RM2.L Regulatory News (RM2)

21 May 2018

RM2 International S.A.

Launch of Open Offer

RM2 International S.A. ("RM2" or the "Company"), the sustainable smart pallet innovator, announces an open offer to raise up to approximately £4.3 million (before expenses) through the issue of up to 430,161,622 new ordinary shares in the Company ("Ordinary Shares") ("Open Offer Shares") at an issue price of 1 pence per share ("Issue Price") (the "Open Offer").

The Company intends to use the net proceeds of the Open Offer in the same manner as it intends to use the net proceeds of the placing it announced on 29 March 2018 (the "Placing"), namely to fund: (i) the retrofitting of existing inventory of RM2 BLOCKPAL with ELIoT track and trace devices, (ii) the production of new RM2 ELIoT pallets and (iii) its sales and general administrative costs.

The Issue Price represents a discount of 37.5 per cent. to the closing price of an Ordinary Share on AIM on 17 May 2018 of 1.6 pence. The Directors do not believe that the Issue Price is representative of the true underlying value of the Company, however in order to provide Shareholders who were not able to take part in the Placing with an opportunity to invest in the Company on the same terms, the Issue Price has been set equal to the price at which the Placing occurred. Furthermore, in order to maximise the number of Open Offer Shares available under the Open Offer for qualifying shareholders, the key investors who participated in the Placing, and the Directors, will not be allowed to participate in the Open Offer.

Details of the Open Offer

Pursuant to the Open Offer, qualifying shareholders will be given the opportunity to subscribe for:

1.15 Open Offer Shares for every 1 Existing Ordinary Share held at the Open Offer Record Date

The Open Offer provides an opportunity for all qualifying shareholders to participate in the fundraising by both subscribing for their respective basic entitlements and by subscribing for excess shares under an excess application facility, subject to availability.

Further information on the Open Offer is set out in this announcement and the Circular to be posted today to qualifying shareholders, along with the Application Form.

Unless defined above, capitalised terms are as per the Definitions section at the end of this announcement and in the Circular.

For further information:

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 .

Notes to Editors

RM2 International S.A. specialises in pallet development, manufacture, supply and management to establish a leading presence in global pallet supply and improve the supply chain of manufacturing and distribution businesses through the effective and efficient use and management of composite pallets. It is quoted on the AIM market of the London Stock Exchange under the symbol RM2.L. For further information, please visit www.rm2.com 

OPEN OFFER OF UP TO 430,161,622 OPEN OFFER SHARES

As announced on 29 March 2018, the Company has raised US$36 million (before fees and expenses) by way of a Placing (effected in two tranches, the first of which has been completed and the second tranche of which is conditional) of 2,535,211,265 Placing Shares to existing institutional investors, certain directors and members of senior management at the Issue Price of 1 pence per Placing Share. The Issue Price represented a discount of approximately 76 per cent. to the closing mid-market price of 4.25 pence on 27 March 2018, being the latest practicable date prior to the announcement of the Placing, and a discount of approximately 48 per cent. from the three month historical average closing mid-market price of 2.91 pence, as of the same date.

The issuance of the first tranche of 1,279,049,295 Placing Shares (gross proceeds of $18,162,500) took place following authorisation received at the general meeting of the Company held on 13 April 2018. The issuance of the second tranche of 1,256,161,970 Placing Shares (gross proceeds of $17,837,500) should occur ten business days following a drawdown notice issued by the Company and is subject to the satisfaction of certain key performance indicators described in the shareholder circular dated 29 March 2018.

In addition, as announced on 29 March 2018, in order to provide Shareholders who were not able to take part in the Placing with an opportunity to invest, the Company is providing all Qualifying Shareholders with the opportunity to subscribe for an aggregate amount of up to 430,161,622 Open Offer Shares, to raise up to £4.3 million (before expenses) for the Company, on the basis of 1.15 Open Offer Shares for every 1 Existing Ordinary Share held on the Open Offer Record Date, at 1 pence per Open Offer Share. Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through the Excess Application Facility.

In order to maximise the number of Open Offer Shares available under the Open Offer to Qualifying Shareholders, the Key Investors who participated in the Placing will not be allowed to participate in the Open Offer. Further, the remaining Directors (noting R. Ian Molson is included in the definition of Key Investors) have also agreed not to participate in the Open Offer. The Open Offer Entitlements which could otherwise have been made available to the Key Investors and the remaining Directors under the Open Offer will be made available to Qualifying Shareholders under the Open Offer and form part of the Qualifying Shareholders' Basic Entitlements.

The Company intends to use the net proceeds of the Open Offer in the same manner as the Placing, namely to fund: (i) the retrofitting of existing inventory of RM2 BLOCKPAL with ELIoT track and trace devices, (ii) the production of new RM2 ELIoT pallets and (iii) its sales and general administrative costs.

RM2 specialises in pallet development, manufacture, supply and management and is seeking to establish a leading presence in global pallet supply and improve the supply chain of manufacturing and distribution businesses through the effective and efficient use and management of composite pallets.

Operational and technological changes have been implemented over the past 18 months to align the Company's organisation to the demands of the marketplace.

Firstly, it transitioned to an outsourced production model to experienced, world class partners, which allowed it to close down its manufacturing facility in Toronto. One of these partners, Jabil, now has a dedicated facility in Ciudad Juarez in Mexico, which is fully built out.

The Company also enhanced its proposition by developing and launching a smart pallet with active tracking, called ELIoT (described below). Through this transition period, the Company reduced its demand of non-ELIoT pallets and as such Jabil has not been operating at capacity. With a portion of the proceeds from the first tranche of the Placing, orders have been placed to permit Jabil to commence retrofitting existing inventory of RM2 BLOCKPAL smart pallets with ELIoT devices.

Equipment is also on site with RM2's other manufacturing partner, Zhenshi in China. The Company has, however, recently exchanged letters with Zhenshi regarding a termination of the agreement and indemnities to cover costs incurred to date through the time of removal of this equipment from Zhenshi's site. Discussions are on-going and in light of these exchanges and its business plan, the Company is currently re-examining its footprint in China. The outcome of these exchanges is unknown at present, but alternatives under consideration could include revising the current agreement with Zhenshi, the amical or litigious termination of the contract and/or establishing an agreement with a different contract manufacturer. Regardless of the outcome of the subcontracting relationship, RM2 expects to continue to source fibreglass raw material for pallet production from Zhenshi's affiliate, Jushi.

Secondly, in order to address issues of asset retention, reduction of theft, and utilization, the Company has developed its RM2 ELIoT tracking technology. ELIoT comprises a cellular device which transmits the whereabouts of each pallet, providing a previously unachievable level of confidence in asset security. The underlying technology is believed to be unique to RM2. The Company has conducted a number of trials of ELIoT-enabled pallets with customers in North America and has signed agreements or is in advanced negotiations for deployment. While the Directors believe that the RM2 ELIoT device is a robust product based on trials and information from component suppliers, it is a new product, and therefore the longevity of which will be demonstrated over its course of service.

RM2 has an extensive pipeline of potential deployments in North America and Europe, a good percentage of which it expects to be successfully converted over the upcoming 12-18 months. These include numerous potential deployments of ELIoT pallets, which have generated significant interest from existing and potential customers following a number of trials of the product. The Company announced on 13 April 2018 that it has entered into a Phase 1 agreement for an initial deployment of ELIoT pallets through 30 June 2018 with a Fortune 500 company in North America following a year-long trial with this blue chip customer's internal network.

In addition, the Company has also completed a major trial with a North American company and discussions on a large-scale implementation are expected to commence. The Company has also expanded ongoing trials with other major US-based customers.

The conversion of a subset of these opportunities, deployed and financed on schedule, is expected to result in the Company generating positive EBITDA in 2019.

The Company also notes that following the repayment of the mortgage on the office building in Switzerland sold in the first quarter of 2018, the Company is debt free.

The Company announced its audited annual results for the year ended 31 December 2017 today. Shareholders should refer to the Company's website, or the Company's page on the London Stock Exchange website, for this announcement.

The Open Offer is being conducted in order to provide Shareholders who were not able to participate in the Placing with an opportunity to invest in the Company at the same price as the Key Investors.

The net proceeds of this Open Offer are intended to be used in the same manner as the Placing, namely to fund: (i) the retrofitting of existing inventory of RM2 BLOCKPAL with ELIoT track and trace devices, (ii) the production of new RM2 ELIoT Pallets and (iii) its sales and general administrative costs.

Qualifying Shareholders may subscribe for Open Offer Shares in proportion to their holding of Existing Ordinary Shares held on the Open Offer Record Date. Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares as an Excess Entitlement, up to the total number of Open Offer Shares available under the Open Offer.

The Open Offer is conditional on Admission becoming effective on or before 8.00 a.m. on 12 June 2018 (or such later date and/or time as the Company and Strand Hanson may agree, being no later than 26 June 2018).

On, and subject to the terms and conditions of the Open Offer, the Company invites Qualifying Shareholders to apply for their Basic Entitlement of Open Offer Shares at the Issue Price. Each Qualifying Shareholder's Basic Entitlement has been calculated on the following basis:

1.15 Open Offer Shares for every 1 Existing Ordinary Share held at the Open Offer Record Date

Basic Entitlements will be rounded down to the nearest whole number of Ordinary Shares.

Qualifying Shareholders are also invited to apply for additional Open Offer Shares (up to the total number of Open Offer Shares available to Qualifying Shareholders under the Open Offer) as an Excess Entitlement. Any Open Offer Shares not issued to a Qualifying Shareholder pursuant to their Basic Entitlement will be apportioned between those Qualifying Shareholders who have applied for an Excess Entitlement at the sole discretion of the Board, provided that no Qualifying Shareholder shall be required to subscribe for more Open Offer Shares than he or she has specified on the Application Form or through CREST. No assurance can be given that any applications under the Excess Application Facility by Qualifying Shareholders will be met in full or in part or at all.

The Open Offer Shares will, when issued and fully paid, rank pari passu in all respects with the Ordinary Shares in issue at that time, including the right to receive all dividends and other distributions declared, made or paid after the date of Admission. The Open Offer is not underwritten.

Qualifying Shareholders should note that the Open Offer is not a "rights issue". Invitations to apply under the Open Offer are not transferable unless to satisfy bona fide market claims. Qualifying non-CREST Shareholders should be aware that the Application Form is not a negotiable document and cannot be traded. Qualifying Shareholders should also be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market nor will they be placed for the benefit of Qualifying Shareholders who do not apply for Open Offer Shares under the Open Offer.

Application will be made to the London Stock Exchange for the Open Offer Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the Open Offer Shares will commence at 8.00 a.m. on 12 June 2018.

The Open Offer Shares have not been and are not intended to be registered or qualified for sale in any jurisdiction other than the UK. Accordingly, unless otherwise determined by the Company and effected by the Company in a lawful manner, the Application Form will not be sent to Shareholders with registered addresses in, or who are resident or located in the United States or another Restricted Jurisdiction since to do so would require compliance with the relevant securities laws of that jurisdiction. The Company reserves the right to treat as invalid any application or purported application for Open Offer Shares which appears to the Company or its agents or professional advisers to have been executed, effected or despatched in a manner which may involve a breach of the laws or regulations of any jurisdiction or if the Company or its agents or professional advisers believe that the same may violate applicable legal or regulatory requirements or if it provides an address for delivery of confirmation of book entry registration for Open Offer Shares, or in the case of a credit of Open Offer Shares in CREST, to a CREST member whose registered address would not be in the UK.

Notwithstanding the foregoing and any other provision of the Circular or the Application Form, the Company reserves the right to permit any Qualifying Shareholder to apply for Open Offer Shares if the Company, in its sole and absolute discretion, is satisfied that the transaction in question is exempt from, or not subject to, the legislation or regulations giving rise to the restrictions in question.

Part IV of the Circular together with the accompanying Application Form, in the case of Qualifying non-CREST Shareholders, contains the terms and conditions of the Open Offer.

If a Qualifying Shareholder does not wish to apply for Open Offer Shares he should not complete or return the Application Form or send a USE message through CREST.

If you are a Qualifying non-CREST Shareholder you will have received an Application Form, which accompanies the Circular and which gives details of your Basic Entitlement (as shown by the number of the Open Offer Shares allocated to you). If you wish to apply for Open Offer Shares under the Open Offer you should complete the accompanying Application Form in accordance with the procedure for application set out in paragraph 4 of Part IV of the Circular and on the Application Form itself. The completed Application Form, accompanied by full payment, should be returned by post to Computershare Investor Services PLC, Corporate Actions Projects, Bristol BS99 6AH or by hand (during normal business hours only) to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE so as to arrive as soon as possible and in any event no later than 11.00 a.m. on 5 June 2018.

Application will be made for the Open Offer Entitlements of Qualifying CREST Shareholders to be credited to stock accounts in CREST. It is expected that the Open Offer Entitlements will be credited to stock accounts in CREST on 12 June 2018. Applications through the CREST system may only be made by the Qualifying CREST Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim. If you are a Qualifying CREST Shareholder, no Application Form is enclosed but you will receive credits to your appropriate stock account in CREST in respect of the Basic Entitlements to which you are entitled. You should refer to the procedure for application set out in paragraph 4 of Part IV of the Circular. The relevant CREST instruction must have settled by no later than 11.00 a.m. on 5 June 2018.

Application will be made to the London Stock Exchange for the Open Offer Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the Open Offer Shares will commence at 8.00 a.m. on 12 June 2018 (or such later date as the Company and Strand Hanson may agree, being not later than 8.00 a.m. on 26 June 2018).

The attention of Shareholders is drawn to the risk factors set out in this announcement (and Part II of the Circular) and the information contained in Parts III to V of the Circular, which provide additional information on the Open Offer and the Company.

Qualifying non-CREST Shareholders wishing to apply for Open Offer Shares or the Excess Shares must complete the enclosed Application Form in accordance with the instructions set out in paragraph 4 of Part IV (Terms and Conditions of the Open Offer) of the Circular and on the accompanying Application Form and return it with the appropriate payment to Computershare Investor Services PLC, Corporate Actions Projects, The Pavilions, Bridgwater Road, Bristol BS99 6AH, so as to arrive no later than 11.00 a.m. on 5 June 2018.

If you do not wish to apply for any Open Offer Shares under the Open Offer, you should not complete or return the Application Form. If you are a Qualifying CREST Shareholder, no Application Form will be sent to you. Qualifying CREST Shareholders will have Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to their stock accounts in CREST. You should refer to the procedure for application set out in paragraph 4 of Part IV (Terms and Conditions of the Open Offer) of the Circular. The relevant CREST instructions must have settled in accordance with the instructions in paragraph 4 of Part IV of the Circular by no later than 11.00 a.m. on 5 June 2018.

Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with the Circular and the Open Offer.

RISK FACTORS

Any investment in the Company is subject to a number of risks. Accordingly, prospective investors should carefully consider the risks set out below as well as the other information contained in this announcement (and the Circular) and any other publicly available information about the Group before making a decision whether to invest in the Company. The risks described below are not the only risks that the Group faces. Additional risks and uncertainties that the Directors are not aware of or that the Directors currently believe are immaterial may also impair the Group's operations. Any of these risks may have a material adverse effect on the Group's business, financial condition, results of operations and prospects. In that case, the price of the Ordinary Shares could decline and investors may lose all or part of their investment. Prospective investors should consider carefully whether an investment in the Company is suitable for them in light of the information in this announcement (and the Circular) and their personal circumstances.

Before making an investment, prospective investors are strongly advised to consult an investment adviser authorised under FSMA who specialises in investments of this kind. A prospective investor should consider carefully whether an investment in the Company is suitable in the light of his or her personal circumstances, the financial resources available to him or her and his or her ability to bear any loss which might result from such investment.

The following factors do not purport to be a complete list or explanation of all the risks involved in investing in the Company. In particular, the Company's performance may be affected by changes in the market and/or economic conditions and in legal, regulatory and tax requirements.

The commencement of RM2 earning material revenues is difficult to predict and there is no guarantee that RM2 will generate any material revenues in the near future. RM2 has a limited operating history upon which its performance and prospects can be evaluated and faces the risks frequently encountered by developing companies. These risks include the uncertainty as to which areas to target for growth. There can be no assurance that RM2's proposed operations will be profitable or produce a reasonable return, if any, on investment.

RM2 intends to continue to develop products which are designed to have a commercial application. There is no guarantee that any such product will be successful nor that any products will actually result in any commercial applications.

The success of RM2 is reliant upon there being a demand for its products. In addition, RM2 relies upon third parties to incorporate its products into their own processes. A particular third party having access to RM2's products may fail to use the products in an effective process or the products or processes may not be or become commercially viable. There can be no assurance that such products will achieve commercial success or be an attractive alternative to conventional products or processes.

It is possible that RM2 focuses its activities on a limited number of products and technologies and that after such further development has taken place, RM2 finds that the resulting product is not successful or has no profitable commercial application, or that the resulting product has been superseded by other products which have a more profitable commercial application when compared with those of RM2.

The development and manufacture of products takes some time to complete. Depending on the process, RM2 may not be able to develop its products within the timeframe required by its potential customers and/or that targeted by its competitors. Further, the success of RM2 may depend on its continued ability to develop new products and to meet potential customers' changing requirements.

The development of a market for a new product is affected by many factors, most of which are beyond the control of RM2, including the emergence of newer and more competitive products or processes, the costs of the products, regulatory requirements, including any future regulatory changes, end-users' perceptions as to the safety of any product and the propensity of end-users to try new products or processes.

If a market for any product fails to develop or develops more slowly than anticipated, RM2 may fail to achieve profitability with respect to the associated products. In addition, RM2 may not continue to develop such products if market conditions do not support the continuation of those products.

RM2 expects to be able to meet its current capital expenditures from internal resources and the net proceeds of the Placing and Open Offer. In the future, it may explore other sources of financing including invoice discounting and other debt facilities. A need to fulfil large orders rapidly may require RM2 to seek additional capital which could entail the issuance of new equity, debt financing or some combination thereof. If RM2 is unable to raise the necessary additional financing for any expanded working capital requirement it could adversely affect its ability to expand its business.

RM2's business and operations are expected to experience rapid growth. This future growth could place significant demands on RM2's operational and financial infrastructure and its ability to expand to meet such growth will be tested. RM2 may need to expand and enhance its infrastructure and technology, and improve its operational and financial systems and procedures and controls from time to time in order to be able to match that growth. If RM2 is unable to manage its growth effectively, its operations could be harmed and profitability reduced. The growth of RM2's sales and profits in the future will depend, in part, on its ability to expand its operations through the roll-out of its products and services to new potential customers and into new markets and geographies. Furthermore, in order to manage its planned expansion, it will need continually to evaluate the adequacy of its management capability, operational procedures, financial controls and information systems. Accordingly, there can be no assurance that RM2 will be able to achieve its expansion goals on a timely or profitable basis.

The financial risk limitation policies, procedures and practices RM2 has established to date are suitable for a company of the size and stage of development of RM2. As RM2 seeks to grow, the design and implementation of RM2's policies, procedures and practices used to identify, monitor and control a variety of risks may fail to be effective. RM2's financial risk limitation methods rely on a combination of internally developed technical controls, industry standard practices, observation of historical market behaviour and human supervision. These methods may not adequately prevent future losses.

A lack of effective internal controls could have a material adverse effect on RM2's reputation, business, financial condition and operating results. Any material weaknesses may materially adversely affect RM2's ability to report accurately its financial condition and results of operations in the future in a timely and reliable manner.

RM2's operations are subject to certain risks including changes in government policies, changes in political and economic conditions, changes in regulatory environments, exposure to different legal, regulatory or fiscal standards, difficulties in staffing and managing operations, and potentially adverse tax consequences. There are no guarantees that RM2 will be able to successfully expand its operations in line with its current expectations.

Management effort and financial resources are being employed by RM2 in rolling out its products and services to potential customers. Although RM2 has budgeted for expected costings, additional expenses in the event of unforeseen delays, cost overruns, unanticipated expenses, regulatory changes and increases in the price of materials and other manufacturing equipment utilised in the production of RM2's pallets may negatively affect RM2's business, financial condition and results of operations.

The success of RM2's business is, and is expected to continue to be, dependent on the development of commercial relationships with its existing and potential customers and suppliers. There is no guarantee that these relationships will be developed sufficiently to the point of generating significant revenue for RM2, or that such potential customers will not seek to use alternative providers of products and services similar to those of RM2.

The raw materials and manufacturing equipment utilised by RM2's manufacturing partners in the delivery of its products and services are readily available from a number of suppliers and counterparties. However, any restriction on the availability of such items may negatively affect RM2's business, financial condition and results of operations.

Substantially all of the Company's manufacturing is performed in whole or in part by outsourcing partners. The Company has also outsourced much of its transportation and logistics management. While these arrangements may lower operating costs, they also reduce the Company's direct control over production and distribution. It is uncertain what effect such diminished control will have on the quality or quantity of products or services, or the Company's flexibility to respond to changing conditions. Although arrangements with these partners may contain provisions for warranty expense reimbursement, the Company may remain responsible to the consumer for warranty service in the event of product defects and could experience an unanticipated product defect or warranty liability.

Any failure of the Company's outsourcing partners to perform may have a negative impact on the Company's cost or supply of components or finished goods. In addition, manufacturing or logistics in these locations or transit to final destinations may be disrupted for a variety of reasons including, but not limited to, natural and man-made disasters, information technology system failures, commercial disputes, military actions or economic, business, labour, environmental, public health, or political issues.

The Company has invested in manufacturing process equipment, much of which is held at certain of its outsourcing partners, and has made prepayments to certain of its suppliers associated with long-term supply agreements. While these arrangements help ensure the supply of components and finished goods, if these outsourcing partners or suppliers experience severe financial problems or other disruptions in their business, such continued supply could be reduced or terminated and the net realisable value of these assets could be negatively impacted.

The Company orders products and builds inventory in advance of purchase orders. Because the Company's markets are developing, competitive and subject to other changes, there is a risk the Company will forecast incorrectly and order or produce excess or insufficient amounts of products.

Because the Company currently obtains RM2 ELIoT components and products from single or limited sources, the Company is subject to significant supply and pricing risks. There can be no assurance that the Company will be able to negotiate, extend or renew supply agreements on similar terms, or at all. Suppliers of components may suffer from poor financial conditions, which can lead to business failure for the supplier or consolidation within a particular industry, further limiting the Company's ability to obtain sufficient quantities of components on commercially reasonable terms. The effects of global or regional economic conditions on the Company's suppliers also could affect the Company's ability to obtain components and products. Therefore, the Company remains subject to significant risks of supply shortages and price increases.

The cellular LTE-m network is expected to be introduced throughout much of North America in the course of 2018. That network will permit the utilization of a new, simpler and less-expensive chip-set. When a component or product uses new technologies, initial capacity constraints may exist until the suppliers' yields have matured or manufacturing capacity has increased. The supply of components could be delayed or constrained, or a key manufacturing vendor could delay shipments of completed products to the Company.

RM2's principal revenues in the near term are expected to be earned in US$. Currency fluctuations may affect RM2's operating cash flow since certain of its costs and revenues are likely to be denominated in a number of different currencies other than US$ and any potential income may become subject to exchange control or similar restrictions. Fluctuations in exchange rates between currencies in which RM2 operates may cause fluctuations in its financial results which are not necessarily related to its underlying operations.

RM2 does not currently have any foreign currency hedges in place. If and when appropriate, the adoption of a hedging policy will be considered by the Board.

There can be no assurance that potential competitors of RM2, which may have greater financial, research and development, sales and marketing and personnel resources than RM2, are not currently developing, or will not in the future develop, products and strategies that are equally or more effective and/or economical as any products or strategies developed by RM2 or which would otherwise render its products or strategies obsolete.

RM2 operates within competitive markets and the Directors believe that it has adopted a competitive business strategy. However, RM2's business, results, operations and financial condition could be materially adversely affected by the actions of its competitors (including their marketing and pricing strategies and product and services development).

RM2 may be forced to change the nature of its business as a result of competitive factors and there is no assurance that RM2 will be able to compete successfully in the market place in which it seeks to operate.

Even if new and advanced manufacturing or production equipment becomes available for the production of RM2's products, RM2 may not have funds available or be able to obtain necessary financing on acceptable terms to acquire it for use by its manufacturing contractors, or agree for its manufacturing contractors to acquire or utilise it. Further, any investment RM2 may make in a perceived technological advance may not be effective, economically successful or otherwise accepted in the market.

A significant proportion of RM2's costs may be fixed and may not then be easily reduced in the short-term. Therefore, RM2 may not be able to reduce certain expenses promptly in response to any future reduction in revenue. Should such a reduction occur and RM2 be unable to reduce its fixed expenses accordingly, its business, financial condition and results of operations may be materially adversely affected.

RM2 is headquartered in Luxembourg. The Chief Executive Officer is currently based in North America and the Chief Financial Officer and the principal sales office are located in Switzerland. Attracting, training, retaining and motivating technical and managerial personnel, including individuals with significant technical expertise is a critical component of the future success of RM2's business. RM2 may encounter difficulties in attracting or retaining qualified personnel. Managing from disparate locations can pose challenges in communication and decision-making. Continued growth may cause a significant strain on existing managerial, operational, financial and information systems resources.

The performance of RM2 depends, to a significant extent, upon the abilities and continued efforts of its existing senior management as well as the recruitment of further senior management in line with the planned growth in operations. The loss of the services or failure to recruit key management personnel or the failure to retain or recruit key employees or the inability to effectively communicate across international offices could adversely affect RM2's ability to maintain and/or improve its operating and financial performance. In common with many businesses, the success of RM2 will, to a significant extent, be dependent on the expertise and experience of the Directors and key senior management, the loss of one or more of whom could have a material adverse effect on RM2.

RM2 depends on the performance, reliability and availability of its information technology and communications systems. Any damage to or failure of its systems could result in disruptions to RM2's operations and websites, which could reduce its revenues and profits, and damage its brands.

RM2's systems are vulnerable to damage or interruption from power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm its systems, natural disasters, including floods and fires, volcanic ash and vandalism, terrorist attacks or other acts.

RM2's disaster recovery plans may not adequately address every potential event and its insurance policies may not cover any loss in full or in part (including losses resulting from business interruptions) or damage that it suffers fully or at all.

RM2 relies on third parties, including data centres and bandwidth providers, to host and operate its websites. Any failure or interruption in the services provided by these third parties could harm its operations and reputation. In addition, RM2 may have little or no control over these third parties, which increases its vulnerability to service problems. Any disruptions in the services provided by these parties or any failure of these providers to handle current or higher visitor traffic or transaction volumes could significantly harm RM2's business. RM2 may in the future experience disruptions or delays in these services. If these providers were to suffer financial or other difficulties, their services could be interrupted or discontinued and replacement providers may be uneconomical or unavailable. Any of these events could have a material adverse effect on RM2's business, operating profit and overall financial condition.

Adverse developments in the political, legal, economic and regulatory environment may materially and adversely affect the financial position and business prospects of RM2. Political and economic uncertainties include, but are not limited to, expropriation, nationalisation, changes in interest rates, the retail prices index, changes in taxation, changes in trade tariffs and trade treaties and changes in law. Whilst RM2 strives to continue to take effective measures such as prudent financial management and efficient operating procedures, there is no assurance that adverse political, economic, legal and regulatory factors will not materially and adversely affect RM2.

Continuing research on and development of RM2's technology may be required and there can be no assurance that any of its future technology will be successfully developed or exploited. RM2 may encounter delays and incur additional research and development costs and expenses over and above those anticipated or allowed for by the Directors. For example while the Directors believe that ELIoT is a robust product based on trials and information from component suppliers, it is a new product which has not yet been able to demonstrate its longevity.

RM2's ability to implement its business strategy may be adversely affected by factors that it cannot currently foresee, such as unanticipated costs and expenses, technological change and severe economic downturn. All of these factors may necessitate changes to the business strategy described in this announcement (and the Circular).

Whilst the Directors believe that there are viable markets for RM2's products and services, there can be no assurance that these will be generally adopted by RM2's existing and potential client base.

Whilst the Directors believe that, taking into account the net proceeds of the Placing and Open Offer, RM2 has sufficient working capital for its present requirements, that is for at least 12 months from the date of Admission, there can be no assurance that RM2 would have sufficient resources to fund further development beyond that period.

RM2's operations may be subject to a variety of national, federal, provincial, state, foreign and local laws and regulations, including environmental, health and safety laws, regulations, treaties and conventions (together, Regulations).

This includes, inter alia, those controlling the discharge of materials into the environment, requiring removal and clean-up of environmental contamination, establishing certification, licensing, health and safety, taxes, labour and training standards, operation of equipment or otherwise relating to the protection of human health and the environment, and export control regulations. The amendment or modification of existing Regulations or the adoption of new Regulations curtailing or further regulating RM2's business could have a material adverse effect on RM2's operating results and financial condition.

Whilst RM2 intends to work to comply with all applicable Regulations, it cannot predict the extent to which future earnings or capital expenditures may be affected by compliance with such new Regulations. In addition, RM2 may be subject to significant fines, penalties or liability if it does not comply with any such existing or future Regulations.

There may be a change in the regulatory environment which may materially adversely affect RM2's ability to implement successfully the strategy set out in this announcement (and the Circular).

RM2 relies upon maintaining the confidentiality of the exact nature of the BLOCKPAL manufacturing process and its RM2 ELIoT technology and does not for example have any patents. The details of the manufacturing process and its RM2 ELIoT technology are the Company's most important intellectual property. The Company protects this intellectual property by ensuring that its relevant employees and manufacturers have confidentiality provisions in their employment and manufacturing contracts preventing them from disclosing the confidential information of the Group to anyone outside of the Group. RM2 ensures relevant suppliers have entered into non-disclosure agreements restricting disclosure by such suppliers of the confidential information of the Group.

However, RM2 cannot be sure that other competitors will not infringe upon, violate, challenge or reverse engineer its intellectual property in the future. If RM2 is not able to adequately protect or enforce its intellectual property rights, its business, results of operations and financial condition may be materially adversely affected.

RM2 is also subject to the risk that third parties may allege that RM2's operations and use of technology infringes upon their intellectual property rights. RM2 cannot be sure that such litigation will not be brought against RM2 in the future and, if brought, whether RM2 would be successful in defending itself against such claims. Moreover, defending such claims may result in protracted litigation, which could result in substantial costs and the diversion of RM2's resources, as a result of which RM2's business, results of operations and financial condition may be adversely affected. Furthermore, RM2 customer contracts may contain indemnities, whereby RM2 may agree to indemnify its customers for third party intellectual property infringement claims and RM2 cannot be sure that it would have no liability to its customers in such circumstances.

RM2 is reliant on the manufacturing sector of the economy to produce goods in sufficient volumes to drive demand for pallets on which to transport those goods. A reduction in manufacturing output may lead to a reduction in the size of the pallet market and in turn RM2 may find it more difficult to obtain orders to produce or lease pallets.

RM2's operations require raw materials, road transportation and water and electricity supply. Any increase in these input costs would affect the profitability of RM2 which may find it difficult to pass on such increased costs to potential customers.

The Company is involved in various claims, proceedings and threats of litigation arising in the ordinary course of business, including matters relating to employees, VAT, transfer pricing, contracts and intellectual property. While there are uncertainties inherent in the ultimate outcome of such matters and it is impossible to determine at present the ultimate costs that may be incurred, management believes the resolution of such uncertainties and the incurrence of such costs will not have a material adverse effect on the Company's financial position, results of operations or cash flows.

Under the Luxembourg Companies Law, shareholders in RM2 are not obliged to disclose their interests in a company in the same way as shareholders of certain public companies incorporated in the United Kingdom. In particular, the Disclosure Guidance and Transparency Rules do not apply. The Articles have been amended to incorporate provisions equivalent to those contained in the Disclosure Guidance and Transparency Rules, but these may be amended by a resolution of the Shareholders.

As RM2 is not admitted to trading on a "regulated market", it is not subject to any takeover laws in Luxembourg or elsewhere.

Investment in the Ordinary Shares may not be suitable for all readers of this announcement (and the Circular). All potential investors are accordingly advised to consult a person authorised under FSMA who specialises in investments of this nature before making any investment decisions.

Investment in shares traded on AIM involves a higher degree of risk, and such shares may be less liquid, than shares in companies which are listed on the Official List. The AIM Rules are less demanding than those rules that govern companies admitted to the Official List. It is emphasised that no application is being made for the admission of RM2's securities to the Official List or to any other investment exchange other than AIM. An investment in the Ordinary Shares may be difficult to realise. Prospective investors should be aware that the value of an investment in RM2 may go down as well as up and that the market price of the Ordinary Shares may not reflect the underlying value of RM2. Investors may therefore realise less than, or lose all of, their investment.

The share price of quoted companies can be highly volatile and shareholdings can be illiquid. The price at which the Ordinary Shares are quoted and the price which investors may realise for their Ordinary Shares will be influenced by a large number of factors, some specific to RM2 and its operations and others which may affect quoted companies generally. These factors could include the performance of RM2, large purchases or sales of the Ordinary Shares, currency fluctuations, legislative changes and general economic, political, regulatory or social conditions.

Issuance of the second tranche of Placing Shares is conditional on the satisfaction of certain key performance indicators. In addition, the subscribers for the second tranche of Placing Shares may be unable to provide the funds for the purchase of such shares at the time the Company issues a drawdown notice. The occurrence of either of these circumstances would lead to the second tranche of Placing Shares not being issued, in which case the Company will not have the resources to carry out its business plan.

Following completion of the Placing and Open Offer, RM2 may in future require additional funds to produce pallets and to respond to business challenges, enhancing existing products and services and further developing its sales and marketing channels and capabilities. Accordingly, RM2 may need to engage in further equity or debt financings to secure additional funds. If RM2 raises additional funds through further issues of equity or convertible debt securities, existing shareholders could suffer further significant dilution, and any new equity securities or convertible debt securities could have rights, preferences and privileges superior to those of current shareholders. Any debt financing secured by RM2 in the future could involve restrictive covenants relating to its capital raising activities and other financial and operational matters, which may make it more difficult for RM2 to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, RM2 may not be able to obtain additional financing on terms favourable to it, if at all. If RM2 is unable to obtain adequate financing or financing on terms satisfactory to it, when required, its ability to continue to support its business growth and to respond to business challenges could be significantly limited or could affect its financial viability.

To the extent that Shareholders do not take up the offer of Open Offer Shares under the Open Offer, their proportionate ownership and voting interest in the Company will be reduced and the percentage that their shareholdings represent of the ordinary share capital of the Company will, following Admission, be reduced accordingly. If available, future financings to provide required capital may dilute shareholders' proportionate ownership in RM2. Following completion of the Open Offer, RM2 may raise capital in the future through public or private equity financings or by issuing debt securities convertible into Ordinary Shares, or rights to acquire these securities (which, in any such case, may not be made available to existing holders of Ordinary Shares). If RM2 raises significant amounts of capital by these or other means, that could cause further dilution for RM2's existing shareholders. Moreover, the Open Offer and/or the further issue of Ordinary Shares could have a negative impact on the trading price and increase the volatility of the market price of the Ordinary Shares. RM2 may also issue further Ordinary Shares, or create further options over Ordinary Shares, as part of its employee remuneration policy, which could in aggregate create a substantial dilution in the value of the Ordinary Shares and the proportion of RM2's share capital in which investors are interested.

RM2 is unable to predict when and if substantial numbers of Ordinary Shares will be sold in the open market following the Open Offer. Any such sales, or the perception that such sales might occur, could result in a material adverse effect on the market price of the Ordinary Shares. RM2 may require additional capital in the future which may not be available to it.

RM2's functional currency is US$. Fluctuations in currency could have an adverse effect on the value of an investor's holdings in RM2 where the principal accounting currency of the investor is not US$ or where there are inverse fluctuations between Sterling, the currency in which the Ordinary Shares are quoted, and US$, the currency in which the Company's results are reported.

There can be no assurance as to whether dividends will be paid in future or in what amount. Subject to compliance with the Luxembourg Companies Law and the Articles, the declaration, payment and amount of any future dividends are subject to the discretion of the Directors, and will depend on, inter alia, the Company's earnings, financial position, cash requirements and availability of profits. A dividend may never be paid and, at present, there is no intention to pay a dividend in the short to medium term.

Certain investment funds and client mandates discretionary managed by Woodford currently own a total of 3,220,027,777 Ordinary Shares, representing, in aggregate, 66.3 per cent. of the Company's issued share capital and 49.7 per cent. of the voting rights due to voting limitations in the Company's Articles on certain investment funds managed by Woodford.

In addition, Woodford benefits from the right to have the Board nominate for election by the Shareholders such director as Woodford may designate. For as long as Woodford does not exercise its rights to designate a director, it will have the right to appoint an observer to attend Board meetings. For as long as Woodford has designated a director appointed to the Board, the quorum for Board meetings will include that director.

As a result, Woodford is able to exercise a significant degree of influence over matters requiring Shareholder approval, including the election of Directors and significant corporate transactions.

The risks noted above do not necessarily comprise all of the risks potentially faced by RM2 and are not intended to be presented in any assumed order of priority.

Although RM2 will seek to minimise the impact of the Risk Factors, investment in RM2 should only be made by investors able to sustain a total loss of their investment. Potential investors are strongly recommended to consult an investment adviser authorised under FSMA, who specialises in investments of this nature before making any decision to invest.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS IN RELATION TO THE OPEN OFFER

If any of the details contained in the timetable above should change, the revised time and dates will be notified to Shareholders by means of a Regulatory Information Service (as defined in the AIM Rules) announcement.

In this announcement, all references to times and dates are to times and dates in London, UK.

In order to subscribe for Open Offer Shares under the Open Offer, Qualifying Shareholders will need to follow the procedure set out in Part IV of the Circular and, where relevant, complete the accompanying Application Form. If Qualifying Shareholders have any queries on the procedure for acceptance and payment, or wish to request another Application Form, they should contact Computershare Investor Services PLC on +44 (0)370 702 0000, quoting the allotment number of their Application Form.

Calls to the Computershare Investor Services PLC number from outside the UK are charged at applicable international rates. Calls may be recorded and monitored randomly for security and training purposes. Computershare Investor Services PLC cannot provide advice on the merits of the Open Offer and cannot give any financial, legal or tax advice.

SHARE CAPITAL AND OPEN OFFER STATISTICS

* assuming full take up of the Open Offer.

DEFINITIONS

The following definitions apply throughout this announcement, unless the context otherwise requires:

A reference to £ is to pounds sterling, being the lawful currency of the UK. A reference to US$ or $ is to the lawful currency of the United States.