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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Frontier Res. | LSE:FRI | London | Ordinary Share | GB00B3K9ML24 | ORD 0.01P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.045 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMFRI TIDMMERC
RNS Number : 4814D
Frontier Resources International
07 July 2016
7 July 2016
Frontier International plc
("Frontier Resources", "Frontier" the "Company" or the "Group")
Intention to acquire Concepta Diagnostics Limited
Placing and Open Offer to raise GBP3.5 million
Change of Name to Concepta PLC
Share Consolidation
Frontier Resources (AIM:FRI), is pleased to announce it has conditionally agreed to acquire Concepta Diagnostics Limited ("Concepta"), a pioneering UK healthcare company established in 2013, that has developed proprietary products and a platform, which targets the personalised mobile health market with a primary focus on women's fertility and specifically unexplained infertility. SPARK Advisory Partners is acting as Nominated Adviser and Financial Adviser to the Company with Beaufort Securities as Broker.
Highlights of the proposed Placing, Open Offer and Acquisition
-- Raising GBP3.5million in a Placing and Open Offer
-- Frontier Resources is acquiring Concepta for GBP3.026 million comprising 30,343,950 New Ordinary Shares and GBP0.75 million in cash
-- Concepta is an innovative player in the Mobile Health and Connected Health Sector that has developed proprietary products for home self-testing as well as in a point-of-care environment
-- Concepta's products will initially address the specific needs of women with fertility issues, in particular unexplained infertility
-- MyLotus brand - unique offering allowing quantitative and qualitative measurement of a woman's personal hCG and LH hormone levels in urine samples
-- Defined route to market:
o Regulatory approvals for launch in China in place - first order from distributor with payment in advance expected following hospital testing after AIM admission
o CE-Marking for UK and Europe to follow in 2017
-- Acquisition presents an attractive market opportunity to capitalise on the Chinese and EU infertility market with annual revenue potential worth c.GBP600m
-- Proven management team with a wealth of experience in the women's health diagnostics industry
-- New Product Development growth opportunities - Concepta's proprietary platform lends itself to wider family home-health monitoring to improve individual health parameters including chronic stress, inflammation, urinary tract, healthy pregnancy progression etc
Adam Reynolds, Executive Chairman of Frontier said: "We have found a compelling acquisition target in Concepta which we believe, if approved, will be in the best interests for the Company, wider stakeholders and offers a value accretive opportunity for our supportive shareholders.
"Since its foundation in 2013, Concepta has established itself as a leading and innovative developer of personalised mobile health diagnostics with a primary focus on women's fertility, where a significant market opportunity exists to develop a 'best in class' product to help women with unexplained infertility to conceive.
"To this end, Concepta has developed a proprietary product branded 'MyLotus', which compared to competing products, has a unique product offering that allows both quantitative and qualitative measurement of a woman's personal hCG and LH hormone levels to help increase conception probability. Concepta is set to launch its product in China in 2016 and in the UK and Europe in 2017 and has the potential to translate its proprietary platform into commercial success in these initial markets where annual revenues are estimated to be worth c. GBP600m."
Erik Henau Chief Executive Officer of Concepta said: "Research indicates that in any given population only an estimated 70% of women are able to fall pregnant within the first six months of trying to conceive and 92% of women after two years. Medical intervention for infertility is not typically offered until at least a year of unsuccessfully trying to conceive and with many couples starting to take positive action well ahead of this time, with little support to help them do so, the market opportunity for a product specifically targeted at helping women with unexplained infertility to conceive is huge.
"The issue of infertility is universal and largely unaffected by demographics, and Concepta has developed a unique product, 'MyLotus', targeting women who have not become pregnant in the first six months of trying to conceive. This accounts for 0.36% of the total population in any given market. Competitor home tests only provide qualitative data collection, measuring hormone levels against a benchmark based on the 'average woman'. This, however, does not capture a significant proportion of the female population. Our target group falls outside of the 'average woman' and MyLotus' quantitative results, we believe, will help early diagnosis of a given woman's fertility issues and increase the chance of conception.
"In addition to this, we intend My Lotus to be a springboard for the launch of other diagnostic products as the platform lends itself to a wide range of home-health monitoring. By quantifying aspects of daily life the platform can be used to improve individual health parameters such as chronic stress, inflammation, urinary tract infection as well as monitoring pregnancy progression. We look forward to updating the market on the launch of MyLotus and these wider new product developments as the Company moves forward."
The Acquisition will constitute a reverse takeover under the AIM Rules and therefore is subject to the approval of Shareholders at the General Meeting to be held at 11.00 a.m. on 25 July 2016 at Finsgate, 5 - 7 Cranwood Street, London EC1V 9EE. If the Resolutions are approved, it is expected Admission will become effective and dealings in the Enlarged Ordinary Share Capital will commence on AIM on or around 26 July 2016.
For further information on Concepta Diagnostics, its products and unexplained infertility please visit www.conceptaplc.com.
Enquiries:
Frontier Resources International Plc
Adam Reynolds, Chairman
Tel: +44 (0) 7785 908158
Concepta Diagnostics Limited
Erik Henau, CEO
+44 (0) 1234 866 601
SPARK Advisory Partners Limited (Nominated Adviser)
Neil Baldwin/ Mark Brady
Tel +44 (0)20 3368 3550
Beaufort Securities Limited (Broker)
Jon Belliss
Tel: +44 (0)20 7382 8300
Yellow Jersey PR Limited (Financial PR)
Felicity Winkles/ Joe Burgess/ Josh Cole
Tel: +44 (0) 7748 843 871
There follows an extract from the Chairman's letter in Part I of the Admission Document which has been published today, and which is available on www.friplc.com
PROPOSED ACQUISITION OF CONCEPTA DIAGNOSTICS LIMITED APPROVAL OF WAIVER OF OBLIGATIONS UNDER RULE 9 OF THE TAKEOVER CODE
CHANGE OF NAME TO CONCEPTA PLC PLACINGS AND SUBSCRIPTION TO RAISE GBP3.538 MILLION
SHARE CONSOLIDATION
ADMISSION OF THE ENLARGED SHARE CAPITAL TO TRADING ON AIM AND
NOTICE OF GENERAL MEETING
1. INTRODUCTION
The Company announced earlier today that it has agreed terms in respect of the acquisition of Concepta Diagnostics Limited. As a result, a number of proposals are to be put to Shareholders at the General Meeting. This document sets out the details of, and reasons for, the Proposals.
The Acquisition, if completed, will constitute a reverse takeover under the AIM Rules and therefore is subject to the approval of Shareholders at the General Meeting. Further details of the General Meeting are set out in paragraph 23 of this Part I. Further details of the terms and conditions of the Acquisition are set out in paragraph 5 of this Part I.
The consideration for the Acquisition of GBP3.026 million is to be satisfied by the issue of 30,343,950 New Ordinary Shares at the Issue Price of GBP0.075 per share and cash of GBP750,120, which values the Existing Share Capital at circa. GBP1.55 million. In addition, the Company will assume GBP650,000 of Concepta's debt, which will be converted to New Ordinary Shares in Frontier under the Debt Conversion Agreement.
Following implementation of the Proposals, a group of Shareholders of the Enlarged Group comprising the Vendors of Concepta (excluding FYSCF) together with myself are deemed to be acting in concert - referred throughout this document as the Concert Party.
Following Admission the Concert Party will be interested in 33,301,138 New Ordinary Shares, representing approximately 30.55 per cent. of the Enlarged Ordinary Share Capital. If all New Options and New Warrants to be granted to members of the Concert Party were exercised at the earliest available opportunity, the Concert Party would be interested in a total of 37,811,438 New Ordinary Shares representing 33.31 per cent. of the Company's then issued share capital.
Under Rule 9 of the Takeover Code, the Concert Party would normally be obliged to make an offer to all Shareholders to acquire their New Ordinary Shares. Following an application by the Concert Party, the Panel has agreed to waive this obligation, subject to the approval of the Independent Shareholders (on a poll) at the General Meeting. Your attention is drawn to the Rule 9 Waiver section contained in paragraph 7 of this Part I.
The Directors believe that it is appropriate, should the Acquisition be approved by Shareholders at the General Meeting and the Acquisition completed, that the name of the Company be changed to Concepta Plc.
The Directors are proposing the Share Consolidation (whereby every 250 Existing Shares are converted into 1 New Ordinary Share) as they consider that it is in the best interests of the Company's long term development as a public quoted company to have a lower number of shares in issue and a higher nominal value such that Ordinary Shares are traded in pence rather than fractions of pence.
The purpose of this document is to provide Shareholders with further information regarding the matters described above and to seek your approval of the Resolutions, which include the Rule 9 Waiver, at the General Meeting. The notice of General Meeting is set out at the end of this document. The Proposals are conditional, inter alia, on the passing of the Resolutions and Admission. If the Resolutions are approved by Shareholders, it is expected that Admission will become effective and dealings in the Enlarged Ordinary Share Capital will commence on AIM on or around 26 July 2016. The General Meeting of the Company at which the Resolutions will be proposed has been convened for 11.00 a.m. on 25 July 2016 at Finsgate, 5 - 7 Cranwood Street, London EC1V 9EE.
You should read the whole of this document and not just rely on the information contained in this letter. In particular, you should consider carefully the "Risk Factors" set out in Part III of this document. Your attention is also drawn to the information set out in Part II and in Parts IV to VIII of this document.
2. BACKGROUND TO AND REASONS FOR THE ACQUISITION
The Company became an AIM Rule 15 cash shell on 23 March 2016, following the disposal of its previous subsidiaries, Frontier Oman Resources Limited and Frontier Resources International Inc. Under this Rule the Company must make an acquisition or acquisitions which constitute a reverse takeover under AIM Rule 14 within six months, failing which the Exchange will suspend trading in the Company's shares pursuant to AIM Rule 40. Since 23 March 2016 the Company has been seeking suitable acquisitions that fit within its new investing policy which is to focus on targeting the acquisition of a business in the media, technology and healthcare sectors.
The Existing Directors believe that the acquisition of Concepta Diagnostics Limited fits within that policy and that the Acquisition presents the Company and its Shareholders with an exciting opportunity to benefit from a business with significant potential in a developing personalised healthcare sector.
Accordingly, the Directors propose that, subject to Shareholders' approval of the Resolutions, the Company will acquire the entire issued share capital of Concepta. The Enlarged Group's operations would thereafter constitute exclusively those of Concepta. Details of the business and operations of Concepta are set out below in paragraph 3 of this Part I.
3. INFORMATION ON CONCEPTA & FUTURE STRATEGY OF THE ENLARGED GROUP
Overview and Strategy
Concepta Diagnostics Limited is a healthcare company operating in the area of fertility and, more specifically, in the niche market segment of unexplained infertility. Concepta's products target the personalised mobile health market which forms part of the growing global connected healthcare sector.
The initial product offering addresses a specific area of unexplained infertility that women can check themselves. The ability to quantify personal hormone levels enables the identification of the fertile period for a large number of women, especially those whose hCG and LH levels vary from mean levels.
The pipeline of future tests which the Directors hope to develop will target additional factors that can affect conception. Addressing a number of factors in any given cycle aims to increase the chances of conception.
The product platform allows for data to be transferred to healthcare professionals and offers the opportunity to play a wider role in private or government mobile health initiatives.
Background
Concepta was founded in 2013 by Michael Catt and Zhang Zhi Gang, each of whom has a background in women's health diagnostics. The founders, and several other of Concepta's employees, had previously worked for Unipath Limited (subsequently part of Alere, Inc), a company operating in the pregnancy and ovulation testing market segment. Concepta was established to address initially the specific needs of women with fertility issues, with target customers being women who are classified as having "unexplained infertility". These are women who are clinically identified as having no identified cause of infertility and who have not conceived after 1 year of trying.
The Concepta team has developed a proprietary platform for self-testing with application in the home as well as in a point-of-care environment. The platform allows Concepta to participate in the exciting emerging mobile health and connected health sectors where the use of technology is looking at improved health outcomes at a lower burden to healthcare systems. An increased ability to track and monitor wellbeing is expected by the Directors to lead to improved prevention.
In April 2014, Concepta raised GBP2.3 million of funding in a private round from FYSCF, Angel CoFund, private individuals, and its directors and employees.
During the first half of 2016 a further GBP0.68 million of bridging finance was raised from Concepta's shareholders, their associates, and its advisers.
Infertility: the issue Concepta is seeking to address
There is a range of available research which indicates that "fertility issues" exist for a significant minority of women. For example, a World Health Organisation report looking at national, regional and global trends using data from 277 health studies from 190 countries lead to an estimate of 48.5 million infertile couples worldwide after five years of trying.
Medical intervention in cases of infertility typically does not start until after 12 months of unsuccessfully trying for a baby. In the UK In Vitro Fertilisation (IVF) treatment is typically only offered after trying for 2 years. In the Concepta Directors' experience, many women and couples start to take positive action ahead of this time.
The term "infertile" can be a misnomer: studies illustrate that after 6 months of trying around 70% of women will be pregnant. The rate of conception slows down thereafter, such that after 2 years around 91% of women are expected to be pregnant.
Concepta's aim is to target primarily these women (who have not become pregnant after 6 months of trying) with the objective of speeding up the time to pregnancy.
Concepta's platform and suite of tests, of which it has two existing tests but more of which are in development and/or planned, allow measurement of factors that can affect the chances of a couple to conceive in any given menstrual cycle as well as providing confirmation (or not) of conception. The focus is on parameters where access to this information can lead to intervention of infertility issues, and where the use of the various products can cumulatively increase the chance of conception.
At present, the Concepta platform allows the measurement of a woman's personal hCG and LH levels. It can store the data and allows for tracking of the menstrual cycle and comparison with her previous menstrual cycles. Concepta's management know of no other home test that can provide women with this quantitative information. Home tests are based on the "average woman", however large variances can exist between women. Concepta's target group of women with "unexplained infertility" has a higher likelihood of not falling into the "average" category.
Description of the platform
Concepta Diagnostics Limited has developed a platform comprising a proprietary meter ("MyLotus Meter") and urine test under the MyLotus brand, together with a mobile phone application ("App") which is compatible with Apple iOS and Android systems.
On a stand-alone basis the App enables users to input data obtained from the urine tests to allow period tracking and mood diary entries. The application allows entering and logging of the test results, which indicate their fertility status and/or pregnancy that appear on the MyLotus Meter.
The business model relies on creating awareness among the target group and on selling them a starter pack that contains a MyLotus Meter and sufficient tests for 3 cycles. Refill test packs can be bought for further cycles.
Once the test (see Figure 1 below) has been inserted in the MyLotus Meter (Figure 2 below) a urine sample is applied. The MyLotus Meter's proprietary anti-counterfeiting facility ensures that only the results of valid tests (i.e. those manufactured by Concepta), and which are used before the "use-by date", are displayed. A digital display shows these results.
Concepta's ovulation test
Precise knowledge of the timing of ovulation has important clinical implications including: helping to optimise the chances of conception; the monitoring of growth; screening for birth defects and the management of delivery following confirmation of pregnancy.
There is considerable normal variability in the phases of the menstrual cycle. Indeed in only about 30% of women is the fertile window entirely within the days of the menstrual cycle identified by clinical guidelines.
The technology for Concepta's ovulation test allows the detection and quantification of the level of LH in urine samples. Once inserted in the MyLotus Meter the test gives both a qualitative result (i.e whether the outcome is positive or negative) to indicate whether a surge in LH has been detected. It also provides a quantitative result - of the actual level of the hormone in the sample.
Detection of the LH Surge is an indicator that ovulation could happen in the next 24 - 48 hours, thereby providing the user with valuable information as to when to attempt conception.
The information received from the quantitative result (expressed in mIU/ml) can be input into the App. For women with unexplained infertility, monitoring the quantitative levels can provide background information to their doctor. For example, a high level of pre-ovulatory LH can be linked to poor conception rates; women with low LH base levels may not detect their ovulation with some other commercial kits which do not tailor results to each user, but rather to the average woman rather than to each user.
MyLotus LH tracking allows a number of LH variations to be identified (e.g. pre-peak surges, small, double and long peaks), thereby providing useful information to users in planning conception.
Additionally monitoring of the menstrual cycle around specific fertility issues, such as polycystic ovary syndrome can take place.
Concepta's pregnancy test
Concepta's pregnancy test also provides both qualitative and quantitative (mIU/ml) results. The qualitative result simply confirms pregnancy (or not). Concepta intends to develop the quantitative result further into a healthy pregnancy monitoring feature as the hCG hormone exhibits a steady rise in the early stages of pregnancy. Many women currently test themselves on a regular basis to see whether they are still pregnant. Qualitative tests are not suitable for this and can give them the wrong result.
Intellectual Property
Concepta has looked to obtain intellectual property through patents, Company know-how, design rights and trademarks.
Patent
Concepta's main patent application looks at the use of the LH Surge to estimate fertilisation date, from this the hCG progression can be tracked to establish if hCG levels are in a healthy range. If they are not, then quick intervention can be delivered to help the pregnancy return to normal health trajectory. Concepta's patent application covers this aspect in a portable system.
Concepta has a sole patent family which includes a pending international patent application, and an application which is being pursued in the UK, and is currently in examination.
Company know-how
Anti-counterfeiting measures have been added to Concepta's system to prevent competitors from copying Concepta's devices. Concepta is keeping, and intends to keep, this as company know-how and will not publish this information.
Design Rights
The MyLotus Meter design and strip design has been protected using design rights. This means that the public design and shapes of Concepta's products cannot be lawfully copied. Application for design right protection have been filed in Europe, Japan, Taiwan, India and China, and of these the European Designs have been registered.
Trademarks
Concepta has trademarks in Europe granted for MyLotus, Lotus, Concepta, and our Flower, and is still waiting for the outcomes from Japan, Taiwan and China.
Freedom to Operate
As far as the Directors are aware there are no issues that impact Concepta's freedom to operate. Further details of Concepta's IPR are set out in paragraph 16 of Part VIII of this document.
Regulatory Approvals
The British Standards Institution ("BSI") has been chosen as Concepta's authorised body for obtaining CE marking. Concepta has passed Stage 1 of the ISO13485 audit. Concepta has commenced the process to seek a CE Mark for the ovulation and pregnancy products, and it is envisaged that this process will take around 9 months to complete post Admission, subsequent to which the Directors expect that the products will be allowed to be sold in the UK and the EU.
Product registrations in China under CFDA have been obtained by Concepta's manufacturing partner, Shiajiazhuang Huanzhong Biotech Limited ("SHBL"). Concepta has entered into an agreement with SHBL (set out in more detail in paragraph 15.18 of Part VIII of this document), whereby SHBL has confirmed that it holds the registration of the products for the benefit of Concepta alone, and that it will use the registration solely for the production of the Concepta products. Additionally Concepta has the right to acquire the business holding the registration if certain events were to occur. Once production for the Chinese market commences, it is also anticipated that SHBL will act as assembler and packager of Concepta's products from components (tests and MyLotus Meters) to be supplied by Concepta though no formal assembly agreement has yet been signed. Following Admission, this registration means that Concepta will be in a position to take orders immediately post Admission.
Future products
Concepta has a development programme for further products that will complement the existing product offering to couples with unexplained infertility and where monitoring can cumulatively improve their chance to conceive. Concepta's R&D effort will be focussed on incorporating next generation product ideas into its proprietary MyLotus Meter, providing improved functionality and lower-cost production.
The Directors believe that, ultimately, the platform lends itself to be used by multiple members of a household by offering personalised monitoring, where each member puts together a profile of parameters they wish to monitor. The MyLotus Meter will be capable of use by multiple users who will be able to download results to their personal App.
Concepta is exploring technology that allows more of this quantitative testing to be done in a home and/or point-of-care environment.
Target markets
Concepta's core target market is women who have tried but failed to conceive for 6 months or longer, although its existing products are suitable for any woman seeking to conceive. The Directors calculate, based on their knowledge of the industry and published articles on the subject, that this core market represents around 3,500 women in any representative population of 1 million women.
Furthermore the Directors believe that this target market is typically highly motivated and is easy to identify. As such, the Directors' strategy is to adopt a targeted approach, rather than adopting a traditional mass- market Over The Counter marketing approach. The business plan does not rely on heavy TV advertising nor does it require significant margins for retail chains. The Directors believe that targeted awareness, availability and affordability are the marketing factors that will drive sales growth.
Premises and Manufacturing
Concepta has its registered office in York and a research laboratory in Colworth, Bedfordshire.
At present the manufacturing of the test strips takes place at the Colworth site which also has some capacity for manual assembly of the test strips into their plastic housing. As the Company moves from low volume production towards commercial production post Admission, the test strip production will be relocated. Concepta will be setting up a manufacturing site in Yorkshire, using a "pick and place" machine which will automate the assembly process for high volumes. The entire re-location process is expected to take 4 - 6 months. Plans are in place to handle the initial orders with manual assembly. It is intended that all the Company's products will be "made to order" with a standard lead time of 12 weeks.
Real time stability testing will extend the product shelf-life over time from the current 12 months to a minimum of 2 years. Actual demand data will then allow Concepta to optimise batch sizes and improve lead times.
The MyLotus Meter is manufactured for the Company by Shenzhen H&T Intelligent Control Ltd. Concepta is in advanced negotiations on the terms of an Assembly Agreement with SHBL, which is expected to be concluded in the near future.
Routes to market
Europe
The Directors believe that the target market in the EU comprises c1.7m women.
As mentioned above, Concepta has commenced its application for CE Marking which is required before it can make sales in the EU. Concepta intends to focus initially on its home market in the UK, and will target on-line sales direct to consumers rather than through retail channels. Marketing activities will centre on dedicated websites for infertile women, specialised publications, help and support groups and the specialised consumer fertility exhibitions.
Achievement of CE marking will allow roll-out into other EU markets.
China
Concepta has the ability to sell into China already, through the CFDA registration obtained by SHBL. In China Concepta intends to use two routes to market: namely through hospitals and via the online market. Concepta intends to target what it has identified as the top 20,000 out of some 600,000 medical facilities and hospitals. This will require a network of regional distributors. Concepta anticipates it will ultimately need to appoint 20 distributors. However in the initial stages, Concepta intends to test this route through the appointment of one distributor.
Concepta will aim to outsource the operational functions to its distributor and will retain control over strategic planning. It is anticipated that its distributor will employ dedicated staff to implement Concepta's strategy for China. This will primarily include the implementation of the marketing plan and the management of a network of Chinese distributors. Concepta expects to receive its first order from its distributor, with payment in advance, following hospital testing soon after Admission.
The second route to market will be via the on-line market, which the Directors believe to be growing fast in China. To date over 400 licences to operate on-line pharmacies have been issued by the PRC Government. Concepta's distributors will be responsible for contracting with suitable on-line pharmacies, and managing those who sign up. Concepta intends to work on-line with a dedicated Chinese distributor through its dedicated staff to provide sales and product support to its distributors.
Competition
Pregnancy tests and ovulation tests have been available commercially for over 30 years. However, the users of those tests can range from those women hoping for a negative result through to Concepta's target market of infertile women hoping to improve their chances of conception.
As such, some providers of products which are capable of use by Concepta's target market are not regarded by the Directors as direct competition. These include, for example, manufacturers of basic urine tests which are capable of providing a yes/no result. However, the Directors believe that ovulation tests are usually provided by competitors as an add-on to the pregnancy test.
The women in the "unexplained infertility" category are typically not "average" - in the sense that their base LH levels may be lower than the statistical mean, or their ovulation commences earlier or later than this mean. Consequently, the Directors believe that current commercial tests are often not suitable for them. Some women use Basal Body Temperature, however medical advice warn not to use this for ovulation testing.
The Directors believe that a large section of the target group currently does not seek medical help. Whilst some ultimately opt for IVF, which tends to produce a pregnancy on c27% of occasions, the Directors believe that MyLotus offers them a chance to try for a natural conception at a fraction of the cost of this alternative.
Apart from competing with IVF, MyLotus can also be used as a complementary product prior to IVF treatment to help identify and rule out cycles with a low probability of success.
4. EXISTING DIRECTORS, PROPOSED DIRECTORS, SENIOR MANAGEMENT AND ADVISORY BOARD
Brief biographical details of the Existing Directors, Proposed Directors, senior management and members of the Advisory Board are set out below:
Existing Directors
The current composition of the Board of the Company is as follows:
Adam Reynolds (Non-executive Chairman) aged 53
Mr Reynolds is a former stockbroker with over 35 years' experience within the UK financial services sector. In 2000, Mr Reynolds founded Hansard Group plc which was admitted to trading on AIM in 2000. Mr Reynolds is currently a director of several AIM traded companies: he is a non-executive director of EKF
Diagnostics Holdings plc, a point-of-care, central laboratory, and molecular diagnostics company; Optibiotix plc, a life sciences business developing compounds to tackle obesity, high cholesterol and diabetes; and Premaitha Health Plc, a company involved in the development of prenatal screening devices. He is also a director of a number of private companies. Adam joined the Frontier board as non-executive Chairman in February 2016.
Neil Herbert (Non-executive Director) aged 50
Neil Herbert has over 25 years of experience in finance and is a Fellow of the Association of Chartered Certified Accountants. He retired as Co-Chairman and Managing Director of energy focused investor Polo Resources Limited in 2013. Under his stewardship the company paid $185 million in special dividends following asset sales. Prior to this he was Finance Director of exploration investment group Galahad Gold PLC and from which Neil also became Finance Director of its most successful investment UraMin Inc, a company which was acquired in 2007. He has a wealth of experience as both an executive and non-executive director having managed and advised companies through asset acquisitions, disposals and company takeovers. Neil joined the Frontier board in November 2014.
Barbara Spurrier (Chief Financial Officer) aged 60
Barbara is a qualified certified accountant (FCCA) with over 35 years finance experience in numerous sectors including Technology, Oil & Gas and Food. As CFO of a fast growing online technology company, blur group plc, she was an integral part of the successful IPO onto AIM. In addition to the establishment of a US subsidiary and the conversion to the International Financial Reporting Standards (IFRS) of the company accounts, she has overseen the application of accounting principles to ensure IFRS compliance. As that company's CFO, she successfully completed its IPO in which she was able to help raise $3.5m in difficult market conditions in 2013. She has been a main board director on four AIM quoted plc's, heading the revenue recognition committee of the board for one of these companies. Alongside her fund raising and IFRS experience Barbara's expertise includes financial and cash management, profit optimisation and the implementation of long term strategic objectives. Barbara was appointed to the Frontier board in March 2013.
4.1 Proposed Directors
On Admission it is intended that the following individuals will be appointed to the Board:
Erik Henau (Chief Executive Officer) aged 56
Erik has over 35 years of experience in Life Sciences companies (Amersham International, Oxoid) and consumer diagnostics (Unipath/Alere). He held a number of General Manager positions including running Unilever subsidiaries in Scandinavia and the Netherlands. He finished his career at Alere as International OTC Director and then set up Adaxis, a Women's Health Consultancy business, before returning to corporate life as firstly business development director, and then as CEO, of Concepta Diagnostics Limited.
Dr Mark Wyatt (Non-executive Director) aged 43
Mark is an investment Director at Enterprise Ventures Limited and has particular expertise in healthcare and clean technology sectors.
He re-joined Enterprise Ventures in 2010 following two years as Bioscience Ventures Manager at London-based Imperial Innovations where is was responsible for the formation of new, and management of existing, early-stage portfolio companies.
Prior to joining Imperial, Mark had spent the previous five years with Enterprise Ventures' Technology team based in the North West, and before that, six years at Merlin Biosciences, a venture capital and advisory company dedicated to the life sciences sector.
4.2 Senior Management
In addition to the Board, details of key senior management personnel within the Enlarged Group are set out below:
Dr Robert Porter - (Chief Technology Officer)
Robert was one of the founders of Concepta Diagnostics and led the research and development, Quality, regulatory and manufacturing teams to develop the MyLotus product. He led the tech transfer of the product to suppliers to manufacture key components of the product and help lead the final product manufacture. He is a highly respected figure in the life sciences industry and is the former co-founder and CTO of Agplus Diagnostics Ltd. In his 19 years in the industry, he has worked in many diagnostics areas evolving women's health, food, personal care and myocardial infarction to name a few. He served as a head scientist at the National Physical Laboratory for the Bio-diagnostics and single molecule detection area, where he helped national bodies (EPSRC, MRC, BBSRC, TP) and international bodies (IFCC) with developments and direction within Diagnostic devices. He has worked at Alere, Unipath and at Unilever. Robert holds a PhD in Immunodiagnostics from the University of Swansea.
Zhang Zhi Gang - (Chief Operations Officer)
Zhang was one of the founders of Concepta Diagnostics and led the way in developing key contacts in China for manufacturing and distribution. Zhang's previous position was at Alere-China's first General Manager and she has extensive knowledge of the Chinese health-care market. During her time at Alere-China, she helped launch 8 new products and managed 5 product lines. Previous to this Zhang was at Unipath UK where she helped develop the patented algorithms currently used by Clearblue's range of fertility and pregnancy test products.
4.3 Advisory Board and consultants
The Company proposes to establish an Advisory Board post Admission. This Board will comprise individuals with skill-sets, expertise or commercial experience which the Board believes can assist the Company in implementing its strategic vision. The first appointee will be Ian Gilham, current Chairman of Concepta.
In addition, David Evans will be appointed as a consultant to the Board. Details of these individuals are set out below:
Dr Ian Gilham
Ian is currently the Chairman of AIM quoted Horizon Discovery PLC and Epistem Holdings plc, a board member at Vernalis plc, and sits on the boards of private companies, Biosurfit Limited and Multiplicom NV. Ian is the former CEO of Axis-Shield PLC, a diagnostics company with over GBP100m sales and acquired by Alere for GBP235m. Prior to joining Axis-Shield, Dr. Gilham held international general management, marketing, business development and R&D positions with GSK, Abbott Laboratories, Celltech and Amersham, gaining wide expertise in the fields of pharmaceuticals and clinical diagnostics.
David Evans
David has a track record in acquiring, integrating and growing businesses in the diagnostic area and in value creation, exemplified by his role at BBI Holdings plc where he grew the company through acquisition and organic growth, from a value of GBP4 million to a value of GBP84 million in 2007, when BBI was sold to Inverness Medical Innovations Inc. He was chairman of DxS Limited (DxS), which was sold three months after his departure in 2009 for GBP82 million. David was also chairman of Sirigen Group Limited, an early stage medical technology company that was sold in 2012 to Becton, Dickinson and Company, a global medical technology company. David was also previously Chairman of Immunodiagnostics Systems Holdings Plc, EKF Diagnostics Holdings plc, Epistem Holdings Plc and Scancell Holdings Plc. David is currently Chairman of Premaitha Health Plc.
5. PRINCIPAL TERMS OF THE ACQUISITION
The Company has conditionally agreed to acquire the entire issued share capital of Concepta Diagnostics Limited for a consideration of GBP3.026 million, to be satisfied by the issue of the Consideration Shares and cash of GBP750,120, which will immediately be used by the Vendors to acquire New Ordinary Shares in the Firm Placing. The Acquisition is conditional, amongst other things, on the passing of the Resolutions and Admission becoming effective on or before 26 July 2016. The Warrantors have given certain customary warranties and indemnities pursuant to the Acquisition Agreement. The Company has entered into a short acquisition agreement with those Vendors who are not giving such warranties and indemnities. Further details of the Acquisition Agreement and such short form acquisition agreement are set out in paragraph 15.1 and 15.2 of Part VIII of this document.
The parties to the Debt Conversion Agreement have separately agreed that the obligation to repay the principal amounts of the Concepta Debt shall be novated by Concepta to the Company. The Company will immediately following Admission repay the principal amount of the Concepta Debt by the issue of New Ordinary Shares and pay the accrued interest of GBP17,380 in cash.
6. FINANCIAL INFORMATION
Historical financial information on the Company and on Concepta is set out in Parts IV and V respectively of this document. An unaudited pro forma net assets statement showing the hypothetical net assets of the Enlarged Group after the Proposals is set out in Part VI of this document.
7. IMPLICATIONS OF THE PROPOSALS UNDER THE CODE
Background to the Concert Party
Under the Code a concert party arises, inter alia, when persons acting together pursuant to an agreement or understanding (whether formal or informal), co-operate to obtain or consolidate control of, or frustrate the successful outcome of an offer for, a company to which the Code applies. Control means an interest or interests in shares carrying an aggregate of 30 per cent. or more of the voting rights of the company irrespective of whether the holding or holdings give de facto control. Persons acting in concert include persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate, to obtain or consolidate control of that company.
Shareholders of a company which is being acquired for shares in a transaction subject to the Code are deemed to be acting in concert. The Panel has agreed, based solely on information provided by the Company, that a concert party exists in relation to the Proposals. The Vendors (excluding FYSCF), together with myself, form the Concert Party in relation to the Proposals.
Further details of the Concert Party are set out in Part VII of the document.
Concert Party
The Concert Party's existing shareholdings in the Company and their proposed interest in the Enlarged Group immediately following Admission are set out in the table below:
Hot Features
Premium
Proposed interest in the Enlarged Group
post Admission(and assuming all New Options
and New Warrants to be granted to the respective
Concert Party members are exercised)*1
% of issued
Enlarged
Ordinary
Share Capital
Current interest in Firm % of (assuming
the Company all
% of Placing Total issued New Options
the
Number Existing Number Shares/ holding Enlarged New and New
of of
Existing Ordinary Consi- Debt Number Sub- of New Ordinary Options/ Warrants
of have
Ordinary Share deration Conversion Offer scription Ordinary Share New been
Name Shares Capital Shares Shares Shares Shares Shares Capital Warrants exercised)1
Steven Lee - - 2,412,050 - - - 2,412,050 2.21 - 2.12
Michael Catt - - 2,240,100 - - - 2,240,100 2.06 - 1.97
Zhang Zhi
Gang - - 2,328,450 - - 133,333 2,461,783 2.26 - 2.17
Robert Porter - - 2,328,450 - - 200,000 2,528,450 2.32 1,100,000 3.20
Angel Co Fund - - 10,001,600 1,666,667 - - 11,668,267 10.70 - 10.28
David Evans - - - 833,333 - 2,000,700 2,834,033 2.60 1,100,000 3.47
Neil McArthur - - - - - 1,999,750 1,999,750 1.83 - 1.76
Clare Hughes - - - - - 1,999,750 1,999,750 1.83 - 1.76
Andrew Parker - - - - - 1,333,800 1,333,800 1.22 - 1.18
Steven
Lister/Debbie
Heath - - - - - 1,000,350 1,000,350 0.92 - 0.88
David Groves - - - - 666,900 666,900 0.61 - 0.59
Alan Halsall - - - - - 666,900 666,900 0.61 - 0.59
David Gare - - - - - 266,950 266,950 0.24 - 0.24
Richard
Faulkner - - - - - 66,500 66,500 0.06 - 0.06
Adam Reynolds 173,333,333 3.36 - - 462,222 - 1,155,555 1.06 1,100,000 1.99
Diagnostic
Capital - - - - - - - 0.00 1,210,300 1.07
------------ --------- ----------- ----------- -------- ----------- ----------- --------- ---------- --------------
Total 173,333,333 3.36 19,310,650 2,500,000 462,222 10,334,933 33,301,138 30.55 4,510,300 33.31
============ ========= =========== =========== ======== =========== =========== ========= ========== ==============
*1 assuming only the New Warrants and New Options to be granted to members of the Concert Party are exercised at the earliest possible opportunity.
In aggregate, on Admission the Concert Party will be interested in 33,301,138 New Ordinary Shares, representing a maximum of 30.55 per cent. of the Enlarged Share Capital following Admission assuming:
(a) no exercise of any outstanding New Options, New Warrants or Existing Warrants; and (b) no other share issues.
Maximum Potential Controlling Positions
Concert Party
As at the date of this document, the members of the Concert Party have an interest in 173,333,333 Existing Ordinary Shares representing 3.36% of the Existing Ordinary Share Capital. Immediately following Admission, the Concert Party will be interested in, in aggregate, 33,301,138 New Ordinary Shares, representing 30.55 per cent. of the Enlarged Ordinary Share Capital which, without a waiver of the obligations under Rule 9 of the Takeover Code, would oblige the Concert Party to make a general offer to Shareholders under Rule 9 of the Takeover Code. Assuming only the New Options and New Warrants to be granted to members of the Concert Party are exercised at the earliest possible opportunity, the Concert Party will be interested in 37,811,438 New Ordinary Shares representing 33.31 per cent. of the Ordinary Share Capital (as so enlarged).
The increase in the Concert Party's interest in New Ordinary Shares, resulting from the issue of the Consideration Shares, Debt Conversion Shares, Firm Placing Shares, Subscription Shares and Offer Shares to the Concert Party would ordinarily incur an obligation under Rule 9 of the Code for the Concert Party to make a general offer for the remainder of the entire issued share capital of the Company. Additionally, the exercise of New Options and New Warrants to be granted to members of the Concert Party (if the aggregate percentage interest in the Company's voting rights at such time of the Concert Party was below 50%) would also ordinarily incur an obligation under Rule 9 of the Code for the Concert Party to make a general offer for the remainder of the entire issued share capital of the Company. However, the Panel has agreed to waive these obligations subject to the approval of the Independent Shareholders voting on a poll at the General Meeting.
Further details regarding the provisions of the Code, the Whitewash Resolution and the interests of the Concert Party in the Company are set out below in the section headed "Waiver of Rule 9 of the Code" of this Part I and in Part VII of this document.
Independent Shareholders
I am not regarded as an Independent Shareholder as I am deemed to be a member of the Concert Party (details of which are set out in paragraph 3 of Part VII of this document). Additionally Barbara Spurrier is not regarded as an Independent Shareholder by virtue of the proposed issue to her of New Warrants, conditional upon Admission, as set out in paragraph 15 of this Part I. All other shareholders in Frontier are deemed to be Independent Shareholders.
Intentions of the Concert Parties
At present Frontier Resources is an "investing company" with no trading business. The Company's objective has been to acquire a trading business, and the Existing Directors believe that the acquisition of Concepta fulfils this objective. The Concert Party has confirmed that following completion of the Proposals its intention is that the business of the Company is changed to that of developing the Concepta business as described under "Information on Concepta and the Future Strategy of the Enlarged Group" as set out in paragraph 3 above.
Other than this change to the Company's strategy, the Concert Party has specifically confirmed that they have no intention to make changes regarding:
-- the location of the Company's places of business;
-- the continued employment of the Company's employees and management, including any material changes in employment;
-- employer contributions into the Company's pension schemes, the accrual of benefits for existing members and the admission of new members; or
-- the maintenance of any existing trading facilities for the Ordinary Shares (i.e. the trading of the Company's shares on AIM),
nor will there be any redeployment of the fixed assets of the Company as result of the Proposals.
Waiver of Rule 9 of the Code
The Code is issued and administered by the Panel. The Company is a company to which the Code applies and its Shareholders are entitled to the protections afforded by the Code. Under Rule 9 of the Code, any person who acquires an interest (as defined in the Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares.
Rule 9 of the Code further provides that where any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of a company but does not hold shares carrying more than 50 per cent. of such voting rights and such person, or any such person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested, such person or persons acting in concert with him will normally be required to make a general offer to all remaining Shareholders to acquire their shares.
An offer under Rule 9 of the Code must be made in cash at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company during the 12 months prior to the announcement of the offer.
The Company has applied to the Panel for a waiver of Rule 9 of the Takeover Code in order to permit the Acquisition without triggering an obligation on the part of the Concert Party to make a general offer to Shareholders. Subject to the approval of the Independent Shareholders on a poll, the Panel has agreed to waive the obligation to make a general offer for the entire issued share capital of the Company that would otherwise arise as a result of the issue of the Consideration Shares in the Acquisition, the issue of Firm Placing Shares, the Subscription Shares, the Debt Conversion Shares and Offer Shares or any subsequent exercise of New Warrants or New Options. Accordingly, the Whitewash Resolution being proposed at the General Meeting will be taken by means of a poll of Independent Shareholders attending and voting at the General Meeting. None of the members of the Concert Party (nor any adviser connected to them) are permitted to exercise their voting rights in respect of the Whitewash Resolution but may exercise their voting rights in respect of the remainder of the Resolutions.
The waiver to which the Panel has agreed under the Code will be invalidated if any purchases are made by any member of the Concert Party, or any person acting in concert with either of them, in the period between the date of this document and the General Meeting. Furthermore, other than as set out in paragraph 4(b) of Part VII no member of the Concert Party, nor any person acting in concert with either of them, has purchased Ordinary Shares in the 12 months preceding the date of this document.
In each case above it is assumed that no other person has converted any convertible securities or exercised any option or any other right to subscribe for shares in the Company following the date of the Admission Document.
In the event that the Proposals are approved in the General Meeting, the Concert Party will not be restricted from making an offer for the remaining shares not held by them.
Independent Advice
SPARK Advisory Partners has provided advice to the Existing Directors in respect of the Offer as required under Rule 3 of the Code.
8. CHANGE OF NAME AND REGISTERED OFFICE
Subject to Shareholders' approval by way of special resolution, it is proposed, pursuant to Resolution 8 that the name of the Company be changed to Concepta PLC. In addition, following Admission the registered office will be moved to Concepta's York offices.
If the special resolution to approve the change of name of the Company is passed at the General Meeting, the Company's AIM symbol will be changed to CPT and its website address will be changed to www.conceptaplc.com following the General Meeting.
9. SHARE CONSOLIDATION
Admission is conditional upon the approval and completion of the Proposals, including the Share Consolidation. The Existing Ordinary Share Capital comprises 5,159,856,649 Existing Ordinary Shares.
The Share Consolidation which is expected to take place after close of business on the Record Date will involve every 250 Existing Ordinary Shares being consolidated into 1 New Ordinary Share. Accordingly the Board will issue one New Ordinary Share in exchange for every 250 Existing Ordinary Shares held. Resolution 3 to be proposed at the General Meeting proposes that every 250 Existing Ordinary Shares of the Company be consolidated into one New Ordinary Share. The rights attached to the New Ordinary Shares will be the same as the rights attaching to the Existing Ordinary Shares and the New Ordinary Shares will trade on AIM in place of the Existing Ordinary Shares.
Following the Share Consolidation, Shareholders will own the same proportion of Ordinary Shares in the Company as they did previously (subject to fractional entitlements) but will hold fewer New Ordinary Shares than the number of Existing Ordinary Shares currently held. The Share Consolidation will result in an issued ordinary share capital of 20,639,427 New Ordinary Shares. The Deferred Shares will not be affected by the Share Consolidation.
In order to ensure that a whole number of New Ordinary Shares is created, it is proposed that the Company may issue Existing Ordinary Shares to the Registrar. The number of Existing Ordinary Shares to be issued will be 101 which will result in the total number of Existing Ordinary Shares being exactly divisible in accordance with the consolidation ratio.
No Shareholder will be entitled to a fraction of a New Ordinary Share and where, as a result of the Share Consolidation, any Shareholder would otherwise be entitled to a fraction only of a New Ordinary Share in respect of their holding of Existing Ordinary Shares on the date of the General Meeting (a "Fractional Shareholder"), such fractions will, in so far as possible, be aggregated with the fractions of New Ordinary Shares to which other Fractional Shareholders of the Company would be entitled so as to form full New Ordinary Shares ("Fractional Entitlement Shares"). These Fractional Entitlement Shares will be aggregated and sold in the market and the net proceeds of the sale shall be retained by the Company.
The provisions set out above mean that any such Fractional Shareholders will not have a resultant proportionate shareholding of New Ordinary Shares exactly equal to their proportionate holding of Existing Ordinary Shares, and as noted above, Shareholders with only a fractional entitlement to a New Ordinary Share (i.e. those Shareholders holding a total of fewer than 250 Existing Ordinary Shares at the Record Date) will cease to be a Shareholder of the Company. Accordingly, Shareholders currently holding fewer than 250 Existing Ordinary Shares who wish to remain a Shareholder of the Company following the Share Consolidation would need to increase their shareholding to at least 250 Existing Ordinary Shares prior to the Record Date. Shareholders in this position are encouraged to obtain independent financial advice before taking any action.
The Existing Warrants will also be subject to the Share Consolidation. The terms of the respective Warrant instruments provide that in the event of any consolidation of the share capital of the Company, then the number of shares subject to the Warrant and/or the exercise price payable on exercise of a Warrant shall be adjusted accordingly to reflect the concentrative effect of the relevant share consolidation.
The Company will issue new share certificates to those Shareholders holding shares in certificated form to take account of the Change of Name and the Share Consolidation. Following the issue of new share certificates, share certificates in respect of Existing Ordinary Shares will no longer be valid. Shareholders will still be able to trade in Ordinary Shares during the period between the passing of the Resolutions and the date on which Shareholders receive new share certificates.
10. PLACINGS AND SUBSCRIPTION
The Company proposes to undertake the Placings and a Subscription to raise up to GBP3.538 million (before expenses) comprising:
-- The Firm Placing of 32,050,342 New Ordinary Shares at the Issue Price to raise GBP2.403 million. This includes GBP1.0m of Firm Placing with Mercia Investment Plan, and GBP750,120 from certain of the Vendors (as set out in the tables on page 25 of this document).
A Subscription for 1,373,330 New Ordinary Shares at the Issue Price to raise GBP103,000. This includes subscriptions as follows:
Employee No of Shares Subscription Erik Henau 213,333 GBP16,000 Robert Porter 200,000 GBP15,000 Zhang Zhi Gang 133,333 GBP10,000
-- The Conditional Placing (subject to clawback in the Open Offer) of 13,759,618 New Ordinary Shares at the Issue Price to raise GBP1.03 million.
The Offer Price (of 7.5 per New Ordinary Share) represents a discount of approximately 48 per cent. to the closing middle market price of 0.0575 pence per Existing Ordinary share on 6 July 2016, being the last business day prior to the announcement of the Proposals, once the effect of the Share Consolidation is taken into account.
11. OPEN OFFER
The Company proposes an Open Offer to raise up to GBP1.03 million (before expenses) through the issue of 13,759,618 New Ordinary Shares at the Issue Price. Any shares issued under the Open Offer will be "clawed back" from the Conditional Placing.
The Offer Shares will be offered to Qualifying Shareholders on the following basis:
2 Offer Shares for every 750 Existing Ordinary Shares held in their name(s) on the Record Date for the Offer
Shareholders should carefully consider the "Risk Factors" set out in Part III of this document before deciding whether or not to proceed with an investment in the Company.
Qualifying Shareholders are being offered the opportunity to apply for additional Offer Shares in excess of their Open Offer Entitlement to the extent that other Qualifying Shareholders do not take up their Open Offer Entitlement in full. In the event that applications are received for in excess of the 13,759,618 Offer Shares available, excess applications will be scaled back pro rata to Qualifying Shareholders' existing shareholdings.
The latest time and date for receipt of completed Application Forms and payment in full under the Open Offer is 11.00 a.m. on 22 July 2016. Admission and commencement of dealings in Offer Shares is expected to take place at 8.00 a.m. on 26 July 2016.
Full details of the Open Offer, together with the terms and conditions of the Open Offer, are set out in Part II of this document.
Any Qualifying Shareholder validly applying for his Open Offer Entitlement shown above will be allotted those shares.
Directors Intentions in the Open Offer
I have undertaken to subscribe for my Open Offer Entitlement of 462,222 New Ordinary Shares at the Issue Price.
Barbara Spurrier has undertaken to subscribe in the Open Offer for 200,000 New Ordinary Shares at the Issue Price. This proposed subscription includes 66,667 New Ordinary Shares in the name of CFPro Limited, a company with which Ms Spurrier is connected.
12. ADMISSION TO AIM AND DEALINGS IN THE NEW ORDINARY SHARES
If all of the Resolutions are passed at the General Meeting, application will be made for the Enlarged Ordinary Share Capital to be admitted to trading on AIM. It is expected that Admission will become effective and dealings in the New Ordinary Shares will commence on 26 July 2016. No application has been or will be made for the New Warrants to be admitted to trading on AIM.
If any of the Resolutions are not passed at the General Meeting, the Acquisition will not proceed and the Directors will consider alternative options for the Company.
SPARK Advisory Partners and Beaufort have been retained as the Company's nominated adviser and broker respectively in relation to Admission. Further details of SPARK Advisory Partners' and Beaufort's engagements are set out at paragraphs 15.10, 15.11, 15.4 and 15.5 respectively of Part VIII of this document.
13. USE OF FUNDS
The net proceeds of the Firm Placing, the Conditional Placing, the Open Offer and the Subscription will be deployed as follows:
-- Cash element of the consideration for the Acquisition GBP0.75m -- Marketing and product launch GBP0.30m -- Product development GBP0.60m -- Manufacturing set up GBP0.25m -- CE Marking GBP0.25m -- App development GBP0.16m -- Patents GBP0.125m -- General working capital GBP0.603m
--------
Total GBP3.038m 14. LOCK-INS AND ORDERLY MARKET ARRANGEMENTS
The Locked-in Persons have undertaken to the Company, SPARK Advisory Partners and Beaufort that they will not dispose of any interest they hold in New Ordinary Shares for a period of 12 months following Admission without having first obtained the consent of SPARK Advisory Partners and Beaufort, such consent not to be unreasonably withheld and that, for a further period of 12 months thereafter, they shall only dispose of an interest in New Ordinary Shares on an orderly market basis through the Company's then broker.
Further details of the lock-in and orderly market arrangements are set out in paragraph 15.3 of Part VIII of this document.
15. WARRANTS AND OPTIONS
At the date of this document, the Company has Existing Warrants in issue in respect of 328,081,463 Existing Ordinary Shares of which 314,141,463 are "Bonus" warrants issued to those shareholders shown on the share register at 15 February 2016. These Existing Warrants are also the subject of the Share Consolidation. Following the Share Consolidation the holders of such Existing Warrants will be entitled, in aggregate, to subscribe for 1,312,325 New Ordinary Shares. The Bonus warrants are exercisable on 7 July 2016 and 7 October 2016, and the other warrants variously on 5 July 2018 and 12 November 2019, after which time they will lapse.
The Company has agreed to issue, conditional upon Admission, in aggregate, 8,133,633 New Warrants, over New Ordinary Shares at an exercise price of GBP0.075 as follows:
(a) To Existing and Proposed
Directors:
Name Number
Erik Henau 1,100,000
Adam Reynolds 1,100,000
Barbara Spurrier 1,100,000
To senior employees:
(b) Robert Porter: 1,100,000
(c) To advisers and consultants:
Name Number
Mr David Evans 1,100,000
Diagnostic Capital 1,210,300
SPARK Advisory Partners 1,090,000
Beaufort Securities 333,333
The New Warrants are exercisable at any time up to the fifth anniversary of Admission, at which time they will lapse.
Further details of the Existing Warrants and the New Warrants are set out in paragraphs 11.1(a), and 11.1(b) and paragraph 15.7 respectively of Part VIII of this document.
At the date of this document, the Company has no Options outstanding.
Following Admission, the Company intends to establish an option scheme to incentivise the directors and employees and to align their interests with the interests of Shareholders. The total number of options which may be granted under the scheme is capped at 10 per cent. of the Company's issued share capital from time to time. Following Admission it is proposed to issue New Options to Directors as follows:
Number of
Option holder shares Exercise price Expiry
Erik Henau 1,569,400 GBP0.075 26 July
2021
In addition, all of the Vendors and employees of Concepta who hold options in respect of Concepta's share capital will be offered New Options over New Ordinary Shares under the Share Option Scheme as set out in paragraph 11.2 of Part VIII of this document and their existing options over shares in Concepta will lapse. Further details of the proposed Share Option Scheme are set out in paragraph 11.2 of Part VIII of this document.
16. DIVID POLICY
The nature of the Enlarged Group's business means that it is unlikely that the Directors will be in a position to recommend a dividend in the early years following Admission. The Directors believe that the Enlarged Group should seek to generate capital growth for its Shareholders but may recommend distributions at some future date, depending upon the generation of sustainable profits, if and when it becomes commercially prudent to do so. There can be no assurance that the Company will declare and pay, or have the ability to declare and pay, any dividends in the future.
17. CORPORATE GOVERNANCE AND INTERNAL CONTROLS
The Directors and Proposed Directors recognise the importance of sound corporate governance and the Enlarged Group will comply with QCA Code, as published by the Quoted Companies Alliance, to the extent they consider appropriate in light of the Enlarged Group's size, stage of development and resources.
The Enlarged Group will hold board meetings periodically as issues arise which require the attention of the Board. The Board will be responsible for the management of the business of the Enlarged Group, setting the strategic direction of the Enlarged Group and establishing the policies of the Enlarged Group. It will be the Board's responsibility to oversee the financial position of the Enlarged Group and monitor the business and affairs of the Enlarged Group on behalf of the Shareholders, to whom the Directors are accountable. The primary duty of the Board will be to act in the best interests of the Enlarged Group at all times. The Board will also address issues relating to internal control and the Enlarged Group's approach to risk management.
The Enlarged Group has also established a remuneration committee ("the Remuneration Committee"), an audit committee ("the Audit Committee") and a nominations committee ("Nominations Committee") with formally delegated duties and responsibilities.
The Remuneration Committee, which will comprise Neil Herbert as Chairman and Adam Reynolds, will meet not less than twice each year. The committee will be responsible for the review and recommendation of the scale and structure of remuneration for senior management, including any bonus arrangements or the award of share options with due regard to the interests of the Shareholders and the performance of the Enlarged Group.
The Audit Committee, which will comprise Neil Herbert as Chairman, and Adam Reynolds, will meet not less than twice a year. The committee will be responsible for making recommendations to the Board on the appointment of auditors and the audit fee and for ensuring that the financial performance of the Enlarged Group is properly monitored and reported. In addition, the Audit Committee will receive and review reports from management and the auditors relating to the interim report, the annual report and accounts and the internal control systems of the Enlarged Group.
The Nominations Committee is responsible for identifying and nominating members of the Board, recommending Directors to be appointed to each committee of the Board, and the chair of each such committee. The Nominations Committee will also arrange for evaluation of the Board. The Nominations Committee will initially comprise Adam Reynolds as Chairman and Neil Herbert. The Nominations Committee will meet at least twice a year and otherwise as required.
The Enlarged Group has adopted and will operate a share dealing code governing the share dealings of the directors of the Company and applicable employees with a view to ensuring compliance with the AIM Rules and the Market Abuse Regulations.
18. TAXATION
General information regarding UK taxation is set out in paragraph 21 of Part VIII of this document. These details are intended only as a general guide to the current tax position under UK taxation law. If an investor is in any doubt as to his tax position he should consult his own independent financial adviser immediately.
Investors subject to tax in other jurisdictions are strongly urged to contact their tax advisers about the tax consequences of holding Ordinary Shares.
19. CREST
CREST is a paperless settlement system enabling securities to be evidenced otherwise than by a certificate and transferred otherwise than by written instrument in accordance with the CREST Regulations.
The New Ordinary Shares will be eligible for CREST settlement. Accordingly, following Admission, settlement of transactions in the New Ordinary Shares may take place within the CREST system if a Shareholder so wishes. CREST is a voluntary system and Shareholders who wish to receive and retain share certificates are able to do so.
For more information concerning CREST, Shareholders should contact their stockbroker or Euroclear UK & Ireland Limited at 33 Cannon Street, London EC4M 5SB or by telephone on +44 (0) 20 7849 0000.
20. DEFERRED SHARES
The Company has two classes of Deferred Shares - the Deferred Shares and the A Deferred Shares which arose from previous share capital reorganisations. These shares are effectively worthless, and the Company has the right to acquire the entire issued share capital of both of these classes of share for GBP1 in aggregate. The Company intends to acquire these Deferred Shares and the A Deferred Shares following publication of the Admission Document, such that at the time of Admission the New Ordinary Shares will constitute the only issued share capital of the Company.
21. BRIBERY ACT 2010
The government of the United Kingdom has issued guidelines setting out appropriate procedures for companies to follow to ensure that they are compliant with the UK Bribery Act 2010 which came into force with effect from 1 July 2011. The Company has conducted a risk review into its operational procedures to consider the impact of the Bribery Act 2010 and has drafted and implemented an anti-bribery policy as adopted by the Board and also implemented appropriate procedures to ensure that the Directors, employees and consultants comply with the terms of the legislation.
22. RISK FACTORS
Shareholders and other prospective investors in the Company should be aware that an investment in the Company involves a high degree of risk. Your attention is drawn to the risk factors set out in Part III of this document.
23. FURTHER INFORMATION
Shareholders should read the whole of this document, which provides additional information on the Company, Concepta and the Proposals, and should not rely on summaries of, or individual parts only of, this document. Your attention is drawn, in particular, to Parts II to VIII of this document.
24. GENERAL MEETING
You will find set out at the end of this document a notice convening the General Meeting of the Company to be held at 11.00 a.m. on 25 July 2016 at Finsgate, 5-7 Cranwood Street, London EC1V 9EE, at which the following Resolutions will be proposed:
Resolution 1: an ordinary resolution to approve the Whitewash;
Resolution 2: an ordinary resolution (subject to, and conditional upon, the passing of Resolution 1) to approve the Acquisition;
Resolution 3: an ordinary resolution to approve the Share Consolidation;
Resolution 4: an ordinary resolution (subject to, and conditional upon, the passing of Resolutions 1 and 2) to appoint Mr Erik Henau as a director of the Company;
Resolution 5: an ordinary resolution (subject to, and conditional upon, the passing of Resolutions 1 and 2) to appoint Dr Mark Wyatt as a director of the Company;
Resolution 6: an ordinary resolution (subject to, and conditional upon, the passing of Resolutions 1 and 2) to authorise the Directors to allot the Consideration Shares, the Debt Conversion Shares, the Firm Placing Shares, the Subscription Shares, the Offer Shares and New Ordinary Shares up to an aggregate nominal amount of GBP908,333, and to grant the New Warrants;
Resolution 7: a special resolution (subject to, and conditional upon, the passing of Resolutions 1, 2 and 6) to dis-apply statutory pre-emption provisions to enable the Directors in certain circumstances to allot New Ordinary Shares for cash other than on a pre-emptive basis but limited to the allotment of the Firm Placing Shares, Debt Conversion Shares, the Subscription Shares, the Offer Shares and New Ordinary Shares up to an aggregate nominal amount of GBP272,500;
Resolution 8: a special resolution to approve the Change of Name.
25. ACTION TO BE TAKEN
A Form of Proxy is enclosed for use by Shareholders at the General Meeting. Whether or not Shareholders intend to be present at the General Meeting, they are asked to complete, sign and return the Proxy Form by post or by hand to the Company's Registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, B63 3DA, as soon as possible but in any event so as to arrive no later than 48 hours before the General Meeting. The completion and return of a Form of Proxy will not preclude a Shareholder from attending the General Meeting and voting in person should he or she wish to do so.
26. RECOMMATION
As I am deemed to be a member of the Concert Party I am not permitted to participate in the Board's consideration of the Whitewash Resolution (Resolution 1), nor may I vote my shares on this Resolution.
Additionally, as Barbara Spurrier is to be granted warrants conditional upon Admission (as set out in paragraph 15 above) she is not permitted to participate in the Board's consideration of the Whitewash Resolution (Resolution 1), nor may she vote her shares on this Resolution.
For the same reason, neither Barbara Spurrier nor I are permitted to participate in the Board's consideration of Resolution 6, under which the New Warrants are granted, nor may either of us vote our shares on Resolution 6.
Neil Herbert, as the Independent Director, who has been so advised by SPARK Advisory Partners, believes that the Proposals are fair and reasonable and in the best interests of the Independent Shareholders. In providing advice to the Independent Director, SPARK Advisory Partners has taken into account the Independent Director's commercial assessments.
Neil Herbert, as the Independent Director, recommends that Independent Shareholders vote in favour of the Whitewash Resolution and Resolution 6 as he intends to do in respect of his own shareholding of 358,007,904 Existing Ordinary Shares, representing approximately 7.19 per cent. of the Existing Ordinary Share Capital entitled to vote on these Resolutions.
The Board is of the opinion that Resolutions 2 to 5 (inclusive), and 7 to 8 are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Existing Directors unanimously recommend that Shareholders vote in favour of each of Resolutions 2 to 5 (inclusive), and7 to 8, as the Existing Directors intend to do in respect of their own beneficial shareholdings, which amount in aggregate to 537,097,355 Existing Ordinary Shares, representing approximately 10.41 per cent. of the Existing Ordinary Share Capital.
Yours faithfully
Adam Reynolds
Chairman
This information is provided by RNS
The company news service from the London Stock Exchange
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July 07, 2016 02:00 ET (06:00 GMT)
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