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:
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
END
MSCDMGGNLVMGVZM
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