PPP's GEM transaction for £1,000,000 CLNs and 80,000,000 warrants

On 21st May, the company issued an RNS detailing:

• Entering into a Convertible Loan Note agreement with GEM Global Yield LLC SCS for up to £1,000,000, with an initial tranche of £150,000 at the lesser of 10p/share and "100% of the average for the three lowest closing bid prices in the 40 days immediately preceding conversion"

• Issuing 80,000,000 warrants to GEM at 4p/share.

This is problematic and does not appear to meet minimum expected FCA and Companies Act requirements for the following reasons:

1. The terms (particularly in light of the ongoing suspension and the inference that the initial tranche is to be drawn down before return) are unclear, with no conversion date, no deemed calculation terms , withholding periods or any other key information that investors need to make an informed decision

2. The transaction includes, as an absolute minimum, issuing an additional 72.8% on top of the current shares is inssue, with almost all of these at a 59% discount to the currently suspended price. The company makes no argument for why it requires this value of money, while massively diluting every shareholder to do so. The company is legally required to do so under s571 (6)

3. The company has no registered and approved prospectus to undertake a transaction of this scale - a requirement by the FCA

4. The directors have no authority to be issuing shares - the authority to do so ceased 15 months after the last AGM, and so would have been exhausted in April. Such authority, including ability to offer shares to an individual party/parties at the expense of the existing shareholders, must be ratified by the shareholders at an AGM or GM (as the company has so acted to issue shares to companies connected to Stephen Lunn). The company itself has chosen to delay the AGM and so no longer has this authority.

This may cause issues for PPP, and the board members themselves, who are legally responsible for the actions of PPP and ensuring legal compliance with the Companies Act and FCA requirements. We are aware that the FCA has an open case on the company based on this reported transaction.

A group of concerned shareholders wrote to all directors of the company, the company's legal agent and the company secretary, Westend Corporate LLP to identify these issues and have yet to receive an adequate response. A copy of the letter has been made available to us. The company has published an update in RNS 20 June:

"As a result of the commitment from GEM Global LLC SCS ("GEM") referred to below, the board of directors of the Company have now been able to provide Crowe U.K. LLP, the Company's auditors, with a going concern memorandum."

"The Convertible Loan Note Facility has not been entered into yet and therefore the warrants have not been issued to GEM."

It is unclear to us how the auditors are willing to directly rely on the GEM transaction considering it hasn't yet been entered into, and is subject to shareholder voting approvals, who would be voting for a substantial dilution to their own shareholdings.

Furthermore this appears to contradict an earlier RNS on 21 May, which states "Accepts" and "Agreed", inferring a commitment to GEM (that the directors are unable to make):

"Company Accepts a Convertible Loan Note Facility for £1,000,000 and Extension of Previous £20,000,000 Share Subscription Facility"

"Pennpetro (LSE: PPP) is pleased to announce that it has agreed to enter into a Convertible Loan Note Facility with GEM Global Yield LLC SCS ("GEM") for a total of £1,000,000 ("CLNF")."

Note that in neither of the above RNSes are there any conditions or restrictions mentioned related to shareholder approval (as referenced in the 10 June RNS for a separate issuance of 62 million shares), prospectus, or director's authority to enter into such a transaction.

Again, this appears to be confusing - the shareholders mentioned above first queried the validity of the GEM transaction on 25 May 2025. However the company declined to address the concerns and has continued to do so until the release of the 20 June RNS. It is not clear why the company would leave such ambiguity in the market for almost a month.

Requirements for a prospectus

As referenced in the above letter, a transaction without a valid prospectus would appear to be strongly in breach of the Prospectus Regulations. Under the prospectus regulations only, a restricted offer may not require a prospectus in advance of the offer, although the company is required to provide and approve one via shareholder vote prior to requesting admission of these shares. Without the details of the agreement, we cannot assess this situation further.

However the company would then appear to be in breach of pre-emption rights by making such an offer to GEM. Such authority lapsed in April 2025 as this extends only for up to 15 months after an AGM.

Despite specific requests to each of the directors involved by the shareholders, no company or director-specific response fully addressing the issues has been made as yet.