TESORO GOLD LTD — M&A Activity 2018

Oct 3, 2018

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4 October 2018

Plukka to acquire The Food Box

• The Food Box (“ TFB ”) is an online/offline food and beverage (“ F&B ”) marketing and sales service platform which assists its customers to take full advantage of growth and demands for international F&B brands in the Asian and Chinese consumer markets

• Strategically and timely positioned given the high growth in the Asian food and related commodity sectors driven by standard of living and wealth increases as consumers place a premium on food quality

• End-to-end full service provider covering market entry, sales and marketing strategies, social media management, branding, ingredient support and logistics

• Unique service offering by virtue of its Chinese operating licenses and highly experienced incountry team, established cross-border logistics channels and foreign exchange capability

• Ability to provide both access to its platform or standalone services and solutions that allow F&B companies to build their brands and connect, communicate and distribute their product

• TFB sources F&B brands globally with teams in Australia, USA, UK and China targeting brands looking to expand sales in the world's biggest consumer markets. Growth through greater Asia (non China) is also being targeted using the networks and resources build by TBF to date

• TFB key strategy is to be the trusted local partner for international F&B brands on their chosen markets globally

• Revenue producing with ~30 international F&B clients from Australia, Europe, USA & Asia

• Highly experienced board with significant food industry and China in-country operating experience

• Plukka to be renamed The Food Box Network Limited & proposed capital raising of $5 million to fund growth

• Trading in Plukka shares to remain suspended pending completion of the company's recompliance with Chapters 1 and 2 of the ASX Listing Rules

The Directors of Plukka Limited (“ Plukka ” or the “ Company ”) (ASX: PKA ) are pleased to announce the Company has executed a binding share sale & purchase agreement (“ SSPA ”) pursuant to which it has agreed, subject to the satisfaction of certain conditions precedent, to acquire 100% of two separate entities collectively known as The Food Box (“ Acquisition ”).

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TFB Business

TFB is an online/offline F&B platform that assists international brands enter into and expand in key Asian markets, with its initial primary focus on China. TFB provides a range of outsourcing services for its clients including fulfilment, operating online sales channels, warehousing, customer delivery, marketing expertise and other related services. TFB’s solution allows its clients the ability to operate in China without the complexity and expense of both opening a local office and also the requirement to directly obtain many of the licenses required to sell F&B products into the Chinese market.

The initial TFB entity was incorporated in China in 2016 and subsequently applied for and was issued several Chinese operating licenses and approvals. In January 2018 TFB was awarded its general business license which covers the sale of food, e-commerce and import and export of goods. Following the issue of this license, TFB has entered into marketing platform agreements with ~30 international F&B clients and has been actively assisting these companies evaluate the Chinese market, promote their products and ultimately enter the Chinese market. Of the ~30 brands who have entered into marketing platform agreements, ~6 of these companies are now actively selling their products into the Chinese market via the TFB platform.

TFB has teams in Australia, USA, UK and China supporting F&B businesses looking to enter the Chinese market. TFB also attracts its clients by working closely with international government and trade bodies from regions including Australia, the United Kingdom and North America. In addition, TFB attends the major food conferences in Asian, Europe, Australia and the United States and also markets its services through joint seminars with industry participants including global professional services firms and banks.

TFB generates revenues from its customers through a variety of sources including fixed annual fees for services provided under its marketing platform agreements, commissions paid on the value of products sold via the TFB platform as well as advisory and consulting fees. For the 6 months ended 30 June 2018, TFB generated gross unaudited revenue of approximately A$1.0 million.

TFB’s strategy is to aggressively, but selectively, grow the number of clients it has on marketing platform agreements and enter into long term general agents agreements with a portion of this client base to drive revenue growth for the business through generating sales commissions. Furthermore, while the primary focus to date has been on assisting international F&B clients enter the Chinese market, resources have already been deployed to broaden the scope of these services to include other key Asian markets as well as Australia and New Zealand.

TFB Management

The TFB executive management team consists of the following significantly experienced individuals:

CEO – David Burns: David has extensive experience in the hospitality, food & beverage industry in the UK, Europe and Australia. David’s experience covers all facets of the food supply chain across manufacturing, wholesale and retail sectors.

David previously held senior positions within many leading food & beverage companies including ASX listed Metcash where he was general manager and a key member of the leadership team responsible for driving the customer lead performance and cultural transformation of Metcash Food & Grocery supporting successful independents. David also held various roles for BP (Head of Food Service,

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Head of Merchandise & Head of Retail Operations) and Coles (Head of Fresh Food / Prepared Meals Development & Head of Instore Bakery Merchandise).

China Director & Head of Marketing – Heidi Duggan: Heidi is an Australian national but Shanghai resident and has lived in China for over 21 years. For over 18 years Heidi has been the host of bilingual Chef TV program “You are the Chef” introducing Chinese consumers to international food styles and brands. Through this role Heidi was awarded “Best Foreign TV Host” and “You Are the Chef” was awarded two years in a row “Best Foreign Language Program”. She has been interviewed by magazines such as Harpers Bazaar, Shanghai TV weekly, Shanghai Daily, China Peoples Evening Newspaper and being guest to numerous tv shows such as Culture Matters, Brain Storm and Talk Talk.

Heidi speaks fluent Chinese and is well known in China both in consumer circles and food and beverage circles.

Acquisition Terms

Pursuant to the SSPA, the Company has agreed to acquire 100% of the individual businesses that comprise The Food Box, subject to the satisfaction or waiver of conditions precedent.

A summary of the key terms of the Acquisition is set out below. The SSPA also contains warranties granted by and to Plukka, among other terms.

1. Consideration

Subject to the satisfaction or waiver of conditions precedent to the Acquisition (summarised in section 2 below), in consideration for acquiring 100% of the issued capital of The Food Box Australia Pty Ltd and The Foodbox (Shanghai) Limited, the Company has agreed to issue upon completion of the Acquisition, the following securities to the vendors of TFB ( “TFB Shareholders” ) on a post-Consolidation basis (see section 2 below):

• 105,000,000 fully paid ordinary shares in the capital of the Company (“ Shares ”);

• 27,000,000 options to acquire TFB Shares exercisable, subject to satisfying vesting conditions, at $0.10 per option, on or before the date which is three years after completion of the Acquisition (“TFB Options”). The TFB Options will vest upon the Share price achieving a consecutive 30-trading day volume weighted average price of at least $0.20; and

• 20,000,000 performance shares which will each convert into one Share upon a TFB entity entering into the TaoBao Contract[1] and the TFB group generating revenue pursuant to the TaoBao Contract prior to 30 June 2022 of not less than $2,000,000 in any single financial year or not less than $5,000,000 on an aggregated basis. The Performance Share terms are subject to ASX’s approval, which approval is a condition precedent to completion of the Acquisition.

1 TaoBao Contract means the agreement expected to be entered into between a TFB entity and Alibaba Group Limited (or one of its associated companies) prior to Completion enabling TFB to sell its customers products on the TaoBao wholesale platform

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2. Conditions Precedent

Completion of the Acquisition will be subject to a number of conditions precedent, including, but not limited to:

• Due diligence: The completion of financial, legal and commercial due diligence by the Company in relation to TFB to its absolute satisfaction;

• Shareholder and regulatory approval: The Company obtaining all necessary shareholder and regulatory approvals required in relation to the Acquisition and other matters contemplated by the SSPA (which includes receipt of ASX’s conditional approval to reinstate the Company’s quoted securities to trading);

• Consolidation: Completion of a consolidation of PKA securities on a ratio of 8 to 1 (“ Consolidation ”);

• Re-Compliance Capital Raising: The Company lodging a prospectus with ASIC for the purpose of ASX reinstatement requirements and to raise an indicative minimum of $5,000,000 at an issue price of $0.10 per Share (post Consolidation) (“ Capital Raising ”);

• Escrow Arrangements: To the extent required by ASX, the Company or the ASX Listing Rules, each of the TFB Shareholders entering into a restriction agreement in relation to the Consideration Securities.

The conditions precedent to completion of the Acquisition must be satisfied by 31 March 2019 (or such later date as the TFB Shareholders and the Company may agree).

Change of Activities, Shareholder Approval & Change of Name

The proposed Acquisition of TFB will constitute a change in the nature and scale of the Company’s activities from retailing fine jewellery to a F&B platform that provides a solution for international brands seeking to access Asian consumer markets for their products.

As part of the Acquisition, the Company will be required, pursuant to Listing Rule 11.1.2, to obtain approval from Plukka shareholders at a general meeting (“ General Meeting ”). The Company will also be required, pursuant to Listing Rule 11.1.3, to re-comply with Chapters 1 & 2 of the Listing Rules.

In addition to approving the Acquisition, at the General Meeting the Company will also seek shareholder approval for the associated Capital Raising, Consolidation and change of name to "The Food Box Network Limited".

Trading in the Company’s securities will remain suspended following the announcement of the Acquisition, with the suspension expected to continue until such time as the Company is able to successfully re-comply with Chapters 1 and 2 of the ASX Listing Rules.

Proposed change in Plukka’s board and management

Following completion and subject to shareholder approval, six additional directors are intended to be appointed to the Board of the Company. Existing Plukka directors Cameron Williams and Peter Ruse will step down as directors following completion while John Toll will remain on the Board as a nonexecutive director.

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In addition to David Burns and Heidi Dugan (executive summaries included above) who are proposed to be appointed as CEO and Executive Director of the Company respectively, the following individuals are intended to be appointed as directors of the Company at completion.

Tim Smith – Non-Executive Chairman – Extensive experience in senior management roles within the banking and finance industry in Australia and Asia. Tim was previously the Head of Westpac Private Bank in NSW & ACT and also worked across the Asia Pacific in many industries for multinationals and major Australian corporates.

Andrew Waters – Non-Executive Director – TFB founder with over 25 years' experience as an investment banker focused on China, Asia consumer and logistics markets. Andrew was a founder of CNL Group which was the first foreign owned company in China to obtain a national logistics license.

Mark Schuab – Non-Executive Director – Partner at King & Wood Mallesons in Shanghai specialising in foreign direct investment, M&A and outbound investment.

Wayne McIntosh – Independent Non-Executive Director – Director and CFO of Bright Food Global, a diversified food group that operates across various markets in the Asia Pacific region.

Indicative Timetable

The indicative timetable for the mattes contemplated by the Acquisition is set out below.

The indicative timetable for the mattes contemplated by the Acquisition is	set out below.
Indicative Timetable1	Date
Despatch of Notice of Meeting	Early November
Lodgement of Prospectus with ASIC	Late November
Opening Date of the Capital Raising Offer	Early December
General Meeting held to approve the Acquisition	Mid December
Closing Date for Capital Raising Offer	Mid December
Issue of shares under the Capital Raising Offer	Mid December
Completion of the Acquisition2	Mid December
Re-quotation of Securities (including Shares issued under the Capital Raising Offer) on ASX	Early January

Notes:

• 1: The above dates are indicative only and may change without notice. The Company reserves the right to extend the Closing Date or close the Offer early without prior notice.

• 2: The above stated date for completion of the Acquisition is only a good faith estimate by the Directors and may have to be extended.

Indicative Capital Structure

Set out below is the indicative capital structure of the Company following completion of the Acquisition and associated Capital Raising. The anticipated capital structure of the Company is only an estimate and is subject to variation.

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Shares
Shares currently on issue (Pre-Consolidation)	175,535,232
Shares currently on issue (Post-Consolidation)	21,941,904
Consideration Shares to be issued to the TRB Shareholders	105,000,000
Shares to be issued to Advisers	3,000,000
Capital Raising	50,000,000
Total upon completion of the Acquisition	179,941,904
Performance Securities
Performance Rights currently on issue (Pre-Consolidation)1	6,267,500
Consideration Performance Shares to be issued to the TFB Shareholders	20,000,000
Total upon completion of the Acquisition	20,000,000
Options
Unquoted Options currently on issue (Pre-Consolidation)2	10,540,000
Unquoted Options currently on issue (Post-Consolidation)2	1,317,500
Unquoted Options to be issued to the TFB Shareholders	27,000,000
Total upon completion of the Acquisition	28,317,500

Notes:

• 1: Plukka currently has 6,267,500 performance rights on issue which relate to the performance of the Company’s prior fine jewellery business. Subject to obtaining relevant regulatory approvals, the Company intends to cancel these performance rights in conjunction with the Acquisition.

• 2: Comprised of 10,000,000 (1,250,000 Post-Consolidation) unlisted options exercisable at $0.20 ($1.60 post consolidation) on or before 4 December 2018 & 540,000 (67,500 PostConsolidation) unlisted options exercisable at $0.20 ($1.60 post consolidation) on or before 28 January 2019.

In conjunction with the Acquisition the Company also intends to adopt, subject to shareholder approval, a securities incentive scheme for key management and employees.

Indicative use of funds

The Company intends to apply funds raised pursuant to the Capital Raising, together with existing cash reserves, over the first two years following completion as follows:

Source of Funds	Amount	%
Existing cash reserves of the Company1	$800,000	22%
Capital Raising	$5,000,000	78%
Total	$5,800,000	100%

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Use of Funds	Amount	%
Operations – China	$2,705,803	46.7%
Operations – Asian Pacific (excl. China)	$551,250	9.5%
Sales & Marketing	$886,574	15.3%
Capital Expenditure	$200,000	3.4%
Working capital & administration costs2	$686,373	11.8%
Costs of the Capital Raising	$770,000	13.3%
Total	$5,800,000	100%

Notes:

• 1: Estimated cash reserves of the Company and TFB at completion, assuming completion by 31 December 2018.

• 2: Includes administration costs, including salaries, general corporate costs including rent and the provision of services to the Company.

Advisers

Azure Capital Ltd is intended to be engaged as corporate adviser and Bellanhouse Lawyers have been appointed as legal adviser. Full terms of the appointment of all advisers will be included in the Prospectus.

For more information, please contact:

John Toll jt@azurecapital.com.au Chairman