Frontier Ip Regulatory News (FIPP)

AIM: FIPP

FRONTIER IP GROUP PLC

("Frontier IP" or "the Group" or "the Company")

Conditional Placing,

Board Reorganisation and Proposed Board Appointment

Frontier IP, which specialises in the commercialisation of intellectual property, is pleased to announce a conditional placing to raise £608,000 by the issuance of 6,080,000 new ordinary shares ("Placing Shares") at 10 pence per share ("the Placing").

Full details of the Placing are set out in a circular, together with a notice of a General Meeting of the Company to consider resolutions in connection with the Placing ("the Circular"), which will be sent to Shareholders and will be available shortly on the Company's website at www.frontierip.co.uk.

Key Points

·; Proposal to raise £608,000 (before expenses) by way of a Placing of 6,080,000 Placing Shares at 10 pence per share, representing approximately 46.58% of the Enlarged Share Capital.

·; Net proceeds of the Placing will be used primarily to provide working capital to support: the ongoing needs of the business, the development and growth of existing long-term university relationships, allied advisory roles and commitments to existing funds as well as the establishment of sector specific funds.

·; Certain of the Directors are participating in the Placing.

·; The Placing is subject to approval of Shareholders at a General Meeting to be held at 41 Charlotte Square, Edinburgh EH2 4HQ on 30 November 2012.

·; Admission of the Placing Shares is expected to be effective from 3 December 2012.

·; Frontier IP also intends to strengthen its Board by undertaking a reorganisation to better reflect key roles. Andrew Richmond, currently Non-executive Director, will become Non-executive Chairman; Executive Chairman, Neil Crabb, will become Chief Executive and executive Directors, Jackie McKay and David Cairns, will become Chief Operating Officer and Portfolio Director respectively.

·; Frontier IP intends to appoint Marcus Yeoman to the Board as Non-executive Director, replacing Graham Barnet who will step down, conditional on admission of the Placing Shares to AIM. Marcus brings extensive experience of working with listed and smaller companies.

Neil Crabb, Executive Chairman, commented,

"The Placing will enable Frontier IP to continue to develop the business and support the expansion of our existing university relationships and funds as well as the establishment of sector specific funds. We see considerable opportunities for the Group and following the Placing, we will be well positioned to make further progress."

An extract from the Circular is included below. Unless otherwise stated, terms and expressions defined in the Circular have the same meaning in this announcement.

Enquiries

Company website: www.frontierip.co.uk

Introduction

The Company has today announced that it has conditionally raised £608,000 by way of a placing of 6,080,000 Placing Shares at 10 pence per share. In addition, the Company is giving notice of a General Meeting of the Company, to be held on 30 November at 41 Charlotte Square, Edinburgh EH2 4HQ for the purpose of considering and if thought fit, passing the Resolutions required to allow the Placing to proceed.

Placing Statistics

Expected Timetable of Principal Events

Background to and reasons for the Placing

Frontier IP specialises in the commercialisation of IP. It establishes partnerships with individual universities and research institutions to assist with their spin-out and licensing activities and helps to maximise the commercial value of technologies emerging from their research programmes. It also establishes funds to support the commercialisation of IP.

Frontier IP's Ordinary Shares were admitted to trading on AIM in January 2011, having previously been quoted on PLUS. Since the Company's admission to AIM, the Directors have continued to develop the business by fostering its relationships with its existing university partners, expanding the number of relationships with university partners (the Company announced a new agreement with Plymouth University in May 2011), managing dedicated funds to invest in spin-out opportunities and seeking to establish sector specific IP commercialisation funds.

Since admission to AIM, the Company has earned stakes in a further 7 new spin-out companies, taking the total number of portfolio companies to 13 and while it looks to add further relationships where there is a business case for doing so, the Company sees considerable opportunity within its existing university relationships. In addition to these relationships, the Company has made progress in its strategy of seeking to establish sector specific funds.

The Company intends to use the net proceeds of the Placing primarily to provide working capital to support:

·; the ongoing needs of the business;

·; the development and growth of existing relationships;

·; allied advisory roles; and

·; commitments to existing funds and the establishment of sector specific funds.

Current Trading

The Directors of Frontier IP announced Preliminary Results for the full year ended 30 June 2012 on 29 October 2012. An extract of the Executive Chairman's Statement from this announcement is set out below.

Introduction

Frontier IP has made good progress during the year ended 30 June 2012 with helping its existing portfolio companies to deploy their technologies and with deepening and extending its relationships within its three university partnerships. The Company has also continued to develop new opportunities in the year, including a fund management agreement with Narec Capital Limited ("Narec Capital") and a first collaboration venture with the University of Central Lancashire ("UCLan"). We saw some slippage in the receipt of equity and in completing two licence agreements which impacted results for the year. However, the completion of the delayed licence agreements remains underway and the equity from several new spin-outs was received in the first quarter of the new financial year.

The new financial year to 30 June 2013 has started well and the Company is benefiting from a high level of activity across its business. The Company has added three new spin-out companies to its portfolio since the start of July 2012 and, in particular, in August we were very pleased to enter into a new collaboration agreement with the University of Dundee, alongside the existing long term partnership.

Results

Revenue from services showed a small increase to £162,000 (2011: £158,000). Total revenue of £223,000 was lower than the prior year (2011: £307,000) due to a smaller increase in value of the Group's portfolio holdings and slippage in the receipt of equity from several new spin-outs into the new financial year as well as a delay in the completion of two licence agreements. With a 5% increase in administrative expenses due to higher personnel costs, the loss before tax was £380,000 (2011: loss of £269,000). The loss per share was 5.45p (2011: 3.86p).

Cash balances stood at £44,000 at 30 June 2012 (2011: £582,000). Net assets per share as at 30 June 2012 were 36.0p (2011: 41.4p). We are currently undertaking a fundraising, which is in its final stage, with the net proceeds intended to provide for the ongoing working capital needs of the business and to support the development and growth of existing relationships, allied advisory roles and commitments to existing funds and the establishment of sector specific funds. The new monies being raised are fundamental to the future of the business. We are making good progress and expect to update the market shortly.

Operational Review

The Group now has three university partnerships, with University of Dundee, Robert Gordon University, Aberdeen and Plymouth University. We believe that there is a broad range of significant commercial opportunities across these three partnerships and, in the short to medium term, we will be focusing our attention on exploring and developing these.

The Group received equity in three new spin-out companies during the year, Glycobiochem Ltd, Kinetic Discovery Ltd and Alusid Ltd.

Glycobiochem Ltd, a spin-out from University of Dundee, markets a software product called PRODRG, which is designed to generate three-dimensional models of chemicals for use in applications such as rational drug design, as well as a range of innovative molecular and chemical tools developed specifically for research into carbohydrate processing enzymes. The Group currently holds approximately 5% of the issued share capital of the company.

Kinetic Discovery Ltd, another spin-out from University of Dundee, is a drug discovery services company which specialises in biosensor based screening. It has a spread of international customers including many of the major pharmaceutical companies, and is already trading profitably. Kinetic Discovery Ltd is embedded within the University of Dundee, enabling it to continue to benefit from university facilities. This "embedded" approach is one which we are looking to develop further across our partnerships. The Group currently holds approximately 5% of the issued share capital of the company.

Our equity holding in spin-out company Alusid Ltd arose from our collaboration with UCLan which was agreed in June with UCLan's Silicate Research Unit. Alusid Ltd is a spin-out with UCLan and was formed just prior to the year end. The company will licence and commercialise the process to transform waste materials into a highly durable and functional material with applications in the construction industry. The material has been exhibited at a number of international design shows where it was well received. The Group currently has a beneficial ownership of 21% of the issued share capital of the company.

After the year end, Frontier IP was allotted equity in a further three spin-out companies, Tissue Repair Technologies Ltd, Ex Scientia Ltd and PoreXpert Limited.

Tissue Repair Technologies Ltd is a spin-out from University of Dundee. The company develops novel wound healing agents based on migration stimulating factor, a naturally occurring protein, which Tissue Repair Technologies Ltd believes has particular application in patients with impaired healing, such as diabetics. The Group currently holds approximately 5% of the issued share capital of the company.

Ex Scientia Ltd, a spin-out from University of Dundee, has been formed to exploit novel informatics and experimental methods to enable new, more effective ways of conducting drug discovery. The Group currently holds approximately 5.75% of the issued share capital of the company.

PoreXpert Ltd, a new spin-out from Plymouth University, was formed to accelerate the commercialisation activity of the Environmental and Fluid Modelling Group at Plymouth which provides software and consultancy for modelling porous systems. The company is now establishing distribution channels for a new version of its software released this month. The Group currently holds approximately 15% of the issued share capital of the company.

In June 2012, we were pleased to announce that we had signed an agreement with Narec Capital Limited ("Narec Capital"), the provider of consultancy and finance services to companies in the renewable energy sector. The agreement confirms Narec Capital's intention to appoint Frontier IP as its provider of fund management and administration services to a portfolio of renewable energy funds which it plans to launch later this year. The focus of this funding initiative will be on providing early-stage capital in order to accelerate the deployment and reduce the cost per megawatt hour of renewable energy technologies and projects emerging from sources including utilities, manufacturers, universities and research centres. Narec is currently investing over £150m of public and private finance to establish the UK's offshore renewable innovation facilities.

Once the funds are established, under the terms of the agreement, Frontier IP will receive fees arising from the introduction of investors and the provision of fund management services to the funds as well as investment deal fees and carried interest from the funds under management. We expect the benefits arising from the agreement to be reflected in the current financial year, to 30 June 2013. In line with existing arrangements, certain regulated activities will be provided through Sigma Technology Management Limited, the FSA authorised and regulated subsidiary of Sigma Capital Group plc, a shareholder in the Company.

In August 2012, we entered into a Collaboration Agreement with University of Dundee. This is in addition to our existing spin-out commercialisation Relationship Agreement. The objective of this new collaboration is for Frontier IP and the University of Dundee to work together to define, agree and, as appropriate, establish a vehicle which funds the exploitation of commercial drug development opportunities arising from the Drug Discovery Unit at University of Dundee ("DDU"). The DDU was founded in 2006 in the university's College of Life Sciences, with the aim of translating basic science into lead compounds to validate putative drug targets, to use as tools to investigate disease pathways and, when appropriate, advance to pre-clinical drug candidates.

Outlook

While the wider economic backdrop continues to be challenging, we are encouraged by the level of activity since the start of the new financial year. Our additional collaboration with University of Dundee has extended that relationship and we are excited by the potential opportunity this offers in the longer term.

The recent growth in the number of portfolio companies represents an opportunity for us to take on advisory roles and we expect to extend this approach to a number of our portfolio companies.

We are also seeing developments in our historic portfolio. In particular, Nandi Proteins Limited ("Nandi"), the Heriot Watt University spin-out, has recently made significant progress with a number of major food companies towards the licensing and adoption of its protein technology. Subject to Nandi concluding licence terms, we expect to recover the significant ongoing advisory fees that are being accrued, which have been provided against to date, as well as an uplift in valuation, and we continue to work with the company to assist in the development of its business.

In addition, we are looking forward to furthering our work with Narec Capital and UCLan during the current financial year.

In summary, we believe that, dependent on the successful outcome of the fundraising which is in its final stage, Frontier IP will be well placed to make further progress and the Board remains confident about the opportunities for growth in the new financial year and beyond.

Details of the Placing

The Company is to raise £608,000 (before expenses) through a conditional placing by Seymour Pierce Limited and Peterhouse Corporate Finance Limited of 6,080,000 Placing Shares at 10 pence per share. If they are all allotted, the Placing Shares will represent approximately 46.58 per cent. of the Enlarged Share Capital.

Under the terms of the Placing Agreement, Seymour Pierce Limited have agreed to use their reasonable endeavours, as agents on behalf of the Company, to procure placees for the Placing Shares at the Placing Price and have conditionally placed the Placing Shares with institutional and other investors including certain Directors as set out below.

The Placing is conditional upon the Placing Agreement becoming unconditional and not being terminated in accordance with its terms, on Admission and on the Resolutions being approved.

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. The Placing Shares will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid in respect of the ordinary share capital of the Company following Admission.

Directors' Participation

The table below sets out the Directors' participation in the Placing:

* These figures include the holding of their connected persons

** It is intended that Marcus Yeoman's appointment will be effective on Admission and that his shareholding will be held by Springtime Consultants Limited of which he is a director and majority shareholder.

*** Marilyn Cole and Graham Barnet are connected to Sigma Capital Group plc ("Sigma") by virtue of being directors of Sigma. Sigma has subscribed for 250,000Placing Shares.

The participation in the Placing by the Directors and Sigma, as described above, constitutes a related party transaction under Rule 13 of the AIM Rules and, as such, for the purposes of the AIM Rules, the Independent Director, having consulted Seymour Pierce Limited, the Company's nominated adviser, considers that the terms of the Placing are fair and reasonable insofar as Shareholders are concerned.

Board Structure

In order to strengthen the Board and to better reflect key roles within the business, the Company is intending to reorganise its Board, as follows:

·; Andrew Richmond will be appointed as Non-executive Chairman

·; Neil Crabb will become Chief Executive

·; Jackie McKay and David Cairns will become Chief Operating Officer and Portfolio Director respectively

In addition, conditional on Admission, the Company is pleased to advise that it intends to appoint Marcus Yeoman to the Board as Non-executive Director, replacing Graham Barnet who will step down. Marcus, aged 49, is currently Non-executive Director of a number of AIM listed companies including Nexus Management Plc, Reach4entertainment Enterprises Plc, 1spatial Plc and Concha Plc. He is also a non-executive director of a number of private companies which have engaged him principally to assist them with their growth strategies. His early career started with the formation of three companies in IT infrastructure and distribution, after which he moved into small company broking and corporate work with Rathbone Stockbrokers Limited and Cheviot Capital (Nominees) Limited. In 2003, Marcus established Springtime Consultants Ltd and has been acting as a consultant or non-executive director to a number of listed companies & SME ventures.

These changes will be effective on Admission.

It is also intended that Marilyn Cole, who is engaged with the Company through a services agreement with Sigma, will be replaced in due course by an independent Finance Director.

In accordance with Schedule 2 paragraph (g) of the AIM Rules, the following information has been included in respect of Marcus Yeoman's current and past directorships.

Mr Yeoman is currently a director or partner of the following companies or partnerships:

Mr Yeoman was a director of the following companies during the past 5 years:

Diamond Lifestyle Holdings Plc entered into a voluntary creditors liquidation in July 2008, Mr Yeoman was a director at that time.

Appointment of Joint Broker

The Company is also pleased to announce the appointment of Peterhouse Corporate Finance Limited as Joint Broker to the Company with immediate effect.

Options

The Company and Neil Crabb have agreed that Neil Crabb's existing share options will be cancelled, therefore there are no share options currently in place. It is the Company's intention to grant options, as soon as practicable, as follows:

Venture Capital Trusts ("VCT") and Enterprise Investment Scheme ("EIS")

The Company has received advance assurance from HMRC that the Placing Shares placed with VCTs are expected to constitute a qualifying holding for such VCTs. HMRC has also confirmed that the Placing Shares should satisfy the requirements for tax relief under the Enterprise Investment Scheme. Eligibility is also dependent on a Shareholder's own position and not just that of the Company. Accordingly, Shareholders and potential investors should take their own independent advice.

Resolutions

At the General Meeting the Shareholders will be asked to authorise the allotment of shares in the capital of the Company without the operation or application of the pre-emption provisions contained in the Companies Act 2006, all for the purpose of enabling the Company to place Ordinary Shares in the capital of the Company pursuant to the Placing. To avoid the confusion of seeking fresh authorities at the forthcoming 2012 AGM, the Board has decided to take the opportunity to now also refresh its general allotment authorities, as last granted at the annual general meeting of the Company which took place on 2 November 2011, and accordingly the authorities now sought will continue until the date falling 15 months after the passing of this resolution or, if earlier, the conclusion of the annual general meeting of the Company to be held in 2013 and no additional allotment authorities will be sought at the forthcoming 2012 AGM.

Recommendation and voting intentions

The Directors consider that the passing of the Resolutions is in the best interests of the Shareholders as a whole as the net proceeds of the Placing are fundamental to the future of the business. Accordingly, the Directors recommend Shareholders to vote in favour of the Resolutions, as they intend to do in respect of their own interests amounting to 639,230 Ordinary Shares (representing approximately 9.2 per cent., in aggregate, of the Ordinary Shares in issue as at the date of this letter). In addition Sigma has confirmed that it intends to vote in favour of the Resolutions in respect of its holding of 3,255,212 Ordinary Shares (46.69 per cent. of the Ordinary Shares in issue as at the date of this document) in aggregate.

Definitions

The following definitions apply throughout this document and in the Form of Proxy, unless the context requires otherwise:

"AIM" a market operated by the London Stock Exchange plc

"Admission" the admission of the Placing Shares to trading on AIM

"Enlarged Share Capital" the number of issued Ordinary Shares immediately following Admission

"Executive Chairman" the executive chairman of the Company

"Existing Ordinary Shares" the Ordinary Shares in issue at the date of this document

"Company" or "Frontier IP" Frontier IP Group Plc, a company incorporated in England and Wales under the Companies Act 1985 with registered number 6262177 and whose registered office is at NorthWest Wing, Bush House, Aldwych, London, WC2B 4EZ

"Directors" or "Board" the directors of the Company, whose names appear in on page 7 of the Circular

"Form of Proxy" the form of proxy accompanying the Circular for use by the Shareholders at the General Meeting

"General Meeting" the general meeting of the Company to be held at 11:00am on 30 November 2012 at 41 Charlotte Square, Edinburgh EH2 4HQ, notice of which is set out at the end of the Circular

"Independent Director" Jackie McKay, who is not participating in the Placing

 "IP" Intellectual Property

"Ordinary Shares" ordinary shares of 10 pence each in the capital of the Company

"Placing" the proposed placing to raise £608,000 by the issue of the Placing Shares at the Placing Price pursuant to the Placing Agreement

"Placing Agreement" the conditional agreement dated 6 November 2012 between the Company and Seymour Pierce Limited 

"Placing Price" 10 pence per share Placing Share

"Placing Shares" 6,080,000 new Ordinary Shares to be issued and allotted in connection with the Placing

"PLUS" Plus Market provided by PLUS Stock Exchange plc, a member of the ICAP group

"Resolutions" the resolutions to be proposed at the General Meeting, as set out in the notice convening the General Meeting at the end of the Circular

"Shareholders" holders of Ordinary Shares