MCS SERVICES LIMITED — Capital/Financing Update 2014

Jun 3, 2014

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4 June 2014

ASX: RGX

RED GUM TO SHIFT FOCUS FROM RESOURCES TO THE INTERNET TRAVEL AND LEISURE INDUSTRY

The Directors of Red Gum Resources Limited ( Red Gum or the Company ) are pleased to announce that the Company has entered into a binding heads of agreement ( Agreement ) to acquire 100% of the issued capital of Western Australian based Holiday Planet Pty Ltd (ACN 095 933 869) ( Holiday Planet ), a privately owned Australian company operating a diversified travel and holiday internet business ( Acquisition ). Settlement is subject to the satisfaction of a number of conditions under the Agreement.

Holiday Planet is one of the largest privately owned Online Travel Companies in Australia, focusing the majority of its business in the higher margin leisure industry, and is one of only a handful of Diamond Agents in Australia for P&O Princess Cruises. Holiday Planet has been operating profitably since inception in 2001, with annualised sales exceeding $35 million p.a. for the past 3 years.

HIGHLIGHTS

• Acquisition of Holiday Planet provides a platform with 13 years of profitable trading history to further aggregate the segmented travel industry to target scale and efficiencies;

• A prospectus offering of $3 million at $0.20 per share to complement Red Gum’s cash balance of circa $2.6 million. A priority share pool of $1.5 million will be made available to Holiday Planet’s 50,000+ customers;

• The new capital proposed to be raised via the prospectus will be used to assist Holiday Planet to expand further into the East Coast domestic market as well as into the Singaporean cruise and leisure travel segment;

• Strengthened Board and management team with over 150 years of experience in the high margin leisure market segment; and

• Board currently in advanced negotiations with additional travel groups as part of the travel aggregation strategy.

ABOUT HOLIDAY PLANET

Holiday Planet is one of the largest privately owned Online Travel Companies in Australia, focusing the majority of its business in the higher margin leisure industry, and is one of only nine Diamond Agents in Australia for P&O Princess Cruises. The Holiday Planet Group is one of Australia’s most diversified online retail travel groups, with sites across all key sectors of leisure travel including Holidays-Cruise-Flights-Hotels.

In operation for over the past 13 years, the company continues to be profitable and debt free offering a unique diversity in terms of online and offline functionality across four key areas of HolidaysCruise-Flights-Hotels.

The primary objective of the Holiday Planet Group is to maximize shareholder value through organic growth opportunities that listing will bring, including:

• to increase penetration into the Australian East Coast and Singaporean domestic markets through organic growth and EBIT accretive acquisitions;

• investment in Information Technology to allow virtual reality search, transaction, and ticket enhancements;

• development of new on-line booking engines in the high volume leisure travel areas of Asia, North America, the South Pacific and Europe; and

• consolidation to become the preferred high end luxury travel brand retailer.

The Executive Chairman of Holiday Planet Mr Alan Dodson stated “we are extremely excited by the prospects of being able to take advantage of the massive growth opportunity afforded through listing Holiday Planet in the trillion dollar global on-line travel industry with our reputation of providing superior first class products into the high end niche travel sector.”

Further, Dr Ray Shaw Chairman of Red Gum Resources stated “we are delighted to have negotiated this deal which we believe will breathe new life into the Company as it seeks to regain its shareholders’ confidence and reinvigorate shareholder value.”

TRANSACTION TERMS

The Company has entered into a binding heads of agreement ( Agreement ) with all of the shareholders of Holiday Planet ( Holiday Planet Shareholders ) pursuant to which it will acquire 100% of the issued share capital in Holiday Planet ( Acquisition ).

The material terms of the Agreement are set out below.

Conditions Precedent

Completion of the Acquisition is subject to the satisfaction (or waiver) of a number of conditions precedent by no later than 31 August 2014, including (but not limited to):

• (a) both parties being satisfied with their due diligence investigations on the other;

• (b) both parties agreeing to the terms of a formal share purchase agreement effecting the Acquisition;

• (c) the Company obtaining all necessary shareholder approvals under the Corporations Act and the ASX Listing Rules in relation to the Acquisition, including (but not limited to) approvals required for the following:

• (i) re-compliance with the admission and quotation requirements of ASX and issue of shares under the Capital Raising;

• (ii) change to the Company’s activities;

• (iii) a consolidation of the Company’s existing capital and change of name; (iv) issue of the Consideration Shares to the Holiday Planet Shareholders for the purposes of Item 7 of Section 611 of the Corporations Act, and if required, the provision of an independent expert’s report concluding that

the Acquisition is fair and/or reasonable to the non-associated shareholders of the Company; and

• (v) the issue of any other securities contemplated under the Agreement;

• (d) the Company raising not less than $3m under a capital raising prospectus; and

• (e) the Company receiving conditional approval from the ASX to have its securities re-instated to trading on the ASX on terms acceptable to both the Company and the Holiday Planet Shareholders.

Settlement of the Acquisition will occur within 5 business days after the satisfaction (or waiver) of the Conditions Precedent above, but in any event by no later than 31 August 2014, failing which the Agreement will be terminated and the Acquisition will no longer proceed.

Consideration

In exchange for the Company acquiring 100% of the issued share capital in Holiday Planet, the Company will issue, by way of consideration on a post-consolidation basis, 18,750,000 fully paid ordinary shares in the capital of Red Gum ( Consideration Shares ) at a deemed issue price of $0.20 each to Holiday Planet Shareholders together with a cash consideration of $1,000,000.

Definitive Agreement

As noted above, it is a condition that the parties will agree the terms of a formal share purchase agreement effecting the Acquisition, prior to settlement.

Termination

Either party may terminate the Agreement if the other party commits a material breach of any of its terms and fails to rectify the breach, if capable of being remedied.

Escrow

The Consideration Shares and any other securities to be issued as part of the Acquisition may be subject to escrow restrictions in accordance with the ASX Listing Rules. The Company will be seeking confirmation from the ASX in the coming weeks as to the application of escrow with respect to these securities.

Other key terms of the transaction are set out in further detail below.

CHANGES TO THE BOARD AND SENIOR MANAGEMENT

Upon settlement occurring, the following directors of Holiday Planet will join the Board of Red Gum:

Alan Dodson – Executive Chairman

Alan Dodson was founder of The Holiday Planet Pty Ltd in May 2001. Alan has built the company into Australia’s most diversified internet travel company offering multiple internet sites across all key sectors of the leisure industry through online and offline distribution channels, including the launch in late 2012 of a new luxury brand. Alan has successfully guided the company since its inception and has spent more than 38 years in the travel industry in Australia and the United Kingdom. His key responsibilities within the Group include company development, finance and overall Sales and Marketing Strategy.

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Michael Croy – Operations Director

With over 30 years experience in the tourist industry, Michael has extensive knowledge of international and domestic tourism markets having served with Jetset Travel (WA) for some 20 years including approximately the last 10 years as State Manager. Michael joined the Holiday Planet Group in 2002 where his responsibilities included information technology management and recruitment in addition to the overall logistical and operational management. He has been a principal and shareholder of the all operations of the Holiday Planet Group since 2003.

Following settlement of the Acquisition, current Red Gum director Jennifer Tobin will remain on the Board whilst Dr Ray Shaw and Edwin Bulseco will resign.

CHANGE OF NAME

Subject to shareholder approval at the upcoming general meeting, the Company intends to change its name to “Australian Travel Group Limited”.

CONSOLIDATION OF CAPITAL

The Company will be seeking shareholder approval to consolidate its current issued capital on the basis of a minimum 1 for 22 ratio.

INITIAL PLACEMENT

The Company has recently completed a placement of 125,000,000 Shares at an issue price of $0.008 together with 26,000,000 options with an exercise price of $0.01 each expiring on or before 15 November 2017 (on a pre-consolidation basis) to sophisticated and institutional investors raising a total of $1m. These funds will assist the Company with working capital during the relisting process. DJ Carmichael Pty Ltd acted as lead manager to the placement.

CAPITAL RAISING

In order to fund the Acquisition and to re-comply with Chapters 1 & 2 of the ASX Listing Rules (amongst other things), the Company intends to undertake a capital raising through the issue of a minimum of 15,000,000 shares, at an issue price of $0.20 each in order to raise at least $3,000,000 ( Capital Raising ).

The Capital Raising is proposed to be completed pursuant to a full form prospectus that is expected to be available in late July 2014.

The $3.0m Capital Raising is intended to have a priority pool of $1.5m allocated to Holiday Planet’s 50,000+ Australian customers whilst $0.5m has been committed by clients of DJ Carmichael Pty Ltd.

In addition to the costs associated with the Acquisition and expenses of the offer under the Capital Raising, the Company also intends to use funds towards the following:

• to increase penetration into the Australian East Coast and Singaporean domestic markets;

• investment in Information Technology to allow virtual reality search, transaction, and ticket enhancements;

• development of new on-line booking engines in the high volume leisure travel areas of Asia, North America, the South Pacific and Europe; and

• consolidation to become the preferred high end luxury travel brand retailer.

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On or around completion of the Capital Raising, the Company will, subject to shareholder approval, also issue Ian Dodson that number of Shares which is the equivalent of 2% of the Capital Raising at a deemed issue price of $0.20 each in payment for services relating to the Capital Raising ( Promoter Shares ).

PRO FORMA CAPITAL STRUCTURE ON COMPLETION OF THE ACQUISITION

All the securities as set out below are based on a post-consolidation basis (that is on a 1 for 22 basis):

Shares	Number
Shares currently on issue	37,500,000
Consideration Shares	18,750,000
Promoter Shares	300,000
Capital Raising Shares	15,000,000
TOTAL	71,550,000
Options	Number
Existing Options on issue1	11,010,639
Capital Raising Options	7,500,000
TOTAL	23,510,639

Note:

1. This consists of 6,818,182 quoted options exercisable at $0.22 each expiring 15 November 2017, 2,783,366 quoted options exercisable at $2.20 each expiring 1 March 2016 and 227,273 unquoted options exercisable at $3.30 each expiring 30 April 2016, and 1,181,818 quoted options at $0.22 each expiring 15 November 2017.

PRO FORMA BALANCE SHEET

A pro forma balance sheet showing the effect of the Acquisition, Consolidation and the Capital Raising on the Company is set out in Annexure A.

CHANGE TO NATURE AND SCALE OF ACTIVITIES UNDER CHAPTER 11 OF THE ASX LISTING

RULES

The acquisition of Holiday Planet constitutes a change to the nature and scale of the Company’s activities.

As part of satisfying its requirements to re-comply with Chapters 1 and 2 of the ASX Listing Rules, the Acquisition must be approved by Red Gum’s Shareholders at a general meeting ( Meeting ). The Company’s Shareholders will receive a notice of meeting setting out various resolutions relating to the Acquisition ( Notice of Meeting ). A detailed explanatory statement will accompany the Notice of Meeting, together with an independent expert’s report (if required) and will be distributed to all Shareholders prior to the Meeting.

In addition to the Notice of Meeting, Red Gum will issue a prospectus that will provide full disclosure of material matters to enable Red Gum to comply with Chapters 1 and 2 of the ASX Listing Rules ( Prospectus ).

The Company’s securities will be suspended on the date of the Meeting at which Shareholder approval for the Acquisition contemplated will be sought. Subject to approval being obtained, the Company’s securities will remain suspended until the

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Company has re-complied with Chapters 1 and 2 of the ASX Listing Rules and completion of the Acquisition has taken effect.

Further detail will be included in the Notice of Meeting.

INDICATIVE TIMETABLE

An indicative timetable for completion of the Acquisition, Consolidation and the Capital Raising is set out below:

aising is set out below:
Task	Date
Execution of Heads of Agreement	3 June 2014
Announce execution of Heads of Agreement	4 June 2014
Execution of Definitive Agreement	13 June 2014
Completion of due diligence investigations	27 June 2014
Despatch Notice of Meeting and independent expert’s report (if required) to RGX shareholders	27 June 2014
Lodgement of Prospectus for Capital Raising with the ASIC	21 July 2014
Opening Date of offer for Capital Raising under the Prospectus	21 July 2014
General Meeting of RGX shareholders	28 July 2014
RGX Shares suspended from trading	28 July 2014 (after receipt of approval of RGX shareholders at the General Meeting)
Consolidation	4 August 2014
Closing Date of offer for Capital Raising under the Prospectus	11 August 2014
Issue of Shares under Capital Raising	20 August 2014
Completion of Definitive Agreement and Issue of Consideration Shares	21 August 2014
Re-instatement to trading on ASX	1 September 2014

*This timetable is indicative only and subject to change. The Directors of Red Gum reserve the right to amend the timetable.

Yours faithfully

Dr Ray Shaw Chairman RED GUM RESOURCES LIMITED

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ANNEXURE A – PRO FORMA BALANCE SHEET

Pro-forma Financial Statement of financial position (assuming the maximum amount is raised under the Offer)

Based upon the un-audited accounts as at 30 April 2014

	Historical as at 30 April 2014 (un-audited) $,000	Acquire 100% share capital of Holiday Planet Pty Ltd $,000	Offer(1)Fully Subscribed less expenses of the Offer $,000	Pro Forma Statement of Financial Position $,000
Current Assets
Cash & Equivalents	520	(1,000)	4,700	4,220
Trade & other receivables	85	-	-	85
Total Current Assets	605	(1,000)	4,700	4,305
Non-Current Assets
Holiday Planet Pty Ltd acquisition	-	4,750	-	4,750
Mineral interests	559	-	-	559
Total Non-Current Assets	559	4,750	-	5,309
Total Assets	1,164	3,750	4,700	9,614
Liabilities
Trade and other payables	358	-	-	358
Provisions for employee benefits	24	-	-	24
Total Liabilities	382	-	-	382
Net Assets	782	3,750	4,700	9,232
Equity
Issued capital	8,391	3,750	4,700	16,841
Share reserve	69	-	-	69
Foreign exchange reserve	(70)	-	-	(70)
Accumulated losses	(7,608)	-	-	(7,608)
Total Equity	782	3,750	4,700	9,232

(1) Offer includes $1.2 million placement announced on 22 May 2014, a $1 million initial placement and $3 million capital raising less estimated total share issue costs of $0.5 million

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