The Concerned Shareholders’ Response to Block Energy’s Statement of 30 July 2021

On 30 July 2021, the Board of Block Energy plc (the “Company”) issued a circular to shareholders including a statement required to be circulated on behalf of G.P. (Jersey) Limited (“GP Jersey”) together with the Board’s response to that statement (the “Board’s Response”). The concerned Shareholders’ primary observations on the Board’s Response are as follows:

1. The concerned Shareholders’ objectives

The Company continues to promote an inaccurate narrative that the concerned Shareholders wish to takeover, control or exert undue influence over the Company for their own benefit. This is untrue. The concerned Shareholders have publicly stated that they are not seeking to take over the Company, merge the Company with another, sell the Company’s assets, or provide any non-equity finance, such as debt. Rather, the concerned Shareholders are seeking to promote the long-term success of the Company by resolving systemic corporate governance issues and reversing the downward trend in the share price.

2. Failure to explain NED departures and NED intention to vote “FOR” the resolutions

The Company has failed to provide adequate answers as to why two of its Independent Non-Executive Directors and its financial PR company have resigned in the days following receipt of the notice from GP Jersey seeking to requisition the General Meeting. Additionally, the only remaining Independent Non-Executive Director has indicated he would have voted “FOR” the resolutions in respect of his own beneficial holdings had he held shares. The Company is making a recommendation to its shareholders based on the position of its two executive directors and no independent or non-executive director, representing a material breakdown in corporate governance.

3. Inadequate response to Chairman’s “insider knowledge” comment

The explanation offered by the Board is that despite the Chairman’s confirmation to the contrary it did not hold inside information at that time and the Chairman made the comment “to discourage the Shareholder Group’s unreasonable and relentless pursuit of information about the Company’s affairs”. The explanation is wholly inadequate and if true, is an intentional attempt to mislead a large number of shareholders and is inconsistent with the QCA Code.

4. Non-disclosure of communications with the concerned Shareholders

The concerned Shareholders have invited the Company to provide full and frank disclosure of all communications as between the concerned Shareholders and the Company. The Company has refused to do so.

The concerned Shareholders again invite the Company to provide full disclosure to the other shareholders.

A full response to the Board’s Response is provided below.

Responses to specific statements

Statement #1:

“The Board, in its current composition (i.e. with Philip Dimmock as non-executive Chairman), is best placed to continue building a robust and successful Company that creates significant value for the benefit of all Shareholders”

Response:

The concerned Shareholders fundamentally disagree for the following reasons:

  1. The Board has presided over a prolonged period of share price decline of approximately c.87% in the last two-year period;
  2. The value on a per share basis has been eroded with negligible shareholder value created; and
  3. The concerned Shareholders are unaware of any quantifiable or objective measurement, such as key performance indicators, upon which the assertion that the Board is “best placed to continue building a robust and successful Company” can reasonably be advanced by the Board.

In conclusion, despite repeated promises to shareholders over a protracted period, the current Board has no track record of value creation, on any relative and/or absolute basis.

Statement #2:

“While the Board welcomes constructive shareholder engagement, it is the Board’s view that this statement is inaccurate and that the Shareholder Group is not seeking to act in the best interests of the Company for the benefit of all Shareholders“.

Response:

The concerned Shareholders fundamentally disagree and would highlight the following:

  1. As owners of approximately 20% of the Company, the concerned Shareholders are only incentivised to see the share price improve from the current historical lows which have been presided over by the current Board. The Board has failed to articulate any compelling reason why the concerned Shareholders would act in any way other than in the best interests of the Company; and
  2. The Board’s conduct in its dealings with the concerned Shareholders to date strongly indicates that it does not welcome constructive shareholder engagement. Over an extended period, the Board has continually obfuscated, misdirected and failed to provide appropriate disclosures and act transparently. The concerned Shareholders interpret the Board’s elusiveness and lack of candour as further evidence of underlying problems with the Company and its poor management.

The concerned Shareholders have always acted, and will continue to, act in the best interests of the wider shareholders in the Company

Statement #3:

“…over a three-year period aimed at gaining undue influence, which would further their interests, whilst putting the interests of other shareholders at risk.”

Response:

The concerned Shareholders fundamentally disagree.

The concerned Shareholders are entirely aligned with the interests of the broader shareholders in the Company. The concerned Shareholders are long-term shareholders who are committed to the Company’s success which is why they have, over a protracted period, repeatedly made significant equity funding available to the Company. Every one of the shares held by this group of concerned Shareholders has been purchased with their own money and they are currently suffering heavy losses on their positions, like the majority of shareholders in the Company and they understand the frustration felt by shareholders by the Company’s failures.

To date, in addition to substantial market purchases, the concerned Shareholders have subscribed for shares in the Company with a total value of c.£4 million. Conversely, since IPO, Board remuneration has totalled c.£2.5 million.

The current proposed action is designed to comprehensively address the corporate governance shortcomings and operational failures which have resulted in systemic value destruction for all Shareholders. We hold the current Board and particularly the current Chairman, Philip Dimmock, responsible for presiding over ongoing losses for all Shareholders.

Allegations of other motives held by the concerned Shareholders are completely untrue and appear to be an attempt by the Company to deflect away from their own underperformance and to scare Shareholders into voting with the Board.

Statement #4:

“Attempts to engage the Company into transactions that would not be in the best interests of all shareholders, such as the engagement of Gneiss Energy Limited, of which Jon Fitzpatrick is founder and Managing Director.”

Response:

The concerned Shareholders reject this assessment in its entirety.

Gneiss Energy is a well-established corporate advisory business with a wide range of clients in the energy space. Subject to what is set out below, Gneiss Energy is unaware of having presented the Company with any prospective transactions and, indeed, has had little direct involvement with the Company since one of its senior directors introduced Paul Haywood to Schlumberger in August 2019.

In early June 2021, Paul Haywood actively solicited Gneiss Energy’s advice and assistance regarding two prospective transactions specifically selected by him. Mr Haywood’s stated objective in respect of these transactions was to provide the Company with a ‘safety-net’ against the Board’s broader concerns around the results of the current drilling programme and an eroding cash balance.

There is private correspondence between the concerned parties to this effect and this can be made available for public review if the Company is willing to agree.

In the interests of ensuring that all shareholders have access to the facts, we again call on the Company to allow the release of all communications between the parties and for matters to be decided on their merits and not by the Board’s repeated inaccurate categorisation and ongoing selective disclosure.

Statement #5:

“Multiple attempts to remove and appoint Board directors, including proposing the appointment of Alastair Ferguson, who is a member of the Shareholder Group, as a non-executive director of the Company.”

Response:

The concerned Shareholders reject this assessment.

As evidenced by the litany of operational, commercial, technical and financial failures encountered by the Company since its IPO, the concerned Shareholders have regularly and openly voiced their well-founded concerns regarding the appropriateness, qualifications and capability of various Board members. The concerned Shareholders continue to be dismayed by the lack of responsibility and accountability assumed by the Board for failures in respect of the Company’s strategy and operational execution.

The concerned Shareholders involvement and concerns are described below.

Recruitment of Non-Executive Directors

The timeline of events is as follows:

  1. The concerned Shareholders have driven an open agenda to improve the broader experience and skill-set of the Board, including in January 2019, engaging in discussions about Mr Alastair Ferguson joining the Board given his breadth of operational, regional and Board level experience working on similar projects in Russia, Ukraine and Kazakhstan over the last 18 years.
  2. These discussions were welcomed by the Board and other major shareholders. Upon the Board’s request, Mr Ferguson provided his CV to facilitate the onboarding due diligence process carried out by the Company’s NOMAD. Ultimately, the Board decided not to progress the appointment without providing an explanation. Mr Ferguson wished to oversee an operational, commercial, technical and financial review to address the Company’s shortcomings and ensure a rigorous process was in place for the Company to learn from its previous mistakes. The concerned Shareholders have not made any subsequent request for Mr Ferguson or, indeed proposed any other individual to join the Board.
  3. Subsequently in March 2020, the Company began to engage concerned Shareholders in an iterative dialogue to secure new, wholly independent non-executive directors. The Board agreed that such appointments were necessary in order to provide expertise and oversight needed to improve standards of corporate governance and general transparency. In return, the Company solicited voting support from the concerned Shareholders in respect of all resolutions at the June 2020 AGM (which the concerned Shareholders voted in favour of). Immediately thereafter, the Board reneged on its commitment to secure new non-executive directors.
  4. Consequently, the concerned Shareholders insisted that the Board should implement an independent process and the request for an observer to oversee this process was a result of validly held concerns about the original qualification criteria and list of candidates proposed by the Board. The initial search criteria proposed were inappropriate and there were serious concerns about the independence of the initial candidates the Board had pre-selected.
  5. In September 2020, the concerned Shareholders rejected the current Chairman’s inappropriate suggestion that he choose one of three candidates which he had unilaterally identified to fill a roll as potential non-executive director. This selection process and the identity of the proposed candidates were the subject of an email communication from Philip Dimmock to the concerned Shareholders on 6 September 2020.
  6. Following a further period of sustained dialogue led by the Company’s Chairman, concerned Shareholders warmly welcomed the Company’s decision to appoint an independent, third-party head-hunter. The collective view was that this exhaustive, market-wide candidate search by leading recruitment specialists, Preng & Associates, and a subsequent competitive interview together with a rigorous assessment process conducted by the Company’s Nominations Committee (comprising Mr Philip Dimmock, Mr Paul Haywood and Mr Chris Brown at the time) helped considerably in addressing these long-standing concerns about the quality and capability of the Board.
  7. Unfortunately, one of the Independent Non-Executive Directors appointed in late 2020 has now resigned after only short tenure. Additionally, the concerned Shareholders note that the other Independent Non-Executive Director appointed in late 2020 has indicated that he would vote for the resolutions at the General Meeting.

Resignation of Non-Executive Directors

Prior to the notice requisitioning a general meeting, the Board comprised the Chairman, two executive directors and three independent Non-Executive directors. Two of the independent Non-Executive directors resigned following the receipt of the notice requisitioning a general meeting.

The Board now comprises of the Chairman, two executive directors and one independent Non-Executive director. The independent Non-Executive director has indicated that he would have voted FOR the resolutions at the general meeting had he held shares in the Company.

The concerned Shareholders have sought explanations from the Company as to why two highly experienced independent Non-Executive directors resigned with immediate effect at this time. These departures together with a divergence of views between the Chairman and the sole remaining independent Non-Executive director is the source of great concern to the concerned Shareholders. This is particularly the case when set against historic corporate governance issues highlighted within the Company.

The concerned Shareholders request a full explanation of the reasons behind these departures as a matter of urgency together with reassurance that the independent recruitment process followed in 2020 will be adopted in relation to replacements.

A major justification for an independent internal forensic audit is to investigate the circumstances under which two Independent Non-Executive directors decided to resign from the Board in quick succession, concurrently with the Company’s external PR advisers. Clearly, this goes to the heart of the lack of transparency and ongoing disclosure issues which continue to dog the Company and is illustrative of the complete breakdown of governance and absence of internal control.

Statement #6:

“Demands to delay the potentially Company-transforming WR-B1 well, against the mandate of shareholders, who voted in December 2020 for the placing to fund the 2-well drilling programme. A delay would have resulted in new funds lying dormant, rather than driving shareholder value.”

Response:

The concerned Shareholders reject this assessment.

To date, the Company has spent significant capital on a total of 3 wells and has yet to drill and complete a successful well. Over a relatively short period, there has a been a significant turnover in technical staff and the Company has been plagued by a series of equipment failures and procurement problems. Well planning and operations execution during previous program has been exposed as woefully inadequate.

The concerned Shareholders requested an operational and technical review of the business when it became increasingly clear during January and February 2021 that the Company’s operational planning processes and preparation for its next well had not been fully addressed and that preparatory work was incomplete.

This included the readiness of the contracted rig and fitness for purpose of other onsite equipment to be used. Understandably, the concerned Shareholders had lost confidence in the Company’s capability to drill these wells with technical competence and requested the Company to take some additional time to plan and prepare. This request was also made in light of the ongoing governance issues exposed at the Company. Ensuring the correct people and procedures were in place to execute the plan was critical and something that the Company had demonstrably failed to do in all previous operations. Given that the concerned Shareholders provided a significant portion of the capital expenditure to drill the wells, it was entirely appropriate that they rigorously sought such confirmations and assurances.

Statement #7:

“Invited the Shareholder Group to participate in the December 2020 placing, which was needed to fund the Company’s plans to drill additional wells and develop a long-term value creation plan across its increased asset portfolio.”

Response:

This is correct.

As far as the concerned Shareholders are aware, no director has participated in any of the Company’s fundraisings. The concerned Shareholders have financially backed the Company on multiple occasions.

The only instance of a director investing in the Company that the concerned Shareholders can identify was a share option exercise made by Paul Haywood on 16 March 2021. As noted in further detail in response to Statement 17 below, this coincided with the period when Philip Dimmock confirmed that the Board was “now hampered by insider knowledge of activities”.

The exercise is unusual in terms of its timing as it represents the only investment in the Company’s shares that Mr Haywood appears to have made during his tenure with the Company. In addition, the option exercise came after concerned Shareholders had raised concerns about corporate governance and the commitment of the board to the success of the Company.

The option exercise is made more unusual because the specific options Mr Haywood chose to exercise had a strike price of 2.5p per share and caused him to a payment of £110,000 to the company. Mr Haywood could have chosen to exercise any of the nil cost options that he holds and, had he done so, would have avoided the need to make any payment to obtain shares in the company.

In December 2020, the concerned Shareholders provided a significant portion of the capital to drill the wells. The Company had, again, run out of money but the Board did not participate in the raise.

Notwithstanding the capital raise in December 2020, the audit opinion related to the financial statements for the year ended 31 December 2020 contained an emphasis of matter in relation to the going concern assumption and the sufficiency of funds on hand to enable the Company to continue as a viable enterprise. The period assessed by the auditors in making their assessment of going concern was limited to 13 months from the date of signature of the report rather than 18 months which is the normal period over which the assessment is made.

The curtailment of the going concern to 13 months indicates a higher level of concern from the auditor as to the viability of the business and the sufficiency of funding.

Statement #8:

“Appointed the recruitment firm requested by the Group and accepted the participation of Alastair Ferguson as an observer in the selection of two non-executive directors, in December 2020.”

Response:

This is statement is broadly correct.

The concerned Shareholders’ response to Statement 5 addresses this matter.

Statement #9:

“These actions by the Company were undertaken on the basis the Shareholder Group would engage in a sustained period of constructive co-operation with the Company, which would have allowed the Board to concentrate on the business, at a key time in the planning of a potentially company-transforming well and the building of the long-term strategy.”

Response:

The concerned Shareholders agree with the sentiment.

Despite appointing new Independent Non-Executive Directors, the Company has continued to operate without any effective corporate governance and Board members have set to out to intentionally frustrate the new appointees ability to enforce adherence to appropriate policies and procedures in line with the QCA (‘QCA’) Corporate Governance Code for Small and Mid-Size Quoted Companies.

The QCA Code is constructed around 10 broad principles and a set of disclosures. The QCA has stated what it considers to be appropriate arrangements for growing companies and asks companies to explain how they are meeting the principles through the prescribed disclosures. The Company sets out its approach here – https://www.blockenergy.co.uk/investors/corporate-governance/

In light of the above, and when read alongside the previous statements and detailed historic correspondence between the various parties published by the concerned Shareholders, the concerned Shareholders would invite the Company to explain how this conduct is consistent with the QCA’s Governance Code and the requirements of AIM Rule 26.

Again, part of the rationale behind the independent forensic audit is to ascertain the conduct of the Chairman and the executive directors in terms of how they managed information flow to the non-executive directors and whether the non-executive directors were provided with information on a timely basis in order for them to be kept fully up to speed with the Company’s decision making and strategy and were permitted to exercise their right of oversight on behalf of all Shareholders.

We are sure that other Shareholders are concerned with the fact that two of the Independent Non-Executive Directors and the Company’s financial PR firm have all resigned in short order. These actions are not suggestive of a cohesive and well-run Board.

Statement #10:

“Furthermore, GP Jersey’s approach shows the Shareholder Group has a clear disregard for Company and shareholder funds and effective use of management time to support the growth of the business.
If the resolution proposed for the second general meeting were to be passed, an independent forensic investigation would create a significant distraction for the Company and impair its ability to deliver on operations and plan its strategic development.”

Response:

The concerned Shareholders reject this assertion.

The Board has continually evaded answering the concerned Shareholders’ questions. It is entirely within the Company’s gift to provide full disclosure on the matters that concerned Shareholders have raised and to which all stakeholders should have access. It has failed to do so.

The Board continues to obfuscate and misdirect. As noted in response to Statement 17 below on director’s dealings, it is wholly inappropriate that the Board considers it acceptable for the Chairman to intentionally mislead a broad group of major shareholders to the effect that the Board held inside information (when it now claims it did not) in order “to discourage the Shareholder Group’s unreasonable and relentless pursuit of information about the Company’s affairs”. This statement sums up the Board’s approach to questions from concerned Shareholders.

The Company’s stated corporate governance policy is to follow the QCA Code which states that for directors of public companies “building strong relationships with shareholders and other stakeholders is an essential part of the job. Corporate reporting should focus on the primacy of shareholders and the need to communicate clearly with this audience. In the absence of high-quality communication, existing or potential shareholders may conclude that a company’s board is not fully committed to safeguarding their interests”.

The concerned Shareholders have, and will continue, to request the Company to address what the concerned Shareholders perceive to be opaque transactions, unusual disclosures, factual inaccuracies and misrepresentations which go to the heart of whether the Company is a viable investment proposition longer term. The concerned Shareholders continue to have concerns that there may be, and may have been historically, a false market in the Company’s shares to the extent that there has been any failure to disclose price sensitive information on a timely basis.

In order to alleviate the extensive ongoing concerns and provide appropriate legal and regulatory assurances, we openly invite the Company and its directors to publicly confirm, having consulted with its nominated advisor, that the Company has been and is currently in material compliance with the AIM Rules for Companies and the EU Market Abuse Regulation (Regulation 596/2014) and that the Company is fully disclosed to the market.

Statement #11:

“Initial price indications received in line with GP Jersey’s scope of work are in excess of $1 million.”

Response:

The concerned Shareholders reject this assessment.

This exercise should be entirely straightforward on the basis that the Company is willing and able to comply with the independent, third-party investigation and provide all information in a complete and timely fashion. Having made appropriate professional enquiries, the concerned Shareholders have been informed that the cost is likely to be a fraction of the total cost that has been suggested by the Company.

The concerned Shareholders invite the Board to provide disclosure on the scope and cost proposals it has received as verification for this statement into the public domain.

Statement #12:

“The pattern of behaviour outlined above has continued through the current requisition process, with the sharing of selective information, which the Board considers represent an incomplete and misleading portrayal of the circumstances.”

Response:

The concerned Shareholders fundamentally reject this statement.

The concerned Shareholders have previously invited the Company and the Board to provide full and frank disclosure to the market of all communications, including those marked “Without Prejudice”, as between the concerned Shareholders and the Company and/or Board.

The Company and Board continues to refuse.

The concerned Shareholders once again expressly invite the Company and/or Board to provide full and frank disclosure of all communications, including those marked “Without Prejudice”, as between the Shareholders and the Company and/or Board. If the Company elects not to do so, the Shareholders invite it to publicly explain why not.

Statement #13:

“There is therefore genuine concern amongst Block’s Board that the Shareholder Group’s ultimate wishes are to achieve similar outcomes to those observed at other companies, where individuals within the Shareholder Group have been appointed directors or exerted influence, with high levels of fees being paid to directors and related parties with no increase in share price for the benefit of other shareholders.”

Response:

The concerned Shareholders reject this assessment.

The concerned Shareholders have made the statement several times; and will publicly do so again. Their motivation has always been to ensure that the Company is well placed to return value for all shareholders.

The concerned Shareholders are not seeking to take over the Company, merge the Company with another, sell the Company’s assets, or provide any non-equity finance, such as debt.

Statement #14:

“To claim that the Directors have not invested their own funds into Company shares is therefore both misleading and incorrect.”

Response:

The concerned Shareholders reject this assessment.

Through reviewing public disclosures, we note that the Directors have received remuneration of c.£2.5 million from the Company since IPO through salary, bonuses and fees. This figure does not include share options which concerned Shareholders estimate to be an additional c.£1.1million excluding salary sacrifice options and based on current market cap.

The Directors have never bought any meaningful stake in the Company. They did not exchange their entire salary for shares during the challenging period of COVID but rather continued to extract 50-60% in cash. The Directors receiving nil cost options in the Company, are not aligned with Shareholders who purchased shares with their own money.

Statement #15:

“Since the start of 2021, Block has provided comprehensive quarterly operational updates, which informed all stakeholders on the status of its operations in Georgia.”

Response:

The Company has provided two updates in 2021 but has done so entirely at the request of concerned Shareholders and following repeated insistence that the Board improve its general media and shareholder communication. These updates are not comprehensive and fall materially short of market practice and what is required to allow Shareholders to understand the underlying operational and financial performance of the Company. For instance, there are no details of period end inventory levels for oil that would allow the reconciliation of production, sales and inventory from one period to the next.

The Company listed in 2018 and, historically, has never provided such updates which itself calls into question the historic practices of this Board, led by the Chairman. For instance, three annual reports have been produced since the IPO, none of which contained sufficient volumetric information regarding the sales and inventory cycle to allow the user to fully understand how volumes flow from production to sales.
Other disclosures in the annual report and financial statements fall well short of what would be expected from a public company and do not reflect common practice within the oil and gas industry making peer comparison difficult, if not impossible. For instance, no meaningful breakdown of either cost of sales or administrative costs is presented. The Company has also elected to present costs based on nature rather than function.

The presentation methods selected by the Company make meaningful independent analysis of operating and financial performance difficult, if not impossible. Taken together with the other deficiencies in communications with shareholders, the concerned Shareholders would question whether the presentation methods selected for use in the financial statements are intended to be clear and not misleading.

Statement #16:

“The allegations relate to the disclosure of a change in the mechanism for calculating the gas price for a small proportion of the Company’s overall revenue, which is not material to the current investment case of the Company. Furthermore, at the time the amendment was made to the pricing calculation, there was no change from the previously agreed fixed price of US$5.24 per MCF, with the gas price variance occurring later and being reported to the market in a timely fashion once gas sales had commenced and the Company provided its Q1 Operational Update.

This gas price is a spot price for small quantities of associated gas consumed in the motor fuel market. It is not related to the price that would be achieved if and when the Company develops its significant natural gas resources and sells them to the state or large industrial and commercial consumers under long-term contracts. Variations in the current spot gas price therefore have a negligible impact on the Company’s current net asset value.”

Response:

The concerned Shareholders reject this assessment.

This is a further example of lack of transparency and disclosure on an assumption that is fundamental for the future of the Company. The concerned Shareholders perceive the above statement as directly in conflict with earlier public announcements.

One such example would be its RNS of 7 April 2020, where the Company said it had “Shut-in of the West Rustavi field’s production at wells WR-16aZ and WR-38Z to conserve valuable gas resources until the gas sales pipeline is complete later this year.” The Company also continued to quote forecasted monthly revenue figures based on the gas production throughout 2020.

Notwithstanding the above, the explanation provided by the Company raises more questions than it answers:

  • (1) If a revised Gas Sales Agreement was signed in May 2020 (11 months before informing the market) – what terms were changed if it didn’t result in a change to the gas price mechanics from a fixed price (announced in October 2019) to a floating mechanism (announced in April 2021)?
  • (2) If the gas price mechanism did not take place under the revised Gas Sales Agreement in May 2020, at what point was the mechanism changed? Why has the market not been appraised of the second revision to the Gas Sales Agreement?
  • (3) What economic case supported the Board’s decision to build the gas sales pipeline and processing facilities, taken in light of a gas price that was unknown and / or changing?

The concerned Shareholders view the gas pricing as a fundamental financial metric for the Company and investors in the Company. The failure to disclose the correct gas pricing to the market on a timely basis would appear to be misleading and inconsistent with the Company’s regulatory obligations.

The Company is once again invited to explain why it adopted this approach and provide assurances to shareholders that it has fully complied with all relevant regulatory obligations.

Statement #17:

“the directors not being in possession of inside information at the time shares were traded”

Response:

The concerned Shareholders demand an adequate explanation regarding Philip Dimmock’s statement made on 24 February 2021 that the Board was “now hampered by insider knowledge of activities”.

Share trades were made by directors of the Company on the following days – 25 February 2021, 2 March 2021 and 15 March 2021 followed by an Operational Update being made by the Company on 7 April 2021. Are shareholders to believe that there was no price sensitive information held in the Company before the operations update given how close together the trades and update were made?

In the same email of 24 February Philip Dimmock wrote “By mid-March, the new Board will have had the time and opportunity to finalise a definitive Investor Communication Plan, which we will share with you. By mid-March, we will also have provided the market with an operational update on all activities. To initiate a scheduled regular shareholder engagement plan, we will arrange calls with all major shareholders a day or two after the RNS announcement.”

The explanation offered by the Board is that it did not hold inside information and made the comment “to discourage the Shareholder Group’s unreasonable and relentless pursuit of information about the Company’s affairs”. The explanation is wholly inadequate and if true, is an intentional attempt to mislead a large number of shareholders and is inconsistent with the QCA Code.

It is unclear to the concerned Shareholders as to why the Chairman would make such statements if the Company was not sitting on price sensitive information throughout the period these trades were made. The concerned Shareholders again invite the Company to explain, with sufficient clarity and completeness, exactly what the Chairman was referring to when making the statement that he held inside information days before a number of share trades were made.

Statement #18:

“the recent resignation of two directors, is not only invalid but the recent actions of GP Jersey and additional members of the Shareholder Group, have been a contributing factor in these two resignations”

Response:

The concerned Shareholders reject this assessment.

The concerned Shareholders entirely disagree with this statement and gaining an understanding as to the reasons for the resignations must be included as a critical scope item for the independent forensic audit. We would also note that the Company’s financial PR firm quit without notice at the same time.

None of these events have anything to do with concerned Shareholders asking legitimate questions but rather the actions of the Board itself and the breakdown in governance.

Statement #19:

“Shareholders’ interests are best served by a Board that is independent of the Shareholder Group.”

Response:

This is correct; a Board should always be independent of its shareholders and be able to manage conflicts of interest appropriately.

The concerned Shareholders have repeatedly stated that no concerned Shareholder has any interest in joining the Board. That said, the concerned Shareholders believe Philip Dimmock has demonstrated an inability to provide leadership, establish appropriate corporate governance procedures within the Company and appropriate engage with all Shareholders – all of which are fundamental for the role of a chair and required pursuant to the QCA Code.

The concerned Shareholders continue to insist that Philip Dimmock is replaced with a suitable independent candidate with the necessary skills to deliver the best outcome for all shareholders.

Statement #20:

“For the reasons noted above, the non-conflicted directors reiterate their unanimous position that the Resolutions are not in the best interests of the Company and its Shareholders and, therefore, recommend that Shareholders VOTE AGAINST both of the Resolutions”

Response:

Other Shareholders must consider the circumstances around the recommendation.

Following the request to hold the General Meeting, two of the three independent non-executive directors (aside from the Chairman) resigned from the Board, leaving the Board comprising the Chairman, CEO, CFO and the last remaining independent non-executive-director, Charles Valceschini.

The Board had resolved that the Chairman and Mr Valceschini were conflicted in terms of the proposed resolutions. Therefore, as the Circular points out, the only Directors left to vote on the Resolutions were the executives (being the CEO and the CFO). This is highly irregular and suggests the Chairman does not have the support of the non-executives that he has been leading – none of whom have backed him.

Shareholders must also focus on the statement made around the voting intentions of Charles Valceschini,

“Charles Valceschini is the only Director who would vote for the Resolutions in respect of his own beneficial holdings but he holds no ordinary shares.”

The last remaining Non-Executive director (who was recently appointed following an independent process run by a professional recruitment agency) has indicated he is in favour of the Resolutions.

This should speak volumes to all Shareholders.

3 August 2021

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