SPGH.L Regulatory News (SPGH)

3 May 2013

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, OR ANY OF THE OTHER EXCLUDED TERRITORIES.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO SELL OR ISSUE, OR ANY SOLICITATION OF ANY OFFER TO PURCHASE OR SUBSCRIBE FOR, ANY NEW ORDINARY SHARES, NOR SHALL IT (OR ANY PART OF IT), OR THE FACT OF ITS DISTRIBUTION, FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, OR ACT AS ANY INDUCEMENT TO ENTER INTO, ANY CONTRACT OR COMMITMENT WHATSOEVER WITH RESPECT TO THE PROPOSED PLACING.

Superglass Holdings plc

("Superglass" or the "Company")

Proposed Delisting from the Official List and Admission to AIM,

Successful Placing of 25,800,000 New Ordinary Shares at 50 pence per share to raise £12.9 million,

Proposed conversion of £5.725 million of bank debt into Convertible Shares,

Proposed Capital Reorganisation,

Proposed Share Consolidation and

Notice of General Meeting

Further to the announcement of 1 May 2013, the Board of Superglass is pleased to announce that, subject to, inter alia, Shareholder approval, it has successfully completed a firm placing to raise £12.9 million (circa £12.2 million net of expenses) through the issue of 25,800,000 New Ordinary Shares at an issue price of 50 pence per New Ordinary Share. This is the equivalent of 2 pence per Existing Ordinary Share, prior to the Share Consolidation.

In addition, the Board announces a restructuring of the Company's banking facilities, conditional, inter alia, on admission of the Ordinary Shares to trading on AIM. The restructuring includes the conversion of £5.725 million of bank debt into Convertible Shares and the early repayment of £3.0 million of bank debt.

The purpose of the Proposals is to reduce the Company's level of debt and to create a strengthened and long term capital structure as a platform upon which to build a sustainable, strong and resilient business that is better positioned to compete more effectively in challenging markets.

Prior to the Placing, the Company is proposing to undertake a Capital Reorganisation and Share Consolidation, further details of which are described below.

In conjunction with the Placing the Board is proposing, immediately following the Capital Reorganisation and Share Consolidation, to cancel the listing of the Existing Ordinary Shares on the Official List and to remove such Existing Ordinary Shares from trading on the Main Market and to apply for admission of the Ordinary Shares, including the Placing Shares, to trading on AIM.

Completion of the Proposals is subject, inter alia, to Shareholder approval, which will be sought at the General Meeting to be held at 10.00 a.m. on 20 May 2013.

Irrevocable undertakings have been received from Shareholders with 45.9 per cent. of the Existing Ordinary Shares to vote in favour of the Resolutions, with the exception of the resolution in respect of the Related Party transaction, from which the related parties must abstain.

Listing Rule 5.2.5R(2) requires that a company wishing to cancel its listing on the Official List may only do so if at least 75 per cent. of the votes cast on a resolution to delist are in favour. However, the financial position of the Company is so precarious that if the Proposals are not implemented by 4 June 2013, when the Bridging Facility will be withdrawn, then there is no reasonable prospect that the Company will avoid entering into administration or some other form of formal insolvency proceedings. The continued listing of the Company on the Official List beyond 4 June 2013 would prevent the implementation of the Proposals (including the receipt of the Placing Proceeds), as these are conditional on Admission, which can only occur once the Delisting has taken place.

The Board believes that the Delisting is in the best interests of both Shareholders and the Company's creditors and has determined that the Company meets the requirements of Listing Rule 5.2.7(R) and will not therefore be seeking the approval of Shareholders for the Delisting. Instead, 20 Business Days' notice of the intended Delisting is being given through this announcement via an RIS. The Delisting is expected to become effective at 8.00 a.m. on 4 June 2013.

A circular (the "Circular") providing full details of the Proposals and incorporating a notice of the General Meeting will be posted to Shareholders later today.

A copy of the Circular will be available for inspection at the National Storage Mechanism which is located at www.morningstar.co.uk/uk/NSM. Copies of the Circular will also be available on the Company's website at www.superglass.co.uk and for collection, free of charge during normal business hours from the Company's registered office up to and including the date of Admission.

Summary of the Proposals

·; Placing of 25,800,000 New Ordinary Shares at a price of 50 pence per Share. This is equivalent to 2 pence per Share on a pre-Share Consolidation basis, which is the same as the Closing Price on 2 May 2013, being the last Business Day prior to this announcement;

·; Conversion of £5.725 million of bank debt into Convertible Shares which would have the right to convert into Ordinary Shares representing 10 per cent. of the Company's enlarged issued share capital on Admission;

·; Proposed Capital Reorganisation, sub dividing each Existing Ordinary Share into one ordinary share of one penny each and one deferred share of 19 pence each;

·; A Share consolidation such that every 25 Post-Capital Reorganisation Shares will be consolidated into one New Ordinary Share; and

·; Delisting from the Official List and admission to AIM which is expected to take place at 8.00 a.m. on 4 June 2013.

If all of the Resolutions are not passed, the Proposals cannot be implemented. In such a situation the Group would be in breach of its Bridging Facility and would also be in default under all of its banking facilities with Clydesdale Bank, which would then become repayable on demand, and the Group would have insufficient cash resources to enable it to continue to trade. In such an event, the Board believes that alternative sources of funding are unlikely to be available and that the Group would enter into some form of formal insolvency proceedings as soon as practicable following the General Meeting, with the Existing Ordinary Shares consequently having no economic value.

John Colley, Chairman, commented:

"We are pleased to announce the £12.9 million placing and also the restructuring of the Company's banking facilities, subject to shareholder approval. We are delighted with the support from investors, with the placing proceeds comfortably exceeding the minimum required for the restructuring, which will provide Superglass with a considerably strengthened and sustainable long term capital structure. The Company will be well placed to benefit from any resurgence in market volumes and the efficiencies from its recent capital investment programme."

For further information please contact:

Nplus1 Singer Advisory LLP

Nplus1 Singer Advisory LLP, which is a member of the London Stock Exchange, is authorised and regulated in the UK by the Financial Conduct Authority, is acting as sponsor, financial adviser, nominated adviser and broker to Superglass Holdings plc in connection with the Proposals. It should be noted that, in connection with the Proposals, Nplus1 Singer Advisory LLP is acting exclusively for Superglass Holdings plc and no one else. Nplus1 Singer Advisory LLP will not be responsible to anyone other than Superglass Holdings plc for providing the protections afforded to clients of Nplus1 Singer Advisory LLP nor for advising any other person on the transactions and arrangements described in this announcement or the Circular. No representation or warranty, express or implied, is made by Nplus1 Singer Advisory LLP as to any of the contents of this announcement or the Circular. Apart from the liabilities and responsibilities, if any, which may be imposed on Nplus1 Singer Advisory LLP by the Financial Services and Markets Act 2000 or the regulatory regime established under it, Nplus1 Singer Advisory LLP accepts no responsibility whatsoever for the contents of this document or the Circular or for any other statement made or purported to be made by it or on its behalf in connection with Superglass Holdings plc, the Existing Ordinary Shares, the New Ordinary Shares or the Proposals. Nplus1 Singer Advisory LLP accordingly disclaims all and any liability whatsoever whether arising in tort or contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or the Circular or any such statement.

Extracts from the Circular

1. Introduction

The Company is proposing to raise in aggregate £12.9 million (approximately £12.2 million net of expenses) by way of a placing of 25,800,000 New Ordinary Shares at a price of 50 pence per Ordinary Share. The Placing Price is equivalent to 2 pence per Ordinary Share on a pre-Share Consolidation basis, which is the same as the comparable Closing Price, before taking into account the Share Consolidation, of 2 pence per Existing Ordinary Share on 2 May 2013 (being the last Business Day prior to the announcement of the Placing). The Board is in agreement that the method of issue is appropriate to secure the investment necessary in the Company, having regard to its financial and trading position, and the need for certainty of funding within a limited timeframe.

The Placing will constitute a related party transaction, with the participation of two substantial shareholders (as defined in the Listing Rules) and will therefore require the approval of Shareholders.

The Company is proposing to undertake a Capital Reorganisation and a Share Consolidation, further details of which are described below.

In conjunction with the Placing the Board is proposing, immediately following the Capital Reorganisation and Share Consolidation, to cancel the listing of the Existing Ordinary Shares on the Official List and to remove such Existing Ordinary Shares from trading on the Main Market and to apply for admission of the Ordinary Shares, including the Placing Shares, to trading on AIM. The Board believes that AIM is a more appropriate market for a company of Superglass' size and will enable the Company to effect the Placing without the publication of a prospectus, which is a costly and time consuming process.

Immediately following Admission, the Existing Ordinary Shares, following the Share Consolidation and Capital Reorganisation, will represent 7.2 per cent. of the Enlarged Issued Share Capital.

Clydesdale Bank, the Company's senior debt provider, has agreed to convert £5.725 million of indebtedness owed by Superglass into Convertible Shares in return for the early repayment of £3.0 million of debt using part of the proceeds of the Placing. The Convertible Shares will have rights of conversion into an aggregate of 2,800,757 Ordinary Shares with effect from 30 April 2015, such shares having an aggregate value of approximately £1.4 million at the Placing Price. These arrangements have been negotiated with a view to providing the Company, in conjunction with the Placing, with a strengthened and sustainable long term capital structure. Further information on the Debt Conversion and the Convertible Shares is set out below. The conversion of indebtedness and the issue of the Convertible Shares are conditional on the passing of the Resolutions.

Listing Rule 5.2.5R(2) requires that a company wishing to cancel its listing on the Official List may only do so if at least 75 per cent. of the votes cast on a resolution to delist are in favour. However, because of the precarious financial position of the Company, the Board has determined that Superglass meets the requirements of Listing Rule 5.2.7R and therefore Shareholder approval of the Delisting will not be sought. Instead, 20 Business Days' notice of the intended Delisting on 4 June 2013 is being given. Further information on the Delisting is given below.

The Placing is conditional, inter alia, on the passing of the Resolutions by the Shareholders at the General Meeting, including a special resolution which will give the Directors the required authority to disapply statutory pre-emption rights in respect of the allotment of the Placing Shares. In addition, due to the proposed participation in the Placing of W & R Barnett and Michael Chadwick, who are substantial shareholders (as defined in the Listing Rules), the Placing will constitute a related party transaction pursuant to the Listing Rules and therefore an ordinary resolution of Independent Shareholders is being proposed at the General Meeting to approve the Related Party Transaction.

The Placing Price would be at a discount to the nominal value of the Existing Ordinary Shares of 20 pence each on a comparable basis before taking into account the Share Consolidation and, as the Act prohibits the issue of shares at a price below their nominal value, the Company is also proposing a Capital Reorganisation, which will have the effect of reducing the nominal value of each Existing Ordinary Share, to avoid a contravention of the relevant provisions of the Act. Further details on the Capital Reorganisation are set out below. Subject to all relevant conditions being satisfied (or, if applicable, waived), it is expected that the New Ordinary Shares (including the Placing Shares) will be admitted to trading on AIM on or around 4 June 2013.

The Board believes that the Proposals are in the best interests of the Company and its Shareholders as a whole. The Board also stresses that it is very important that Shareholders vote in favour of the Resolutions at the General Meeting. It is likely that failure to pass the Resolutions would lead to Shareholders' Existing Ordinary Shares having no value and also lead to the Company entering into administration or some other form of insolvency procedure.

2. Background to and reasons for the Proposals and current trading

As was highlighted within successive trading update statements released on 5 February and 6 March 2013, current trading conditions are extremely challenging for the Group for a number of reasons. The recent transition from CERT to ECO/Green Deal has caused a major gap in activity within the retrofit market for both loft and cavity insulation. Combined with abnormally low levels of house-building activity in the UK by historical standards of new unit construction, the net effect is a surplus of UK-based insulation manufacturing capacity and highly competitive market conditions, which in turn are detrimentally impacting the Company's operating profits and cash-flow, albeit that these do not yet reflect the full efficiency benefits that will be realised from Project Phoenix, as set out below.

The first phase of Project Phoenix, our previously announced transformational capital investment programme, was completed in April 2013. The Board has reassessed the aggregate deliverable cost savings arising from Project Phoenix and other related initiatives and has confirmed previous estimates of a reduction in the Group's annual operating cost base of approximately £5.0 million. The first full year of savings for the majority of the benefits is expected to be in the financial year ending 31 August 2014. Once these cost savings are factored in, the Board's assessment is that Superglass can be cash generative at the operating level in the future, even at current depressed market volumes and prices.

The impact of the recent transition from CERT to ECO/Green Deal and competitive pressures continue to impact the overall level of demand in the market, with reduced sales since the interim period end. Consequently the Board expects sales volumes in the second half of the year to be below first half levels.

Looking beyond the current financial year, there are grounds for greater optimism in the Group's core markets. The Board expects that government stimuli will generate a gradual increase in UK house-building activity from 2014 onwards; and that the volume of retrofit activity should improve significantly within a timescale of six to twelve months as the flagship Green Deal and ECO initiatives become fully operational.

However, debt amortisation payments are due to resume in November 2013 and the Board's view is that for so long as market conditions remain as they are now, these debt service obligations will be unsustainable. Furthermore, the Board has agreed temporary bridging facilities of £750,000 with Clydesdale Bank which are required to fund the Group's cash requirements from the General Meeting until receipt of the proceeds of the Placing, which demonstrates that the Group is already operating at the limits of its available debt facilities.

It is against this background that the Board is presenting the Proposals, including the Placing, the Capital Reorganisation and admission of the New Ordinary Shares to trading on AIM, to Shareholders.

The proposed Debt Conversion and the Revised Committed Facilities have been negotiated with the Lender with a view to providing the Group, in conjunction with the Placing, with a strengthened and sustainable long term capital structure. The Proposals, in addition to reducing bank debt and restructuring the balance sheet, will result in net cash balances at Admission of circa £5.9 million, assuming the Bridging Facility has been fully drawn at that point. As a result, Superglass will have a strengthened and more appropriate capital structure as a platform upon which to build a sustainable, strong and resilient long term business that is better positioned to compete more effectively.

Admission to AIM will provide Shareholders with a market on which to trade their Ordinary Shares whilst providing the Company with continued access to equity capital, including the potential ability to raise further funds, if required. The Board believes that a transfer to AIM will provide the Company with a market more suited to its current size and market capitalisation. The simplification of administrative and regulatory requirements, with a consequent reduction in ongoing costs associated with a premium listing on the Main Market and its associated one-off professional costs when issuing new equity, will allow the Company to more effectively implement its cost savings objectives.

The Delisting and Admission will not have any impact on the Company's strategy or business.

3. Details of the Delisting and Admission

Listing Rule 5.2.5R(2) requires that a company wishing to cancel its listing on the Official List may only do so if at least 75 per cent. of the votes cast on a resolution to delist are in favour. However, the financial position of the Company is so precarious that if the Proposals are not implemented by 4 June 2013, when the Bridging Facility will be withdrawn, then there is no reasonable prospect that the Company will avoid entering into administration or some other form of formal insolvency proceedings. The continued listing of the Company on the Official List beyond 4 June 2013 would prevent the implementation of the Proposals (including the receipt of the Placing Proceeds), as these are conditional on Admission, which can only occur once the Delisting has taken place.

The Board believes that the Delisting is in the best interests of both Shareholders and the Company's creditors and has determined that the Company meets the requirements of Listing Rule 5.2.7(R) and will not therefore be seeking the approval of Shareholders for the Delisting. Instead, 20 Business Days' notice of the intended Delisting is being given through this announcement via an RIS. The Delisting is expected to become effective at 8.00 a.m. on 4 June 2013.

In order to effect the Admission and Placing, the Company will require, inter alia, Shareholder approval of the Resolutions at the General Meeting.

Conditional on the Resolutions being approved at the General Meeting and the Placing Agreement not having been terminated in accordance with its terms, the Company has applied to cancel the listing of the Existing Ordinary Shares on the Official List and to trading on the Main Market and is giving 20 Business Days' notice of its intention to seek admission to trading on AIM under AIM's streamlined process for companies that have had their securities traded on an AIM Designated Market (which includes the Official List). Conditional on the Resolutions being approved at the General Meeting and Admission taking place, the Company will issue 28,007,517 New Ordinary Shares (including the Placing Shares).

It is anticipated that the last day of dealings in the Existing Ordinary Shares on the Main Market will be 3 June 2013. Cancellation of the listing of the Existing Ordinary Shares on the Official List will take effect at 8.00 a.m. on 4 June 2013. Admission is expected to take place, and dealings in the Ordinary Shares (including the Placing Shares) are expected to commence on AIM, at 8.00 a.m. on 4 June 2013.

As the Existing Ordinary Shares are currently listed on the premium segment of the Official List, the AIM Rules do not require an admission document to be published by the Company in connection with the Company's admission to trading on AIM. However, the Company will publish an announcement which complies with the requirements of Schedule One to the AIM Rules comprising information required to be disclosed by companies transferring their securities from the Official List, as an AIM Designated Market, to AIM.

Although it is their intention, there is no guarantee that the Directors will be successful in achieving admission of the Ordinary Shares to trading on AIM or that the conditions in the Placing Agreement will be satisfied (or if applicable waived).

4. Details of the Debt Conversion and Bridging Facility

The Directors have concluded that the Company's existing financing structure is unsustainable given the current trading performance, and the scheduled resumption of debt amortisation payments in November 2013, with Superglass due to repay £8.2 million of debt, in aggregate, over the three years to November 2016.

The Debt Conversion (in respect of £5.725 million of outstanding indebtedness), the early repayment of £3.0million of bank debt and the Placing will together result in a reduction in core debt of £8.725 million and net cash at Admission of circa £5.9 million, assuming the Bridging Facility described below has been fully drawn at that point.

The headline terms of the Debt Conversion are as follows:

·; the conversion of £5.725 million of the outstanding borrowings from Clydesdale Bank into a total of 2,800,757 Convertible Shares which, subject to certain conditions, will have rights of conversion into 2,800,757 Ordinary Shares, representing a value of circa £1.4 million at the Placing Price. The Convertible Shares will be convertible during the period beginning on the second anniversary of the date of issue of the Convertible Shares and ending on 30 April 2023, or, if made on or before 20 April 2023, on repayment in full of all amounts outstanding under the Revised Committed Facilities. Since all of the Convertible Shares will be subscribed for at Admission, no further subscription monies will be payable on conversion of such shares;

·; the early repayment of £3.0 million of debt by the Company to Clydesdale Bank from the Placing proceeds;

·; the amendment of the terms of the residual £2.5 million bank facility, which will be a non-amortising loan with a bullet repayment due on 30 April 2018;

·; the Lender will have the right to receive 50 per cent. of the Company's profits after tax (excluding exceptional items), commencing from the year ending 31 August 2014, in permanent reduction of the loan; and

·; the conversion of the Lender's Existing Convertible Shares into Deferred 20p Shares.

The Lender is also waiving its right to receive £0.75 million of fees from the Company which would otherwise have been payable in the future.

In the event that notice is not served to convert the Convertible Shares into Ordinary Shares in the required period, then the conversion rights shall lapse and the Convertible Shares shall be converted into Deferred 25p Shares with no value.

The Lender is also providing the Bridging Facility to the Company, comprising a committed £750,000 short term facility available from the time the Resolutions are passed until Admission to fund the Company's short term cash requirements. The Lender has confirmed that the Bridging Facility will not be extended beyond the expected date of Admission of 4 June 2013.

The Convertible Shares will be entitled to participate in a return of capital and, following an entitlement to convert into Ordinary Shares arising, the appropriate number of Convertible Shares will be entitled to participate in dividends and other distributions of profits pari passu with the Ordinary Shares then in issue. The Convertible Shares will be entitled to participate in a future fund raising of the Company but will have no voting rights, save in limited circumstances. The Convertible Shares will have rights of conversion into Ordinary Shares such that, if all of the Convertible Shares were to be converted, the resulting interest in Ordinary Shares held by Clydesdale Bank would be 2,800,757 Ordinary Shares, equivalent to 10 per cent. of the Enlarged Issued Share Capital at Admission, subject to any adjustments required to take account of share consolidations, subdivisions or bonus issues of new Ordinary Shares in the capital of the Company following the issue of the Convertible Shares.

The Convertible Shares will not be listed on the Official List nor will they be admitted to trading on an investment exchange.

5. Capital Reorganisation

The Placing Price is equivalent to 2 pence per Ordinary Share on a pre-Share Consolidation basis, which would represent a discount of 90 per cent. to the current nominal value of the Existing Ordinary Shares of 20 pence each on a comparable basis before taking into account the Share Consolidation. The Act prohibits the allotment of shares at a discount to their nominal value and it is therefore proposed to reorganise the share capital of the Company by subdividing each Existing Ordinary Share into one ordinary share of one penny each and one Deferred 19p Share.

Save for the dilution which will result from the issue of the Placing Shares and Convertible Shares (if converted), the interests of existing Shareholders (both in terms of their economic interest and voting rights) will not be diluted by the implementation of the Capital Reorganisation and each New Ordinary Share will have the same rights (including voting and dividend rights) as each Existing Ordinary Share has at present.

Resolution 2 will be proposed at the General Meeting for the purpose of the Capital Reorganisation and Resolution 4 will be proposed to approve the adoption of the New Articles as referred to below.

In order to effect the Capital Reorganisation, the Company proposes to adopt the New Articles which will consist of the existing articles of association of the Company amended to include the rights of the Deferred 19p Shares. These rights will be minimal, thereby rendering the Deferred 19p Shares effectively valueless.

The rights attaching to the Deferred 19p Shares can be summarised as follows:

·; they do not entitle holders to receive any dividend or other distribution or to receive notice or speak or vote at general meetings of the Company;

·; they have no rights to participate in a return of assets on a winding up;

·; they are not freely transferable;

·; the creation and issue of further shares will rank equally or in priority to the Deferred 19p Shares;

·; the passing of a resolution of the Company to cancel the Deferred 19p Shares or to effect a reduction of capital shall not constitute a modification or abrogation of their rights; and

·; the Company shall have the right at any time to purchase all of the Deferred 19p Shares for an aggregate consideration of £0.01.

No application will be made to the London Stock Exchange for the Deferred 19p Shares to be admitted to trading on AIM or any other stock exchange. No share certificates will be issued for any Deferred 19p Shares. There are no immediate plans to purchase or to cancel the Deferred 19p Shares, although the Directors propose to keep the situation under review.

A copy of the New Articles proposed to be adopted by Resolution 4 will be available for inspection at the General Meeting and will be made available free of charge on the Company's website at www.superglass.co.uk.

6. Share Consolidation

Under the Proposals, it is intended that the Company will undertake a share consolidation such that every 25 Post-Capital Reorganisation Shares will be consolidated into one New Ordinary Share. The purpose of the Share Consolidation is to reduce the total number of shares in issue.

The Directors believe that this may reduce the volatility in the price of the Company's Ordinary Shares and may ensure that the price of the Ordinary Shares is more appropriate than would otherwise have been the case following the Proposals.

Following the Share Consolidation and prior to the issue of the Placing Shares, the Company's issued ordinary share capital will comprise 2,007,577 Ordinary Shares of 25 pence each in the capital of the Company. Fractional entitlements to Ordinary Shares will, so far as possible, be aggregated and be sold at the best price reasonably obtainable in the market for the benefit of the Company.

Following completion of the Share Consolidation, new share certificates will be issued to those existing Shareholders who hold their shares in certificated form. The Share Consolidation is conditional upon the approval of the Shareholders at the General Meeting. Due to the interconditionality of the Resolutions proposed at the General Meeting, all such Resolutions will need to be passed in order for the Share Consolidation to take effect.

7. Related Party Transaction

W & R Barnett and Michael Chadwick are related parties of the Company for the purposes of the Listing Rules as they have existing shareholdings in the Company that are greater than 10 per cent., being 22.3 per cent. and 11.2 per cent., respectively. Therefore their proposed participation in the Placing will require Shareholder approval. It is proposed that W & R Barnett and Michael Chadwick will participate in the Placing in respect of 7,000,000 and 500,000 Placing Shares, respectively. W & R Barnett and Michael Chadwick will abstain, and will take all reasonable steps to ensure that their associates (as defined in the Listing Rules) will abstain, from voting at the General Meeting in relation to the resolution for the approval of the Related Party Transaction.

The Board considers, having been so advised by the Company's sponsor N+1 Singer, the terms of the Related Party Transaction to be fair and reasonable as far as the Shareholders are concerned. In providing advice to the Directors, N+1 Singer has taken into account the commercial assessment of the Directors.

8. Use of proceeds

The proceeds of the Placing of £12.9 million will be used for the repayment of outstanding debt, and for investment in working capital, as set out below:

9. Information on the Placing

The Company is proposing to raise £12.9 million by way of a placing of 25,800,000 Ordinary Shares at the Placing Price. The Placing Shares will represent approximately 92.1 per cent. of the Enlarged Issued Share Capital of the Company. The Placing Price is equivalent to 2 pence per Existing Ordinary Share and is the same as the comparable Closing Price (before taking into account the Share Consolidation) of 2 pence per Existing Ordinary Share as at 2 May 2013 (being the last Business Day prior to the announcement of the Placing).

In connection with the Placing, the Company has entered into the Placing Agreement pursuant to which N+1 Singer has agreed, in accordance with its terms, to use reasonable endeavours to place the Placing Shares with certain institutional and other investors.

The Placing is conditional, inter alia, on:

·; the passing of the Resolutions;

·; the conditions in the Placing Agreement being satisfied or (if applicable) waived and the Placing Agreement not having been terminated in accordance with its terms prior to Admission; and

·; Admission becoming effective by no later than 8.00 a.m. on 4 June 2013 (or such later time and/or date, being no later than 8.00 a.m. on 30 June 2013, as the Company and N+1 Singer may agree).

The Placing Agreement contains customary warranties given by the Company to N+1 Singer as to matters relating to the Group and its business and a customary indemnity given by the Company to N+1 Singer in respect of liabilities arising out of or in connection with the Placing. N+1 Singer is entitled to terminate the Placing Agreement in certain circumstances prior to Admission including circumstances where any of the warranties are found not to be true or accurate or were misleading in any material respect.

The Placing Shares will be issued credited as fully paid and will rank in full for all dividends and other distributions declared, made or paid after the admission of the Placing Shares in respect of the Ordinary Shares and will otherwise rank on Admission pari passu in all respects with the Ordinary Shares. The Placing Shares are not being made available to the public and are not being offered or sold in any jurisdiction where it would be unlawful to do so.

Application will be made to the London Stock Exchange for the New Ordinary Shares (including the Placing Shares) to be admitted to trading on AIM. On the assumption that, inter alia, the Resolutions are passed, it is expected that Admission will become effective on or around 4 June 2013.

Alex McLeod, Chief Executive, and Allan Clow, Finance Director, have each given undertakings to use at least two thirds of the net of tax amount of any cash bonus received in respect of the three financial years ending 31 August 2016 to purchase Ordinary Shares in the market, any such shares to be retained for at least 18 months following acquisition of such shares, except in circumstances where their employment with the Company is terminated other than for cause.

10. Consequences of the move to AIM

Following Admission, the Company will be subject to the AIM Rules. Shareholders should note that AIM is self-regulated and that the protections afforded to investors in AIM companies are less rigorous than those afforded to investors in companies listed on the premium segment of the Official List.

While for the most part the obligations of a company whose shares are traded on AIM are similar to those of companies whose shares are listed on the premium segment of the Official List, there are certain exceptions, including those referred to below:

·; Under the AIM Rules, prior shareholder approval is required only for: (i) reverse takeovers (being an acquisition or acquisitions in a twelve month period which would: (a) exceed 100 per cent. in various class tests; or (b) result in a fundamental change in the company's business (being disposals that exceed 75 per cent. in various class tests), board or voting control; or (ii) disposals which, when aggregated with any other disposals over the previous twelve months, would result in a fundamental change of business. Under the Listing Rules, a more extensive range of transactions, including certain related party transactions, are conditional on shareholder approval and require the publication of a detailed circular.

·; There is no requirement under the AIM Rules for a prospectus or an admission document to be published for further issues of securities to institutional investors, except when seeking admission for a new class of securities or as otherwise required by law.

·; Unlike the Listing Rules, the AIM Rules do not specify any required structures or discount limits in relation to further issues of securities.

·; Compliance with the UK Corporate Governance Code is not mandatory for companies whose shares are admitted to trading on AIM.

·; The ABI Guidelines, which give guidance on issues such as executive compensation and share based remuneration, corporate governance, share capital management and the issue and allotment of shares on a pre-emptive or non pre-emptive basis, do not apply directly to companies whose shares are admitted to trading on AIM.

·; The AIM Rules require that AIM companies retain a nominated adviser and broker at all times.

·; There is no specified requirement for a minimum number of shares in an AIM company to be held in public hands, whereas a company listed on the Official List has to maintain a minimum of 25 per cent. of its issued ordinary share capital in public hands.

·; Certain securities laws will no longer apply to the Company following Admission; for example, the Disclosure and Transparency Rules ("DTR") (save that DTR Chapter 5 in respect of significant shareholder notifications will continue to apply to the Company). This is because AIM is not a regulated market for the purposes of the European Union's directives relating to securities.

·; Companies whose shares trade on AIM are deemed to be unlisted for the purposes of certain areas of UK taxation. Following the Delisting and Admission, individuals who hold Ordinary Shares may, provided that the two year holding period is satisfied, therefore be eligible for certain inheritance tax benefits. Shareholders and prospective investors should consult their own professional advisers on whether an investment in an AIM security is suitable for them, or whether the tax benefit referred to above may be available to them. In particular, they should note that it is not possible to hold shares traded solely on AIM in an Individual Savings Account ("ISA"). The Directors understand that, following Admission, Shareholders will, under current HMRC guidance, have 30 days to decide whether to transfer their shareholding in the Company into their own name or to sell the holding and retain the proceeds within the relevant ISA.

·; The cancellation may have implications for Shareholders holding shares in a Self-Invested Personal Pension ("SIPP"). For example, shares in unlisted companies may not qualify for certain SIPPs under the terms of that SIPP and, if in any doubt, Shareholders should consult with their SIPP provider immediately.

The comments on the tax implications described in this announcement are based on the Directors' current understanding of tax law and practice, are not tailored to any individual circumstances and are primarily directed at individuals who are UK resident and domiciled. Tax rules can change and the precise tax implications for you will depend on your particular circumstances. If you are in any doubt as to your tax position, you should consult your own independent professional adviser.

Following Admission, Ordinary Shares that are held in uncertificated form will continue to be held and dealt through CREST.

11. Dilution resulting from the Proposals

The Placing will result in a very significant dilution of the proportionate holdings of existing Shareholders who do not participate in the Placing. Existing Shareholders will experience dilution of approximately 92.8 per cent. on completion of the Proposals.

Furthermore, the Convertible Shares are convertible into Ordinary Shares in certain circumstances. If such conversion takes place, the interests of Shareholders would be diluted by a further 9.1 per cent. 

12. General Meeting

Set out at the end of the Circular is a notice convening the General Meeting of the Company to be held at 10.00 a.m. on 20 May 2013 at the offices of Maclay Murray & Spens LLP, Quartermile One, 15 Lauriston Place, Edinburgh EH3 9EP, at which the Resolutions summarised below will be proposed:

Resolution 1 - disapplication of pre-emption rights

A special resolution to disapply statutory shareholder pre-emption rights in relation to the issue of the 25,800,000 New Ordinary Shares pursuant to the Placing and the issue of the 2,800,757 Convertible Shares to Clydesdale Bank and otherwise, up to an aggregate nominal amount of £7,497,783.75.

Resolution 2 - approval of the Capital Reorganisation

A special resolution to approve the Capital Reorganisation.

Resolution 3 - approval of the conversion of Existing Convertible Shares into Deferred 20p Shares

A special resolution to convert the Existing Convertible Shares into Deferred 20p Shares.

Resolution 4 - adoption of the New Articles

A special resolution to approve the adoption of the New Articles containing, amongst other things, provisions relating to the Convertible Shares and the Deferred 19p Shares.

Resolution 5 - authority to allot

An ordinary resolution to authorise the Directors to allot New Ordinary Shares in the Company in connection with the Placing, the issue of Convertible Shares to Clydesdale Bank and otherwise, up to an aggregate nominal value of £9,444,314.25, representing 94.1 per cent. of the total issued ordinary share capital of the Company (as at 2 May 2013, being the last Business Day prior to the publication of this circular). This authority will expire at the conclusion of the next annual general meeting of the Company.

Resolution 6 - approval of the Related Party Transaction

An ordinary resolution to authorise the Related Party Transaction.

Resolution 7 - consolidation of share capital

An ordinary resolution to consolidate every 25 Post-Capital Reorganisation Shares into one New Ordinary Share of 25 pence per share.

Each of the Resolutions is conditional on the other Resolutions being passed so that, if one or more of the Resolutions is not passed, none of the Resolutions will become effective and the Proposals will not be implemented.

13. Irrevocable Undertakings

Each of Tommy Conway, Ennismore Fund Management Ltd. and Lazard Asset Management Ltd. have given an irrevocable undertaking to vote in favour of the Resolutions in respect of their own beneficial holdings of Existing Ordinary Shares, together totalling 6,248,189, representing in aggregate 12.5 per cent. of the issued Existing Ordinary Shares.

Each of W & R Barnett and Michael Chadwick have given an irrevocable undertaking to vote in favour of the Resolutions, excluding Resolution 6 to approve their participation in the Placing (which constitutes a related party transaction under the Listing Rules), in respect of their own beneficial holdings of Existing Ordinary Shares, together totalling 16,782,390, representing in aggregate 33.4 per cent. of the Existing Ordinary Shares.

14. Importance of the vote

If all of the Resolutions are not passed, the Proposals cannot be implemented. In such a situation the Group would be in breach of its Bridging Facility and would also be in default under all of its banking facilities with Clydesdale Bank, which would then become repayable on demand, and the Group would have insufficient cash resources to enable it to continue to trade. In such an event, the Board believes that alternative sources of funding are unlikely to be available and that the Group would enter into some form of formal insolvency proceedings as soon as practicable following the General Meeting, with the Existing Ordinary Shares consequently having no economic value.

15.  Recommendation

The Board believes that the Proposals are in the best interests of the Company and its Shareholders as a whole. The Directors stress that it is very important that Shareholders vote in favour of the Resolutions at the General Meeting to be held on 20 May 2013. It is likely that failure to pass the Resolutions would lead to Shareholders' Existing Ordinary Shares having no value and is likely to lead to the Company entering into administration or some other form of insolvency procedure. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting.

Expected Timetable of Principal Events

Issue Statistics

Definitions