payment in full under the Open Offer is a.m. on 18 December The procedure for application and payment for Qualifying Shareholders is set out in Part II of this document, and, where relevant, will be set out in the Application Form to be sent to Qualifying Non-CREST Shareholders. The New Ordinary Shares to be issued will, following their issue, rank pari passu with the Existing Ordinary Shares and will rank in full for all dividends and other distributions thereafter declared, made or paid on the ordinary share capital of the Company. The New Ordinary Shares described in this document have not been, and will not be, registered under the US Securities Act of 1933, as amended (the Securities Act ) or under the securities laws of any state of the United States, and may not be offered, sold, resold, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offer of the New Ordinary Shares in the United States. The New Ordinary Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares or the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the United States. In addition, offers, sales or transfers of the New Ordinary Shares in or into the United States for a period of time following completion of the Placing and Open Offer by a person (whether or not participating in the Placing or Open Offer) may violate the registration requirement of the Securities Act. Furthermore, the New Ordinary Shares have not been and will not be registered under the applicable laws of any of Australia, New Zealand, Canada, the Republic of South Africa or Japan and, subject to certain exceptions, may not be offered or sold to any national, resident or citizen thereof or any other jurisdiction where to do so might constitute a violation of local securities laws or regulations. The distribution of this document in or into jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe such restrictions. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. Subject to certain exceptions, this document is not for release, publication or distribution, directly or indirectly, in or into the United States, Australia, New Zealand, Canada, the Republic of South Africa, Japan or any other jurisdiction where to do so might constitute a violation of local securities laws or regulations. Copies of this document will be available for collection, free of charge, for a period of one month from the date of this document, at the Company s registered office during normal business hours (Saturdays, Sundays and public holidays excepted) and at the Company s website: This document includes certain forward-looking statements which includes all statements other than statements of historical fact, including, without limitation, those regarding the Group s financial position, business strategy, plans and objectives of management for future operations, or any statements preceded by, followed by or that include the words targets, believes, expects, aims, intends, will, may, anticipates, would, could or similar expressions or negatives thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Group s control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements and therefore undue reliance should not be placed on such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group s present and future business strategies and the environment in which the Group will operate in the future. These forward-looking statements speak only as at the date of this document. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based unless required to do so by applicable law or the AIM Rules. 2

3 c109184pu010 Proof 4: _16:52 B/L Revision: Table of contents Page Expected timetable of principal events 4 Firm Placing and Open Offer statistics 5 Directors, secretary and advisers 6 Part I Letter from the Chairman of Corac plc 7 Part II Terms and Conditions of the Open Offer 15 Part III Risk Factors 33 Definitions 37 Notice of General Meeting 40 3

4 c109184pu010 Proof 4: _16:52 B/L Revision: Expected timetable of principal events Record Date for entitlement to participate in the Open Offer 5.00 p.m. on 28 November 2013 Announcement of the Firm Placing and the Open Offer and despatch of the Circular, Form of Proxy and, to certain Qualifying Non- CREST Shareholders, the Application Form 2 December 2013 Expected ex-entitlement date for the Open Offer 8.00 a.m. on 2 December 2013 Open Offer Entitlements credited to CREST stock accounts of Qualifying CREST Shareholders Recommended latest time and date for requesting withdrawal of Open Offer Entitlements from CREST as soon as practicable after 8.00 a.m. on 3 December p.m. on 12 December 2013 Latest time for depositing Open Offer Entitlements into CREST 3.00 p.m. on 13 December 2013 Latest time and date for splitting Application Forms (to satisfy bona fide market claims only) Latest time and date for receipt of Forms of Proxy for the General Meeting Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instruction (as appropriate) 3.00 p.m. on 16 December a.m. on 17 December a.m. on 18 December 2013 General Meeting a.m. on 19 December 2013 Allotment and issue of VCT Placing Shares Allotment of New Ordinary Shares (other than VCT Placing Shares) after 5.00 p.m. on 19 December 2013 before 8.00 a.m. on 20 December 2013 Admission of the New Ordinary Shares to trading on AIM 8.00 a.m. on 20 December 2013 New Ordinary Shares in uncertificated form expected to be credited to accounts in CREST (uncertificated holders only) Expected date of despatch of definitive share certificates for the New Ordinary Shares in certificated form (certificated holders only) as soon as practicable after 8.00 a.m. on 20 December 2013 by 31 December 2013 Notes: (1) The ability to participate in the Open Offer is subject to certain restrictions relating to Qualifying Shareholders with registered addresses or located or resident in countries outside the UK (particularly the Excluded Overseas Shareholders), details of which are set out in paragraph 6 of Part II of this document. Subject to certain exceptions, Application Forms will not be despatched to, and Open Offer Entitlements will not be credited to the stock accounts in CREST of, Shareholders with registered addresses in any of the Restricted Jurisdictions or any other jurisdiction where to do so might constitute a violation of local securities laws or regulations. (2) Each of the times and dates set out in the above timetable and mentioned in this document refer to London time and are subject to change by the Company (with the agreement of Cenkos), in which case details of the new times and dates will be notified to the London Stock Exchange and the Company will make an appropriate announcement through a Regulatory Information Service. (3) Different deadlines and procedures for applications may apply in certain cases. For example, if you hold your Shares through a CREST member or other nominee, that person may set an earlier date for application and payment than the dates noted above. (4) Assumes that all Resolutions that are set out in the Notice of General Meeting are passed. 4

5 c109184pu010 Proof 4: _16:52 B/L Revision: Firm Placing and Open Offer statistics Issue Price per New Ordinary Share Closing Price per Existing Ordinary Share on the Latest Practicable Date Discount to Closing Price of an Existing Ordinary Share on the Latest Practicable Date Open Offer Entitlement of Qualifying Shareholders under the Open Offer 10 pence 11.5 pence 13.0 per cent. 1 Open Offer Share for every 15 Existing Ordinary Shares Number of Existing Ordinary Shares 307,930,416 Number of New Ordinary Shares to be issued by the Company pursuant to the Firm Placing Gross proceeds of the Firm Placing Maximum number of New Ordinary Shares to be issued by the Company pursuant to the Open Offer Maximum gross proceeds of the Open Offer 110,010, million 20,528, million Number of Ordinary Shares in issue immediately following 438,469,342 Admission (1) New Ordinary Shares as a percentage of the Enlarged Share Capital (1) Estimated net cash proceeds of the Firm Placing and Open Offer (1) ISIN Code for Open Offer entitlements 29.7 per cent million GB00BGP6P540 Notes: (1) Assumes the maximum number of New Ordinary Shares under the Open Offer are allotted. 5

6 c109184pu010 Proof 4: _16:52 B/L Revision: Directors, secretary and advisers Directors: Richard King (Non Executive Chairman) Philip Cartmell (Chief Executive) Mark Crawford (Chief Operating Officer) Jon Carter (Chief Financial Officer) Rohan Courtney (Non Executive Director) Julia Henderson (Non Executive Director) all of whose business address is at: Technology Centre Stirling Road Slough Berkshire SL1 4ST United Kingdom Company Secretary: Registered Office: Nominated Adviser and Broker: Solicitors to the Company: Auditors to the Company: Registrars and Receiving Agents: PR Adviser: Michael Webb Technology Centre Stirling Road Slough Berkshire SL1 4ST United Kingdom Cenkos Securities Plc 6-8 Tokenhouse Yard London EC2R 7AS Nabarro LLP Lacon House 84 Theobald s Road London WC1X 8RW Deloitte LLP Abbots House Abbey Street Reading RG1 3BD Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA MHP Communications Limited 60 Great Portland Street London W1W 7RT 6

7 c109184pu010 Proof 4: _16:52 B/L Revision: Part I LETTER FROM THE CHAIRMAN OF CORAC GROUP PLC Corac Group plc (Registered in England and Wales with company number ) Directors: Richard King (Non Executive Chairman) Philip Cartmell (Chief Executive Officer) Mark Crawford (Chief Operating Officer) Jon Carter (Chief Financial Officer) Rohan Courtney (Non Executive Director) Julia Henderson (Non Executive Director) Registered Office: Technology Centre Stirling Road Slough Berkshire SL1 4ST To Shareholders and, for information only, to the holders of Options 2 December 2013 Proposed Firm Placing and Open Offer and Notice of General Meeting 1. Introduction The Company announced today that it intends to raise 11.0 million (before fees and expenses) through a Firm Placing of 110,010,232 New Ordinary Shares with existing and new institutional investors together with an Open Offer to raise up to 2.1 million (before fees and expenses), in each case through the issue of New Ordinary Shares at an Issue Price of 10 pence per New Ordinary Share. The Issue Price represents an approximate 13.0 per cent. discount to the Closing Price of 11.5 pence per Ordinary Share on the Latest Practicable Date. Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. It is expected that Admission will occur on 20 December I am writing to set out the background to and reasons for the Firm Placing and Open Offer and to give you notice of the General Meeting to be held at a.m. on 19 December 2013, formal notice of which is set out at the end of this document. The General Meeting is being convened for the purpose of proposing the Resolutions described below, which is a condition to completion of the Firm Placing and Open Offer. The Directors intend to vote (or procure a vote) in favour of the Resolutions in respect of their own beneficial holdings totalling 2,248,603 Ordinary Shares, representing approximately 0.7 per cent. of the Existing Ordinary Shares. Your attention is drawn to: (a) paragraph 4 of Part II of this document which sets out the actions to be taken by Qualifying Shareholders seeking to participate in the Open Offer; and (b) the Notice of General Meeting contained at the end of this document and paragraphs 7 and 8 of this letter which explain the purpose of the General Meeting and action to be taken by you in relation to the Notice of General Meeting. 2. Background to and reasons for the Firm Placing and Open Offer Company Background Corac was established in 1996 on the Science Park at Brunel University with the primary objective of researching and developing technologies in the field of gas compression using air bearing technology. Through more than a decade of such development, Corac has successfully combined knowhow and technology in the fields of gas bearings, permanent magnet motors, aerodynamics, thermal heat transfer and power electronics, developing integrated high speed turbo machinery solutions. Corac holds 55 patents worldwide (of which 13 are pending) with eight European design registrations and has three main development programmes: Downhole Gas Compression, Wellhead Gas Compression and Turbo Compressors. In December 2010, the Company raised 19.5 million through a firm placing, placing and open offer to fund the Company s working capital requirements for a period of three years and to fund the Company s move to new facilities and investment in new equipment. In April 2012, the Group raised 7

8 c109184pu010 Proof 4: _16:52 B/L Revision: 6.35 million through a placing to fund the acquisition of Wellman Hunt Graham Limited (renamed Hunt Graham Limited ( Hunt Graham )) and Wellman Defence Limited (renamed Atmosphere Control International Limited ( ACI )). In January 2013, the trading of Corac was hived down into Corac Energy Technologies Limited ( CET ). All three companies are now wholly owned subsidiaries of Corac Group plc. Over the past 18 months, the Group has integrated the acquired businesses and made significant progress within CET. The following key developments have been achieved by the Group: * Tested the downhole gas compressor technology in Texas; * Signed a contract with BP for the development of offshore compression technology, which has led to 1.12 million of firm orders to date, and could lead to development revenues in total of 2.5 million; * Signed a contract amendment with Saudi Aramco for the design and build of an in-pipe gas compressor at the wellhead taking the total contract value to in excess of 1 million; * Joint development and exclusive licence agreement with a global market leader to apply CET s core technology in a range of industrial compressors and expanders for new commercial applications, with initial partner investment of 0.73 million; * Signed a tripartite funded agreement with major corporate partners in the UK and United States to develop an electricity generation system using waste energy in the gas transmission network; * Hunt Graham signed a contract for multiple heat exchangers valued in excess of 1.6 million for delivery in Saudi Arabia; * ACI signed a 0.7 million contract with a foreign navy for submarine air purification equipment; and * CET carried out a funded feasibility study on behalf of Tullow Oil, a FTSE 100 global oil and gas producer, focusing on wellhead compression on a gas platform in the Southern North Sea. Reasons for the Firm Placing and Open Offer The Directors believe that the Group s structure of two successful trading businesses and the proprietary technology, development programme, partnerships and multidisciplinary team of industry experts at CET represents a strong platform to create a technology-led industrial engineering group in the UK. The Directors believe that further investment is required in the gas compression technology to prove the technology meets industry requirements. It is expected that this should lead to the first commercial sales from turbo compressors in 2014 and from gas compression technology in Accordingly, the Directors believe that a firm placing and open offer of Ordinary Share is in the best interests of the Company and Shareholders as the funds raised should enable the Company to complete its programme of testing to required industry standards. 3. Current trading and outlook On 16 September 2013, Corac announced its unaudited interim results for the six months to 30 June 2013, which included the following summary consolidated figures: 6 months to 30 June 2013 ( 000) 6 months to 30 June 2012 ( 000) Revenues 8,347 4,261 Operating Loss 2,362 3,953 Loss per share (Pence) Free cash and Equivalents 2,774 6,806 The full text of the Group s interim results can be found on the Group s website at As noted in Corac s interim report for the six months ended 30 June 2013, the Board was pleased with the progress shown by the operating companies in the first six months of the year. Technology programmes are being progressed, and market partners are reacting positively to the proof points they are being shown. The Board believes that the outlook for the second half of this year is encouraging, underpinned by a strong order book securing the winning of several new orders across 8

9 c109184pu010 Proof 4: _16:52 B/L Revision: all parts of the business. As a result, the Board anticipates performance in line with EBITDA expectations, with a reduction in second half losses and cash outflow. The result is expected to be a more balanced business, with strong continuity of performance from ACI, a revitalised Hunt Graham and an increasingly commercial CET. Based on information from existing technology partners, the Board has identified a commercial path leading to commercial orders being received in The Board believes that this should lead to further orders of up to 10 units with each partner in the period up to 2016 and that a product portfolio for industrial expanders and compressors and oil and gas downhole and wellhead should be marketed from the fourth quarter of The Board believes the revenues from existing partners has the potential to exceed 100 million per annum from these markets. 4. Use of Proceeds The Group is seeking up to 13.1 million to fund the next stage of progress. This funding will be used to accelerate the rate of commercial return at CET through the following specific items: * 4 million to complete the on-going support to enlarged partner programmes (net of income); * 3.5 million for production of additional systems and components for intensive testing and accelerated for compliance of completed products; * 3 million for capital expenditure on testing facilities ( 1.5 million) and a small batch production facility ( 1.5 million); and * 2.6 million working capital requirement to accelerate growth in the trading businesses. It is envisaged that funding of the above programmes will place the Group in a position of having implemented several installations of gas compressor applications in downhole and wellhead applications with track records of delivering the known benefits and starting to deliver commercial sales of the gas compression technology in Information on the Firm Placing and Open Offer Structure The Directors have given careful consideration as to the structure of the proposed fundraising and have concluded that the Firm Placing and Open Offer is the most suitable option available to the Company and its Shareholders at this time. 110,010,232 Firm Placing Shares will be issued through the Firm Placing at 10 pence per New Ordinary Share to raise aggregate gross proceeds of approximately 11.0 million and up to 20,528,694 New Ordinary Shares will be issued through the Open Offer at 10 pence per New Ordinary Share (to raise in aggregate gross proceeds of up to approximately 2.1 million (assuming full take-up under the Open Offer)). Principal terms of the Firm Placing The Company is proposing to issue 110,010,232 Firm Placing Shares pursuant to the Firm Placing. In accordance with the terms of the Placing and Open Offer Agreement, Cenkos has, as agent for the Company, conditionally placed, with institutional and other investors, the Firm Placing Shares at the Issue Price to raise approximately 11.0 million. The Firm Placing Shares are not subject to clawback and are not part of the Open Offer. The Placing and Open Offer Agreement contains warranties and indemnities given by the Company to Cenkos which are customary for an issue of this nature. Under the Placing and Open Offer Agreement, the Company has agreed to pay to Cenkos a commission based on the aggregate value of the Firm Placing Shares placed at the Issue Price and the costs and expenses of the Firm Placing together with any applicable VAT. It is expected that the VCT Placing Shares will be unconditionally allotted and issued after 5.00 p.m. on 19 December 2013, and all remaining Firm Placing Shares will be allotted and issued before 8.00 a.m. on 20 December 2013, subject to Admission. CREST accounts are expected to be credited with Firm Placing Shares on the day of Admission and share certificates in respect of Firm Placing Shares (where applicable) will be dispatched by post (at Shareholders risk) by 31 December

10 c109184pu010 Proof 4: _16:52 B/L Revision: Principal terms of the Open Offer The Board considers it important that Qualifying Shareholders have the opportunity to participate in the fundraising, and the Directors have concluded that the Open Offer is the most suitable option available to the Company and its Shareholders. The Open Offer provides an opportunity for all Qualifying Shareholders to participate in the fundraising. Pursuant to the Open Offer, Qualifying Shareholders will be given the opportunity to subscribe for 1 Open Offer Share for every 15 Existing Ordinary Shares held on the Record Date at the Issue Price of 10 pence. The Open Offer will raise gross proceeds of up to approximately 2.1 million, assuming full take-up. The Issue Price of 10 pence represents a 13.0 per cent. discount to the Closing Price of 11.5 pence per Ordinary Share on the Latest Practicable Date. The Company has agreed to pay Cenkos a commission based on the aggregate value of the Open Offer Shares taken up by Qualifying Shareholders. Open Offer Entitlement Qualifying Shareholders are invited, on and subject to the terms and conditions of the Open Offer, to apply for any number of Open Offer Shares at the Issue Price up to their Open Offer Entitlement. Qualifying Shareholders have an Open Offer Entitlement of: 1 Open Offer Share for every 15 Existing Ordinary Shares registered in the name of the relevant Qualifying Shareholder on the Record Date. Open Offer Entitlements under the Open Offer will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will be disregarded in calculating Open Offer Entitlements. The aggregate number of Open Offer Shares available for subscription pursuant to the Open Offer will not exceed 20,528,694 New Ordinary Shares. The Open Offer has not been underwritten. None of the Open Offer Shares have been conditionally placed with institutional or other investors. Therefore there is no guaranteed minimum number of Open Offer Shares which will be issued under the Open Offer. Application procedure under the Open Offer Qualifying Shareholders may apply for any whole number of Open Offer Shares up to their Open Offer Entitlement referred to above. The Open Offer Entitlement, in the case of Qualifying Non- CREST Shareholders, is equal to the number of Open Offer Entitlements as shown in Box 2 on their Application Form or, in the case of Qualifying CREST Shareholders, is equal to the number of Open Offer Entitlements standing to the credit of their stock account in CREST. Qualifying Shareholders with holdings of Existing Ordinary Shares in both certificated and uncertificated form will be treated as having separate holdings for the purpose of calculating their Open Offer Entitlements. Qualifying CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of their Open Offer Entitlement as soon as practicable after 8.00 a.m. on 3 December Application will be made for the Open Offer Entitlements to be admitted to CREST. The Open Offer Entitlements will also be enabled for settlement in CREST as soon as practicable after 8.00 a.m. on 3 December Applications through the CREST system may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear s Claims Processing Unit. Qualifying Non-CREST Shareholders should note that their Application Form is not a negotiable document and cannot be traded. Further information on the Open Offer and the terms and conditions on which it is made, including the procedure for application and payment, are set out in Part II of this document and, where relevant, on the Application Form. 10

11 c109184pu010 Proof 4: _16:52 B/L Revision: Conditionality The Firm Placing in respect of the VCT Placing Shares is conditional, inter alia, on: * the passing, without amendment, of the Resolutions at the General Meeting; and * the performance by the Company of its obligations under the Placing and Open Offer Agreement insofar as the same are required to be performed prior to the allotment and issue of the VCT Placing Shares. The Firm Placing in respect of the Firm Placing Shares (other than the VCT Placing Shares) and the Open Offer are conditional, inter alia, upon the following: * the passing, without amendment, of the Resolutions at the General Meeting; * Admission occurring by not later than 8.00 a.m. on 20 December 2013 (or such later date as may be agreed between the Company and Cenkos); and * the Placing and Open Offer Agreement becoming unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms. If the Resolutions are not passed, Admission does not take place by 8.00 a.m. on 20 December 2013 (or such later time and/or date as the Company and Cenkos may agree) or the Placing and Open Offer Agreement does not become unconditional or is terminated, the Firm Placing (save for the VCT Placing Shares in certain circumstances as described in the next paragraph) and the Open Offer will lapse, any Open Offer Entitlements admitted to CREST will, after that time and date, be disabled and application monies under the Open Offer will be refunded to the applicants, by cheque (at the applicant s risk) in the case of Qualifying Non-CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest, as soon as practicable thereafter. The VCT Placing Shares will not be issued conditional on their admission to trading on AIM. Accordingly, although unlikely in the opinion of the Directors, there is a possibility that the VCT Placing Shares may not be admitted to trading on AIM following their allotment. As the VCT Placing Shares will be allotted before the allotment of the other Firm Placing Shares and the Open Offer Shares, it is possible, although unlikely in the opinion of the Directors, that the allotment of the VCT Placing Shares could occur and, due to unforeseen circumstances in the intervening time, the allotment of the other Firm Placing Shares and Open Offer Shares may not occur. Application for Admission Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. Subject to, among other things, the Resolutions being passed, it is expected that Admission will occur and trading in the New Ordinary Shares will commence at 8.00 a.m. on 20 December No temporary documents of title will be issued. The New Ordinary Shares will, following Admission, rank pari passu in all respects with the Existing Ordinary Shares in issue at the date of this document and will carry the right to receive all dividends and distributions declared, made or paid on or in respect of the Ordinary Shares after Admission. Important notice Qualifying Shareholders should note that the Open Offer is not a rights issue. Qualifying Shareholders should be aware that in the Open Offer, unlike with a rights issue, any Open Offer Shares not applied for by Qualifying Shareholders under their Open Offer Entitlements will not be sold in the market on behalf of, or placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer. The Firm Placing and the Open Offer are separate and distinct transactions involving the issue of New Ordinary Shares. Qualifying Shareholders are being invited to participate in the Open Offer and (subject to certain exceptions) will have received an Application Form with this document. However Qualifying Shareholders are not able to participate in the Firm Placing. In issuing this document and structuring the Firm Placing and Open Offer in this manner, the Company is relying on the exemption from issuing a prospectus in section 85(5) and paragraph 9 of Schedule 11A of FSMA and on paragraphs 43 and 60 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended). Any Qualifying Shareholder who has sold or transferred all or part of his registered holding(s) of Existing Ordinary Shares prior to the date on which the shares are marked ex-entitlement is advised 11

12 c109184pu010 Proof 4: _16:52 B/L Revision: to consult his stockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possible since the invitation to apply for Open Offer Shares under the Open Offer may be a benefit which may be claimed from him by the purchasers under the rules of the London Stock Exchange. Effect of the Firm Placing and Open Offer Upon completion of the Firm Placing and Open Offer, the New Ordinary Shares will represent approximately 29.7 per cent. of the Enlarged Share Capital (assuming the Open Offer is subscribed in full). 6. Enterprise Investment Scheme and Venture Capital Trusts On issue, the New Ordinary Shares will not be treated as either listed or quoted securities for relevant tax purposes. The following information is based upon the laws and practice currently in force in the UK and may not apply to persons who do not hold their Ordinary Shares as investments. The Directors believe that the VCT Placing Shares should be eligible (subject to the circumstances of investors) for tax reliefs under EIS and for investment by VCTs. The Company has applied for and obtained, advance assurance from HMRC, based on information provided, that: (i) following receipt of a properly completed form EIS 1, it will be able to authorise the Company to issue certificates under section 204(1) Income Tax Act 2007 in respect of the VCT Placing Shares; and (ii) the New Ordinary Shares will be eligible shares for the purpose of section 285(3A) of the Income Tax Act 2007 and may be part of a qualifying holding for the purposes of Chapter 4 of Part 6 of the Income Tax Act 2007 (iii) the proposed utilisation of funds raised will constitute satisfactory employment for the purposes of section 293 of the Income Tax Act 2007 and the placing of those funds raised on deposit account pending eventual use within the business will not jeopardise the Group s qualifying status. In order to ensure the VCT Placing Shares qualify with the relevant requirements of EIS and VCT legislation, it is necessary to ensure that the VCT Placing Shares are issued prior to the remainder of the New Ordinary Shares. Accordingly, it is expected that the VCT Placing Shares will be unconditionally allotted and issued after 5.00 p.m. on 19 December 2013 and the remaining New Ordinary Shares will be allotted and issued before 8.00 a.m. on 20 December 2013, subject to Admission. It is expected that Admission of all New Ordinary Shares will occur at 8.00 a.m. on 20 December Although the Company currently expects to satisfy the relevant conditions for EIS and VCT investment, and the Directors are not aware of any subsequent change in the qualifying conditions or the Company s circumstances that would prevent the VCT Placing Shares from being eligible EIS and VCT investments on this occasion, neither the Directors nor the Company gives any warranty or undertaking that relief will be available in respect of any investment in the VCT Placing Shares pursuant to this document, nor do they warrant or undertake that the Company will conduct its activities in a way that qualifies for or preserves its status. Companies can raise up to 5 million from State Aid investment sources, including under the combined Enterprise Investment Scheme (EIS) and from Venture Capital Trusts (VCTs), in any 12 month period. In order to comply with this restriction only a certain number of the Firm Placing Shares, which are allocated as VCT Placing Shares, will be able to claim EIS or VCT relief. As the rules governing EIS and VCT reliefs are complex and interrelated with other legislation, if Shareholders or any potential investors are in any doubt as to their tax position, require more detailed information than the general outline above, or are subject to tax in a jurisdiction other than the United Kingdom, they should consult their professional adviser. 7. General Meeting Set out at the end of this document is a notice convening a General Meeting of the Company to be held at the offices of Nabarro LLP at Lacon House, 84 Theobald s Road, London WC1X 8RW at a.m. on 19 December 2013, at which resolutions (the Resolutions ) authorising the Directors to allot the New Ordinary Shares on a non pre-emptive basis will be proposed. The Firm Placing and Open Offer are conditional, inter alia, on the passing of these Resolutions. 12

13 c109184pu010 Proof 4: _16:52 B/L Revision: 8. Action to be taken by Shareholders in respect of the General Meeting Shareholders will find enclosed with this document a Form of Proxy for use at the General Meeting. Whether or not you propose to attend the General Meeting in person, you are strongly encouraged to complete, sign and return your Form of Proxy in accordance with the instructions printed on it as soon as possible, but in any event so as to be received, by post or, during normal business hours only, by hand, at Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA by no later than a.m. on 17 December 2013 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting (excluding any part of a day that is not a working day)). Appointing a proxy in accordance with the instructions set out above will enable your vote to be counted at the General Meeting in the event of your absence. The completion and return of the Form of Proxy will not prevent you from attending and voting at the General Meeting, or any adjournment thereof, in person should you wish to do so. 9. Action to be taken by Qualifying Shareholders in respect of the Open Offer Qualifying Non-CREST Shareholders (i.e. holders of Existing Ordinary Shares who hold their Existing Ordinary Shares in certificated form) If you are a Qualifying Non-CREST Shareholder you will receive an Application Form which gives details of your Open Offer Entitlement under the Open Offer (as shown by the number of Open Offer Entitlements set out in Box 2 of the Application Form). If you wish to apply for Open Offer Shares under the Open Offer, you should complete the Application Form in accordance with the procedure for application set out in paragraph 4.1 of Part II of this document and on the Application Form itself. Completed Application Forms, accompanied by full payment in accordance with the instructions in paragraph 4.1 of Part II of this document, should be posted using the accompanying reply-paid envelope (if posted from the UK only) or returned by post or by hand (during normal business hours only) to Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA in either case, as soon as possible and in any event so as to be received by no later than a.m. on 18 December If you do not wish to apply for any Open Offer Shares under the Open Offer, you should not complete or return the Application Form. Qualifying CREST Shareholders (i.e. holders of Existing Ordinary Shares who hold their Existing Ordinary Shares in uncertificated form) If you are a Qualifying CREST Shareholder you will not be sent an Application Form. You will receive a credit to your appropriate stock account in CREST in respect of your Open Offer Entitlement under the Open Offer. You should refer to the procedure for application set out in paragraph 4.2 of Part II of this document. The relevant CREST instructions must have settled in accordance with the instructions in paragraph 4.2 of Part II of this document by no later than a.m. on 18 December Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with this document and the Open Offer. If you are in any doubt as to the action you should take, you should immediately seek your own personal financial advice from an appropriately qualified independent professional adviser. 10. Overseas Shareholders The attention of Qualifying Shareholders who have registered addresses outside the United Kingdom, or who are citizens or residents of countries other than the United Kingdom, or who are holding Ordinary Shares for the benefit of such persons (including, without limitation, subject to certain exceptions, custodians, nominees, trustees and agents), or who have a contractual or other legal obligation to forward this document, the Form of Proxy or (if applicable) an Application Form to such persons, is drawn to the information which appears in paragraph 6 of Part II of this document. In particular, Qualifying Shareholders who have registered addresses in or who are resident in, or who are citizens of, countries other than the UK (including, without limitation, the United States or any other Restricted Jurisdiction) should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their entitlements to the Open Offer. 13

14 c109184pu010 Proof 4: _16:52 B/L Revision: 11. Taxation Shareholders who are in any doubt as to their tax position, or who are subject to tax in a jurisdiction other than the UK should consult an appropriate professional adviser immediately. 12. Further Information Your attention is drawn to the further information set out in Part II and Part III of this document, as well as the Notice of General Meeting set out at the end of this document. Shareholders should read the whole of this document and not rely solely on the information set out in this letter. In particular, you should consider the risk factors set out in Part III of this document. 13. Intentions of the Directors in relation to the Firm Placing and the Open Offer Certain of the Directors intend to subscribe for an aggregate of 650,000 Firm Placing Shares as set out below: Number of Firm Placing Directors Shares Phil Cartmell 350,000 Richard King 150,000 Mark Crawford 150,000 In addition, certain members of the senior management team of the Company intend to subscribe for an additional 150,000 Firm Placing Shares. The Directors, who in aggregate together with their immediate families or persons connected with them (within the meaning of Section 252 of the Act) hold 2,248,603 Existing Ordinary Shares, representing approximately 0.7 per cent. of the Existing Ordinary Shares in issue at the Latest Practicable Date, intend to vote (or procure a vote) in favour of the Resolutions at the General Meeting. 14. Related Party The participation of M&G Investment Management Ltd. ( M&G) and Legal & General Investment Management Ltd. ( L&G ) in the Firm Placing constitute a related party transaction under the AIM Rules for Companies by virtue of the fact that M&G and L&G are substantial shareholders in the Company and that their respective participation in the Firm Placing represent more than 5% of the market capitalisation of the Company as of this date. The Directors consider, having consulted with Cenkos, its nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned. 15. Recommendation The Directors believe that the Firm Placing and Open Offer and the Resolutions to be proposed at the General Meeting are in the best interests of the Company and Shareholders as a whole and unanimously recommend that you vote in favour of the Resolutions. Yours faithfully Richard King Non Executive Chairman 14

15 c109184pu020 Proof 4: _16:52 B/L Rev PART II TERMS AND CONDITIONS OF THE OPEN OFFER 1. Introduction As explained in Part I of this document, the Company proposes to issue up to 20,528,694 Open Offer Shares at the Issue Price in order to raise approximately 2.1 million (before fees and expenses) by way of the Open Offer (assuming that the Open Offer is subscribed in full). The Open Offer is an opportunity for Qualifying Shareholders to apply to subscribe for Open Offer Shares at the Issue Price in accordance with the terms of the Open Offer. The Open Offer Shares to be issued pursuant to the Open Offer will, following Admission, rank pari passu in all respects with the Existing Ordinary Shares and will carry the right to receive all dividends and distributions declared, made or paid on or in respect of the Ordinary Shares after Admission. Any Qualifying Shareholder who has sold or transferred all or part of his registered holding(s) of Existing Ordinary Shares prior to 8.00 a.m. on 2 December 2013, when the Existing Ordinary Shares are marked ex the entitlement to the Open Offer, is advised to consult his stockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possible since the invitation to apply for Open Offer Shares under the Open Offer may be a benefit which may be claimed from him by the purchaser(s) under the rules of the London Stock Exchange. The Open Offer has not been underwritten. None of the Open Offer Shares have been conditionally placed with institutional or other investors. Therefore there may be no or fewer than 20,000,000 Open Offer Shares issued under the Open Offer. The Open Offer is not conditional upon the level of applications made to subscribe under the Open Offer or upon any minimum level of proceeds being raised. For the purposes of section 578 of the Act, the Open Offer is being made on the basis that the Open Offer Shares subscribed for will be allotted in any event. Accordingly, even if the Open Offer is not fully subscribed, Open Offer Shares will be issued to Qualifying Shareholders who have applied (subject to the terms and conditions set out in this document and the Application Form). A summary of the arrangements relating to the Open Offer is set out below. This document and, for Qualifying Non-CREST Shareholders, the Application Form contain the formal terms and conditions of the Open Offer. Your attention is drawn to paragraph 4 of this Part II which gives details of the procedure for application and payment for the Open Offer Shares. The attention of Overseas Shareholders is drawn to paragraph 6 of this Part II. 2. The Open Offer Subject to the terms and conditions set out below (and, in the case of Qualifying Non-CREST Shareholders, in the Application Form), Qualifying Shareholders are being given the opportunity to apply for any number of Open Offer Shares up to their Open Offer Entitlement at the Issue Price (payable in full on application and free of all expenses) and will have an Open Offer Entitlement of: 1 Open Offer Share for every 15 Existing Ordinary Shares registered in the name of each Qualifying Shareholder on the Record Date. Valid applications by Qualifying Shareholders will be satisfied in full up to their Open Offer Entitlements. Open Offer Entitlements will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will be disregarded in calculating Open Offer Entitlements. Qualifying Shareholders with fewer than 15 Existing Ordinary Shares at the Record Date will not be able to apply for Open Offer Shares. Qualifying Shareholders may apply to acquire less than their Open Offer Entitlement should they so wish. Please note that holdings of Existing Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating Open Offer Entitlements, as will holdings under different designations and in different accounts. Qualifying CREST Shareholders will have their Open Offer Entitlements credited to their stock accounts in CREST and should refer to paragraph 4.2 of this Part II and also to the CREST Manual for further information on the relevant CREST procedures. Qualifying Shareholders may apply for any whole number of Open Offer Shares up to their Open Offer Entitlement. The Open Offer Entitlement, in the case of Qualifying Non-CREST Shareholders, 15