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KleenAir Systems International Plc
Final Results
23 December 2009
Preliminary results for the 9 months ended 30 June 2009
CHAIRMAN'S STATEMENT
Introduction
The last Chairman's Statement, issued on 20th July 2009, covered key business and corporate events throughout the nine month period ended 30th June 2009, the period to which these accounts relate.
Board Changes
On 5th August 2009, I was appointed as an Executive Director of KleenAir Systems International Plc ("KleenAir" or the "Company") and was appointed Executive Chairman on 11th August 2009, Mr Lionel Simons having stepped down from that position, but remaining an Executive Director.
Mr Anthony Rentoul and Mr Peter Newell, both non-executive Directors, announced their resignations from the Board on 22nd July 2009. Mr Robert Hayim, also a non-executive Director, announced his resignation from the board on 4th August 2009. The Board wishes to thanks to these three former Directors of the Company for the work they did during their tenure.
Financial Results
The accounts for the period to 30th June 2009 show an operating loss of £252,265.
Business and Corporate Review
The Company's Ordinary Shares resumed trading on AIM on 5th August 2009, following publication of the accounts for the year ended 30th September 2008 and the issue of the interim results for the six months period ended 31st March 2009.
The Company announced, on 5th August 2009, that it had received £200,000 (after expenses) under a secured convertible loan note (the "Loan Note") to support its working capital requirements going forward. The Loan Note was issued to Global Investment Strategy UK Limited ("GIS" - an FSA authorised and regulated company registered in England) on 29th July 2009, convertible into 2,200,000 1p Ordinary Shares ("Shares") at a conversion price of 10 pence per Share; the conversion rights to expire on 28th January 2011.
The Company announced, on 13th November 2009, that GIS had converted £30,000 of the Loan Note into 300,000 Shares, representing 51.4 per cent. of the enlarged issued share capital of the Company. These Shares have been placed with unconnected third parties.
The Company announced, on 20th November 2009, that GIS had converted a further £30,000 of the Loan Note into 300,000 Shares, representing 33.9 per cent. of the enlarged issued capital of the Company. These Shares have also been placed with unconnected third parties.
On 8th September 2009, the Company announced that it had entered into an Exclusivity and Co-Operation Agreement with Argosec Pty Ltd ("Argosec" - a South African limited liability company) and with Argosec's parent undertaking, GlobalTech Marketing Limited ("GlobalTech" - a New Zealand limited liability company), with regard to future co-operation between the parties to establish and develop a coal briquetting business for Argosec in South Africa.
The Company also announced on the same date that it had entered into a £3,000,000 credit facility agreement (the "Facility Agreement") with GIS under which KleenAir has the right to draw down funds periodically up to an aggregate amount of £3,000,000 against the issue of new KleenAir Shares. The price of the Shares which may be issued to GIS under the Facility Agreement would be 85% of the rolling average closing mid-market price of KleenAir's shares over a period of five dealing days, commencing two business days prior to a drawdown notice by KleenAir and ending two business days after the date of the drawdown notice.
The Facility Agreement provides that funds may be drawn in one or several tranches (at the discretion of the Company) provided that no tranche shall result in GIS holding more than 29.9 per cent. of the voting rights in the Company as a result of new Shares pursuant to Facility Agreement (save as permitted by the Takeover Panel under a Rule 9 waiver) and GIS is not obliged to subscribe for Shares which, when aggregated with its existing holding, would result in it holding more than 29.9 per cent. (save as permitted by the Takeover Panel).
The purpose of the Facility Agreement is to enable KleenAir to have prompt access to funding when required to investigate growth opportunities and for general working capital.
The Company announced, on 3rd November 2009, that it had entered into a Call Option Agreement ("Call Option") with GlobalTech for the purchase from GlobalTech of 74% of the issued share capital of Argosec, thereby further formalised and protected its relationship with Argosec. The balance of 26% of the issued share capital of Argosec is intended to be transferred to a South African Black Economic Empowerment Entity on or prior to exercise by the Company of the Call Option. KleenAir is under no obligation to exercise the Call Option over the Argosec shares; the Company has, however, paid a refundable deposit of £25,000 to GlobalTech in consideration of the grant of the Call Option. KleenAir does not currently intend to exercise the Option unless and until GlobalTech has finalised sufficient long-term financing to enable Argosec to establish substantial commercial production of the coal briquetting business. The long stop date for exercise of the Call Option is 31st December 2010.
The Company announced, on 27th November 2009, that under the secured loan note agreement dated 29th July 2009 ("the Agreement") pursuant to a loan note instrument dated 29 July 2009 ("the Loan Note Instrument"), Global Investment Strategy (UK) Ltd ("GIS") has exercised its option to subscribe for a further 32,248 £1 convertible loan notes of the Company. These notes are to be issued on the same terms and conditions as set out in the Loan Note Instrument. The subscription for the further convertible loan notes will yield £29,317 (after expenses) for the Company and the number of loan notes over which GIS holds an option to subscribe at £1 will reduce to 190,683 which includes a commission of 10% payable to GIS in the form of loan notes.
The Company is developing a strategy within the resources sector addressing related environmental issues. The arrangements with Argosec and the potential opportunity in coal briquetting production is the first step towards fulfilling this strategy. Furthermore the Company is examining a range of other relevant opportunities and will make announcements with regard to any new developments at the appropriate time.
We are still evaluating the opportunity with Argosec to establish its commercial value we expect to be able to update shareholders with progress in the new year.
We have deferred putting in motion the change of name for the company at the general meeting but instead have recommended that the articles being changed to empower the directors to do so if it becomes appropriate.
W. Reid
Executive Chairman
INCOME STATEMENT
for the nine months ended 30 June 2009
| Notes | Period to 30 June 2009 £ | Year to 30 September 2008 £ | |
| REVENUE | |||
| Cost of sales | - | - | |
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| GROSS PROFIT | - | - | |
| Administrative expenses | (252,265) | (323,129) | |
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| OPERATING LOSS | (252,265) | (323,129) | |
| Provisions against assets | - | (2,756,376) | |
| Other interest receivable | - | 1,324 | |
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| LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION | (252,265) | (3,078,181) | |
| Taxation | 3 | - | - |
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| LOSS FOR THE PERIOD | (252,265) | (3,078,181) | |
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| LOSS PER ORDINARY SHARE - BEFORE EXCEPTIONAL | 4 | 0.63p | 0.23p |
| LOSS PER ORDINARY SHARE - AFTER EXCEPTIONAL | 4 | 0.63p | 14.54p |
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The income statement has been prepared on the basis that all operations are continuing operations.
STATEMENT OF CHANGES IN EQUITY
for the nine months ended 30 June 2009
| Share | Share | Other | Retained | ||
| Capital £ | Premium £ | Reserve £ | Loss £ | ||
| At 1 October 2007 | 206,885 | 1,985,074 | 86,891 | (384,679) | |
| Movement in shares issued | 71,109 | 1,044,998 | - | - | |
| Issue costs of placing | - | (268,517) | - | - | |
| Loss after tax for the period | - | - | - | (3,078,181) | |
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| At 30 September 2008 | 277,994 | 2,761,555 | 86,891 | (3,462,860) | |
| Movement in shares issued | 818 | 17,182 | - | - | |
| Loss after tax for the period | - | - | - | (252,265) | |
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| At 30 June 2009 | 278,812 | 2,778,737 | 86,891 | (3,715,125) | |
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Share capital is the amount subscribed for shares at nominal value.
Share premium represents the excess of the amount subscribed for share capital over the nominal value of the respective shares.
Retained loss represents the cumulative loss of the company attributable to equity shareholders.
BALANCE SHEET
30 June 2009
| Notes | 30 June 2009 £ | 30 September 2008 £ | |
| Current Assets | |||
| Trade and other receivables | - | 11,798 | |
| Cash and cash equivalents | 355 | 1,864 | |
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| 355 | 13,662 | ||
| CURRENT LIABILITIES | |||
| Trade and other payables | (448,920) | (350,082) | |
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| NET CURRENT ASSETS | (448,565) | (336,420) | |
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| TOTAL ASSETS LESS CURRENT LIABILITIES | (448,565) | (336,420) | |
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| SHAREHOLDERS' EQUITY | |||
| Called up share capital | 5 | 400,932 | 277,994 |
| Share premium account | 6 | 2,778,737 | 2,761,555 |
| Other reserve | 6 | 86,891 | 86,891 |
| Retained loss | 6 | (3,715,125) | (3,462,860) |
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| TOTAL EQUITY | (448,565) | (336,420) | |
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Approved by the board and authorised for issue on 21 December 2009.
L Simons
Director
Company Registration Number: 05075088
CASH FLOW STATEMENT
for the nine months ended 30 June 2009
| Notes | Period to 30 June 2009 £ | Year to 30 September 2008 £ | |
| Net Cash utilised by | (19,511) | (922,848) | |
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| Investing activities | |||
| Interest received | 2 | 1,324 | |
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| Net cash from activities | 2 | 1,324 | |
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| Cash Flows from Financing | |||
| Net proceeds from issue of shares | 18,000 | 847,590 | |
| Loan from Bramley Ltd | - | 75,000 | |
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| Net cash from financing | 18,000 | 922,590 | |
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| Net cash inflow/(outflow) | (1,509) | 1,066 | |
| Cash and cash equivalent at beginning of period | 1,864 | 798 | |
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| Cash and cash equivalent at end of period | 355 | 1,864 | |
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| Notes to Cash Flow Statement | |||
| Loss in period | (252,267) | (3,079,505) | |
| Decrease in receivables | 11,798 | 1,934,248 | |
| Increase in payables | 220,958 | 144,056 | |
| Loss on write off of intangibles and investments | - | 78,353 | |
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| (19,511) | (922,848) | ||
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NOTES TO THE FINANCIAL STATEMENTS
for the nine months ended 30 June 2009
1. GENERAL INFORMATION
KleenAir Systems International Plc is a company incorporated in England & Wales. The company's shares are traded on AIM, a market operated by the London Stock Exchange. The company went into a CVA which was approved by the members on 24 June 2009. The address of the registered office is disclosed on page 1 of the financial statements. The principal activities of the company are described in the directors' report.
The results for the year have been prepared on a basis consistent with the accounting policies set out in the Annual Report for the period ended 30 June 2009.
The financial information set out above does not constitute the Company's statutory accounts for the period ended 30 June 2009 or year ended 30 September 2008, but is derived from those accounts. Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the Company's Annual General Meeting. The auditors, Jeffreys Henry LLP, have reported on those accounts. Their report in the 2009 accounts was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006 or equivalent preceding legislation.
The 2008 accounts audit report contained an adverse opinion arising from the departure from IAS 27 - consolidated and separate financial statements.
2. ACCOUNTING POLICIES
2.1 Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) issued by the International Accounting Standards Board (IASB), as adopted by the European Union, and as applied in accordance with the provisions of the Companies Act 2006 applicable to companies preparing their accounts under IFRS. The financial statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statement, are disclosed within the accounting policies note.
Going Concern
a) The directors believe that the company is a going concern on the basis that it has entered into a £3,000,000 credit facility agreement (the "Facility Agreement") with Global Investment Strategy (UK) Ltd ("GIS") a UK, FSA authorised and regulated company, under which the company will have the right to draw funds from time to time over the next 12 months up to an aggregate amount of £3,000,000 (the "facility") against the issued of new ordinary shares in the capital of KleenAir.
The price of the new shares which may be issued to GIS under the Facility Agreement would be 85% of the rolling average closing mid-market price of KleenAir's shares over a period of five dealing days, commencing two business days prior to a drawdown notice by KleenAir and ending two business days after the date of the drawdown notice. The Facility Agreement contains a number of warranties and undertakings from KleenAir in favour of GIS in relation to various matters relating to KleenAir and an indemnity from KleenAir in favour of GIS in respect of certain matters in relation to the agreement. The Facility Agreement, which terminates on 30 June 2010, is terminable by GIS in certain circumstances including if there is a material breach of the agreement by KleenAir or a material breach by KleenAir of any of the warranties. The Facility Agreement provides that the Facility may be drawn once or in tranches (at the discretion of the Company) provided that any tranche shall not result in GIS holding more than 29.9 per cent, of the voting rights in the Company as a result of it being issued new shares pursuant to Facility Agreement (save as permitted by the Takeover Panel). GIS are not obliged to subscribe for any number of new shares which when aggregated with its existing holding of shares in the capital of the Company would result in GIS holding 29.9 per cent or more of the issued voting share capital (save as permitted by the Takeover Panel).
The purpose of this facility is to enable KleenAir to have the ability to draw down funds promptly when required to explore growth opportunities and for general working capital.
b) Following the agreement entered with Argosec Pty Ltd (Argosec) as announced on 8 September (see note 20A above), the company has entered, as the 3 November 2009, into a Call Option Agreement ("Call Option" with Globaltech Marketing Limited (GlobalTech) for the purchase from Global Tech of 74% of the issued share capital of Argosec, and thereby has further formalised and protected its relationship with Argosec. The balance of 26% of the issued share capital of Argosec is intended to be transferred to a South African Black Economic Empowerment Entity on or prior to exercise by the Company of the Call Option. A refundable deposit of £25,000 is payable to GlobalTech for grant of the Call Option.
The company under no obligation to exercise the Call Option over the Argosec shares, and does not currently intend to exercise the Call Option unless and until GlobalTech has finalised sufficient long-term financing to enable Arogsec to establish sustainable commercial production of the coal briquetting business. The long-stop date for exercise of the Call Option is 31 December 2010.
The consideration will be payable annually following the end of each of the 3 years following the commencement of full time commercial production of coal briquettes and calculated as an amount equal to 74% of Argosec's adjusted post-taxation earnings.
c) The Company announced on 13 November 2009 that Global Investment Strategy (UK) Ltd had agreed to convert £30,000 of the outstanding debt into 300,000 ordinary shares of 1 pence each, representing 51.4 per cent, of the enlarged issued share capital of the Company. These shares have been placed with unconnected third parties.
d) On 20 November 2009, Global Investment Strategy (UK) Limited converted a further £30,000 of the outstanding debt to 300,000 ordinary shares of 1 pence each.
| 3. | TAXATION Due to the losses in the period, no corporation tax liability has arisen. Factors affecting current tax charge: The tax assessed on the loss on ordinary activities for the period is different from the standard rate of corporation tax in the UK of 21% (2008-20%). |
| Period to 30 June 2009 £ | Year to 30 September 2008 £ | ||
| Loss on ordinary activities before taxation | (252,265) | (3,078,181) | |
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| Loss on ordinary activities by rate of tax | (52,976) | (615,636) | |
| Other tax adjustments | 52,976 | 615,636 | |
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| Total current tax | - | - | |
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The Company has excess management excess of £725,936 (2008:£473,669) to carry forward, capital loss of £150,000 (2008-£150,000) and excess capital allowances of £78,334 (2008-£78,334) to carry forward. No deferred tax asset has been provided on any of them due to uncertainty of recovery.
4. LOSS PER SHARE
Loss per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The calculations of both basis and diluted earnings per share for the year are based upon a loss after tax of £252,265 (2008: loss of £3,078,181).
The weighted number of equity shares used in the basic calculation is 40,080,655 (2008: 21,174,748). The weighted average number of shares used in the dilution calculation is 40,080,655 (2008 - 21,174,748). As the potential ordinary shares to be issued are deemed anti-dilutive, for the purpose of the dilution they have been excluded from the calculation of the weighted number of shares.
| 5. SHARE CAPITAL | ||
| Period to 30 June 2009 £ | Year to 30 September 2008 £ | |
| Authorised | ||
| 100,000,000 ordinary shares of £0.01 | - | 1,000,000 |
| 87,788,000 ordinary shares of £0.01 | 877,880 | - |
| 12,212,000 'B' ordinary shares of £0.01 | 122,120 | - |
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| 1,000,000 | 1,000,000 | |
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| Issued and fully paid | ||
| 27,799,424 ordinary shares of £0.01 | - | 277,994 |
| 27,881,242 ordinary shares of £0.01 | 278,812 | - |
| 12,212,000 "B" ordinary shares of £0.01 | 122,120 | - |
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| 400,932 | 277,994 | |
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On 12 December 2008, the company allotted 81,818 ordinary shares at 22p raising £18,000 before expenses.
'B' ordinary shares
At a general meeting held on 24 June 2009, the company created new B ordinary shares by re-designating 12,212,000 ordinary shares into 12,212,000 new B ordinary shares; the rights attaching to them are set out in a new Article 3 of the company's existing articles of association.
The B ordinary shares are credited as fully paid and rank pari passu in all respects with the ordinary shares, save that the holder or holders of B ordinary shares shall not have the right to attend and vote at general meeting of the company (save in respect of resolutions to vary the rights attaching to the B ordinary shares) and have the option to convert their interests in B ordinary shares at any time, and from time to time into ordinary shares on a 1 for 1 basis.
Re-organisation of authorised and issued share capital
At a general meeting of the company held on 21 August 2009, the following changes were approved to the company's share capital:
a) Increase in the authorised share capital
The authorised share capital was increased from £1,000,000 to £1,900,000.
b) Capital re-organisation
The effect of the capital re-organisation was to consolidate every 100 existing ordinary shares into 1 new ordinary share and 1 deferred Share. The capital re-organisation consisted of the following steps:
(i) The company's new authorised share capital was consolidated into ordinary shares of nominal value £1 each as a result of the issued ordinary shares of 1p each and B ordinary shares of 1p each being consolidated into ordinary shares of £1 B ordinary shares of £1, respectively, on the basis of 1 ordinary share of £1 for each ordinary shares of 1p;
c) Capital re-organisation
(ii) Each of the issued ordinary shares of nominal value of £1 arising by reason of (i) above was then sub- divided into one new ordinary share of 1 penny and one deferred share of 99p; and
(iii) Each of the issued B ordinary shares of nominal value £1 arising by reason of (i) above was sub-divided into one new ordinary Share of 99p each.
The new ordinary shares replaced the existing ordinary shares under the newly approved company's articles of association.
The provisions in relation to the deferred shares are also contained in the company's articles of association.
The deferred shares have very limited rights and are effectively valueless. The deferred Shares have no voting rights, and have no rights as to dividends and only very limited rights on a return of capital. They are not freely transferable.
The new ordinary shares and new B ordinary shares have the same rights as those currently accruing to the existing respective ordinary shares under the company's articles of association, including those in respect of voting and entitlement to ordinary shares will not be affected.
The share capital of the company now comprises:
| Ordinary Shares of 1p each | B Ordinary Shares of 1p each | Deferred Shares of 99p each | |
| Authorised | 150,185,574 | 122,120 | 400,932 |
| Issued | 883,812 | 122,120 | 400,932 |
(i) on 19th August 2009, 5,000 new ordinary shares of 1p each were issued to the supervisor of CVA.
(ii) on 13 November 2009, 300,000 new ordinary shares were issued to unconnected third parties on conversion of a loan note.
(iii) on 20 November 2009, 300,000 new shares were issued to unconnected third parties on the conversion of a loan note.
6. RESERVES
| Share premium account | Other reserves | Profit and loss account | |
| £ | £ | £ | |
| At 30 September 2008 | 2,761,555 | 86,891 | (3,462,860) |
| Loss for the period | - | - | (252,265) |
| New equity share capital subscribed | 17,182 | - | - |
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| At 30 June 2009 | 2,778,737 | 86,891 | (3,715,125) |
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7. POST BALANCE SHEET EVENTS
KleenAir Systems International Plc ("KleenAir" or the "Company") announced, on 5th August 2009, that it has received £200,000 (after expenses) under a secured convertible loan note (the "Loan Note") to support its working capital requirements going forwards. The Loan Note was issued to Global Investment Strategy UK Limited ("GIS" - an FSA authorized and regulated company registered in England) on 29th July 2009 and is convertible into 2,200,000 1p Ordinary Shares ("Shares") at a conversion price of 10 pence per Share; the conversion rights expire on 28th January 2011.
The Company announced, on 13th November 2009, that GIS had converted £30,000 of the Loan Note into 300,000 Shares, representing 51.4 per cent. of the enlarged issued share capital of the Company. These Shares have been placed with unconnected third parties.
The Company announced, on the 20th November 2009, that GIS had converted a further £30,000 of the Loan Note into 300,000 Shares, representing 33.9 per cent. of the enlarged issued capital of the Company. These Shares have been placed with unconnected third parties.
On 8th September 2009, the company announced that it had entered into an Exclusivity and Co-Operation Agreement with Argosec Pty Ltd ("Argosec" - a South African limited liability company) and with Argosec's parent undertaking, GlobalTech Marketing Limited ("GlobalTech" - a New Zealand limited liability company), with regard to future co-operation between the parties to establish and develop a coal briquetting business for Argosec in South Africa.
The Company also announced on the same date that it had entered into a £3,000,000 credit facility agreement (the "Facility Agreement") with GIS under which KleenAir has the right to draw down funds periodically up to an aggregate amount of £3,000,000 against the issue of new KleenAir Shares. The price of the Shares which may be issued to GIS under the Facility Agreement would be 85% of the rolling average closing mid-market price of KleenAir's shares over a period of five dealing days, commencing two business days prior to a drawdown notice by KleenAir and ending two business days after the date of the drawdown notice.
The Facility Agreement contains a number of warranties and undertakings ("Warranties") from KleenAir in favour of GIS in relation to various matters relating to KleenAir and an indemnity from KleenAir in favour of GIS in respect of certain matters in relation to the agreement. The Facility Agreement terminates on 30th September 2010 unless it has previously been terminated by GIS in certain circumstances including a material breach of the Facility Agreement by KleenAir or a material breach by KleenAir of any Warranties.
The Facility Agreement provides that funds may be drawn in one or several tranches (at the discretion of the Company) provided that no tranche shall result in GIS holding more than 29.9 per cent. of the voting rights in the Company as a result of new Shares pursuant to Facility Agreement (save as permitted by the Takeover Panel under a Rule 9 waiver) and GIS is not obliged to subscribe for Shares which, when aggregated with its existing holding, would result in it holding more than 29.9 per cent. (save as permitted by the Takeover Panel).
The purpose of the Facility Agreement is to enable KleenAir to have prompt access to funding when required to investigate growth opportunities and for general working capital.
The Company announced, on 2nd November 2009, that it had entered into a Call Option Agreement ("Call Option") with GlobalTech for the purchase from GlobalTech of 74% of the issued share capital of Argosec, thereby further cementing its relationship with Argosec. The balance of 26% of the issued share capital of Argosec is intended to be transferred to a South African Black Economic Empowerment Entity on or prior to exercise by the Company of the Call Option. KleenAir is under no obligation to exercise the Call Option over the Argosec shares; the Company has, however, paid a refundable deposit of £25,000 to GlobalTech in consideration of the grant of the Call Option.
The Company announced, on 27 November 2009, that under the secured loan note agreement dated 29 July 2009 ("the Agreement") pursuant to a loan note instrument dated 29 July 2009 ("the Loan Note Instrument"), Global Investment Strategy (UK) Ltd ("GIS") has exercised its option to subscribe for a further 32,248 £1 convertible loan notes of the Company. These notes are to be issued on the same terms and conditions as set out in the Loan Note Instrument. The subscription for the further convertible loan notes will yield £29,317 (after expenses) for the Company and the number of loan notes over which GIS holds an option to subscribe at £1 will reduce to 190,683 which includes a commission of 10% payable to GIS in the form of loan notes.