RNS Number:0555F
Freeplay Energy PLC
23 June 2006
23 June 2006
Freeplay Energy plc
Proposed Acquisition of Barrett Marketing Company Inc.
Placing to raise #2.54 million (net of expenses)
Introduction
Freeplay Energy plc ("Freeplay" or "the Company"), the sustainable energy
company that captures, stores and delivers electric power to self-powered
devices such as radios, torches and mobile phone chargers, is pleased to
announce that it has agreed, subject to shareholder approval, to acquire the
entire issued share capital of Barrett Marketing Company Inc. ("BMGI") and its
wholly owned subsidiary, Dixie Sales Company Inc. ("Dixie").
The Company also announces the Placing of 11,397,358 shares with institutional
and other investors, raising #2.54 million net of expenses. The expected market
capitalisation of the Company, at the Placing Price, is #14.4 million.
Highlights
* Dixie is an established sales, marketing, distribution and customer
service provider based in Greensboro, North Carolina, USA. Dixie provides a
full range of services to its customers and suppliers, which includes
customer and supplier account management, customer and supplier logistics,
consumer call centre services and technical services, such as training and
education to customers.
* As at 21 June 2006, Freeplay's total sales book, including product
shipped, orders received and placed on the factory and orders received and
not yet placed on the factory, pending release of funds, was approximately
US$6.1 million for the financial year to date.
On 12 May 2006, Freeplay announced it has entered into a distribution agreement
with WP Phones for its FreeCharge mobile phone charger in sub-Saharan Africa.
The five year agreement will provide Freeplay with minimum annual sales through
WP Phones of one million units per annum. It is anticipated that the first
shipment will be made in the last quarter of 2006. The agreement was extended on
12 June 2006 to cover the Caribbean for an additional 100,000 units of the
FreeCharge mobile phone charger. The total agreement is now for a minimum of
1.1 million units per annum over the next five years.
* Orders received since 23 May 2006 include a further order of US$143,000
for a range of products to the EU, an AID order of Lifeline radios of
US$300,000 and a US$317,000 order, through Tango Group, for the supply of
Ranger radios and Kito flashlights to the UK Ministry of Defence. These new
orders bring Freeplay's total sales book to US$6.1 million, including US$1.4
million for Freeplay's AID and Humanitarian division.
* The Board's strategy is to develop Freeplay into a broad based
sustainable energy company, accomplished through the establishment of its
own self-powered products in the market and the formation of strategic
alliances or acquisitions with partners to develop, manufacture and supply
sustainable energy products.
* Peter Porteous, CEO of Dixie, will be appointed chief executive of the
enlarged group and the Board will be further strengthened by the appointment
as non executive directors of both William and Edward Barrett, Harold
Reiter, Barrett Corporation President and COO of Barrett Corporation and
Stuart Kinney, Barrett Corporation General Counsel. Both Rory Stear and
Richard Court remain as Executive Chairman and Finance Director respectively
and, with the exception of Baroness Chalker and John Hutchinson, the
Freeplay directors will stay in their current positions.
* The acquisition is classified as a reverse takeover for the purposes of
the AIM Rules because of the size of Dixie in relation to the existing size
of Freeplay. As a result of this, the Directors requested that the Ordinary
Shares be suspended from trading on 18 May 2006.
* The acquisition, as a result of being a reverse takeover, is conditional
upon the approval of Shareholders at the EGM, which will take place on 17
July 2006.
* The Company is also pleased to announce that it proposes to raise up to
approximately #2.54 million (net of expenses) by the issue of up to
11,397,358 new Ordinary Shares at 29 pence each by way of a Placing.
* The net proceeds of the placing will be used to fund working capital and
investment needs of the enlarged group and to augment its working capital
facilities.
Rory Stear, Chairman and Chief Executive of Freeplay Energy plc, commented:
"Freeplay already has a proven track record in the development of self-powered
energy products, a portfolio of products and an expanding international
distribution base. The acquisition of Dixie and the fundraising mark a
step-change for Freeplay, giving us direct control in North American over our
sales targets, through Dixie's strong formal relationships with many US
retailers and merchants.
"Freeplay will also benefit from Dixie's marketing and operational expertise,
which, allied with Dixie's focus on distribution, its customer service
capability and its strong management team, will give Freeplay the added impetus
we need to ensure the success of the Group, particularly in North America. The
Acquisition is a milestone development for Freeplay and it brings us significant
further capability in order that we can achieve our vision of developing into a
broad based sustainable energy company".
- Ends -
For further information, please contact:
Freeplay Energy plc 020 7851 2630
Rory Stear, Chairman and Chief Executive
Charles Stanley & Co 020 7739 8200
Mark Taylor or Freddy Crossley
Weber Shandwick Square Mile 020 7067 0700
Louise Robson or Rachel Taylor
Notes to Editors
Freeplay Energy's core technology revolves around the efficient conversion and
storage of applied human energy, and the delivery of this energy on demand as
electricity to create self-powered electronic devices. Initial applications
include radios (both consumer and humanitarian), torches, mobile phone chargers
and standalone foot chargers and the Company has a new product development plan
which anticipates broadening the application of its technology into new product
categories. Freeplay believes it was first to market and commercialise
self-powered technology and that it is recognised as a leading brand in this
market for such products.
Established in 1994, the Company today has offices in both London and Cape Town
and floated on AIM (AIM: FRE), a market operated by the London Stock Exchange
plc, in March 2005. Further information about Freeplay Energy and its products
can be found at www.freeplayenergy.com.
23 June 2006
Freeplay Energy plc
Proposed acquisition of Barrett Marketing Company Inc.
Placing to raise #2.54 million (net of expenses)
INTRODUCTION
It was announced on 18 May 2006 that the Company has agreed, subject inter alia
to Shareholder approval, to acquire the entire issued share capital of BMGI.
Dixie, a wholly owned subsidiary of BMGI, is a well established brand building,
marketing, sales, order management and parts and wholesale distribution company
based in North Carolina, USA.
The Acquisition is classified as a reverse takeover for the purposes of the AIM
Rules because of the size of Dixie in relation to the existing size of the
Company. As a result of this, the Directors requested that the Ordinary Shares
be suspended from trading on 18 May 2006, pending publication of the Admission
Document, which contains details of the Proposals. The Acquisition, as a result
of being a reverse takeover, is conditional upon the approval of Shareholders at
the EGM.
The Company is also pleased to announce that, subject inter alia to Shareholder
approval, it proposes to raise up to approximately #2.54 million (net of
expenses) by the issue of up to 11,397,358 new Ordinary Shares at 29 pence each
by way of a Placing. 11,067,358 new Ordinary Shares have been conditionally
placed with institutional and other investors by Charles Stanley and 330,000 new
Ordinary Shares have been placed with certain Directors by the Company at the
Placing Price.
The net proceeds of the Placing will be used to fund the working capital and
investment needs of the Enlarged Group and to augment its working capital.
The Acquisition, if approved by Shareholders, will result in the Barrett
Corporation (through its wholly owned subsidiary Barrett Marketing Group Ltd)
holding 35.26 per cent. of the Enlarged Issued Ordinary Share Capital.
An EGM has been convened for 11.00 a.m. on 17 July 2006, at which Shareholders
will be asked to consider the Resolutions necessary to approve and implement the
Proposals. A notice of EGM is set out at the end of this document.
REASONS FOR THE ACQUISITION
Freeplay has a proven track record in the development of self-powered energy
products and has a portfolio of self-powered products and an expanding
international distribution base. The Board's strategy is to develop Freeplay
into a broad based sustainable energy company. This strategy will be
accomplished through the establishment of its own self-powered products in the
market and the formation of strategic alliances or acquisitions with partners to
develop, manufacture and supply sustainable energy products.
The Board believes that distribution strength will be a key area in ensuring the
success of the Group and that, in particular, North America will be a key market
for the distribution of the Group's existing products and other future
sustainable energy products. In addition, the Board believes that the North
American market will be key to Freeplay's commercial and financial success.
In 2005, after a review of the Group's North American distribution, Freeplay
entered into an agreement with Dixie to distribute Freeplay's products in North
America. Dixie has been successful in securing some major listings of Freeplay's
products with large North American retailers, including Target Corp who will be
rolling out the Kito flashlight in 200 stores, Macys Midwest who will be rolling
out 3 SKU's into 86 US stores; Sharper Image who have listed the EyeMax radio
across their stores and their website and REI, a leading US sporting goods
retailer.
Dixie is a North American focused distribution company, which includes a call
centre, multi-location warehouses and a strong management team. The Acquisition
will provide the Enlarged Group with strong formal relationships with many US
retailers and merchants and furthermore, Dixie will provide the business with a
strong track record in sales and marketing strategy and execution. As a result
of the Acquisition, the Enlarged Group will be well placed to maximise sales and
distribution opportunities for both Freeplay's existing and future products in
the US.
On Admission, Peter Porteous, CEO of Dixie will be appointed chief executive of
the Enlarged Group and the Board will be further strengthened by the appointment
of both William and Edward Barrett, Harold Reiter, Barrett Corporation President
and COO of Barrett Corporation and Stuart Kinney, Barrett Corporation General
Counsel. These additions to the Board will provide valuable sales, marketing and
distribution experience that is required to enable the delivery of the Enlarged
Group's strategy of developing a sustainable energy development, sales,
marketing and distribution company.
INFORMATION ON DIXIE
Overview
BMGI will directly own the entire issued share capital of Dixie upon completion
of the Acquisition Agreement. The Dixie shares are owned by an intermediary
holding company, BDS which, in accordance with the Acquisition Agreement, will
be dissolved and liquidated prior to completion so that the BMGI Group will
consist of BMGI, Dixie and Mower MD a joint venture in which Dixie has a 50 per
cent. interest. On Admission, Dixie and Mower MD will be the only trading
entities within the BMGI Group.
History
The business of Dixie was founded in 1914 and Dixie was incorporated in 1950. In
2001 the Barrett Corporation acquired 75 per cent. of Dixie and in 2005 it
acquired the remaining 25 per cent. of Dixie from Jim Starmer, the president of
Dixie.
Operations
Dixie is an established sales, marketing, distribution and customer service
provider based in Greensboro, North Carolina, USA. Dixie provides a full range
of services to its customers and suppliers, which includes customer and supplier
account management, customer and supplier logistics, consumer call centre
services and technical services such as training and education to customers.
Dixie also has electronic ordering and e-commerce tools.
Dixie's core business includes the sales and marketing of parts to the lawn and
garden industry, hand held power tools, generators and as a distributor for
whole goods such as scooters, quad bikes, go-karts and hand held lawn and garden
equipment on behalf of manufacturers. These parts are sourced from large
manufacturers and distributed via private carrier or postal services to
customers all over the USA and Canada. In addition, Dixie provides customer care
and repair centre network management to a number of its clients.
Dixie's headquarters and main warehouse are based in Greensboro, North Carolina,
USA. Dixie also operates a further three warehouses based in Florida, Tennessee
and Ontario under a service agreement. This network of locations enables Dixie
to arrange for the delivery of goods to over half of the USA in one day and over
two thirds of the USA within two days (Source: UPS website).
Dixie's service offerings are as follows:
Sales and Marketing
Dixie sells a wide range of products including parts to the lawn and garden
industry and handheld power tools. In addition, Dixie markets and sells a range
of finished goods such as scooters, quad bikes, go-karts and hand held lawn and
garden equipment. These products are sourced from both domestic and
international manufacturers. Sales are completed through three main channels
including an extensive dealer network (consisting of approximately 11,000
dealers in the United States and 800 dealers in Canada), national mass merchant
retailers and direct to the consumer through the use of its call centre and a
newly redesigned web-site.
Dixie's major suppliers include MTD Consumer Inc. (Products include: Cub Cadet,
Troy-Bilt, YardMan, YardMachine, White Outdoor, McCullouch), Electrolux Home
Products (Products include: Poulan, Poulan Pro, WeedEater) and Komatsu Zenoah
America (Products include: RedMax).
Over the past few years Dixie has made significant investment in enhancing its
IT capability, which has enabled Dixie to integrate its IT platform with that of
the customer. In addition, Dixie has improved its web site ("Ordertree.com"),
which has been a factor in the double-digit growth of the consumer direct
channel over the past year. In the year ended 31 December 2005 electronic
ordering represented approximately 20 per cent. of total sales, compared with
approximately 2 per cent. four years ago. The consumer direct channel (database)
now consists of approximately 400,000 customers.
Dixie uses EDI or direct system access ordering with most of its major client
relationships that results in reduced cost and improved processing time.
Customer Care
Dixie operates a call centre staffed by approximately 100 highly trained
customer service agents that handled approximately 1.1 million calls in 2005
from call centres located in Greensboro, North Carolina and through a service
agreement with personnel in Woodstock, New Brunswick. The customer service team
provides services such as:
- Responding to queries to the manufacturer's 1-800 customer care line;
- Placing of orders;
- Technical assistance to the customer to ensure that the correct part is ordered;
- Proper routing of consumers to a certified repair centre;
- General technical assistance to customers (end users); and
- Warranty registration and claim processing.
Fulfilment
Dixie distributes its goods through three US distribution centres located in
North Carolina (Greensboro), Tennessee, Florida and one in Ontario (Canada)
through a service agreement. Dixie currently manages the distribution of
approximately 450,000 SKU's and provides fulfilment ordering that results in the
capability of delivering goods from orders placed up to 6.00 p.m. the previous
evening to approximately one half of the US (the next day). The length of time
taken to fulfil an order is particularly important for national mass merchant
retailers and dealers. In addition Dixie achieved a 'fill rate' (product on hand
available to ship in its entirety at time of order placement) of approximately
93 per cent. in the year ended 31 December 2005, compared to the industry norm
of approximately 90 per cent. This results in improved shipping economics and
more importantly enhanced customer satisfaction.
The combination of Dixie's service offerings has made it the partner for many
manufacturers, dealers and national mass merchants. For example, one national
mass merchant has advised its suppliers that Dixie is the partner of choice to
provide the special parts order solution. In addition, several manufacturers
compensate Dixie for access to its extensive dealer network and customer
database.
Dixie entered into an exclusive distribution agreement with Freeplay in respect
of the sale of Freeplay's products in North America commencing in May 2005.
Under this agreement Freeplay reimburses Dixie in respect of certain costs in
return for which Freeplay receives a share of the profit generated by the
relationship.
Market background
Overview of marketplace
Dixie's core market is the development and management of dealer/repair centres.
It also handles the sales of parts and accessories through a number of different
sales channels, including independent dealer/repair centres, mass retailers,
branded national service centre solutions, such as AltaQuip and directly with
end consumers. A significant portion of category sales are now controlled by the
national mass retailers. Dixie is evolving its business to reflect and
capitalise on these market changes while reducing risk in the distribution
business. The mass retailer and consumer direct channels offer stronger gross
margin and sales growth potential. Dixie is able to offer a one stop North
American service solution for manufacturers and retailers.
Competitors
Current competition tends to specialise in targeted areas or primary product
lines. The dealer channel is a very competitive market place with many different
companies/sources competing for repair centres purchases. Competition can arise
from alternate sources of OEM, competing OEM brands or aftermarket product. The
competitive environment is less crowded with respect to providing service/parts
program solutions for the mass retailers or one stop North American service
execution.
Competitive factors
For all channels access to quality information and trained/certified personnel
are key differentiators. The dealer channel seeks competitive pricing, high fill
rate, timely shipping and receipt of product. The mass retailer is looking for a
partner who can execute across a number of brands (category solution)
consistently for all of their stores (national solution). The retail direct
customer is searching for competitive pricing, excellent information/answers and
prompt service and product delivery.
Current trading and prospects
Dixie's key strategy is to focus on developing new distribution channels for its
business by:
- increasing direct sales to consumers through its online sales portal
www.ordertree.com;
- continued skill enhancement of customer care and sales teams;
- developing its relationships with national retailers and service only
providers. In the year ended 31 December 2005, sales to national retailers
grew by 66 per cent. as a result of a focused mass retailer customer care
team, proactive store clerk education of the support/business building tools
available through Dixie and the launch of a new, advertised consumer direct
parts hotline for Lowes; and
- expanding and enhancing relationships with the core dealer/repair centre
customer base. This sector represents approximately 70 per cent. of Dixie's
business.
Senior Management of Dixie
Peter Porteous (age 43), Chief Executive Officer
Peter Porteous joined Barrett Corporation in 1989 where latterly he was the
President of the Barrett Marketing Group Ltd. When Barrett Corporation purchased
Dixie in 2001, Peter Porteous became the Chief Executive Officer of Dixie. Prior
to his involvement with Barrett Corporation, he was Director of Marketing at
Kraft Foods, where he gained significant experience in sales, distribution and
marketing. He studied for his commerce degree at the Carleton University,
graduating in 1986 and has been a member of YPO (Young Presidents Organisation)
since 2002.
Jim Starmer, (age 59), President
Jim Starmer has been involved with Dixie since 1969 and has substantial
experience in the distribution industry which is combined with technical
expertise. He also has significant industry contacts and manages important
vendor relationships.
Mike Rounsavall (age 45), General Manager
Mike Rounsavall graduated in 1983 from the North Carolina State University with
a degree in economics. In 1994 he undertook an MBA at the University of North
Carolina, becoming an MBA Professor at the Youngstown State University, Ohio in
2002. Mike Rounsavall joined Dixie in March 2005 having been the Vice President
of Operations and Technology at the Ohio division of Alphabet Inc, a large
manufacturing company. The division generated US$200 million of revenue from US,
Mexican and Brazilian locations. He was responsible for 2,000 employees
supplying market leaders in the heavy truck and agricultural markets.
Laura Garrett (age 44), Chief Financial Officer
Laura Garrett graduated from the University of North Carolina with a degree in
business and accounting. She qualified as a Certified Public Accountant in 1986
whilst working for Breslow Starling Frost Warner Boger Hiatt who are the current
auditors of Dixie. Laura Garrett began working for Dixie in September 1995 and
is responsible for the finance and accounting function.
Craig Stewart (age 48), Manager Dealer Sales General
Craig Stewart joined Dixie in 2001 having worked for the Barrett Corporation
since 1988. He is responsible for the entire dealer sales channel, managing
accounts, marketing, sales, program management and customer care.
Mark Brennan (age 36), Manager, Retail Sales and Canada
Mark Brennan joined Barrett in 1999 and has been working exclusively on the
Dixie business through a service agreement since 2004. He graduated in business
marketing in 1994 from the New Brunswick College and is responsible for the
operation of the retail, mass retail and Canadian businesses.
Doug Holmes (age 43), Manager, Procurement and Productivity
In 1984 Doug Holmes graduated from the Eastern Carolina University with a degree
in industrial technology. He previously worked for Alphabet Incorporation and
was a Senior Program Manager before joining Dixie in November 2005. Whilst
working for Alphabet, he was responsible for co-ordinating Mexican associates
and plant management. At Dixie, he is responsible for managing stock levels and
productivity. He was recruited to add experience and the necessary skills to the
stock operations.
David Stephens (age 39), Manager IT & Operations
David Stephens has a degree in electrical engineering from the North Carolina
State University. Before joining Dixie in March 2002, he worked for Signum, a
North Carolina company as Business Unit Manager. David Stephens played a major
role in upgrading Dixie's operating platform and implemented a new call centre
operating system. David Stephens is also responsible for the operation of all of
Dixie's warehouse branches.
Doug Azbell (age 41), Business Manager - Freeplay
Doug Azbell graduated from the Anderson University in Indiana with a management
degree. He was a sales manager between 1992 and 1998. Doug Azbell is now the
Project Manager of Freeplay.
Darla Fain (age 39), Manager, Human Resources
Darla Fain obtained a business degree specialising in human resources from the
Indiana University. She is currently studying for a masters degree in
organisational development at the Case Western University, Cleveland. She joined
Dixie in 1999 and is responsible for payroll, recruitment, appraisal and staff
welfare. Darla has two HR administrative assistants.
Principal terms of the Acquisition Agreement
On 17 May 2006 the Company entered into the Acquisition Agreement with BMG, a
wholly owned subsidiary of Barrett Corporation, for the purchase of the entire
issued share capital of BMGI, which, through a wholly owned subsidiary, BDS,
owned the entire issued share capital of Dixie. Under the terms of the
Acquisition Agreement, the Company agreed to a consideration which will be due
to BMG consisting of the Consideration Shares and US$1.084 million by way of a
promissory note secured over the shares in and assets of Dixie.
Prior to completion of the Acquisition, certain liabilities in BMGI will be
assumed by BMG and BMGI will be released from these liabilities. These include
amounts due to James E Starmer, Jr and Richard L Starmer pursuant to certain
promissory notes in connection with BMG's acquisition of Dixie and certain
intercompany loans due from BMGI to BMG.
The Acquisition Agreement contains warranties and indemnities from BMG in favour
of Freeplay and certain warranties and indemnities from the Company in favour of
BMG in respect of itself. The Acquisition is conditional, inter alia, on the
passing of the Resolutions and Admission.
The 17,559,131 Consideration Shares to be issued pursuant to the Acquisition
Agreement will represent approximately 35.26 per cent. of the Enlarged Issued
Ordinary Share Capital and will, when issued, rank pari passu in all respects
with existing Ordinary Shares then in issue, including all rights to all
dividends and other distributions declared, made or paid following Admission.
Financial information
Year ended 31 December
2005 2004 2003
US$'000 US$'000 US$'000
Turnover 40,622 35,318 36,975
Gross profit 12,743 10,629 10,782
Operating profit 1,111 521 252
Profit/(loss) before taxation 677 206 (13)
As at 31 December 2005, Dixie had gross assets of US$18.3 million.
INFORMATION ON FREEPLAY
History
In April 1994, Chris Staines and Rory Stear began to develop and commercialise
the technology of Trevor Baylis' wind-up radio following a feature on BBC1's
Tomorrow's World programme.
In February 1996, the original wind-up radio (Freeplay's first commercial
product) was manufactured and exported to the UK, Holland and Africa for the
first time and subsequently to the US in May of the same year. Following
interest in this initial product, the Freeplay brand was launched in September
1996.
Freeplay has developed patented technology that enables exerted human energy to
be captured, stored and delivered in an electrical form to power a range of
electronic devices. First applications include radios, torches and a mobile
phone charger, with over 3.7 million units sold.
Freeplay seeks to create, develop and supply the market for self-powered energy
products internationally. This is being accomplished through both the
establishment of its own products in the market, and the formation of strategic
alliances with partners, aiming to combine compatible technology with market
leadership. At the same time however, its intellectual property rights and
know-how mean that it may be able to licence or 'whitelabel' its technology to
other brands as the market develops.
Freeplay believes it was first to market and commercialise self-powered
technology and that it is recognised as a leading brand in the market for such
products. Freeplay believes there are competitive offerings but that those
competitive offerings utilise technology which is less efficient.
The Group has received a number of substantial investments since 1997 including:
- in March 1997, General Electric Pension Trust invested US$10 million for a 33
per cent. stake in the Group;
- in May 1998, the US satellite company, WorldSpace International Network Inc,
invested US$5 million for a 10 per cent. stake in the Group;
- in September 1999, South Africa Capital Growth Fund invested US$10 million;
- in November 1999, BoE Ventures Limited and Transatlantic Private Equity (Pty)
Ltd jointly invested US$3 million;
- in June 2004, Nutraco Nominees Limited invested #0.35 million in the Group
through the issue of convertible loan stock;
- in January 2005, Nutraco Nominees Limited, Chetwynd Nominees Limited and
Framley Consultancy Limited invested, #0.865 million, #0.135 million and #0.5
million respectively in the Group through the issue of convertible loan stock;
and
- in February 2005, the Company raised #3.5 million through a placing on the
admission of its Ordinary Shares to trading on AIM.
In 1998, the Freeplay Foundation was established. The Foundation is a non-profit
organisation whose key aim is to promote access to information using alternative
energy solutions. The Foundation is a fund-seeking organisation with tax-exempt
status in the US, a non-profit organisation in the Republic of South Africa and
a registered charity in the UK. The Freeplay Foundation is committed to
providing innovative, affordable and practical energy solutions to ensure
sustained access to information via radio.
The Foundation receives an annual donation from the Group of US$150,000, certain
administrative resources are shared with the Group and the Group provides office
accommodation for the Foundation. The Foundation uses the donation from the
Group to fund its overheads whilst funds raised externally by the Foundation are
used for designated projects carried out by the Foundation. In 2005 over
#230,000 of external funds were raised by the Foundation to fund humanitarian
projects.
Working on a public-private sector partnership model, the Freeplay Foundation
collaborates across sub- Saharan Africa with a variety of government ministries
such as ministries of education, health, agriculture and labour; UN agencies
including UNDP, UNICEF and UNHCR; international Non Governmental Organisations
such as World Vision, PATH, CARE, Nelson Mandela Children's Fund, Red Cross and
Green Belt Movement; and radio content providers such as Takalani Sesame, Soul
Buddyz, Education Development Center and BBC World Service Trust.
Beginning in 2001, the Company signed a worldwide exclusive co-branding and
distribution agreement with Motorola to develop and market Freeplay's mobile
phone charger, the FreeCharge. This agreement has subsequently concluded in
accordance with its terms but has provided Freeplay with a product that is
currently being adapted to provide self-powered energy to the majority of the
world's most popular brands of mobile phones.
In 2001, new patent applications were filed for third generation direct charge
technology.
In July 2002, the Summit Radio was launched, which for the first time
incorporated Freeplay's technology with digital tuning.
In April 2003, the Lifeline Radio, a product developed specifically for the
developing markets and not for retail sale, was launched.
In 2003, Freeplay and Motorola mutually agreed to terminate their exclusive
arrangement concerning the mobile phone charger jointly developed by them due to
the inability to reach agreement on the technical specifications but agreed that
Motorola's manufacturer will continue to be available to Freeplay as a
manufacturing base. All tooling and IP associated with the FreeCharge product
became the exclusive property of Freeplay.
In October 2003, Freeplay completed its group reorganisation with the relocation
of its finance team to Cape Town, South Africa.
In February 2005, the Company's Ordinary Shares were admitted to trading on AIM.
Products
Radio - Consumer & Outdoors
Radio models include the Freeplay Ranger (previously known in North America as
the Coleman Outrider), Freeplay Summit, Freeplay Plus and the EyeMax (with light
and with weatherband and the Devo DAB and FM receiver). These products will play
for approximately twenty to thirty minutes (volume dependent) per forty-five
second wind, and can be rewound at any time. The units can also be powered with
its solar cells by sunlight, playing and charging simultaneously. The internal
batteries can be fully charged via the solar panel or an AC/DC adapter, to give
approximately twenty five hours' playing time once fully charged. Freeplay's
range of radios are positioned both for the outdoors market and, particularly in
the US, for the emergency preparedness market. The radios are sold through
stores specialising in the outdoors and sporting goods, DIY, department stores,
consumer electronics and also through catalogues and online.
Radio - Humanitarian
Freeplay's Lifeline Radio is not sold in retail outlets but is available to aid
and donor agencies, which range from UNICEF through to corporate sponsors such
as Vodafone Group plc, for humanitarian broadcasting projects. The units can be
powered by wind-up (direct charge) and solar power and have been designed and
engineered to be highly robust for use in the harshest of rural conditions and
climates. In certain markets, the Lifeline Radio is available commercially in a
cause-related offering. For example, in a project with a customer C. Crane
Company, Inc. for every Lifeline Radio purchased by C. Crane Company, Inc. one
Lifeline Radio is donated to the Freeplay Foundation for distribution to one of
its humanitarian projects.
Illumination
Currently illumination products include Xray LED, Jonta and Kito flashlights,
the Emergency Light Centre and the Indigo table lantern. Approximately 45
seconds of winding gives from 10 minutes to 60 minutes of light, depending on
the model and light intensity selected. Recharging the products via an AC/DC
adapter allows for approximately five hours of light at normal brightness and
thirty minutes at high brightness. The torches are designed for repeated and
long-term use. These torches are sold in outdoors and sporting goods stores, DIY
and department stores, as well as online, and through catalogues and automotive
retailers. The lantern is designed to provide both space and surface
illumination to users in both developed and developing markets.
Mobile Phone Charger
The FreeCharge mobile phone charger was originally developed in partnership with
Motorola, to its specification in 2001 as an accessory for Motorola mobile phone
handsets. However, the Group has now adapted the initial charger for the
powering of major brands or series of mobile phones. Two models of the
FreeCharge are available. One model is a low-cost 12 volt unit which is adapted
to hand sets via a standard cigarette lighter adapter. The other model is a
multiple voltage unit with versatile connectivity which is able to power a wide
range of cell phone handsets and other personal electronic devices. The internal
battery can be charged via the alternator, or an AC/DC adapter, and energy can
be stored in the charger itself, to be supplied to the mobile phone when
required. Approximately forty-five seconds of winding provides about three
minutes of call time, and several hours of standby.
Standalone Foot Charger
Freeplay's foot charger (known as the Weza) was launched commercially in the
third quarter of 2005. It delivers 12 volts of power to a wide range of
appliances, including a main voltage inverter. Both Governmental bodies and
commercial entities in several African countries have expressed strong interest
for both telecommunications purposes and rural domestic use.
Research and Development Facilities
Freeplay Technology, the research and development division of the Group, is a
fully integrated mechanical and electrical product development and project
execution resource that includes concept creation, design, sourcing and the
promotion of solutions.
There is also an external market for Freeplay's product development expertise.
This has allowed the Group to undertake a number of external collaborative
projects. In 2003 the research and development resource of the Group was
utilised in the ratio of approximately 65 per cent. for internal projects and 35
per cent. for external projects. In 2004 this ratio was 85 per cent. for
internal projects and 15 per cent. for external projects, as the focus of the
Group shifted back to a more intense new product development programme. In 2005
all research and development efforts were internally focused as a result of the
high new product development activity.
Freeplay has been contracted to develop the alternative energy solution for
MIT's "Hundred Dollar Laptop" project, also known as the "One Laptop Per Child"
programme. First prototypes were delivered to MIT mid-April and final designs
are expected to be completed during July. Freeplay is broadening its energy base
by allocating research and development resources into solar and wind technology.
Distribution
Freeplay's business development director is actively supported in the Western
and Eastern hemispheres by specialised sales management who in turn have
responsibility for the day to day management of the Group's distributors.
The following distribution arrangements exist:
- In the UK, Freeplay will manage distribution itself but will also engage third
party distributors on a non-exclusive basis, such as Tango Group Limited. Tango
Group Limited is headed by Vivian Blick who was previously a senior executive
at the Company responsible for business development in the eastern hemisphere
for 6 years. In the year ended 31 December 2005 Freeplay made sales of US$1.1
million to Tango Group Limited.
- Dixie Sales Company Inc, is the Group's exclusive distributor of all Freeplay
products in North America. The agreement commenced in May 2005. Dixie also took
over the management of and relationship with C. Crane Company, Inc, referred to
below. Under the agreement, Freeplay reimburses Dixie for certain costs in return
for which it is entitled to a share of the profit.
- An exclusive agreement with WP Phones International's Hong Kong subsidiary, WP
Phones International Hong Kong Limited for its FreeCharge Mobile Phone Charger
in Africa and the Caribbean region. The five year agreement will provide Freeplay
with minimum annual sales through WP Phones International Hong Kong Limited of
1.1 million units of the FreeCharge mobile phone charger.
- An agreement under which C. Crane Company, Inc., distributes the Freeplay Plus
radio through its catalogue. C. Crane Company Inc. is a US Company that operates
a catalogue business through mailing lists. C. Crane Company Inc. primarily sells
Freeplay products through its catalogues. In the year ended 31 December 2005,
Freeplay made sales of US$0.2 million to C. Crane Company Inc.
- An exclusive agreement with CICCI, a Danish headquartered multinational which
specialises in the aid and donor market. The relationship with CICCI supports
the Company's own efforts to the aid and donor market. CICCI holds inventory
thereby allowing it to supply smaller orders whilst seeking sales for the Group's
products through Government tenders and other development opportunities. This
in turn ensures that the Group is widely represented in these important markets.
- An agreement with Connoisseur Electronics (Pty) Limited which distributes audio
and illumination products in South Africa, Namibia, Botswana, Swaziland and Lesotho.
The agreement is exclusive in relation to certain customers in those territories.
- Several non-exclusive distribution arrangements exist in Western Europe, Africa
and Australia, all of which have potential for future growth as the Company
develops products appropriate to these markets. Non-exclusive distributor agreements
are in place with SITE Logistics for Kenya, D.B Electrical & Lighting Distributors
for Namibia, African Cell Connect for Botswana, Brentford Energy for Zambia,
OfficeMart for Malawi, The Crammond Group for Zimbabwe, Alternative Energy
Solutions for Rwanda and Multi-Powered Products for Australia.
Manufacturing
Prior to 1999, the manufacture of the Company's products was carried out
in-house in Freeplay's factories in South Africa. During 2000 the management of
the Company undertook an exercise to evaluate the efficiencies of the South
African factories and as a result chose to relocate the manufacturing of its
products to China in February 2001.
Solar Electronics Corporation Limited is currently the principal manufacturer
supplying the Group and is responsible for the sourcing of raw materials and
other components, the physical manufacture as well as delivery of the finished
goods to port for shipment. Freeplay does, however, source some of the
specialised components directly. In addition to Solar Electronics Corporation
Limited, Sun Young Electronics Limited is responsible for the manufacture of the
FreeCharge mobile phone charger, Power Pro Manufacturing Limited manufactures
the foot charger described above, Hip Shing Electronics Limited manufactures the
Devo Radio and More Bright Technology Limited is the manufacturer of the Kito
Flashlight.
Apart from those mentioned above, there are no other significant suppliers to
the Group. The Directors are aware of the risk associated with the supplier
concentration, but believe that it is currently the best approach for the Group
due to increased negotiation leverage.
FUTURE STRATEGY AND CURRENT TRADING
For the year ended 30 December 2005, turnover was US$3.1 million (2004: US$6.3
million) with sales of US$2.6 million in the second half contributing to overall
turnover for the period. This reduction in turnover was impacted by like for
like turnover in the UK and Continental Europe decreasing by 37 per cent., due
to a recall of Devo, the Company's new portable DAB and FM radio and Weza,
Freeplay's FreeCharge portable energy source, towards the year end. Both these
one-off issues have now been resolved and the product was reshipped to
distributors in the first quarter of 2006. Turnover was also affected by the
change in accounting treatment of revenue recognition as a result of the
distribution agreement with Dixie, the Group's North American distribution
partner.
Gross profit fell to US$1.1 million (2004: US$2.1 million) as a result of the
reduction in revenue. In line with expectations, administrative expenses
increased by 97 per cent. to US$5.5 million (2004: US$2.8 million) as a result
of the Group's investment in new staff, business development costs incurred in
the US to set up the new distribution relationship and unrealised foreign
exchange losses. Freeplay reported a substantial increase in operating loss to
US$4.4 million (2004: US$0.7 million) and the loss before taxation increased to
US$4.5 million (2004: US$2.0 million). The Group utilised research and
development tax credit claims of US$0.2 million bringing the loss for the
financial year to US$4.3 million (2004: US$2.0 million).
The technical issues relating to the Weza FreeCharge portable energy source, and
Devo, a portable DAB and FM radio, which were recalled in December have been
resolved and these orders were reshipped during the first quarter of 2006.
As at 21 June 2006, Freeplay's total sales book, including product shipped,
orders received and placed on the factory and orders received and not yet placed
on the factory, pending release of funds, was approximately US$6.1 million for
the financial year to date as follows:
- Approximately US$837,000 relates to aid sales, and the Freeplay Foundation has
to date purchased 25,000 Lifeline radios;
- US$330,000 relates to the delivery of Lifeline radios to UNICEF;
- Approximately US$1 million was generated in Africa by Ubuntu Trading in Nigeria;
by Angola, and by Connoisseur, the Group's new South African distribution
partner;
- US$450,000 was generated by sales made to distributors in the UK and Europe;
- US$900,000 from sales through Dixie and Crane in the US;
- A US$1.8 million agreement with WP Phones; and
- A US$100,000 order by Connoisseur relating to Kito and Xray products.
Additional recent orders include a further order of US$143,000 for a range of
products to the EU, an AID order of Lifeline radios of US$300,000 and a
US$317,000 order, through Tango Group, for the supply of Ranger radios and Kito
flashlights to the UK Ministry of Defence. These new orders bring Freeplay's
total sales book to US$6.1 million, including US$1.4 million for Freeplay's AID
and Humanitarian division.
In addition, Freeplay has entered into a distribution agreement with WP Phones
for its FreeCharge mobile phone charger in sub-Saharan Africa. The five year
agreement will provide Freeplay with minimum annual sales through WP Phones of
one million units per annum. It is anticipated that the first shipment will be
made in the last quarter of 2006. This agreement was extended on 12 June 2006 to
cover the Caribbean for an additional 100,000 units of the Free Charge mobile
phone charger. The total agreement is now for a minimum 1.1 million units per
annum over the next five years.
Freeplay has signed a Long Term Arrangement ("LTA") with UNICEF to be the sole
supplier of wind up radios, the Freeplay Lifeline radio, to UNICEF. Following
independent testing, UNICEF chose the Freeplay product for an opening order,
indicated above, of 20,000 radios for Madagascar and, in addition, the contract
will make the Lifeline radio available to the entire United Nations through
UNICEF. Under the terms of the contract, the United Nations will no longer need
to tender for the supply of wind-up radios to its sister organizations.
Dixie has been successful in securing some major listings of Freeplay's products
with large North American retailers, including: (i) Target who will be rolling
out the Kito flashlight in 200 stores in "weather states"; (ii) Macys MidWest
who will be rolling out 3 SKU's into 86 US stores; (iii) Sharper Image who have
listed the EyeMax radio across their stores and their website and (iv) REI a
leading outdoor recreation retailer. Dixie is working to a targeted plan to
ensure that Freeplay is listed with primary retailers in each of the key
channels - sporting goods, consumer electronics, home improvement and emergency
preparedness.
In terms of products, production continues to progress in line with development
plans. The Group has commenced tooling a table lantern and 12 volt FreeCharge
mobile phone charger. The power Supply for a prototype self-powered laptop
computer is being developed in conjunction with a partner who has confirmed the
provision of funding for the project.
The future strategy for 2007 is to continue to maximise sales in North America,
Europe, and Africa. Other opportunities will be considered as they present
themselves. An example of such an opportunity is the current evaluation of a
distribution partner in India which remains one of the fastest growing economies
in the world.
As a result of the opportunities outlined above the Directors are confident of
the Enlarged Group's future prospects.
DIRECTORS
The Board currently comprises seven Directors, brief biographies of whom are set
out below. Baroness Chalker and John Hutchinson have agreed to resign from the
Board upon Admission.
Rory Stear, age 47, Chairman and Chief Executive
Rory Stear has over twenty years of experience in corporate leadership, new
business development and strategic planning. He co-founded Freeplay in 1994, and
has been CEO since inception. Rory Stear was previously Managing Director of
Seeff Corporate Finance (Pty) Ltd, a joint venture between him and a listed
South African property group. He has been the recipient of various awards,
including the Theodor Herzl Award for outstanding business achievement (2000),
as well as being named as one of Business Week's Entrepreneurs of the Year 2000.
Rory Stear is a fellow of the Schwab Foundation for Outstanding Social
Entrepreneurs which is affiliated to the World Economic Forum. He has been a
regular contributor to the Forum's events having made presentations at the
Forum's annual meeting in Davos over the last three years. Rory Stear is also a
member of both the Young Presidents Organisation, the Dean's Council at Harvard
University's John F. Kennedy's School of Government and the Advisory Board of
the Business School of Nelson Mandela University, Port Elizabeth.
Richard Court, age 41, Finance Director
Richard Court has fifteen years experience in financial and general
international management. Having qualified as a UK Chartered Management
Accountant in 1990 and been awarded fellowship in 1993, he worked for three
years as Financial Controller of Quadrant Catering a division of the Post Office
in the UK where he was responsible for the strategic development of financial
systems. He has also worked as a divisional financial controller of Kwik Fit
plc. Richard Court spent eight years as director of finance and operations with
Periphonics Limited, a specialist computer hardware and voice driven software
company which was brought to Nasdaq in 1995 and, later acquired by Nortel
Networks. Having integrated Periphonics and a number of acquisitions into
Nortels EBusiness Europe, he spent a year in Nortel Network's Brazilian
operation as CFO Brazil managing a significant downsizing. Richard Court joined
Freeplay in 2004.
John Hutchinson, age 54, Technology Director
John Hutchinson joined Freeplay in 1995 and has been involved with the
development of Freeplay's technology and products from the outset. He leads a
team of ten engineers and industrial designers, responsible for the advancement
of Freeplay's technology and the creation of new products. John Hutchinson
graduated with a degree in engineering from the University of Cape Town in 1976,
and has since acquired an MBA from the University of Cape Town. Prior to joining
Freeplay, he spent 20 years in the manufacturing industry in South Africa. His
career began with Barlow Rand Group, working with several start-ups, including
in the bicycle and consumer electronics sector such as Justastat, Genventics
Electronics, Superbikes and Western Flyer Cycles.
The Rt Hon Baroness Chalker of Wallasey, age 65, Non-executive Director
Before entering Parliament in 1974, Baroness Chalker worked for Kodak Inc,
Unilever Limited (Research), Shell Mex, British Telecom plc, Louis Harris
International and Barclays Bank Limited. She was appointed a Life Peer in the
House of Lords in 1992. Baroness Chalker returned to business in 1997 and joined
the World Bank Africa team as an advisor. She formed her own consultancy, Africa
Matters Limited, in 1998. Baroness Chalker was appointed as an advisory director
of Unilever plc in 1998, and Chairman of its External Affairs and Corporate
Relations Committee in 1999. She is also a non-executive Director of Group 5
(Pty) Ltd in South Africa, and of Ashanti Goldfields Company Limited. In 2001,
she was appointed to the Presidential Advisory Council on Investment for
Nigeria, and now leads the Council for President Obasanjo. Baroness Chalker
joined Freeplay in 1997.
Leonard Fassler, age 74, Non-executive Director
Leonard Fassler is a founder, Director and Chairman of Vytek Wireless, Inc., a
privately owned wireless company that has recently announced its merger with
California Amplifier, Inc., a NASDAQ quoted company. In 1999 Leonard Fassler
co-founded Interliant, Inc., an internet web-hosting company and in 1992,
co-founded and served as Co-Chairman of AmeriData Technologies, Inc., a New York
Stock Exchange-listed IT company, acquired by General Electric Capital
Corporation in 1996. Prior to AmeriData, Leonard Fassler was co-founder and
Co-Chairman of Sage Broadcasting Corp., a NASDAQ-listed company. Leonard Fassler
holds a bachelor's degree in business administration from City College of New
York and a law degree from Fordham Law School. Leonard Fassler has been
associated with Freeplay for over five years.
Gordon Roddick, age 63, Non-executive Director
Gordon Roddick co-founded The Body Shop with his wife, Anita Roddick, in 1976 as
a one-shop venture in Brighton. As Co-Chairman of The Body Shop, Gordon Roddick
has devoted considerable energy to providing assistance to disadvantaged groups
around the world, through the company's Trading with Communities in Need
programme. Gordon Roddick brought to the UK the idea of street newspapers and
co-founded the Big Issue with John Bird. Gordon Roddick joined Freeplay in 1999.
Andy Polansky, age 44, Non-executive Director
Andy Polansky is president of Weber Shandwick Worldwide, a leading,
international public relations agency and part of the Interpublic Group of
Companies. He has been with Weber Shandwick for more than 20 years, and was
appointed to his current global role in March 2004 after leading the firm's
North American business. He sits on the Board of Trustees of the Institute for
Public Relations, an independent foundation in the field of public relations
focusing on research and education. Andy Polansky also serves on the Honors &
Awards Committee of The Public Relations Society of America, and on the Council
of PR Firms Client Advisory Committee. In addition, he is a member of the McCann
WorldGroup board and a member of Weber Shandwick's board.
On Admission, Rory Stear will become Chairman and Peter Porteous will be
appointed Chief Executive Officer and Baroness Chalker and John Hutchinson will
resign as Directors. In addition Harold Reiter will be appointed to the Board as
Non-executive Deputy Chairman and Edward Barrett, William Barrett and Stuart
Kinney as Non-executive Directors. Details of the Proposed Directors are
outlined below:
Peter Porteous age 43, Proposed Chief Executive Officer
Peter Porteous joined Barrett Corporation in 1989 where latterly he was the
President of BMG. When Barrett Corporation purchased Dixie in 2001, Peter
Porteous became the Chief Executive Officer of Dixie. Prior to his involvement
with Barrett Corporation, he was Director of Marketing at Kraft Foods, where he
gained significant experience in sales, distribution and marketing. He studied
for his commerce degree at the Carleton University, graduating in 1986 and has
been a member of YPO (Young Presidents Organisation) since 2002.
Harold Reiter age 52, Proposed Non-executive Deputy Chairman
Harold Reiter joined the Barrett Corporation in 2003 and is President and Chief
Operating Officer. Prior to joining Barrett Corporation, he was President and
Chief executive Officer of Maxxcom Inc., a company engaged in providing
marketing and communications services in the United States, Canada and the
United Kingdom. He was Executive Vice President responsible for Canadian
Operations for CIT Financial Ltd. (Formerly Newcourt Credit Group Inc.), which
he joined in 1998. Prior to this he was a partner with Ernst & Young in Toronto,
Canada.
Edward Barrett age 52, Proposed Non-executive Director
Ed Barrett is a shareholder and Co-CEO of Barrett Corporation, a privately held
international management company, based in Woodstock, New Brunswick, Canada.
Founded in 1976 and largely held by members of the Barrett Family, Barrett
Corporation holds equity positions in several North American companies primarily
in telecommunications, real estate development and as sales, marketing and
distribution service providers.
Outside of Barrett Corporation Ed serves on three corporate boards, is Chairman
of Atlantic Baptist University and sits on the advisory board of the Manning
School of Business at Acadia University. Ed graduated with a BA from Acadia in
1975 and a MBA from Dalhousie University in 1977.
William Barrett age 54, Proposed Non-executive Director
William Barrett is a shareholder and Co-CEO of Barrett Corporation, a privately
held international management company, based in Woodstock, New Brunswick,
Canada. Founded in 1976 and largely held by members of the Barrett Family,
Barrett Corporation holds equity positions in several North American companies
primarily in telecommunications, real estate development and as sales, marketing
and distribution service providers.
Outside of business, William Barrett is active in several charitable
organisations and serves on a number of industry boards. He graduated from
Acadia University in 1974 and presently serves on its Board of Governors.
Stuart Kinney age 47, Proposed Non-executive Director
Stuart graduated from University of King's College, Halifax, NS with a Bachelor
of Arts in 1984 and earned his Bachelor of Laws at the University of New
Brunswick Law School in 1988. Following graduation he clerked for the Federal
Court of Canada, Trial Division in Ottawa Canada. He was called to the Bar in
New Brunswick in 1990 and remained in private practice until he joined Barrett
Corporation in 2001 as General Counsel, where he has managed the company's
mergers and acquisitions and financings, and participated in strategic planning
and direction for its distribution business in Canada and the US. He holds
membership in the Canadian Bar Association and in the Law Society of New
Brunswick, where he has served on the Bar Admission Course Committee and as an
Instructor for the Course. From 2002 to 2004 Stuart Kinney served as Director of
Region 3 Hospital Corporation of New Brunswick, a public sector health services
corporation, where he also served as Chair of the Finance and Strategic Planning
Committee for two years. For the last ten years he has served as Chair of the
Carleton Memorial Hospital Foundation.
BANKING FACILITIES
The Company currently has an overdraft facility of up to US$3.7 million
available to it from HSBC. Of this the sum of US$1.9 million is guaranteed by
Rory Stear and Gordon Roddick, directors of Freeplay, and Vincent Mai, a
shareholder of Freeplay. This facility reduces to US$1.8 million on Admission
and expires on 14 May 2007. Dixie has credit facilities of up to US$11 million
with PNC Bank, which is guaranteed by Barrett Corporation. Pursuant to the
Acquisition Agreement, Barrett Corporation has agreed to maintain its guarantee
in respect of this facility at least until 31 December 2007.
REASONS FOR THE PLACING
The net proceeds of the Placing available to the Group after the expenses of the
Proposals will be #2.54 million. This will be used to augment the Enlarged
Group's working capital facilities in order to facilitate the Enlarged Group's
growth plans allowing capacity to fulfil volume orders as received.
THE PLACING
The Company is proposing to raise approximately #2.54 million (net of expenses)
in the Placing by the issue of 11,397,358 new Ordinary Shares at the Placing
Price. The Placing will represent approximately 22.89 per cent. of the Enlarged
Issued Ordinary Share Capital. The aggregate proceeds of the New Ordinary Shares
will be approximately #3.3 million before expenses, of which #2.54 million net
of expenses will be receivable by the Company.
Pursuant to its obligations under the Placing Agreement, Charles Stanley has
conditionally placed the 11,067,358 new Ordinary Shares at the Placing Price
with institutional and other investors. The Placing has not been underwritten by
Charles Stanley or any other person.
The Placing Agreement is conditional, inter alia, upon Admission having taken
place by not later than 8.30 a.m. on 20 July 2006 or such later time and date,
being not later than 8.30 a.m. on 3 August 2006, as the Company and Charles
Stanley may agree. The Placing Agreement contains provisions entitling Charles
Stanley to terminate the Placing Agreement at any time prior to Admission in
certain circumstances. If this right is exercised the Placing will lapse.
Additionally, the Company has conditionally placed 330,000 new Ordinary Shares
at the Placing Price with certain of the Directors of the Company.
The Placing Shares will rank pari passu with the existing Ordinary Shares in
issue in all respects including the right to receive all dividends declared or
paid on the ordinary share capital of the Company on or after Admission.
On Admission the Company will have 49,801,868 Ordinary Shares in issue and a
market capitalisation of approximately #14.4 million at the Placing Price.
Application has been made to the London Stock Exchange for the Enlarged Issued
Ordinary Share Capital to be admitted to trading on AIM. It is expected that
Admission will become effective and that dealings will commence on 20 July 2006.
THE CITY CODE
The City Code applies to companies which are registered and traded in the UK,
Channel Islands and Isle of Man and which have their registered offices in the
UK, Channel Islands and Isle of Man if any of their securities are admitted to
trading on a regulated market in the UK or any stock exchange in the Channel
Islands or the Isle of Man. In addition, the City Code applies to public
companies, which have their registered offices in the UK, Channel Islands or the
Isle of Man and which are considered by the Panel to have their place of central
management and control in the UK Channel Islands or the Isle of Man.
Freeplay's registered office is in the UK and its Ordinary Shares are traded on
AIM. Freeplay's operations and executive management are based in Maitland, South
Africa and the majority of board meetings are conducted outside of the UK.
Following Admission, the Enlarged Group's operations will be based in Maitland,
South Africa and Greensboro, North Carolina, USA. In addition, the majority of
Freeplay's and the Enlarged Group's Board members will not be resident or
domiciled in the UK.
Following discussion with the Panel, it has been established that as Freeplay
does not, and will not following Admission, have its place of central management
in the United Kingdom, the Channel Islands or the Isle of Man, the provisions of
the City Code do not apply to Freeplay. Investors should therefore be aware that
they will not be afforded the protections of the City Code.
DIVIDEND POLICY
The Board's current intention is to retain the Company's earnings in the
foreseeable future to finance growth and further expansion. It is however, the
Board's intention to pay dividends when, in the view of the Board, the Company
has sufficient cash resources and distributable reserves.
SHARE SCHEMES AND MANAGEMENT INCENTIVE ARRANGEMENTS
The Board believes that the retention of senior management will be a key factor
for the success of the Enlarged Group. Consequently, the Company has adopted an
unapproved share option scheme for its employees, details. Under the rules of
this Scheme the number of options over Ordinary Shares available for grant will
not exceed 10 per cent. of the issued share capital of the Company. Options will
be granted at market value and will have individually agreed performance targets
and vesting periods, to be determined by the Remuneration Committee.
On Admission it is proposed to grant 3,610,635 options over Ordinary Shares to
the Directors and Proposed Directors.
EXTRAORDINARY GENERAL MEETING
A notice convening an Extraordinary General Meeting of the Company to be held at
11.00 a.m. on 17 July 2006 at which Shareholders will be asked to consider the
Resolutions, necessary to approve and implement the Proposals will be sent to
Shareholders.
RELATED PARTY TRANSACTION
Rory Stear, Gordon Roddick and Leonard Fassler, Directors of the Company, are
subscribing for 1,000,000, 1,200,000 and 230,000 Ordinary Shares, respectively,
under the Placing. Peter Porteus, a Proposed Director, is subscribing for
100,000 Ordinary Shares under the Placing. In addition, Leonard Fassler, Gordon
Roddick and Andy Polansky are subscribing for 51,724, 51,724, and 20,689 new
Ordinary Shares, respectively, at the Placing Price relating to accrued but
unpaid non-executive directorship fees of #15,000, #15,000 and #6,000
respectively.
The subscription by certain of the Directors and the Proposed Director for new
Ordinary Shares is regarded as a related party transaction under the AIM Rules.
In the opinion of the independent directors, having consulted with Charles
Stanley, the subscription by certain of the Directors and the Proposed Director
is fair and reasonable as far as Shareholders are concerned.
IRREVOCABLE UNDERTAKINGS
The Directors who own or are interested in 4,394,404 Ordinary Shares
representing approximately 21.2 per cent. of Existing Ordinary Shares of the
Company have irrevocably undertaken to vote in favour of the Resolution to be
proposed at the EGM in respect of their total holdings.
TIMETABLE OF PRINCIPAL EVENTS
Announcement and Publication of Admission document 7.00 a.m. on Friday
23 June 2006
Latest time and date for receipt of Forms of Proxy 11.00 a.m. on 15
July 2006
Extraordinary General Meeting 11.00 a.m. on Monday
17 July 2006
Admission and commencement of dealings in New Ordinary 8.00 a.m. on
Shares Thursday 20 July
2008
CREST members' accounts credited Thursday 20 July
2006
Dispatch of definitive share certificates for New Ordinary Friday 28 July
Shares in certificated form (where applicable) 2006
- Ends -
For further information, please contact:
Freeplay Energy plc 020 7851 2630
Rory Stear, Chairman and Chief Executive
Charles Stanley & Co 020 7739 8200
Mark Taylor or Freddy Crossley
Weber Shandwick Square Mile 020 7067 0700
Louise Robson or Rachel Taylor
For the purposes of this press release Charles Stanley, which is authorised in
the United Kingdom under the Financial Services and Markets Act 2000, is acting
as Nominated Adviser and Broker to the Company in relation to the Placing and
the Open Offer, and is not acting for any other person and will not regard any
other person (whether or not a recipient of this press release) as its customer
in relation to the Placing and the Open Offer and will not be responsible for
providing the protections afforded to customers of Charles Stanley to any other
person or for providing advice to any other person in relation to the Placing
and the Open Offer. If you require advice in relation to this press release
you should contact your stockbroker, bank manager, solicitor, accountant or
other independent financial adviser authorised under the Financial Services and
Markets Act 2000.
This press release does not constitute, or form part of the Placing and the Open
Offer or any invitation to sell or issue, or any solicitation of any offer to
purchase or subscribe for, any shares in the Company nor shall this press
release 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 Placing and the Open
Offer or otherwise.
Definitions in this announcement bear the same meaning as those in the Admission
Document dated 23 June 2006, which will be sent to shareholders today.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQAKBKKDBKBFAB
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