DeepVerge PLC

("DeepVerge" or "Company")

Firm Placing, Conditional Placing & Subscription to raise £10m at 2p per share; Broker Offer to raise up to £2.5m; Related Party Transactions, Notice of General Meeting

DeepVerge (AIM: DVRG), the environmental and life science group of companies that develops and applies AI and IoT technology to analytical instruments for the analysis and identification of bacteria, virus and toxins, is pleased to announce that it has conditionally raised £10 million, before expenses, in an oversubscribed Placing and Subscription (the "Fundraising") at a price of 2 pence per share ("Issue Price").

Turner Pope Investments (TPI) Limited ("Turner Pope") acted as sole broker and Placing Agent to the Company.

Key Highlights:

·      Placing and Subscription of £10 million received strong support from a number of institutions, including several new entrants to the shareholder register

·      DeepVerge Directors, Management, Employees and associates have subscribed over £0.5 million

·      Broker Offer of up to £2.5m open to and prioritising qualifying existing DeepVerge shareholders; other qualifying investors may also apply

·      Principal Uses of Net Proceeds:

o  Investment in Labskin/Skin Trust Club

o  Repayment in full and retirement of the March 2022 Loan facility

o  Working Capital

·      Conditional Placing, Conditional Subscription and Broker Offer are subject to Shareholders' approval at a General Meeting on 14 November 2002.

Dr Nigel Burton, interim Chief Executive, commented: "We are delighted with the response to this fundraising, with support received from an encouraging mix of both new and existing investors, including a number of institutions, high net-worth professional investors and Family Offices. The Company and its broker, Turner Pope, are pleased to extend access to the Fundraising by way of a Broker Offer, which will prioritise other existing shareholders who were not involved in the Placing. The proposed Fundraising will ensure that the Company has a sufficiently refinanced balance sheet at a critical point in its development and, subject to the passing of the relevant resolutions at the General Meeting, will be able to look forward with renewed confidence. I'd like to thank the entire DeepVerge team, our suppliers and partners for their support, and look forward to working with them to deliver profitable growth in 2023 and beyond."

Introduction

The Company is pleased to announce that it has conditionally raised £10 million, before expenses, in an oversubscribed Fundraising at the Issue Price. The Fundraise comprises a placing (the "Placing") of 471,740,000 new Ordinary Shares ("Placing Shares") and subscription (the "Subscription"; together, the "Fundraising") for 28,260,000 new Ordinary Shares ("Subscription Shares") at the Issue Price. The Fundraising comprises a firm placing of 32,955,956 new Ordinary Shares to raise £0.659 million (before expenses), together with a conditional placing of 438,784,044 new Ordinary Shares to raise £8.775 million (before expenses) and a conditional subscription for 28,260,000 new Ordinary Shares to raise £0.565 million, which are subject to Shareholders' approval at the General Meeting.

The Issue Price represents a discount of 20 per cent. to the closing price per Ordinary Share of 2.5 pence at close of business on 26 October 2022, being the last practicable date prior to the announcement of the Placing. The New Ordinary Shares will represent approximately 74 per cent. of the Enlarged Issued Share Capital (assuming the Broker Offer (defined below) is subscribed in full).

In addition, all subscribers in the Placing, the Subscription and the Broker Offer will be issued with Placing Warrants on the basis of one Placing Warrant for every four New Ordinary Shares subscribed for by or placed with the relevant investor.

The Placing Warrants, which are constituted by the Placing Warrant Instrument, will be exercisable at an exercise price of 3 pence per Ordinary Share at any time up to the date one year following Third Admission. No application is being made for the Placing Warrants to be admitted to trading on AIM.

Broker Offer

To provide shareholders and other investors who did not initially participate in the Placing the opportunity to invest in the Company, under the Placing Agreement, TPI has a Broker Offer under which TPI will, as agent for the Company, invite subscriptions for additional new Ordinary Shares with a value expected to be around £1.0 million at the Issue Price but which may be increased up to £2.5 million subject to agreement between TPI and the Company.  The Broker Offer opens immediately and will close at 4.30 p.m. on Friday 28 October 2022. 

As far as is practical, participation in the Broker Offer will be prioritised for shareholders (direct or indirect) on the register at the close of business on 26 October 2022 ("Existing Shareholders").  If the expected maximum subscription under the Broker Offer is taken up, it will raise an additional £2.5 million before expenses.

To subscribe for Broker Offer Shares, Existing Shareholders or other interested parties who are qualified investors who wish to register their interest in participating in the Broker Offer should click on the following link: DeepVerge - TPI Broker Offer (URL: https://forms.office.com/r/nptcgkst65)

A further announcement will be made following the end of the period during which the Broker Offer is open. If the Broker Offer is not fully subscribed by 4.30 p.m. on 28 October 2022, orders from eligible investors will be satisfied in full, and the balance of the Broker Offer shall lapse.

Completion of the Broker Offer is conditional on the Resolutions being passed at the General Meeting and Second Tranche Admission occurring.

The First Tranche Placing is conditional, inter alia, upon First Admission (which is expected to become effective with dealings in the First Tranche Placing Shares to commence on 1 November 2022). The Second Tranche Placing is conditional, inter alia, upon Second Admission (which is expected to become effective with dealings in the Second Tranche Placing Shares to commence on 15 November 2022). The Third Tranche Placing, the Subscription and the Broker Offer are conditional, inter alia, upon Third Admission (which is expected to become effective with dealings in the Third Tranche Placing Shares, the Subscription Shares and any Broker Offer Shares to commence on 16 November 2022). The Placing, the Subscription and the Broker Offer have not been underwritten.

For the Second Tranche Placing, the Third Tranche Placing, the Subscription and the Broker Offer to proceed, the Company requires Shareholders' to pass the Resolutions, giving the Directors authority to allot the Second Tranche Placing Shares, the Third Tranche Placing Shares, the Subscription Shares and any Broker Offer Shares (and grant the Placing Warrants, the Broker Warrants and the Broker Further Warrants) and disapplying statutory pre-emption rights in relation to the issue of the Second Tranche Placing Shares, the Third Tranche Placing Shares, the Subscription Shares and any Broker Offer Shares  (and the grant of the Placing Warrants, the Broker Warrants and the Broker Further Warrants).

Timetable

A timetable of events is set out at the end of the Appendix to this announcement.

Related Party Transactions

(1)  Participation in Subscription

The participation in the Subscription by Ross Andrews, Gerard Brandon, Camillus Glover and Nigel Burton constitute related party transactions under Rule 13 of the AIM Rules. Details of their participation in the Subscription is set out below.

Fionan Murray (the only independent director for these purposes), having consulted with SPARK, the Company's nominated adviser, considers that the terms of participation by Ross Andrews, Gerard Brandon, Camillus Glover and Nigel Burton in the Subscription is fair and reasonable in so far as Shareholders are concerned.

(2)  Transaction with Cellulac

DeepVerge holds a 9.35% shareholding in Cellulac plc ("Cellulac"). Gerard Brandon and Camillus Glover are directors of, and shareholders in Cellulac. Cellulac is treated as a related party under AIM Rule 13.

In the period September to December 2021 DeepVerge's subsidiary, Rinocloud Limited, engaged with Cellulac to provide engineering services under a purchase order ("Purchase Order") to support the Modern Water Membrane division in the delivery of All Membrane Brine Concentration technology, design expertise, training, development and preparation of training materials, at a consulting rate of £1,000 per day. The engineering support related to projects referred to in the Company's notification of 15 September 2021.  An invoice under the Purchase Order was issued to Rinocloud for £11,000 in December 2021.  Cellulac engaged a subcontractor for this service and this subcontractor fee was passed directly onto Rinocloud without any markup by Cellulac.  This fee was exactly calculated and charged on an arms' length basis.

Following extensive investigation by the Company into transactions conducted with related and connected parties, the Board has recently become aware that entering into the Purchase Order should have been considered under AIM Rule 13 and notified at the time it was signed.

The independent Directors, being Ross Andrews, Nigel Burton and Fionan Murray ("Independent Directors"), have considered the terms of the Purchase Order. The Independent Directors consider, having consulted with SPARK Advisory Partners, its nominated adviser, that the terms of the Purchase Order are fair and reasonable insofar as its shareholders are concerned

General Meeting

The Conditional Placing, the Subscription and the Broker Offer are subject to the passing of Resolutions at the General Meeting.

The General Meeting is to be held at the offices of Jeffreys Henry LLP at Finsgate, 5 - 7 Cranwood Street, London, EC1V 9EE at 12.00 noon on 14 November 2022.

Allotment and Admission

32,955,956 new Ordinary Shares of 0.1p ("the First Tranche Placing Shares") have today been allotted and issued. Application has been made for the First Tranche Placing Shares to be admitted to trading on AIM ("First Admission"). First Admission is expected on or around 1 November 2022.

Total Voting Rights

Following First Admission, the Company's issued share capital will consist of 252,662,334 shares with a nominal value of 0.1p each, with voting rights ("Ordinary Shares"). The Company does not hold any Ordinary Shares in Treasury.

Therefore, following First Admission, the above figure may be used by shareholders in the Company as the denominator for the calculation by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the FCA's Disclosure Guidance and Transparency Rules.

Availability of documents

A circular ("Circular") and formal Notice of General Meeting will be sent to Shareholders later today and will be available on the Company's website www.deepverge.com. Extracts from the Circular are set out in the Appendix to this announcement.

Enquiries:

Market Abuse Regulation (MAR) Disclosure

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED.  ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

Appendix (The following contains extracts from the Letter from the Chairman of DeepVerge in Circular)

1.   INTRODUCTION

The Company announced on 27 October 2022 that it had conditionally raised £10 million, before expenses, by way of a placing of 471,740,000 new Ordinary Shares and subscription for 28,260,000 new Ordinary Shares all at a price of 2 pence per New Ordinary Share. The fundraising comprises a firm placing of 32,955,956 new Ordinary Shares to raise £0.659 million (before expenses), together with a conditional placing of 438,784,044 new Ordinary Shares to raise £8.775 million (before expenses) and a conditional subscription for 28,260,000 new Ordinary Shares to raise £0.565 million, which are subject to Shareholders' approval at the General Meeting.

The Company also launched the Broker Offer on 27 October 2022 to enable Shareholders who are qualifying investors and other investors, at the sole discretion of Turner Pope, who did not have the opportunity to participate in the Placing, to invest in the Company on the same terms as the Placing. The Broker Offer, which is also subject to Shareholders' approval at the General Meeting, will potentially enable the Company to raise up to an additional £2.5 million (gross) through the issue of up to 125,000,000 new Ordinary Shares at the Issue Price.

The Issue Price represents a discount of 20 per cent. to the closing price per Ordinary Share of 2.5 pence at close of business on 26 October 2022, being the last practicable date prior to the announcement of the Placing. The New Ordinary Shares will represent approximately 74 per cent. of the Enlarged Issued Share Capital (assuming the Broker Offer is subscribed in full).

The First Tranche Placing is conditional, inter alia, upon First Admission (which is expected to become effective with dealings in the First Tranche Placing Shares to commence on 1 November 2022). The Second Tranche Placing is conditional, inter alia, upon Second Admission (which is expected to become effective with dealings in the Second Tranche Placing Shares to commence on 15 November 2022). The Third Tranche Placing, the Subscription and the Broker Offer are conditional, inter alia, upon Third Admission (which is expected to become effective with dealings in the Third Tranche Placing Shares, the Subscription Shares and any Broker Offer Shares to commence on 16 November 2022). The Placing, the Subscription and the Broker Offer have not been underwritten.

For the Second Tranche Placing, the Third Tranche Placing, the Subscription and the Broker Offer to proceed, the Company requires Shareholders' to pass the Resolutions, giving the Directors authority to allot the Second Tranche Placing Shares, the Third Tranche Placing Shares, the Subscription Shares and any Broker Offer Shares (and grant the Placing Warrants, the Broker Warrants and the Broker Further Warrants) and disapplying statutory pre-emption rights in relation to the issue of the Second Tranche Placing Shares, the Third Tranche Placing Shares, the Subscription Shares and any Broker Offer Shares  (and the grant of the Placing Warrants, the Broker Warrants and the Broker Further Warrants).

I am therefore writing to provide you with details of the Placing, Subscription and Broker Offer and to give you notice of the General Meeting at which the Resolutions will be put to Shareholders. The General Meeting is to be held at the offices of Jeffreys Henry LLP at Finsgate, 5 - 7 Cranwood Street, London, EC1V 9EE at 12.00 noon on 14 November 2022. The formal Notice of General Meeting is set out at the end of this document.

2.   BACKGROUND TO, AND REASONS FOR, THE PLACING, THE SUBSCRIPTION AND THE BROKER OFFER

The Company announced on 5 August 2022 that the Board conservatively expects revenue to be in excess of £18 million for the full year to 31 December 2022, which, although below market expectations at the time, would equate to a near doubling of turnover from the full year 2021. The Company also expects that achieving this level of turnover would see an overall EBITDA positive result, reflecting the fact that the Company has invested in its growth, both evolving existing commercial relationships and forming new ones.

Importantly, the Group has successfully evolved its business model to focus more on being a solutions provider as opposed to 'just' selling equipment and consumables. Some recent contract wins have highlighted the symbiotic relationships within DeepVerge, with their specifications requiring the services of all Group divisions. We have taken what may seem to be two disparate divisions in Modern Water and Labskin and applied AI capability with expanded testing services to create a highly differentiated product offering. Our 'blue-chip' client base is testament to what has been achieved and the Board understands that we need to provide financial comfort to all stakeholders in the business.

Demand for home test kits from Skin Trust Club, for example, has been unprecedented and it has become apparent that the capital available to the Group would not sufficiently allow the required investment to keep up with the current and anticipated demand and employ and retain the staff needed to cope with such demand. The increasing order intake at Modern Water, particularly evidenced through several announcements since the summer, has also required increased working capital availability. The Company's pipeline, both through the potential extension of current contracts and from new potential orders, has also highlighted a requirement for a refinanced balance sheet.

The Company announced on 17 March 2022 that it had secured a mezzanine loan facility ("Facility") of up to £25 million with Riverfort Global Opportunities PCC Limited and YA II PN Limited ("the Lenders"), of which an initial £4m was drawn down. Monthly repayments were scheduled to commence with the initial repayment of £0.5m due on 16 October 2022.

In connection with the March 2022 Loan, the Lenders also received warrants over 11,265,622 Ordinary Shares with an exercise price of 20 pence per Ordinary Share ("Lender Warrants").

The Company has been in talks with the Lenders for some time and, under the terms of the Deed of Standstill, it has been agreed between them that (amongst other things) there will be no Event of Default relating to any repayments under the March 2022 Loan that have been or may be missed up to 30 November 2022 (being the longstop date for Admission under the Placing Agreement) provided the balance of the principal of the funding from the Lenders and the interest to accrue until the original maturity date of 16 March 2023 is made in full immediately following Third Admission.  The Company has also agreed to rebase the exercise price for the Lender Warrants to the Issue Price, which will have the effect of reducing the exercise price from 20 pence per Ordinary Share to 2 pence per Ordinary Share.

It is therefore intended that part of the gross proceeds of the Placing will be used to make payments in full and final settlement of the above, subsequent to which the remaining facility will be cancelled.

The Company, with the support of its principal advisers, Turner Pope and SPARK, has thoroughly reviewed its financing arrangements and the gross proceeds of the Placing will also be used to fund the Company's working capital requirements, with the aim of enabling the Company to reach profitability and cash generation during the second half of 2023.

Pursuant to the above and as announced by the Company on 20 July 2022, the Company is exploring a range of options to meet the unprecedented demand for Labskin services and the accelerating growth of Skin Trust Club which will require further investment by the Company.

3.   USE OF PROCEEDS

The gross proceeds receivable by the Company pursuant to the Placing and the Subscription (and assuming no Broker Offer Shares are issued) are expected to be £10 million. The Company intends to use the net proceeds, after expenses, of approximately £9.35 million for the following purposes:

·      Investment in Labskin and Skin Trust Club                      £2.30 million

·      Repayment of March 2022 Loan                                     £4.37 million

·      Working capital                                                             £2.68 million

The net proceeds of the issue of any Broker Offer Shares will be used for general working capital purposes.

4.   CURRENT TRADING AND PROSPECTS

The Company's most recent published results are the unaudited interim results for the six months ended 30 June 2022 ("H1") and were released on 22 September 2022. A copy of these results can be found at www.deepverge.com.

In the interim results announced by the Company on 22 September 2022, the Company confirmed:

·          Unaudited group revenues for H1 2022 grew by 94% to £6.436 million (H1 2021: £3.319 million).

·          Adjusted EBITDA loss reduced by 46.6% to £0.372 million (H1 2021: £0.697 million loss)

·          Operating loss fell by 7.4% to £2.139 million (H1 2021: £2.311 million loss) after providing for depreciation, amortisation, and exceptional costs.

In the Company's announcement of its interim results for H1, Gerard Brandon, CEO DeepVerge plc, commented:

"The Company continues to expand across all divisions with record H1 half-year sales and expectations of £18m for the full year. Demand for Modern Water monitoring and membrane solutions grew, not least because of the impact of climate change and a severe global drought. Order values have moved from £50k to £100k equipment sales in 2020 to now include multiple £1m+ solutions in Middle East, North Africa, China and South Asia and the recent £2.4m project on the Savannah River in Georgia, USA. The Company has a substantial order book of £8.87m for H2 supply and expects to continue its year-on-year history of revenues weighted in H2 over H1 since 2018."

5.   BOARD CHANGES

As announced on 25 October 2022, the fast pace of growth experienced by the Company has stretched both the balance sheet and the existing management team. As a consequence, a new CEO, CFO and Non-Executive director will be recruited.

The following changes to the board, and to the roles undertaken by existing directors, took effect from earlier today:

Gerard Brandon stepped down as Chief Executive, remaining on the board as Executive Director with responsibility for the Modern Water Division.

Dr Nigel Burton became Interim Chief Executive while the Company commences the search for a new Group Chief Executive.

Fionan Murray remains on the Board as Executive Director with responsibility for the Skin Trust Club and Labskin Division.

Camillus Glover left the board but will remain as Chief Financial Officer while the Company commences the search for a new Group Finance Director.

A further independent non-executive director will be appointed as soon as practicable.

6.   DETAILS OF THE PLACING

The Placing

The Placing is being conducted in three tranches because the Company currently has limited shareholder authority to issue new Ordinary Shares for cash on a non-pre-emptive basis and to assist investors in the Placing to claim certain reliefs available to EIS investors and VCTs. Details of the three tranches of the Placing are set out below.

First Tranche Placing

The firm placing of the First Tranche Placing Shares at the Issue Price has raised approximately £0.659 million (before expenses) for the Company, within the Company's existing share allotment authorities which were granted at the Company's annual general meeting held on 20 July 2022.

The First Tranche Placing is conditional, inter alia, upon:

(a)         the Placing Agreement becoming unconditional in all respects (save for First Admission occurring) and not having been terminated in accordance with its terms; and

(b)        admission of the First Tranche Placing Shares to trading on AIM becoming effective by no later than 8.00 a.m. on 1 November 2022 (or such later time and/or date as the Company, SPARK and Turner Pope may agree (being no later than 8.00 a.m. on 30 November 2022)).

Second Tranche Placing

The conditional placing of the Second Tranche Placing Shares at the Issue Price has raised £2.7 million (before expenses).  The number of Second Tranche Placing Shares has been determined by calculation of the level of gross assets at Second Admission to ensure the "gross assets" test for EIS/VCT relief is satisfied.

The Second Tranche Placing Shares has been offered to those investors seeking to claim EIS relief in relation to their subscription and to VCTs.    

The Second Tranche Placing is conditional, inter alia, upon:

(a)         the passing of the Resolutions at the General Meeting;

(b)        the Placing Agreement becoming unconditional in all respects (save for Second Admission occurring) and not having been terminated in accordance with its terms; and

(c)         admission of the Second Tranche Placing Shares to trading on AIM becoming effective by no later than 8.00 a.m. on 15 November 2022 (or such later time and/or date as the Company, SPARK and Turner Pope may agree (being no later than 8.00 a.m. on 30 November 2022)).

Third Tranche Placing

The conditional placing of the Third Tranche Placing Shares at the Issue Price raised £ 6.075 million (before expenses). The Third Tranche Placing Shares have been offered to those investors who are neither seeking EIS relief nor are VCTs.

The Third Tranche Placing is conditional, inter alia, upon:

(a)         the passing of the Resolutions at the General Meeting;

(b)        the Placing Agreement becoming unconditional in all respects (save for Third Admission occurring) and not having been terminated in accordance with its terms; and

(c)         admission of the Third Tranche Placing Shares to trading on AIM becoming effective by no later than 8.00 a.m. on 16 November 2022 (or such later time and/or date as the Company, SPARK and Turner Pope may agree (being no later than 8.00 a.m. on 30 November 2022)).

If such conditions are not satisfied or, if applicable, waived, by the date(s) and time(s) referred to above the Placing will not proceed.

The Issue Price represents a discount of 20 per cent. to the closing price per Ordinary Share of 2.5 pence at close of business on 26 October 2022, being the last practicable date prior to the announcement of the Placing, the Subscription and the Broker Offer.

The Placing is not underwritten by Turner Pope or any other person.

The Placing will result in the issue of 471,740,000 new Ordinary Shares representing approximately 55.8 per cent. of the Enlarged Issued Share Capital. The Placing Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Ordinary Shares.

EIS and VCT

The Company has not received any advance assurance from HM Revenue & Customs as regards whether the New Ordinary Shares will be capable of being a "qualifying holding" for the purposes of investment by venture capital trusts ("VCTs") or whether placees will be able to obtain Enterprise Investment Scheme ("EIS") reliefs in respect of the New Ordinary Shares.

Neither the Company, the Directors nor any of the Company's advisers give any warranty, undertaking or other assurance that any tax reliefs will continue to be available and will not be withdrawn at a later date. The actual availability of qualifying status for VCT and EIS relief would be contingent upon certain conditions being met by both the Company and the relevant investors.

Shareholders and proposed investors must take their own professional advice in order that they may fully understand how the relief legislation may apply in their individual circumstances and what they are required to do in order to claim any reliefs (if available) and rely on it. As the rules governing VCT and/or EIS reliefs are complex and interrelated with other legislation, if any Shareholders or proposed 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 UK, they should consult own their professional advisers.

Admission

The First Tranche Placing Shares have been allotted conditional upon First Admission and it is expected that they will be admitted to trading on AIM at 8.00 a.m. 1 November 2022 (or such later time and/or date as the Company, SPARK and Turner Pope may agree (being no later than 8.00 a.m. on 30 November 2022)).

The Second Tranche Placing Shares and the Third Tranche Placing Shares have been placed conditional upon, inter alia, the passing of the Resolutions at the General Meeting.

It is expected that the Second Tranche Placing Shares will be admitted to trading on AIM at 8.00 a.m. on 15 November 2022 (or such later time and/or date as the Company, SPARK and Turner Pope may agree (being no later than 8.00 a.m. on 30 November 2022)).

It is expected that the Third Tranche Placing Shares will be admitted to trading on AIM at 8.00 a.m. on 16 November 2022 (or such later time and/or date as the Company, SPARK and Turner Pope may agree (being no later than 8.00 a.m. on 30 November 2022)).

Placing Agreement

The Company, SPARK and Turner Pope have entered into the Placing Agreement, pursuant to which Turner Pope has agreed, subject to certain conditions, to use its reasonable endeavours to procure placees for the Placing Shares and the Broker Offer Shares.

The Placing Agreement is conditional, inter alia, upon First Admission becoming effective at 8.00 a.m. on 1 November 2022 (or such later time and/or date as the Company, SPARK and Turner Pope may agree (being no later than 8.00 a.m. on 30 November 2022)), Second Admission becoming effective at 8.00 a.m. on 15 November 2022 (or such later time and/or date as the Company, SPARK and Turner Pope may agree (being no later than 8.00 a.m. on 30 November 2022)) and Third Admission becoming effective at 8.00 a.m. on 16 November 2022 (or such later time and/or date as the Company, SPARK and Turner Pope may agree (being no later than 8.00 a.m. on 30 November 2022)).

The Company has agreed to pay all costs and expenses relating to the Placing and the applications for Admission, including commissions payable to Turner Pope and a corporate finance advisory fee to SPARK.

The Placing Agreement contains certain customary warranties given by the Company and the Directors in favour of SPARK and Turner Pope in relation to, inter alia, the accuracy of the information in this document and other matters relating to the Group and its business. In addition, the Company and the Directors have agreed to indemnify SPARK and Turner Pope in respect of certain liabilities they may incur in respect of the Placing or Admission. It also contains provisions entitling SPARK and Turner Pope to terminate the Placing Agreement if, inter alia, a breach of any of the warranties occurs, a force majeure event occurs or an event occurs which is material in the context of the Placing.

The Placing Warrants

In addition, all subscribers in the Placing, the Subscription and the Broker Offer will be issued with Placing Warrants on the basis of one Placing Warrant for every four New Ordinary Shares subscribed for by or placed with the relevant investor.

The Placing Warrants, which are constituted by the Placing Warrant Instrument, will be exercisable at an exercise price of 3 pence per Ordinary Share at any time up to the date one year following Third Admission. No application is being made for the Placing Warrants to be admitted to trading on AIM.

The Broker Warrants

Under the terms of the Placing Agreement, the Broker Warrants will be issued to JIM Nominees Limited (as nominee on behalf of Turner Pope) as part of the consideration payable to Turner Pope for its services as placing agent to the Placing and Broker Offer. The Broker Warrants, which are constituted by the Broker Warrant Instrument, will be exercisable at an exercise price equal to the Issue Price per Ordinary Share at any time up to the date three years following Third Admission. No application is being made for the Broker Warrants to be admitted to trading on AIM.

The Broker Further Warrants

In addition, under the terms of the Placing Agreement, the Broker Further Warrants will be issued to JIM Nominees Limited (as nominee on behalf of Turner Pope) as part of the consideration payable to Turner Pope for its services as placing agent to the Placing and Broker Offer. The Broker Further Warrants will be granted depending on the number of Placing Warrants exercised by investors in the 12 months following Third Admission and will (at 3 pence per Broker Further Warrant) equal 8% of the aggregate subscription price received by the Company in each calendar month in respect of exercised Placing Warrants.  The Broker Further Warrants, which are constituted by the Broker Further Warrant Instrument, will be exercisable at 3p per Ordinary Share at any time up to the date 18 months following Third Admission. No application is being made for the Broker Warrants to be admitted to trading on AIM.

7.   DETAILS OF THE BROKER OFFER

The Broker Offer

Pursuant to the Broker Offer, Turner Pope has the option to require the Company to issue the Broker Offer Shares at the Issue Price to subscribers procured by Turner Pope as agent of the Company.  The Broker Offer will allow Turner Pope to accommodate additional demand under the Placing in the event that requests to participate in the Placing are received from Shareholders who are qualifying investors ("Existing Shareholders") and other qualifying investors during the period following the release of the announcement on 27 October 2022 until 4.30 p.m. on 28 October 2022.

The Broker Offer Shares have not been made available to the public and none of the Broker Offer Shares are being offered or sold in any jurisdiction where it would be unlawful to do so. No prospectus will be issued in connection with the Broker Offer. 

Turner Pope will have absolute discretion (after consultation with the Company) in the allocation of any Broker Offer Shares following the communication of any such interest, and communication of an order to Turner Pope will not guarantee any person any allocation or participation.

Any Broker Offer Shares issued in connection with the Broker Offer will be issued on the same terms and conditions as the Placing Shares. Any Broker Offer Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Ordinary Shares.

The maximum number of Broker Offer Shares that may be issued pursuant to the Broker Offer is 125,000,000 to raise £2.5 million.   Assuming the Broker Offer is fully subscribed, the Broker Offer will result in the issue of 125,000,000 new Ordinary Shares representing approximately 14.8 per cent. of the Enlarged Issued Share Capital.

If the Broker Offer is not fully subscribed by 4.30 p.m. on 28 October 2022, orders from eligible investors will be satisfied in full and no further Ordinary Shares will be issued pursuant to the Broker Offer. The Company will announce the results of the Broker Offer and the resultant number of Broker Offer Shares following close of the Broker Offer.

The Broker Offer is conditional upon Third Admission becoming effective.  If this condition is not satisfied, the Broker Offer Shares will not be issued.

The Broker Offer is not underwritten by Turner Pope or any other person.

Admission

Any Broker Offer Shares will be placed conditional upon, inter alia, the passing of the Resolutions at the General Meeting.

It is expected that the Broker Offer Shares will be admitted to trading on AIM at the same time as Admission of the Third Tranche Placing Shares and Subscription Shares, that is 8.00 a.m. on 16 November 2022 (or such later time and/or date as the Company, SPARK and Turner Pope may agree (being no later than 8.00 a.m. on 30 November 2022)).

Subscription to the Broker Offer

To subscribe for Broker Offer Shares, Existing Shareholders or other interested parties who are qualified investors who wish to register their interest in participating in the Broker Offer should use the Turner Pope URL: https://forms.office.com/r/nptcgkst65 .

It is important that shareholders note that the above URL is only valid to 4:30 p.m. on 28 October 2022. The Directors acknowledge that the Broker Offer will likely have closed before any Shareholder receives this document in hard copy.

8.   DETAILS OF THE SUBSCRIPTION

The Subscription

Certain parties have agreed to subscribe for 28,260,000 new Ordinary Shares pursuant to the Subscription direct with the Company.

The Subscription Shares will be issued at the Issue Price, raising £0.565 million for the Company.  The parties who have subscribed pursuant to the Subscription have subscribed directly with the Company for the Subscription Shares, which are issued on the same terms and conditions as the Placing Shares.

The Subscription will result in the issue of 28,260,000 new Ordinary Shares representing approximately 3.3 per cent. of the Enlarged Issued Share Capital.

The Subscription Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Ordinary Shares.

The Subscription is conditional upon Third Admission becoming effective.  If this condition is not satisfied, the Subscription Shares will not be issued.

The Subscription is not being underwritten by Turner Pope or any other person.

Admission

The Subscription Shares have been subscribed for conditional upon, inter alia, the passing of the Resolutions at the General Meeting.

It is expected that the Subscription Shares will be admitted to trading on AIM at the same time as Admission of the Third Tranche Placing Shares and Broker Offer Shares, that is 8.00 a.m. on 16 November 2022 (or such later time and/or date as the Company, SPARK and Turner Pope may agree (being no later than 8.00 a.m. on 30 November 2022)).

Participation in the Subscription by Directors and PDMRs

Certain Directors and PDMRs of the Company intend to subscribe for Subscription Shares with an aggregate value of £392,500 in the Subscription, as set out in the table below. These Subscription Shares will be issued on the same terms and conditions as the Placing Shares.

The participation in the Subscription by Ross Andrews, Gerard Brandon, Camillus Glover and Nigel Burton constitutes a related party transaction under Rule 13 of the AIM Rules.  Fionan Murray (the only independent director for these purposes), having consulted with SPARK, the Company's nominated adviser, considers that the terms of participation by Ross Andrews, Gerard Brandon, Camillus Glover and Nigel Burton in the Subscription is fair and reasonable in so far as Shareholders are concerned.

9.   SETTLEMENT AND DEALINGS

The New Ordinary Shares will be issued credited as fully paid and will rank pari passu with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid in respect of Ordinary Shares after First Admission, Second Admission or Third Admission (as the case may be).

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 the First Tranche Placing Shares will be admitted to trading on AIM at 8.00 a.m. on 1 November 2022, that the Second Tranche Placing Shares will be admitted to trading on AIM at 8.00 a.m. on 15 November 2022 and that the Third Tranche Placing Shares, the Subscription Shares and any Broker Offer Shares will be admitted to trading on AIM at 8.00 a.m. on 16 November 2022. Second Admission and Third Admission will be subject, inter alia, to the passing of the Resolutions at the General Meeting.

Placees who elect to receive their Placing Shares in CREST will have their CREST account credited with their Placing Shares following First Admission, Second Admission or Third Admission (as the case may be).  For placees who elect to receive their Placing Shares in certificated form, definitive certificates in respect of the First Tranche Placing Shares, Second Tranche Placing Shares and Third Tranche Placing Shares are expected to be sent to placees by 15 November 2022, 29 November 2022 and 30 November 2022 respectively.

Subscribers who elect to receive their Subscription Shares in CREST will have their CREST account credited with their Subscription Shares following Third Admission.  For Subscribers who elect to receive their Subscription Shares in certificated form, definitive certificates in respect of the Subscription Shares are expected to be sent to Subscribers by 30 November 2022.

Placees who elect to receive their Broker Offer Shares in CREST will have their CREST account credited with their Broker Offer Shares following Third Admission.  For placees who elect to receive their Broker Offer Shares in certificated form, definitive certificates in respect of any Broker Offer Shares are expected to be sent to placees by 30 November 2022.

10.  GENERAL MEETING

Set out at the end of this document is a notice convening the General Meeting to be held at the offices of Jeffreys Henry LLP at Finsgate, 5 - 7 Cranwood Street, London, EC1V 9EE at 12.00 noon on 14 November 2022, at which the Resolutions will be proposed.

A summary and brief explanation of the Resolutions to be proposed at the General Meeting is set out below. Please note that this is not the full text of the Resolutions and you should read this paragraph in conjunction with the Resolutions contained in the Notice of General Meeting at the end of this document.

·          Resolution 1 - an ordinary resolution to grant the Directors authority to: (a) allot the Second Tranche Placing Shares pursuant to the Second Tranche Placing; (b) allot the Third Tranche Placing Shares pursuant to the Third Tranche Placing; (c) allot the Subscription Shares pursuant to the Subscription; (d) allot any Broker Offer Shares pursuant to the Broker Offer;  (e) grant the Broker Warrants, Broker Further Warrants and Placing Warrants; and (f) allot or grant rights to subscribe for a further 197,348,000 new Ordinary Shares up to an aggregate nominal value of £197,348.00 (being approximately 33 per cent. of the Enlarged Issued Share Capital).

·          Resolution 2 - a special resolution to disapply statutory pre-emption rights in respect of: (a) the allotment of equity securities which takes place in connection with a rights issue or other similar offer; (b) the allotment of the Second Tranche Placing Shares pursuant to the Second Tranche Placing; (c) the allotment of the Third Tranche Placing Shares pursuant to the Third Tranche Placing; (d)  the allotment of the Subscription Shares pursuant to the Subscription; (e) the allotment of any Broker Offer Shares pursuant to the Broker Offer; (f) the grant of the Broker Warrants, Broker Further Warrants and Placing Warrants; and (g) the allotment or grant of rights to subscribe for a further 88,806,000 new Ordinary Shares up to an aggregate nominal value of £88,806 (being approximately 15 per cent. of the Enlarged Issued Share Capital) (such Resolution being conditional upon the passing of Resolution 1).

Resolution 1 is being proposed as an ordinary resolution and requires approval by a simple majority of those votes cast (by persons present in person or by proxy) at the General Meeting for the resolution to be passed. Resolution 2 is being proposed as a special resolution and requires approval by not less than three-quarters of the votes cast (by persons present in person or by proxy) at the General Meeting for the resolution to be passed.

11.  ACTION TO BE TAKEN

A Form of Proxy for use at the General Meeting accompanies this document. You are asked to complete the Form of Proxy and return it to the Company's registrars, Neville Registrars at Neville House, Steelpark Road, Halesowen, West Midlands B62 8HD so as to be received by no later than 12.00 noon on 10 November 2022 (or, in the case of an adjournment of the General Meeting, not less than 48 hours (excluding any part of a day that is not a Business Day) before the time and date fixed for the holding of the adjourned meeting).

If you hold your Ordinary Shares in uncertificated form in CREST, you may vote using the CREST Proxy Voting Service in accordance with the procedures set out in the CREST Manual. Further details are also set out in the notes to the Notice of General Meeting at the end of this document. Proxies submitted via CREST must be received by the Company's agent, Neville Registrars (CREST Participant ID 7RA11), by no later than 12.00 noon on 10 November 2022 (or if the General Meeting is adjourned, 48 hours (excluding any part of a day that is not a Business Day) before the time and date fixed for the adjourned meeting).

Shareholders are asked to complete the Form of Proxy in accordance with the instructions printed on it so as to be received by the Company's registrars, Neville Registrars, as soon as possible but in any event no later than 12.00 noon on 10 November 2022.

12.  RECOMMENDATION

The Directors unanimously consider that the Placing, the Subscription and the Broker Offer are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions, as the Directors intend to do in relation to their own and associated holdings of 19,513,672 Ordinary Shares in total, representing approximately 8.88 per cent. of the Existing Ordinary Shares (as at the date of this document).

Yours faithfully

Ross Andrews

Non-Executive Chairman

INDICATIVE TIMETABLE

KEY STATISTICS

Notes:

*           Assuming no other Ordinary Shares are issued prior to completion of the Placing and the Subscription and the Broker Offer is taken up in full.

**          Assuming the Broker Offer is taken up in full, and all Placing Warrants are exercised.

DEFINITIONS

The following words and expressions shall have the following meanings in this document unless the context otherwise requires: