Surface Transforms Regulatory News (SCE)

THE INFORMATION COMMUNICATED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATIONS (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SINGAPORE, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

FURTHER, THIS ANNOUNCEMENT IS MADE FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR SOLICITATION TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE SHARES IN SURFACE TRANSFORMS PLC IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.

Surface Transforms plc

("Surface Transforms" or the "Company")

Proposed Placing and Subscription to raise approximately £3.0 million

and

Open Offer to raise up to £0.5 million

Surface Transforms, (AIM:SCE) manufacturers of carbon fibre reinforced ceramic (CFRC) materials is pleased to announce that the Company is carrying out a Placing, Subscription and Open Offer of up to approximately 22,580,806 new Ordinary Shares at a price of 15.5 pence per share to raise gross proceeds for the Company of approximately £3.5 million. 

The Placing will be conducted by way of an accelerated bookbuild process which will be launched immediately following this announcement, in accordance with the terms and conditions set out in the Appendix to this announcement. Cantor Fitzgerald is acting as Nominated Adviser and Joint Broker and finnCap is acting as Joint Broker in connection with the Fundraising.

In addition to the proposed Placing and Subscription, the Company intends to provide all Qualifying Shareholders with the opportunity to subscribe for an aggregate of up to 3,225,806 new Ordinary Shares ("Open Offer Shares") at a price of 15.5 pence per share, to raise approximately £0.5 million (before expenses), on the basis of 1 New Ordinary Share for every 27.99608377 Existing Ordinary Shares held on the Record Date (the "Open Offer"). Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through the Excess Application Facility.

The proposed Placing, Subscription and Open Offer (together the "Fundraising") will be subject to shareholder approval. The proposed Placing, Subscription and Open Offer are not being underwritten.

The Issue Price of 15.5 pence per share represents a discount of approximately 0.8 per cent. to the price of 15.625 pence per existing Ordinary Share, being the closing price on 5 July 2017.

The final number of Placing Shares will be agreed by Cantor Fitzgerald Europe, finnCap and Surface Transforms at the close of the bookbuild, and the results of the Placing and Subscription will be announced as soon as practicable thereafter. The timing for the close of the bookbuild and the allocation of Placing Shares shall be at the absolute discretion of Cantor Fitzgerald and finnCap, in consultation with the Company. Surface Transforms reserves the right to issue and sell a greater or lesser number of shares through the Placing.

Reasons for the Fundraising

The Company remains focused on the premium automotive brake disc market, and the brake disc market for military and light commercial aircraft. As previously communicated to Shareholders, the Company is in the process of pursuing a number of significant original equipment manufacturer ("OEM") production contract opportunities in these markets.

In April 2016, the Company successfully raised £5.5 million by way of an equity fundraising, the net proceeds of which were used to commission the new Knowsley facility, for ongoing research and development ("R&D") programmes and general working capital purposes.

Since then, the Company has successfully completed its move to the new Knowsley facility and is in full production on all processes. The Knowsley facility is performing more efficiently than the previous site. The Board now consider that the Knowsley facility, when the current investment programme is complete, will be capable of manufacturing approximately 20,000 discs per annum.

Except for the ceramic furnaces, all the new equipment is on order, at prices broadly in line with budget. Extended testing however required by OEM 3, together with additional unbudgeted development costs and delays in contracted aerospace revenues (all of which are discussed further below) resulted in the Board deciding to raise additional money to maintain R&D momentum and progress potential OEM contracts as well as avoiding any significant working capital constraints.

In addition to completing the move to Knowsley, the Board considers that substantial operational progress has been achieved in the last 15 months, and whilst this has not yet translated into commercial agreements for volume road cars, they are increasingly confident on the outlook of the business and further commercial contracts being awarded. These achievements include entering into a pre-production technology development agreement with OEM 3 in June 2016, being nominated as a supplier to Aston Martin (OEM 6) in February 2017, the Company's expected imminent appointment by OEM 3 for a limited edition track day car for their motorsport series, and VDA 6.3 approval being attained by September 2017.

Accordingly, certain of the Directors have indicated that they intend to subscribe for, in aggregate £300,000 pursuant to subscription agreements with the Company. A further announcement will be made in due course regarding their intentions to subscribe.

Operations Update

As set out further below, the Company is in discussions with several OEMs with certain models anticipated to commence production mid-2018 onwards.

Automotive

The Company is currently in detailed discussions with six automotive OEMs, details of which are set out below. The Directors consider the key criteria for adoption by automotive OEMs are price, product quality, lead time and security of supply. To address these criteria, the Company is continuing its investment programme to progressively increase annual manufacturing capacity to the next milestone target of 20,000 discs per annum.

Further and as previously advised, in the Board's experience, automotive OEM's seek to appoint suppliers for new models approximately 24 months in advance of start of production.

German OEM 3:

The Company is pleased that, if the required technical conditions are met, the customer is now expected to introduce the Company's products earlier than anticipated - now in 2018 - albeit on a limited edition race track only car. Contractual details are in final discussion, and one relatively straightforward regulatory approval test remains to be completed (note: the Company has already passed this particular test on other cars for OEM3, as well as many other customers). Revenues from this car are expected to be £500k in the 2018 race season - which typically runs from March to October. The customer is able to accelerate this introduction because the product requirement, testing and quality accreditations are different for track cars than road cars. The Board considers this decision further validates the customer's confidence in the core Surface Transforms product.

In respect to the road car, the Company and the customer are now planning a revised introduction route to the previously announced mainstream, volume, vehicle range. The vehicle range is unchanged but the introduction variant is different to and later than previously announced. This six month delay of road car nomination allows for the completion of technical development and replication. This effectively represents a one year delay on start of production (excluding race car, if awarded). However, as this is solely a different entry point to the same model range it does not impact medium term mainstream sales.

In accordance with the terms of the pre-production technology development agreement with OEM 3, product testing is ongoing and the Company believes it can meet the customer's requirements by Q3 2017. However the Company and customer have agreed that Surface Transforms needs to replicate these results and this could take until the end of the calendar year - consistent with the new road car nomination date.

British OEM 2 and German OEM 4:

OEM's 2, 3 and 4 are sister companies in the same group. German OEM 3 has re-iterated that their testing programme covers the requirements of other group companies. Completion of product testing with OEM 3 will therefore complete product testing for OEM's 2 and 4.

German OEM 5:

This is a different German automotive group. The customer's testing is going well; they have slightly different test requirements to German OEM 3 although the Company believes it can also meet these. The customer's target model has a 2019 start of production date with mature run rate volumes of £2.5m per year.

British OEM 6:

In February 2017, the Company won an order from Aston Martin - now described as OEM 6. Engineering work on the Aston Martin order continues to plan and the launch date of January 2019 is unchanged with development revenues for the Company expected before that date.

British OEM 1: Delay with the first model for OEM 1 is understood by the Board to be due to challenges they are having integrating their brake system and unrelated to the discs. The customer's solution appears to have been to ask the Company's competitor for a holistic caliper and disc system offering. As a result, this latter project has been deleted from the Company's internal forecasts and replaced by Aston Martin. The net effect of these changes is minimal. The Company continues to include the second model for OEM 1 in its planning as it will be offering a joint caliper, disc and pad solution to the OEM, replicating the success of Aston Martin.

Aerospace

The Company's aerospace activities remain focused on one existing customer, for disc braking both in civil and military aviation. As previously reported, testing has been completed and the only outstanding issue is formal sign off by US Naval Air Command and the aeroplane manufacturer. This "sign off" however, continues to be delayed, for reasons the Board believes to be the result of the aeroplane customer wanting to "package" a number of changes at the same time. The Company is in discussions with its immediate landing gear customer with regard to the financial implications of this airframe delay, as the launch date was a fundamental feature of the original commercial agreement. These discussions include off-setting finance if production income is delayed for reasons within the customer's responsibility.

New Knowsley facility and VDA 6.3

The Company is now in full production, on all processes, at Knowsley. The new site, (approximately five times the size of the old site) has been designed using "lean manufacturing" principles and is performing better than the old site. The Company fully vacated its old Ellesmere Port facility on 30 April 2017.

The current capacity of the new site is sales of £4 million in two cells: Small Volume Automotive Production providing £2.5 million and Aerospace providing £1.5 million. When the current investment programme is complete, total capacity is expected to equate to £16 million in sales per annum by 2021/22, although given the site footprint £50 million of annual sales could be achieved, albeit this would require additional capital expenditure. This £50 million sales target reflects the pipeline of the current customer discussions.

Changes to the production process to meet the further product requirements of OEM 3 will require up to approximately £750k of additional capital equipment for automation of the process and additional ceramic furnaces.

Additionally, further cost reductions have been identified from both the establishment of a Combined Heat and Power Plant on the new site and increased purchasing power on gas supplies.

VDA 6.3: All German customers require this quality standard. At the Company's request, OEM 3 recently completed a "potential survey analysis" aimed at evaluating our progress and calibrating the Company's perception on the closeout actions needed before final approval of VDA 6.3. The survey achieved this objective and the customer confirmed Surface Transforms is close to being approved. An action list with a relatively small number of detailed items has been agreed and management expect to address these by September 2017. This timeline is consistent with the new OEM 3 road car nomination date. Racetrack cars however do not require VDA 6.3 approval.

Use of proceeds

To enable the Company to properly exploit the current commercial opportunities, the Directors have decided to raise approximately £3.0 million, before expenses, through a Placing and Subscription of New Ordinary Shares with existing Shareholders and new institutional and other investors, and raising up to £0.5 million, before expenses, by way of an Open Offer to all Qualifying Shareholders. The net proceeds of the Fundraising will be used for:

· capital expenditure, namely £750k for ceramic layer furnaces which is expected to further increase production capacity to 20,000 discs per annum;

· £250k for additional testing and development costs for OEM 3; and

· general working capital purposes of approximately £2.0 million, needed due to (i) expected 12 month delay in aerospace revenues and (ii) OEM 3 commercial road car revenues being delayed by 12 months.

Current Trading and Outlook

The Company recently reported an unaudited trading update for the financial year ended 31 May 2017.

Sales in the year are expected to be approximately £700k. This was below market expectations but was the result of a conscious decision by management to switch capacity from revenue generating product to test parts (see further explanation below) together with problems establishing the gas supply at Knowsley.

These delayed sales however have not been lost. At 31 May 2017, the Company had retrofit and near-OEM customers orders of £770k and customer commitments for sales for delivery in the new financial year for £119k. This £889k total pipeline is the highest visibility of next year sales the Company has ever had (31 May 2016: £427k).

As part of the process of securing the race track and road car business with OEM 3, the Company has spent approximately £350k on extra development costs which will impact FY16/17 results, partially offset by an increase of at least £120k in the R&D tax credit expected to be received and credited to the income statement in FY17/18.

The Company's cash balance at 31 May 2017 was £1.53 million to which can be added an expected tax credit of more than £450k in the first half of the new financial year and the outstanding grants and loans of £118k (claimed but not yet received).

The Board remain confident in the outlook of the business; the expected new race track business is a welcome short term boost to revenues but the uncertainty over aerospace revenues and the later starting date for the OEM 3 road car are expected to delay total planned revenues by a year, each year, for the period to FY 20/21 returning to the previous notified run rate thereafter.

Surface Transforms plc

Kevin Johnson, CEO +44 151 356 2141

David Bundred, Chairman

Cantor Fitzgerald Europe (Nomad & Joint Broker)

David Foreman, Michael Reynolds (Corporate Finance) +44 20 7894 7000

Mark Westcott, Alex Pollen (Sales)

finnCap Ltd (Joint Broker)

Stephen Norcross, Richard Chambers (Corporate Broking) +44 20 7220 0500

Ed Frisby, Giles Rolls (Corporate Finance)

For further Company details, visit www.surfacetransforms.com

Details of the Placing and Subscription

The Placing and Subscription are expected to raise gross proceeds of up to £3.0 million (before expenses). The issue and allotment of the Placing Shares and Subscription Shares would exceed the Company's existing authorities and therefore Shareholder approval will be required. Pursuant to the terms of the Placing Agreement, Cantor Fitzgerald and finnCap, as agents to the Company, have agreed to use their reasonable endeavours to procure placees for the Placing Shares to be issued under the Placing. The Placing is not being underwritten by Cantor Fitzgerald, finnCap or any other person.

The Placing is conditional, amongst other things, on the following:

i. the Placing Agreement not being terminated prior to Admission of the Placing Shares and being otherwise unconditional in all respects; and

ii. Admission of the Placing Shares becoming effective on or before 8.00 a.m. on 26 July 2017 (or such later date and/or time as Cantor Fitzgerald and finnCap may agree, being no later than 11 August 2017).

Certain directors of Surface Transforms have indicated that they intend to subscribe for approximately £300,000 of New Ordinary Shares at the Placing Price following this announcement. Details of the Subscription will be announced separately in due course.

Details of the Open Offer

Alongside the Placing and Subscription, the Company is proposing to raise a further amount of up to approximately £0.5 million (before expenses) pursuant to the Open Offer. The proposed Issue Price of 15.5 pence per Open Offer Share is the same price as the price at which New Ordinary Shares are being issued pursuant to the Placing and Subscription, as the case may be.

Qualifying Shareholders may subscribe for Open Offer Shares in proportion to their holding of Existing Ordinary Shares held on the 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 to Qualifying Shareholders under the Open Offer.

The issue and allotment of the Open Offer Shares will not exceed the Company's existing authorities and therefore does not require Shareholder approval.

The Open Offer is conditional, amongst other things, on the following:

i. completion of the Placing;

ii. the Placing Agreement not being terminated prior to Admission and becoming and being declared otherwise unconditional in all respects; and

iii. Admission becoming effective on or before 8.00 a.m. on 26 July 2017 (or such later date and/or time as the Company, Cantor Fitzgerald and finnCap may agree, being no later than 11 August 2017).

Open Offer Entitlement

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

1 Open Offer Share for every 27.99608377 Existing Ordinary Shares held at the Record Date

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

Excess Application Facility

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) pursuant to an Excess Application Facility. Any Open Offer Shares not issued to a Qualifying Shareholder pursuant to their Open Offer Entitlement will be apportioned between those Qualifying Shareholders who have applied under the Excess Application Facility 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.

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 of them.

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.

Settlement and dealings

Application will be made to the London Stock Exchange for Admission of the Open Offer Shares. It is expected that such Admission will become effective and that dealings will commence at 8.00 a.m. on 26 July 2017.

Overseas Shareholders

The Open Offer Shares have not been and are not intended to be registered or qualified for sale in any jurisdiction other than the United Kingdom. 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 any jurisdiction other than the United Kingdom 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 share certificates 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.

This announcement and 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.

Qualifying non-CREST Shareholders

If you are a Qualifying non-CREST Shareholder you will receive an Application Form which gives details of your Open Offer 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 Application Form in accordance with the procedure for application set out in the Circular and on the Application Form itself. The completed Application Form, accompanied by full payment, should be returned by post to Capita Asset Services, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU so as to arrive as soon as possible and in any event no later than 11.00 a.m. on 24 July 2017.

Qualifying CREST Shareholders

Application has been made for the Open Offer Shares of Qualifying CREST Shareholders to be admitted to CREST. It is expected that the Open Offer Shares will be admitted to CREST on 7 July 2017. 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 will be sent to you but you will receive credits to your appropriate stock account in CREST in respect of your Open Offer Entitlements. You should refer to the procedure for application set out in the Circular. The relevant CREST instruction must have settled by no later than 11.00 a.m. on 24 July 2017.

Action to be taken

Open Offer

Qualifying non-CREST Shareholders wishing to apply for Open Offer Shares must complete the Application Form in accordance with the instructions set out in the Circular (Terms and Conditions of the Open Offer) and on the Application Form and return it with the appropriate payment to Capita Asset Services, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, so as to arrive no later than 11.00 a.m. on 24 July 2017.

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 the Circular (Terms and Conditions of the Open Offer). The relevant CREST instructions must have settled in accordance with the instructions in the Circular by no later than 11.00 a.m. on 24 July 2017.

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

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

APPENDIX - TERMS AND CONDITIONS OF THE PLACING

IMPORTANT INFORMATION FOR INVITED PLACEES ONLY

1. Introduction

An investment in the Placing Shares is subject to a number of risks. Before making an investment decision with respect to the Placing Shares, prospective investors should carefully consider the risks associated with an investment in the Company, the Company's business and the industry in which the Company operates, in addition to all of the other information set out in this document.

 EACH PLACEE SHOULD CONSULT WITH ITS ADVISERS AS TO LEGAL, TAX, BUSINESS AND RELATED ASPECTS OF AN INVESTMENT IN PLACING SHARES. THE DISTRIBUTION OF THIS ANNOUNCEMENT, ANY PART OF IT OR ANY INFORMATION CONTAINED IN IT MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS, AND ANY PERSON INTO WHOSE POSSESSION THIS ANNOUNCEMENT, ANY PART OF IT OR ANY INFORMATION CONTAINED IN IT COMES SHOULD INFORM THEMSELVES ABOUT, AND OBSERVE, SUCH RESTRICTIONS.

 All information in this document, including the terms and conditions of the Placing in this Appendix, is directed only at persons ("FSMA Qualified Investors") who are both "qualified investors" as referred to at section 86(7) of the Financial Services and Markets Act 2000 ("FSMA") and are persons at or to whom any private communication relating to the Company that is a "financial promotion" (as such term is used in relation to FSMA) may lawfully be issued, directed or otherwise communicated without the need for it to be approved, made or directed by an "authorised person" as referred to in FSMA.

2. Placing

Each of Cantor Fitzgerald and finnCap is acting as the Company's agent in respect of the Placing. Cantor Fitzgerald and finnCap shall determine the extent of each Placee's participation in the Placing, which will not necessarily be the same for each Placee. No commissions will be paid to or by Placees in respect of their agreement to subscribe for any Placing Shares.

Each Placee will be required to pay to Cantor Fitzgerald or finnCap (as appropriate), on the Company's behalf as agent, the Placing Price as the subscription sum for each Placing Share that it is required to subscribe for in accordance with the terms set out in or referred to in this Appendix. Each Placee's obligation to subscribe and pay for Placing Shares under the Placing will be owed to each of the Company and Cantor Fitzgerald or finnCap (as the case may be). Each Placee will be deemed to have read this Appendix in its entirety. Neither of the Brokers nor any other Broker Person will have any liability (subject to applicable legislation and regulations) to Placees or to any person other than the Company in respect of the Placing.

Various dates referred to in this document are stated on the basis of the expected timetable for the Placing. It is possible that some of these dates may be changed. 

Placees' commitments in respect of Placing Shares will be made solely on the basis of the information contained in this document and on the terms contained in it. No admission document for the purposes of the AIM Rules for Companies, or prospectus, is required to be published, or has been or shall be published, in relation to the Placing or the Placing Shares.

3. Participation and settlement

Participation in the Placing is only available to persons who are invited to participate in it by Cantor Fitzgerald and/or finnCap.

A Placee's commitment to subscribe for a fixed number of Placing Shares under the Placing will be agreed orally (or, if agreed previously, may be confirmed orally) with Cantor Fitzgerald or finnCap on or before the time on which the Impact Announcement is made. Such agreement will constitute a legally binding commitment on such Placee's part to subscribe for that number of Placing Shares at the Placing Price on the terms and subject to the conditions set out or referred to in this Appendix and subject to the Company's constitution. After such agreement is entered into a written confirmation will be dispatched to the Placee by Cantor Fitzgerald or finnCap stating (i) the number of Placing Shares for which such Placee has agreed to subscribe, (ii) the aggregate amount such Placee will be required to pay for those Placing Shares and (iii) relevant settlement information and instructions. A settlement instruction form will be included in each written confirmation and, on receipt, should be completed and returned by the date and time stated in it.

Settlement of transactions in the Placing Shares will take place within the CREST system, subject to certain exceptions, on a "delivery versus payment" (or "DVP") basis. Cantor Fitzgerald or finnCap reserves the right to require settlement for and/or delivery to any Placee of any Placing Shares by such other means as it may deem appropriate if delivery or settlement is not possible or practicable within the CREST system within the timetable set out in this document or the Impact Announcement.

A Placee whose Placing Shares are to be delivered to a custodian or settlement agent should ensure that the written confirmation is copied and delivered promptly to the appropriate person within that organisation.

4. Placing Agreement

Cantor Fitzgerald and finnCap have entered into the Placing Agreement with the Company under which each of Cantor Fitzgerald and finnCap has agreed on a conditional basis to use their respective reasonable endeavours as the Company's agents to procure subscribers at the Placing Price for all Placing Shares.

5. Placing conditions

The Placing is conditional on (i) the release of the Impact Announcement through the London Stock Exchange's Regulatory News Service (or another regulatory information service, as that term is used in the AIM Rules for Companies), (ii) the passing of one or more resolutions at a general meeting of the Company to be proposed in the notice of that meeting that is to be included in the Company's circular to its shareholders concerning the Placing and related matters, (iii) each of Cantor Fitzgerald's and finnCap's obligations under the Placing Agreement not being terminated in accordance with its terms, (iv) Admission taking place by the relevant time and date to be stated in the Impact Announcement, and (v) each of Cantor Fitzgerald's and finnCap's obligations under the Placing Agreement becoming unconditional in all other respects. Cantor Fitzgerald and finnCap may extend the time and/or date for the fulfilment of any of the conditions referred to above to a time no later than 5.00 p.m. on the Long Stop Date. If any such condition is not fulfilled (and, if capable of waiver under the Placing Agreement, is not waived by Cantor Fitzgerald and finnCap) by the relevant time, the Placing will lapse and each Placee's rights and obligations in respect of the Placing will cease and terminate at such time.

Each of Cantor Fitzgerald's and finnCap's obligations under the Placing Agreement may be terminated by Cantor Fitzgerald or finnCap at any time prior to Admission in certain circumstances including, among other things, following a material breach of the Placing Agreement by the Company and/or the occurrence of certain force majeure events. The exercise of any right of termination pursuant to the Placing Agreement, any waiver of any condition in the Placing Agreement and any decision by Cantor Fitzgerald and/or finnCap whether or not to extend the time for satisfaction of any condition in the Placing Agreement will be within Cantor Fitzgerald's and/or finnCap's absolute discretion (as is the exercise of any right or power of Cantor Fitzgerald and/or finnCap that is referred to in this Appendix). Neither Cantor Fitzgerald nor finnCap will have any liability to any Placee or to anyone else in respect of any such termination, waiver or extension or any decision to exercise or not to exercise any such right of termination, waiver or extension in respect of the Placing Agreement.

6. Scaling back

The Brokers (after consulting with the Company) reserve the right to scale back the number of Placing Shares to be subscribed or purchased by any Placee or the number of Placing Shares to be subscribed for by all Placees in aggregate. The Company and the Brokers also reserve the right not to offer allocations of Placing Shares to any person and not to accept offers to subscribe for or purchase Placing Shares or to accept such offers in part rather than in whole. The Brokers shall be entitled to effect the Placing by such method as they shall in their discretion determine.

To the fullest extent permissible by law, neither of the Brokers nor any other Broker Person nor any person acting on behalf of any of the foregoing shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, no Broker Person nor any person acting on behalf of any such Broker Person shall have any liability to Placees in respect of the conduct of the Placing.

7. Placees' warranties and undertakings to the Company, Cantor Fitzgerald and finnCap

By agreeing with Cantor Fitzgerald or finnCap as agent of the Company to subscribe for Placing Shares under the Placing, a Placee (and any person acting on a Placee's behalf) will irrevocably acknowledge and confirm and warrant and undertake to, and agree with, each of the Company and Cantor Fitzgerald and finnCap, in each case as a fundamental term of such Placee's application for Placing Shares and of the Company's obligation to allot and/or issue any Placing Shares to it or at its direction, that:

(a) it agrees to and accepts all the terms set out in this Appendix;

(b) its rights and obligations in respect of the Placing will terminate only in the circumstances referred to in this Appendix and will not be subject to rescission or termination by it in any circumstances;

(c) this document, which has been issued by the Company, is within the sole responsibility of the Company;

(d) it has not been, and will not be, given any warranty or representation in relation to the Placing Shares or to the Company or to any other member of its Group in connection with the Placing, other than (i) by the Company as included in this document, and (ii) by the Company to the effect that at the time that the Placee enters into a legally binding commitment to subscribe for Placing Shares pursuant to the Placing the Company will not then be in breach of its obligations under the London Stock's Exchange's AIM Rules for Companies or under the EU Market Abuse Regulation (596/2014) to disclose publicly in the correct manner all such information as is then required to be so disclosed by the Company;

(e) it has not relied on any representation or warranty in reaching its decision to subscribe for Placing Shares under the Placing, save as given or made by the Company as referred to in the previous paragraph;

(f) it is not a client of Cantor Fitzgerald or finnCap in relation to the Placing and neither Cantor Fitzgerald nor finnCap is acting for it in connection with the Placing and neither Cantor Fitzgerald nor finnCap will be responsible to it in respect of the Placing for providing protections afforded to their respective clients;

(g) it has not been, and will not be, given any warranty or representation by any Broker Person in relation to any Placing Shares, the Company or any other member of its Group and no Broker Person will have any liability to it for any information contained in this document or which has otherwise been published by the Company or for any decision by it to participate in the Placing based on any such information or on any other information provided to it;

(h) it will pay the full subscription sum at the Placing Price as and when required in respect of all Placing Shares for which it is required to subscribe under its Placing participation and will do all things necessary on its part to ensure that payment for such shares and their delivery to it or at its direction is completed in accordance with the standing CREST instructions (or, where applicable, standing certificated settlement instructions) that it has in place with Cantor Fitzgerald or finnCap or puts in place with Cantor Fitzgerald or finnCap;

(i) it is permitted to subscribe for Placing Shares under the laws of all relevant jurisdictions which apply to it and it has complied, and will fully comply, with all such laws (including where applicable, the Anti-Terrorism, Crime and Security Act 2001, the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2007) and has obtained all governmental and other consents (if any) which may be required for the purpose of, or as a consequence of, such subscription, and it will provide promptly to Cantor Fitzgerald and/or finnCap such evidence, if any, as to the identity or location or legal status of any person which Cantor Fitzgerald or finnCap may request from it in connection with the Placing (for the purpose of complying with any such laws or ascertaining the nationality of any person or the jurisdiction(s) to which any person is subject or otherwise) in the form and manner requested by Cantor Fitzgerald or finnCap on the basis that any failure by it to do so may result in the number of Placing Shares that are to be allotted and/or issued to it or at its direction pursuant to the Placing being reduced to such number, or to nil, as Cantor Fitzgerald and/or finnCap may decide;

(j) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done or to be done by it in relation to any Placing Shares in, from or otherwise involving the United Kingdom and it has not made or communicated or caused to be made or communicated, and it will not make or communicate or cause to be made or communicated, any "financial promotion" in relation to Placing Shares in contravention of section 21 of FSMA;

(k) it is a FSMA Qualified Investor;

(l) it is acting as principal only in respect of the Placing or, if it is acting for any other person (i) it is duly authorised to do so, (ii) it is and will remain liable to the Company and/or Cantor Fitzgerald and/or finnCap for the performance of all its obligations as a Placee in respect of the Placing (regardless of the fact that it is acting for another person), (iii) it is both an "authorised person" for the purposes of FSMA and a "qualified investor" as defined at Article 2.1(e)(i) of Directive 2003/71/EC (known as the Prospectus Directive) acting as agent for such person, and (iv) such person is either (1) a FSMA Qualified Investor or (2) its "client" (as defined in section 86(2) of FSMA) that has engaged it to act as his agent on terms which enable it to make decisions concerning the Placing or any other offers of transferable securities on his behalf without reference to him;

(m) nothing has been done or will be done by it in relation to the Placing or to any Placing Shares that has resulted or will result in any person being required to publish a prospectus in relation to the Company or to any Ordinary Shares in accordance with FSMA or the Prospectus Rules or in accordance with any other laws applicable in any part of the European Union or the European Economic Area;

(n) it will not treat any Placing Shares in any manner that would contravene any legislation applicable in any territory or jurisdiction and no aspect of its participation in the Placing will contravene any legislation applicable in any territory or jurisdiction in any respect or cause the Company and/or Cantor Fitzgerald and/or finnCap to contravene any such legislation in any respect;

(o) (in this paragraph "US person" and other applicable terms have the meanings that they have in Regulation S made under the US Securities Act of 1933, as amended) (i) none of the Placing Shares have been or will be registered under that Act or under the securities laws of any State of or other jurisdiction within the United States, (ii) subject to certain exceptions, Placing Shares may not be offered or sold, resold, or delivered, directly or indirectly, into or within the United States or to, or for the account or benefit of, any US person, (iii) it is (unless otherwise expressly agreed with Cantor Fitzgerald and finnCap) neither within the United States nor a US person, (iv) it has not offered, sold or delivered and will not offer sell or deliver any of the Placing Shares to persons within the United States, directly or indirectly, (v) neither it, its affiliates, nor any persons acting on its behalf, has engaged or will engage in any directed selling efforts with respect to the Placing Shares, (vi) it will not be subscribing Placing Shares with a view to resale in or into the United States, and (vii) it will not distribute this document or any offering material relating to Placing Shares, directly or indirectly, in or into the United States or to any persons resident in the United States;

(p) Cantor Fitzgerald and/or finnCap may themselves agree to become a Placee in respect of some or all of the Placing Shares or by nominating any other relevant Broker Person or any person associated with any Broker Person to do so;

(q) time is of essence as regards its obligations under this Appendix;

(r) this Appendix and any contract which may be entered into between it and Cantor Fitzgerald and/or finnCap and/or the Company pursuant to this Appendix or the Placing, and all non-contractual obligations arising between the Placee and Cantor Fitzgerald and/or finnCap and/or the Company in respect of the Placing, will be governed by and construed in accordance with the laws of England, for which purpose it submits (for itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts as regards any claim, dispute, or matter arising out of or relating to this Appendix or such contract, except that each of the Company, Cantor Fitzgerald and finnCap will have the right to bring enforcement proceedings in respect of any judgment obtained against such Placee in the English courts or in the courts of any other relevant jurisdiction;

(s) each right or remedy of the Company or Cantor Fitzgerald or finnCap provided for in this Appendix is in addition to any other right or remedy which is available to such person and the exercise of any such right or remedy in whole or in part will not preclude the subsequent exercise of any such right or remedy;

(t) any document that is to be sent to it in connection with the Placing will be sent at its risk and may be sent to it at any address provided by it to Cantor Fitzgerald or finnCap;

(u) nothing in this Appendix will exclude any liability of any person for fraud on its part, and all times and dates in this document are subject to amendment at the discretion of Cantor Fitzgerald and finnCap except that in no circumstances will the date scheduled for Admission be later than the Long Stop Date; and

(v) none of its rights or obligations in respect of the Placing is conditional on any other person agreeing to subscribe for any Placing Shares under the Placing and no failure by any other Placee to meet any of its obligations in respect of the Placing will affect any of its obligations in respect of the Placing.

8. Payment default

A Placee's entitlement to receive any Placing Shares under the Placing will be conditional on (as applicable) Cantor Fitzgerald's or finnCap's receipt of payment in full for such shares by the relevant time to be stated in the written confirmation referred to above, or by such later time and date as Cantor Fitzgerald or finnCap may determine, and otherwise in accordance with that written confirmation's terms. Either of the Brokers may waive this condition as regards their own Placees, and will not be liable to any Placee for any decision to waive it or not.

If any Placee fails to make such payment by the required time for any Placing Shares (1) the Company may release itself, and (if it decides to do so) will be released from, all obligations it may have to allot and/or issue any such Placing Shares to such Placee or at its direction which are then unallotted and/or unissued, (2) the Company may exercise all rights of lien, forfeiture and set-off over and in respect of any such Placing Shares to the full extent permitted under its constitution or by law and to the extent that such Placee then has any interest in or rights in respect of any such shares, (3) the Company or, as applicable, the Brokers or either of them may sell (and each of them is irrevocably authorised by such Placee to do so) all or any of such shares on such Placee's behalf and then retain from the proceeds, for the account and benefit of the Company or, where applicable, the Brokers or either of them (i) any amount up to the total amount due to it as, or in respect of, subscription monies, or as interest on such monies, for any Placing Shares and (ii) any amount required to cover dealing costs and/or commissions necessarily or reasonably incurred by it in respect of such sale, and (4) such Placee will remain liable to the Company and to the Brokers for the full amount of any losses and of any costs which it may suffer or incur as a result of it (i) not receiving payment in full for such Placing Shares by the required time, and/or (ii) the sale of any such Placing Shares to any other person at whatever price and on whatever terms are actually obtained for such sale by or for it. Interest may be charged in respect of payments not received by the Brokers for value by the required time referred to above at the rate of two percentage points above the base rate of Barclays plc. The remedies set out in this paragraph shall be without prejudice to any other remedy which either of the Brokers and/or the Company may have at law and the relevant Placee will remain liable for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax or securities transfer tax (together with any interest or penalties) which may arise upon the sale of any Placing Shares on such Placee's behalf. By communicating a bid for Placing Shares, each Placee confers on the Brokers all such authorities and powers necessary to carry out any such sale and agrees to ratify and confirm all actions which the Brokers lawfully takes in pursuance of such sale.

9. Overseas jurisdictions

The distribution of this document and the offering and/or issue of shares pursuant to the Placing in certain jurisdictions is restricted by law. Persons who seek to participate in the Placing must inform themselves about and observe any such restrictions. In particular, this document does not constitute or form part of any offer or invitation, or a solicitation of any offer or invitation, to subscribe for or acquire or sell or purchase or otherwise deal in Ordinary Shares in the United States, Canada, Japan or Australia or in any other jurisdiction in which any such offer, invitation or solicitation is or would be unlawful. The Placing Shares have not been and will not be registered under the US Securities Act of 1933, as amended or under the securities laws of any State of or other jurisdiction within the United States, and, subject to certain exceptions, may not be offered or sold, resold or delivered, directly or indirectly, in or into the United States, or to, or for the account or benefit of, any US persons (as defined in Regulation S under that Act). No public offering of the Placing Shares is being or will be made in the United States.

10. Placing Shares

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing issued Ordinary Shares.

In this Appendix to the Announcement and, as the context shall admit, in the Announcement:

DEFINITIONS

Terms defined elsewhere in this document have the same meanings, unless the context requires otherwise.