FFWD.L Regulatory News (FFWD)

7 September 2015

Kuala Innovations Limited

("Kuala" or the "Company")

Acquisition of interest in The Diabetic Boot Company Limited

Appointment of Mr James Mellon as Co-Chairman of the Company

The Board of Kuala Innovations Limited ("Kuala" or the "Company") is pleased to announce the acquisition of a 4.9 per cent. interest in the issued shares of UK incorporated private company The Diabetic Boot Company Limited ("DBC").

In aggregate, the Company has acquired 25,978 ordinary shares of DBC ("DBC Shares") at a price of £13.37 per DBC Share (the "DBC Acquisition"), for total consideration of £347,324 (the "Consideration"). At the price paid by the Company, DBC has an aggregate value of £7.05 million. The price paid by Kuala to the vendors is the same price per DBC Share as the subscription by Regent Pacific Group Limited ("Regent Pacific"), a Hong Kong listed company, in May 2015 (further details of the Regent Pacific subscription are set out on the Regent Pacific website at www.regentpac.com) and a recent round of fundraising completed by DBC in August 2015.

The Consideration payable by the Company is to be satisfied by the issue of 6,946,480 new shares of Kuala (each of £0.01) ("Consideration Shares") to the vendors, each with an implied value of £0.05 (5 pence) per share. The Consideration Shares will, on issue, rank pari passu with the existing ordinary shares in issue and application will be made for the Consideration Shares to be admitted to trading on AIM. Admission and trading in the Consideration Shares on AIM is expected to commence on or around 10 September 2015 ("Admission").

Prior to the DBC Acquisition, the Company did not hold any interest in DBC.

The Diabetic Boot Company

DBC is a private single product medical device company based near Oxford, in the UK. DBC is focussed on the treatment of diabetic foot ulcers ("DFUs"), which are a comorbidity of diabetes mellitus. The treatment of DFUs represents a significant commercial opportunity with the current standard of care and alternative therapies lacking efficacy.

DBC's lead product is the PulseFlow® which combines intermittent plantar compression with the current standard of care for the treatment of DFUs called offloading. Technology created by DBC in relation to the PulseFlow is currently the subject of a number of granted patents in key jurisdictions, with further patents submitted. Intermittent plantar compression as a mechanism of action has been shown in independent clinical studies to produce statistically significant improvements over placebo in wound closure.

In 2014, the prevalence of diabetes in the UK was 5.38 per cent of the total population. It is estimated that approximately 2.5 per cent. of diabetics have DFUs at any given time. These prevalence rates led the NHS in England to spend approximately GBP 1 in every GBP 150 on the treatment of DFUs and associated lower limb amputation. Similar rates of diabetes and ulceration are observed in other markets.

PulseFlow is approved for sale in Europe having been granted a CE mark in December 2013 as a Class IIa medical device. DBC has submitted an FDA 510(k) application for PulseFlow in March 2015.

DBC has distribution agreements in place in a number of geographies including Australia, Canada, New Zealand, Germany, Austria, Switzerland and Saudi Arabia. DBC hopes to expand this list and is currently negotiating with additional distributors in key markets.

On completion of the DBC Acquisition, the Company has also entered into a deed of adherence with DBC, pursuant to which the Company has undertaken to DBC and all DBC shareholders that it will adhere to and be bound by the terms of an investment agreement between DBC and its shareholders (the "Investment Agreement") as if the Company were a party to the investment agreement originally. As the Company's interest in DBC is below 10 per cent. of DBC's issued shares, the Company does not have "lead investor" protection under the Investment Agreement and is not entitled to appoint a nominee director, but shareholders of the Company should note that Mr Mellon has appointed a nominee director of DBC by virtue of his personal holdings in DBC.

Appointment of Mr James Mellon as Co-Chairman

Concurrent with completion of the DBC Acquisition the Board has resolved to appoint Mr James Mellon as Co-Executive Chairman of the Board of Directors. Mr Mellon is currently a non-executive director of the Company.

Commenting on the DBC Acquisition and his recent appointment, Mr Mellon noted:

"I am delighted to take up the position of Co-Chairman. PulseFlow® has the potential to be a blockbuster product addressing a major unmet clinical need in the developed and developing World. Health services and insurers globally spend substantial funds treating diabetic foot ulcers, their co-morbidities and helping to prevent them. We believe PulseFlow has the potential to provide a significant improvement on the existing standard of care, offer considerable cost savings to the clinicians and insurers and improve the quality of life for patients. DBC management continue to make good progress commercialising PulseFlow, and securing the regulatory approvals for the product to reach its full potential."

Related Party Transaction

The interest in DBC is being acquired by the Company equally from each of Regent Mercantile Holdings Limited ("Regent") and Galloway Limited ("Galloway"). Regent is owned by a trust under which Mr Stephen Dattels, a director of the Company, is a discretionary beneficiary. In addition, Mr Ian Burns, a director of the Company, is a director of Regent. Galloway is owned by a trust of which Mr James Mellon, a director of the Company, is a life tenant.

In addition, Regent Pacific is interested in 89,753 shares of DBC, representing 17.0 per cent. of the issued shares of DBC. Mr Mellon and Mr Dattels are both interested in the shares of Regent Pacific, and Mr Mellon and Mr Dattels are together Co-Chairmen of Regent Pacific.

Accordingly, the DBC Acquisition constitutes a Related Party Transaction under Rule 13 of the AIM Rules for Companies. Mr Bryan Smith, the independent director of the Company, confirms that, having consulted with the Company's Nominated Adviser, that the terms of the DBC Acquisition are fair and reasonable insofar as the Company's shareholders are concerned.

In particular, Mr Smith noted that the price paid by the Company for its interest in DBC is the same as previously paid by Regent Pacific in May 2015, and as a result of the Regent Pacific investment and the August 2015 funding round DBC is now fully funded until the middle of 2016.

The Consideration has been satisfied by the issue of Consideration Shares at an implied price of £0.05 (5 pence) per share; this has been priced at the same price as the recent placing undertaken by the Company with unconnected third parties, as announced on 1 September 2015 (the "Placing") and is at a premium of approximately 160 per cent to the net asset value of Ordinary Shares at the date of completion of the DBC Acquisition (approximately 1.9 pence per Ordinary Share).

Interest of Regent and Galloway in the Company following completion of the DBC Acquisition

Following completion of the DBC Acquisition, the resultant shareholdings of the directors are as follows:

1 Mr Dattels' interest in the Company is held by Regent Mercantile Holdings Limited. Regent Mercantile Holdings Limited is owned by a trust under which Mr Dattels is a discretionary beneficiary.

2 Mr Mellon's interest in the Company is held by Galloway Limited. Galloway Limited is owned by a trust of which Mr James Mellon is a life tenant.

Interest of the Concert Party

On 7 November 2014 the Company was recapitalised (the "Recapitalisation") in accordance with the terms of resolutions approved by the Company's shareholders at a general meeting of the Company held on 12 November 2014 (the "2014 AGM"). Further details regarding the recapitalisation are set out in the circular to shareholders dated 20 October 2015 (the "2014 AGM Circular") available on the Company's website www.kualainnovations.com.

At the 2014 AGM, independent shareholders of the Company approved, on a poll, the waiver resolution under Rule 9 of the City Code ("Waiver") in respect of the subscription by the new investor group (the "2014 Concert Party") of new Ordinary Shares ("Subscription"), immediately following completion of which the 2014 Concert Party's interest in the Company amounted to 74.19 per cent. of the then enlarged issued share capital. Full details of the 2014 Concert Party, of which Galloway and Regent are members, were set out in the 2014 AGM Circular.

As set out in the 2014 AGM Circular, on completion of the Subscription, for so long as the 2014 Concert Party hold more than 50 per cent. of the Company's voting share capital and its members are deemed to be acting in concert by the Panel on Takeovers and Mergers (the "Panel"), they may increase their aggregate interests in the Ordinary Shares in the Company without incurring any obligation under Rule 9 to make a general offer for the remaining Ordinary Shares, although individual members of the 2014 Concert Party would not be able to increase their percentage interest in the Ordinary Shares of the Company through, or between, a Rule 9 threshold without the consent of the Panel.

The 2014 Concert Party's interest in the Company has remained at more than 50 per cent. of the Company at all times following completion of the Subscription, there has been no change to the membership of the Concert Party and on completion of the issue of the Consideration Shares, each of Galloway and Regent will be interested in less than 30 per cent. of the Company (the Rule 9 threshold).

Following completion of the DBC Acquisition, the 2014 Concert Party will be interested in 39,567,201 Ordinary Shares representing 76.55% of the Company's enlarged issued share capital.

Total Voting Rights

Following the issue of the Consideration Shares, the Company's issued share capital will consist of 39,997,419 Ordinary Shares, with voting rights. This 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 Financial Conduct Authority's Disclosure and Transparency Rules.

For further information please visit www.kualainnovations.com or contact:

Further AIM information

Financial Information regarding The Diabetic Boot Company Limited

DBC's net loss for the 15 months period ended 30 June 2014 from continued operations was £645,305 and net loss for the financial year ended 31 March 2013 from continued operations was £185,944, both before taxation. DBC's net loss for the 12 months period ended 30 June 2015 from continued operations based on DBC's unaudited accounts to 30 June 2015 is approximately £900,000 before taxation.

The net asset value of DBC was £287,258 as at 30 June 2014, as set out in DBC's latest audited accounts for the 15 months period ended 30 June 2014. The net asset value of DBC was £1,118,443 as at June 30th 2015, as set out in DBC's unaudited management accounts for the 12 months ended 30th June 2015.

Further details regarding The Diabetic Boot Company Limited are available on its website at www.pulse-flow.net.

CAUTIONARY STATEMENT

The AIM Market of London Stock Exchange plc does not accept responsibility for the adequacy or accuracy of this release. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. All statements, other than statements of historical fact, in this news release are forward-looking statements that involve various risks and uncertainties, including, without limitation, statements regarding potential values, the future plans and objectives of Kuala Innovations Limited. There can be no assurance that such statements will prove to be accurate, achievable or recognizable in the near term.

Actual results and future events could differ materially from those anticipated in such statements. These and all subsequent written and oral forward-looking statements are based on the estimates and opinions of management on the dates they are made and are expressly qualified in their entirety by this notice. Kuala Innovations Limited assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change.