PXOG.L Regulatory News (PXOG)

Premier Gold Resources plc

("Premier Gold" or the "Company")

Suspension of Trading

Proposed Company Voluntary Arrangement, Disposal of Central Asia Resources Limited, Adoption of New Investing Policy, Change of name to Prospex Oil and Gas plc, Share Capital Reorganisation, Subscription for New Ordinary Shares and Notice of General Meeting

Premier Gold announces that it has requested that trading in its shares be suspended, with effect from 7.30am today pending clarification of its financial position in light of the following developments:

It was noted that:

1. Proposals have been filed in the High Court and will today be dispatched to the creditors of Premier Gold together with a notice convening a Creditors Meeting the purpose of which is to consider the Directors' proposal for a Company Voluntary Arrangement ("CVA"), subject to shareholders approval;

2. Premier had entered into a Settlement Deed with Tridevi Capital Partner (I) LP ("Tridevi"), conditional on Shareholder approval, to dispose of the entire issued share capital of Central Asia Resource Limited ("CAR"), the Company's wholly owned subsidiary, to Tridevi in full and final settlement of the outstanding loan under the Convertible Loan Agreement. CAR holds an 80% stake in Premier Asia and is the ultimate owner of the exploration licence known as the Cholokkaindy licence in the Kyrgyz Republic (the "Licence"). ACA Howe has independently valued the Licence on 24 February 2015 at £nil. Such valuation is set out in the Schedule to the Shareholders Circular. The Company entered into the Convertible Loan Agreement on 2 July 2013 which was secured by a fixed charge over all the shares held by the Company in CAR. Following this transaction, Tridevi's loan will be reduced to £nil, Tridevi will waive any right it may have to participate in the CVA and Tridevi would transfer £50,000 to the Company in order to enable it to make an improved offer of settlement to the unsecured Creditors of the Company, than would have otherwise have been possible.

3. As CAR, and its interest in the Licence, represents more than 75% of the assets of the Company the Disposal is a fundamental disposal pursuant to Rule 15 of the AIM Rules which is conditional on consent of Shareholders being given in a general meeting and that as the effect of the Disposal is to dispose of all, or substantially all of the Company's activities and assets, that the Company is required to adopt an Investing Policy, which also must be approved by Shareholders in a general meeting . The details of that proposed Investing Policy are set out below;

4. It was proposed that the Company's share capital be re-organised through the consolidation of every 25,000 Existing Ordinary Shares into one Consolidation Share; and thereafter each Consolidation Share will be subdivided into 100 Ordinary Shares of 1p each and 1 New Deferred Share;

5. The Company had conditionally raised £1,076,150 through the issue of 35,283,591 New Ordinary Shares to advance the Company's Investing Policy, of which £50,000 would be transferred to the Company in order to enable it to make an improved offer of settlement to the unsecured Creditors of the Company, than would have otherwise have been possible; and

6. conditional on the above, that a new board would be appointed and that the Company was to change its name to Prospex Oil and Gas plc, subject to shareholder approval;

(together the "Proposals").

Accordingly, the Company has today issued a shareholder circular convening a shareholders general meeting at 11:30 on 14 April 2015 at the offices of offices of Peterhouse Corporate Finance Limited, 3rd Floor, New Liverpool House, 15 Eldon Street, London, EC2M 7LD, to approve the Proposals. The Circular sets out the background to and the reasons for the Proposals. It also explains why the Directors consider these proposals to be in the best interests of the Company and Shareholders as a whole and why they recommend that Shareholders should vote in favour of the Resolutions to be proposed at the General Meeting

Copies of the Circular will be available free of charge from the Company's registered office, on the website of the Company www.premiergoldresources.com and from the offices of Peterhouse Corporate Finance Limited, 3rd Floor, New Liverpool House, 15 Eldon Street, London, EC2M 7LD during normal business hours for a period of one month from the date of this announcement.

Contacts:

Extracts from the Circular

All defined terms in this announcement have the meaning set out at the end of this announcement.

Information on Premier Gold Resources Plc

Premier is a gold exploration and development company admitted to trading on AIM. The Company owns 100% of the share capital of CAR, a company which, in turn, holds 80% of the shares of Premier Asia (together, the "Group"). The Group focuses on gold opportunities in Central Asia, in particular the Kyrgyz Republic.

The company holds more than 20% of the share capital of the following companies:

* the shares of Premier Asia Resources LLC are held by Central Asia Resources Limited

The Company is not yet producing minerals and so has no income other than a small amount of bank interest. The Company has been predominantly dependant on cash advances from Tridevi drawn down under the Convertible Loan Agreement, and as announced on 26 September 2014, in order to preserve the capital available, the Company has suspended all directors' salaries. The Company's current working capital position is therefore extremely constrained.

Background to and reasons for the Proposals

The Company through its 80% indirect interest in Premier Asia holds an interest in the Licence. Four gold prospects have been identified in the Licence area which is in Northern Tien Shan, about 80 km southwest of the capital, Bishkek. These prospects are early stage and current losses attributable to the asset as of the audited accounts of Premier Asia dated 31 December 2013 are Kyrgyz SOM 21,131,303

Following early exploration success in 2012 no further exploration of the Licence has been possible due to local groups, holding up work programmes illegally. Despite pressing the Kyrgyz authorities and threatening a claim against the government little progress was made in 2014. Significant additional legal, political and social work needs to be carried out in the UK and in the Kyrgyz Republic for the Company to gain safe access to the Licence. There can be no guarantee at this point that safe access will ever be achieved. Additionally, the necessary and anticipated funds for the work are not available to the Company.

The Company entered into the Convertible Loan Agreement, secured by way of fixed charge against all present and future rights and interests in the investments and dividends of CAR, for the provision of up to £1 million, to advance the exploration programme in accordance with the Licence. To date approximately £580,000 has been drawn down. The remaining funds can only be drawn upon once exploration work on Cholokkaindy commences, unless Tridevi agrees otherwise.

In view of the ongoing inability for the Company to access its Licence, as well as increased pressure from Creditors and its constrained working capital position, the Directors have been exploring other options for the Shareholders.

A new management and directorial team comprising Edward Dawson, Richard Mays, Bill Smith and Gavin Burnell (the "Proposed Directors") have approached the Company with a view to using it as a vehicle to make investments in the oil and gas sector. This proposal requires that Premier does not have any outstanding Creditors and the Directors have reluctantly concluded to call the General Meeting for the purpose of considering and voting on the proposal for the CVA, subject to the Creditors approving the CVA at the Creditors Meeting.

The CVA , which is supported by the Proposed Directors, will eliminate the Company's indebtedness and liabilities and should provide the unsecured Creditors an opportunity to make a partial recovery of the debt they are owed.

In order to recapitalise the Company and, provide the Company with sufficient cash resources to enable it to fulfil its new strategy and to provide funding for the CVA, Peterhouse has conditionally raised £1,076,150 at £0.0305 per Subscription Share, through the Subscription of 35,283,591 New Ordinary Shares. It is agreed that £50,000 of these funds will be used to fund the CVA.

The Board have also received a proposal whereby Tridevi will accept the Company's 100% interest in CAR, being the holding company of Premier Asia and the Company that holds the 80% interest in the Licence, in full and final settlement of the sums outstanding under the Convertible Loan Agreement. Tridevi will also advance an additional sum of £50,000 to the Company in order to enable it to make an improved offer of settlement to the unsecured Creditors of the Company, than would have otherwise have been possible.

Given the current situation in the Kyrgyz Republic, and without further, significant funding, the Company is unable to explore the Licence, and the Licence itself is therefore considered by the Board to currently be of minimal commercial value. This valuation is supported by an independent valuation prepared by ACA Howe, which is attached as a schedule to the Circular for information, dated 24 February 2015. The Directors confirm that there were no material changes to the conditions of the Licence since the date of the valuation. The Directors believe that this Proposal is in the best interest of Shareholders and accordingly have entered into the Settlement Deed, conditional on Shareholder approval.

If the CVA and the Disposal are approved, the Company will have no other assets and accordingly, pursuant to Rule 15 of the AIM Rules, becomes an investing company. Following the issue of the Subscription Shares the Company will also have approximately £926,150 of cash to make further investments. Pursuant to the AIM Rules the Company is required to adopt an investment policy, setting out its investing strategy for the Company going forward. This must be approved by Shareholders. The Proposed Directors have prepared the proposed Investing Policy, which is set out on pages 14 and 15 of the Circular, for consideration by the Shareholders at the General Meeting.

If this Investing Policy is approved, the Company must make an acquisition or acquisitions which constitute a reverse takeover under AIM Rule 14 or otherwise implement the Investing Policy approved at the General Meeting to the satisfaction of the Exchange within twelve months of becoming an investing company.

Conditional on the passing of the Resolutions, Christian Schaffalitzky, Richard Nolan, Garth Earls and Gerald Desler will resign as directors immediately following the conclusion of the General Meeting and Edward Dawson, Richard Mays, Bill Smith and Gavin Burnell will be appointed to the board of the Company.

A notice convening a General Meeting at 11:30 a.m. on 14 April 2015, at the offices of Peterhouse Corporate Finance Limited, 3rd Floor, New Liverpool House, 15 Eldon Street, London, EC2M 7LD, to consider the Resolutions, is set out at the end of the Circular.

Unless all of the Resolutions are passed the Proposals would not proceed.

Terms of the CVA

Under the proposed terms of the CVA, the Creditors will, in aggregate, be offered a total of £100,000 together with the cash and debtors remaining in the Company, immediately prior to the injection of new funds, which will be distributed on a pro rata basis to the Creditors who make a valid claim as soon as possible and within a maximum of twelve months of the date of the CVA being approved. The amount owed to Creditors, who will rank for dividend in the CVA, currently stands at approximately £276,039 which means that Creditors should receive approximately 48 pence for every £1 of debt. However, this is not guaranteed, and if there are employee redundancies made, employees' claims could result in a lower return to Creditors. It is expected that the CVA will be approved at the Creditors Meetings to be held at 11:30 a.m. on 14 April 2015.

The CVA is conditional on:

1. Tridevi accepting, and the Shareholders approving the Disposal and agreeing to waive any claim to any monies disbursed as part of the CVA; and

2. Tridevi making a single contribution of £50,000 towards the CVA; and

3. Creditors being offered a total of £100,000 in full and final settlement. If agreed, this would eliminate all of the Company's debts. The cash and debtors remaining in the Company, immediately prior to the injection of new funds will also be paid into the CVA for the benefit of Creditors.

For the avoidance of doubt, Shareholders will retain their Existing Ordinary Shares in the Company and the CVA will not result in any distribution being made to the Shareholders of the Company in their capacity as Shareholders.

The Directors have requested that Antony Batty of Antony Batty & Company LLP, acts as Nominee in respect of the proposal of the Directors for the CVA. Antony Batty of Antony Batty & Company LLP has provided his consent to act and his Nominee's Report will be filed at Court as required.

In accordance with Section 246B of the Insolvency Act and Rule 12.A.12 of the Insolvency Rules 1986, as amended, notice is hereby given that a copy of the Directors' proposal incorporating the Nominee's Report will be available for download from the following website as of 20 March 2015:

URL: http://www.antonybatty.net/client-login.php 

Client ID: 1261695714

The report can be found under "Creditor Guides and Insolvency Appointments" and is titled "Proposal by the Board of Directors for a CVA and Nominee's Report". This document will be available at the above address for not less than three months from the date of this letter.

Should any Shareholder wish to receive a paper copy of the proposal please contact John Baalham of Antony Batty & Company LLP on 0207 831 1234, or email JohnBaalham@antonybatty.com, or write to 3 Field Court, Gray's Inn, London, WC1R 5EF.

Copies of the circular to Creditors containing information on the proposed CVA and accompanying statutory information on the Company including a statement of affairs of the Company as at 28 February 2015 can be downloaded from the website provided above.

Resolution 1 seeks Shareholders' approval of the CVA and Resolution 5 seeks Shareholder approval of the Disposal.

If the CVA is not approved the Directors believe that the Company will face an uncertain future as there are currently insufficient assets to repay the Creditors. In this situation it is highly likely that ahead of a potential cancellation of the listing on AIM, the outcome will be for the Company to be placed into liquidation and in such circumstances there are unlikely to be any returns for Shareholders.

Share Capital Reorganisation

The Existing Ordinary Shares have a current nominal value of £0.001 per share. The Company will not be able to raise funds via an issue of Existing Ordinary Shares at present, the current trading price of the Existing Ordinary Shares being lower than the nominal value. The Company is therefore proposing to undertake the Share Capital Reorganisation so that it can raise further equity capital via the Subscription at the Subscription Price.

The Share Capital Reorganisation will take place in two stages:

· Firstly, every 25,000 Existing Ordinary Shares will be consolidated into one Consolidation Share. The Consolidation Shares will not be held by Shareholders but are an integral part of the Share Capital Reorganisation process (the "Consolidation").

· Secondly, each Consolidation Share will be subdivided into 100 Ordinary Shares of 1p each and 1 New Deferred Share.

The Consolidation will give rise to fractions of shares whereby a Shareholder's total holding of Ordinary Shares is not exactly divisible by 25,000 at the Record Date. Fractions of New Ordinary Shares will not be allotted, instead they will be aggregated and sold for the benefit of the Company. It is estimated that the total value of all fractions will amount to less than £10.

The table below gives some examples of the effect of the Share Capital Reorganisation on specific shareholdings of Existing Ordinary Shares:

Pursuant to Resolution 3, the New Deferred Shares created by the Share Capital Reorganisation will be effectively valueless as they will not carry any voting rights or dividend rights. In addition, holders of New Deferred Shares will only be entitled to a payment on a return of capital or on a winding up of the Company after each of the holders of New Ordinary Shares have received a payment of £100,000 on each such share. The New Deferred Shares will not be listed or traded on AIM and no share certificates will be issued in respect of the New Deferred Shares. In addition, the Board may appoint any person to act on behalf of all the holders of the New Deferred Shares to procure the transfer of all such shares back to the Company, or its nominee, or cancel the New Deferred Shares.

The rights attaching to the New Ordinary Shares will be identical in all respects to those of the existing Ordinary Shares, save for the change in nominal value. The New Deferred Shares will have the rights set out in Resolution 3.

At the time of issue of the Existing Options, provisions were included in the documentation to adjust the exercise price of the Existing Options following any changes to the share capital structure of the Company. Following the passing of Resolutions 2 and 3, the Directors intend to adjust the Existing Options, in line with the proposed Share Capital Reorganisation, on the basis of one New Option for each 250 Existing Options. Further to this, the exercise price will also be adjusted in line with the proposed Share Capital Reorganisation. The table below gives detail of the Existing Options and the New Options: 

The Subscription

Conditional upon the approval of the Proposals at the General Meeting, Peterhouse has placed 35,283,591 new Ordinary Shares at a price of £0.0305, raising £1,076,150 before expenses.

Use of Proceeds

£50,000 of the proceeds of the Subscription will be used to settle outstanding Creditors under the terms of the CVA, as set out above, and the remainder will provide the Company working capital to pursue its new Investing Policy.

Following the settlement of Creditors as part of the proposed CVA, the Company will be free of debt.

Dis-application of pre-emption rights and authority to allot shares

In order to facilitate the proposed Subscription, as described above and to enable the Company to raise further funds to implement its intended Investing Policy with minimal limitations, it is necessary for the Directors to seek authority from Shareholders at the General Meeting pursuant to the Companies Act 2006 to, inter alia, issue the Subscription Shares and to issue further shares for cash. The Directors may look to raise additional funds for the Company following the General Meeting, subject to any necessary resolutions being approved by Shareholders.

Full details of the authorities the Directors are seeking at the General Meeting are set out in the attached notice of General Meeting.

Change of Name

Subject to Shareholders' approval of the Proposals, it is proposed that the name of the Company be changed to Prospex Oil and Gas Plc.

Proposed Directors

Subject to the Resolutions being passed, it is proposed that immediately following the General Meeting the Proposed Directors will join the Board and the Directors will resign from office with no compensation for loss of office, and will waive all claims against the Company under their appointment letters.

Edward Roland Dawson, CEO & Managing Director (aged 40)

Edward holds a BEng and a MSc in Investment Analysis and has over 10 years' experience in the sector, as a financier of, investor in or holding senior management roles in junior oil and gas companies. Positions held include: Managing Director of Peppercoast Petroleum plc and Managing Director of Black Star Petroleum plc, Analyst on RAB Capital's Energy fund, Business Development and Finance Manager for Oilexco Incorporated and a Fund Manager for Park Place Capital.

Additional disclosures pursuant to Schedule 2 (g) of the AIM Rules:

Richard Paul Mays, Non-Executive Director (aged 54)

Richard holds LLB, LLM, PhD degrees and is a Solicitor in Scotland. Formerly Professor and Depute Dean of the Aberdeen Business School he has extensive industry, commercial and legal experience. He is VP and General Counsel at Canadian Overseas Petroleum Limited a TSX and FTSE listed company. He has leadership and senior management experience of other London Stock Exchange listed companies (formerly at DEO Petroleum plc and at Oilexco North Sea Limited). He has also served as Executive Chairman of Peppercoast Petroleum plc and Black Star Petroleum plc.

Additional disclosures pursuant to Schedule 2 (g) of the AIM Rules:

William ("Bill") Hartman Smith, Non-Executive Director (aged 62)

Bill is a resident of Calgary, Alberta, Canada. He is a director of a number of listed and private companies including Orca Exploration Group (TSXV); Mosaic Capital Corporation (TSXV); Axia NetMedia Corporation (TSX); PFB Corporation (TSX). He holds a license to practice law in Alberta and is a past senior partner of McCarthy Tetrault LLP in Canada. He has extensive corporate experience including a number of start-up ventures and also in the oil and gas sector and brings an international prospective to the board.

Gavin John Burnell Non-Executive Director (aged 37)

Gavin is a Director, Corporate Finance with Sanlam Securities UK Limited. He holds a degree in Accounting & Finance and has specialised in advising AIM and ISDX-traded smaller companies for the last thirteen years.

Gavin is a co-founder and / or director of a number of private and publicly traded entities, including Globo plc, Elephant Oil Limited, Magnolia Petroleum plc, Stratex lnternational plc, Iceni Oil and Gas Limited (sold to then TSXV-listed Bridge Resources Corp), Silvrex Limited (sold to Stratex), Sula Iron & Gold plc and Hot Rocks Investments plc. Gavin has taken a number of companies from start-up through to sale or flotation.

Additional disclosures pursuant to Schedule 2 (g) of the AIM Rules:

Additional Disclosures

Edward Dawson and Richard Mays

Edward Dawson and Richard Mays were appointed to the board of Broadway Consolidated plc Limited ("Broadway"), by RAB Capital ("RAB") acting as the investment manager of the RAB Energy Fund Limited under and in accordance with the loan agreement dated 3 November 2005 with the Broadway ("RAB Loan Agreement"). RAB Energy Fund Limited was not a shareholder at the time.

At a board meeting of Broadway which had taken place on 11 March 2010, two members of the board, Mr Stickley and Mr Townsend refused to acknowledge the validity of the appointment under the RAB Loan Agreement. As a result, RAB commenced proceedings against Broadway, seeking confirmation of the validity of the appointment. Following a court hearing which took place on 20 April 2010, the court upheld the right of appointment under the RAB Loan Agreement and Edward Dawson and Richard Mays were confirmed as appointed to the board.

In 2011 the company changed its name to Peppercoast Petroleum plc ("Peppercoast"). As directors Edward Dawson and Richard Mays led, what they perceive to be, a transformation of Peppercoast including the restructuring of debts and management. They led a refinancing of Peppercoast and appointed financial advisors to assist a strategic alternatives review. In 2011 a sale and purchase agreement was entered into in respect of the Peppercoast's asset. The transactional value of the sale and purchase was $109m. That transaction finally completed in 2013, and the asset held by Peppercoast was transferred to Canadian Overseas Petroleum Limited and ExxonMobil. The transaction was formally endorsed by the President and both the Congress and the Senate of Liberia. On completion, all creditors were paid, all taxes were paid, the residual funds were distributed as a capital distribution and the Peppercoast entered into a members' voluntary liquidation in 2013.

During its existence there were some adverse media articles concerning Peppercoast, but these do not relate to either Edward Dawson or Richard Mays. Any criticisms of Peppercoast or its affairs relate to matters in the period prior to their involvement.

William Smith

Oilexco Inc

Mr. William Smith, a nominee director was a director and officer of Oilexco Incorporated ("Oilexco") when, as a consequence of the severe disruption in the financial and commodity markets during the fall of 2008, it filed for protection under the Companies Creditors' Arrangement Act (Canada) on or about February 5, 2009. At about the same time its wholly-owned subsidiary in the United Kingdom (of which Mr. Smith was also a director and officer) filed for administration for the benefit of its creditors. Oilexco was subsequently suspended from trading by the TSX-V in September, 2009. ScotOil Petroleum Limited, the successor to Oilexco, was subject to cease trade orders issued by the Alberta, British Columbia and Ontario securities commissions in March 2010 for failure to file financial statements. In addition, the directors of Oilexco, including Mr. Smith, were reprimanded by the TSX-V based on the TSX-V finding that Oilexco ought to have issued certain press releases when it was insolvent.

SemBioSys Genetics

Mr. William Smith was a director of SemBioSys Genetics Inc. ("SemBioSys") a listed Canadian company which was developing technology to manufacture insulin in genetically modified plants. The company was approached by a Chinese company Tasly Pharmaceuticals, Ltd of Tianjin, China ("Tasly") which is one of China's top 5 producers of Chinese Medicines. However, shortly before the deal was finalised Tasly withdrew from the arrangement. SemBioSys was struggling financially and Mr. Smith and other directors resigned from the board. Shortly thereafter, a secured creditor, being the main investor, in an effort to protect his investment was granted a court order to enforce his security and remove specific secured assets from SemBioSys. SemBioSys was not placed into administration however there was an orderly liquidation of its other assets and the funds realized were distributed to the other creditors.

Proposed Directors Interest in the Subscription Shares and Proposed Remuneration Package

The Proposed Directors are participating in the Subscription, and conditional on the passing of all the Proposals, their interest in the Enlarged Share Capital will be as follows:

* 983,606 Ordinary Shares are held through Sallork Limited, a company wholly owned and controlled by Richard Mays

Proposed Directors Remuneration Package

In addition, as set out below, subject to completion of the Proposals and the adoption of a Share Option Plan it is proposed that each of the Proposed Directors enter into a letter of appointment with the Company pursuant to which they will each be appointed as non-executive directors of the Company for an initial term of one year and that they will each be paid £12,000 per annum, monthly in arrears; other than Edward Dawson who will be appointed as an executive director for an initial term of one year and will be paid £102,000 per annum, monthly in arrears. In addition, it is intended that the Proposed Directors will be issued options over a total of 5.66% of the issued share capital of the Company (as set out below) exercisable at the Subscription Price at any time for a period of ten years, subject to the approval of the Nominated Adviser.

Investing Policy

The Company's proposed new Investing Policy is to invest in and/or acquire companies and/or projects within the natural resources and/or energy sector with potential for growth and/or income. The Company may also directly apply for new exploration licences or invest in existing licences. It is anticipated that the geographical focus will primarily be Europe, however, investments may also be considered in other regions to the extent that the Proposed Directors consider that valuable opportunities exist and returns can be achieved.

In selecting investment opportunities, the Proposed Directors will focus on businesses, assets and/or projects that are available at attractive valuations and hold opportunities to unlock embedded value.

Where appropriate, the Proposed Directors may seek to invest in businesses where it may influence the business at a board level, add their expertise to the management of the business, and utilise their significant industry relationships and access to finance; as such investments are likely to be actively managed.

The Company's interests in a proposed investment and/or acquisition may range from a minority position to full ownership and may comprise one investment or multiple investments. The proposed investments may be in either quoted or unquoted companies; be made by direct applications, acquisitions or farm-ins; and may be in companies, partnerships, earn-in joint ventures, debt or other loan structures or direct or indirect interests in assets, projects or licences. The Proposed Directors may focus on investments where intrinsic value can be achieved from the restructuring of investments or merger of complementary businesses.

The Proposed Directors expect that investments will typically be held for the medium to long term, although short term disposal of assets cannot be ruled out if there is an opportunity to generate an attractive return for Shareholders. The Proposed Directors will place no minimum or maximum limit on the length of time that any investment may be held.

There is no limit on the number of projects into which the Company may invest, and the Company's financial resources may be invested in a number of propositions or in just one investment, which may be deemed to be a reverse takeover under the AIM Rules. The Proposed Directors intend to mitigate risk by appropriate due diligence and transaction analysis. Any transaction constituting a reverse takeover under the AIM Rules will also require Shareholders' approval. The Proposed Directors consider that as investments are made, and new promising investment opportunities arise, further funding of the Company may also be required.

Where the Company builds a portfolio of related assets it is possible that there may be cross holdings between such assets. The Company does not currently intend to fund any investments with debt or other borrowings but may do so if appropriate. Investments in early stage assets are expected to be mainly in the form of equity, with debt potentially being raised later to fund the development of such assets. Investments in later stage assets are more likely to include an element of debt to equity gearing. The Proposed Directors may also offer new Ordinary Shares by way of consideration as well as cash, thereby helping to preserve the Company's cash for working capital and as a reserve against unforeseen contingencies including, for example, delays in collecting accounts receivable, unexpected changes in the economic environment and operational problems.

The Proposed Directors will conduct initial due diligence appraisals of potential business or projects and, where they believe further investigation is warranted, intend to appoint appropriately qualified persons to assist. The Proposed Directors believe they have a broad range of contacts through which they are aware of various opportunities which may prove suitable, although at this point only preliminary due diligence has been undertaken. The Proposed Directors believe their expertise will enable them to determine quickly which opportunities could be viable and so progress quickly to formal due diligence. The Company will not have a separate investment manager. The Company proposes to carry out a comprehensive and thorough project review process in which all material aspects of a potential project or business will be subject to rigorous due diligence, as appropriate. Due to the nature of the sector in which the Company is focused it is unlikely that cash returns will be made in the short to medium term; rather the Company expects a focus on capital returns over the medium to long term.

Proposed Grant of Options to certain Proposed Directors and key management and employees

The Directors believe that the Group's success is highly dependent on the quality and loyalty of its employees, directors, officers and consultants. To assist in the recruitment, retention and motivation of high quality staff, as necessary, the Company must have an effective remuneration strategy. The Proposed Directors consider that an important part of this remuneration strategy is the ability to award equity incentives and, in particular, share options. The Proposed Directors also feel that it is important to address the requirements of such persons according to the different legal and tax requirements of the region in which they work. Conditional on the approval of the Resolutions, the Company intends to adopt an option plan and grant options over up to 10% of the issued share capital of the Company, from time to time as enlarged by any future issues of equity. Subject to the approval of the Nominated Adviser and following the Share Capital Reorganisation and Subscription, the Proposed Directors intend to issue themselves options over 5.66% of the issued share capital of the Company exercisable at the Subscription Price for a period of ten years.

Directors Participation in the CVA

Under the terms of the CVA the directors are making a claim for unpaid remuneration, as set out below. Accordingly, assuming all Creditors make a valid claim under the CVA, the total amount to be paid to directors under the CVA is also set out below. Should fewer of the Creditors make a valid claim under the CVA then the amount issued to the Directors may increase:

The settlement of the remuneration and expenses under the CVA to the directors constitutes a related party transaction pursuant to Rule 13 of the AIM Rules. However, there are no independent directors for the purpose of providing the statement required by Rule 13. Therefore having consulted with the Directors, W H Ireland, the Company's Nominated Adviser considers that the terms of the settlement of the Directors remuneration and expenses are fair and reasonable insofar as the shareholders are concerning.

Share certificates

No new share certificates are being issued in respect of Existing Ordinary Shares held in certificated form but any new share certificates will be issued in the name of Prospex Oil and Gas Plc. Shareholders should retain their existing share certificates which will continue to be valid.

General Meeting

There is attached to this Document the notice convening a General Meeting of the Company to be held at the offices of Peterhouse Corporate Finance Limited, 3rd Floor, New Liverpool House, 15 Eldon Street, London, EC2M 7LD, at 11:30 a.m. on 14 April 2015 at which the Resolutions will be proposed to, inter alia, approve the CVA, to appoint the Proposed Directors, to approve the Share Capital Reorganisation, to give the Directors authority to issue the New Ordinary Shares, to approve the Disposal and to change the name of the Company. A summary of the Resolutions is set out below. Please note that unless all of the Resolutions are passed the Proposals outlined in this Document will not proceed.

At the General Meeting, the following Resolutions will be proposed, of which resolutions 1 - 10 will be proposed as ordinary resolutions and resolutions 11 and 12 will be proposed as special resolutions:

Resolution 1 seeks approval for the entry into the CVA

Resolution 2 is to consolidate the Company's share capital so that every 25,000 Ordinary Shares will be consolidated into 1 Consolidation Share of £25 each.

Resolution 3 seeks to subdivide the Consolidation Shares so that every Consolidation Share will be subdivided into 100 New Ordinary Share of £0.01 each and 1 New Deferred Share of £24 each.

Resolution 4, is in substitution for all existing authorities and will give the Directors authority to allot shares in the capital of the Company up to an aggregate nominal value of £1,000,000.

Resolution 5 seeks approval for the Disposal, pursuant to AIM Rule 15, on the terms set out in the Circular and pursuant to the Settlement Deed,

Resolution 6, seeks approval for the Investing Policy to be adopted by the Company as set out in the Circular.

Resolutions 7 - 10 seek approval for the appointments of Edward Dawson, Richard Mays, Bill Smith and Gavin Burnell to the Board of the Company.

Resolution 11 seeks approval for the change of the Company's name to Prospex Oil and Gas Plc

Resolution 12 which is conditional upon Resolution 4 be passed will empower the Directors to allot equity securities for cash on a non-pre-emptive basis (i) up to any agreed nominal amount of £352,835.91 in connection with the Subscription and (ii) otherwise up to an aggregate nominal amount of £1,000,000

Resolutions 4 and 12 will replace the existing authorities relating to the allotment of shares in the capital of the Company obtained at the annual general meeting of the Company held on 24 June 2014.

Please note that unless all of the Resolutions are passed the Proposals outlined in this Document will not proceed. If any of the Resolutions are not passed the General Meeting will be adjourned and the Board will consider the Company's future position in respect of its current trading and working capital position. The Board will seek immediate advice regarding insolvency proceedings in relation to its assets.

Admission to Trading on AIM

Application will be made for the 5,447,700 New Ordinary Shares being created as a result of the Share Capital Reorganisation and the 35,283,591 New Ordinary Shares being issued as a result of the Subscription, to be admitted to AIM and admission is expected to occur on 15 April 2015 ("Admission").

On Admission the Company will have in issue a total of 40,731,291 Ordinary Shares of £0.01 each.

Action to be taken

Shareholders will find a Form of Proxy enclosed for use at the General Meeting with the Circular. Whether or not you intend to be present at the General Meeting, you are requested to complete and return the Form of Proxy in accordance with the instructions printed thereon as soon as possible. To be valid, completed Forms of Proxy must be received by the Company, not later than 11:30 on 9 April 2015, being 2 business days before the time appointed for holding the General Meeting. You are entitled to appoint a proxy to attend and to exercise all or any of your rights to vote and to speak at the General Meeting instead of you. Completion of the Form of Proxy will not preclude you from attending and voting at the General Meeting in person if you so wish. Your attention is drawn to the notes to the Form of Proxy.

Recommendation

The Directors consider the Proposals to be in the best interests of the Company and the Shareholders as a whole. The Directors therefore unanimously recommend that you vote in favour of the Resolutions as they will be doing in respect of shares representing 3.94 % of the issued share capital of the Company.

Expected timetable of principal events

Definitions

The following definitions apply throughout the Circular and this Announcement unless the context requires otherwise: