Ubisense Group plc : Fundraising Oversubscribed - Admission with Market Capitalisation Of £38.6m

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Ubisense Group plc (AIM: UBI, "Ubisense” "the Group” or "the Company”), the Cambridge headquartered real-time location solutions (RTLS) company, is to be admitted to AIM with a market capitalisation of £38.6m. The Placing, conducted by Canaccord Genuity Limited ("Canaccord Genuity”), with institutional investors has raised £8.7m, before expenses, at a price of 180p per share. Trading in Ubisense shares is expected to start on Wednesday 22 June 2011.

Placing details

• Placing of 4,817,867 Ordinary Shares at 180p per share to raise:
• £5.0 million, before expenses, for the Group to fund the expansion of its Real-Time Location Systems ("RTLS”) offering to new customers and markets, and to grow its Geospatial division, both organically and potentially through acquisition
• £3.7 million, before expenses, for selling shareholders
• Ubisense is expected to have a market capitalisation, at the placing price of 180p per share, of approximately £38.6 million on Admission
• Dealings are expected to commence on AIM at 8.00am Wednesday 22 June 2011. (Ticker symbol UBI)
• Canaccord Genuity is acting as the Company’s Nominated Adviser and Broker, and acted as sole book-runner on the Placing.

The Business

• Ubisense is a world leader in providing end to end (hardware, software and services) real-time location solutions to companies allowing them to track people and assets with a high degree of accuracy
• The Group operates in two divisions: RTLS and Geospatial
• The RTLS division uses Ubisense’s proprietary technology to target high value manufacturing businesses which are used to track assets, such as tools, people and vehicles, in factories and other indoor environments with an accuracy that satellite based systems cannot currently achieve
• Ubisense’s ultra-wideband ("UWB”) based RTLS is currently one of the few systems that delivers both reliable accuracy and the ability to track resources in three dimensions in real-time
• The Geospatial division uses Ubisense’s expertise in location solutions to deliver applications, software and other solutions primarily in the utilities and telecom sectors
• The Geospatial division focuses on the detailed mapping of network assets and provides, on behalf of its customers, network management planning and design, and has particular expertise in GE Smallworld software and solutions.

Key strengths

• The Group has a secure platform on which to develop its business and has progressed to date by leveraging the profitable, cash generative Geospatial business whilst developing its RTLS technologies
• Ubisense has large manufacturing and industrial companies in its existing customer base. The Directors believe considerable opportunities exist for further revenue generation within its current customer base
• Ubisense’s RTLS product is proven in industrial environments and Ubisense currently has numerous blue chip customers. Ubisense has received a number of awards in recent times
• The Board has experience in growing early stage technology businesses into successful and profitable companies. Several members of the Board have previously founded, grown and then subsequently sold technology businesses
• The Directors believe the Group’s RTLS product is currently the most accurate and reliable solution available to support high value manufacturing and industrial processes indoors
• Ubisense has assembled a considerable set of proprietary intellectual property relating to its RTLS product.

Richard Green, Chief Executive, said:

"We are delighted by the support we have received from both new and existing investors.

"The fact that our placing was substantially oversubscribed is testament to our leading IP and high growth market opportunity with global leaders such as Aston Martin, EADS, BMW, Atlas Copco and Deutsche Telekom. We now have an opportunity to leverage these customer relationships on a global scale.

"The proceeds of this placing provide us with a strong platform to support the rapid growth of our RTLS division and to take advantage of some exciting opportunities to develop our Geospatial business, both organically and by acquisition.”

Note to editors

Ubisense is the market-leading location solutions company, delivering mission-critical enterprise asset tracking and geospatial systems that bring visibility and control to previously intractable business processes. The Group operates in two divisions, RTLS and Geospatial.

Through its RTLS division, Ubisense is a world leader in real-time location solutions allowing companies to track assets (such as tools, people and vehicles) within factories and other indoor environments in real time in three dimensions. Ubisense’s end-to-end RTLS solutions provide dynamic and precise indoor tracking of assets helping its clients, which are primarily in the automotive, aerospace and transportation industries, to bring visibility and control to business processes thereby helping to lower costs and drive logistical efficiencies. The Geospatial division uses Ubisense’s expertise in location solutions to help large infrastructure companies, such as utilities and telecom companies, to map, plan, manage and optimise their networks across large geographic areas.

Ubisense is headquartered in Cambridge, UK and has offices in the USA; Canada; France; Germany; Singapore; and Korea. For more information please visit: www.ubisense.net

This announcement is issued by Ubisense Group plc (the "Company”) in connection with the proposed placing of ordinary shares in the capital of the Company ("Ordinary Shares”) and the proposed application for admission of the whole of the ordinary share capital of the Company, issued and to be issued, to trading on the AIM market of London Stock Exchange plc. The information in this announcement, which is for background purposes only, is preliminary in nature and is subject to change. No representation or warranty express or implied is made as to the fairness, accuracy or completeness of the information contained herein and no reliance should be placed upon it. Application for shares in the Company may be made only on the basis of the admission document relating to the Company which is expected to be published on 17 June 2011 and the risk factors set out in that admission document. A copy of the admission document will be available on the Company's website and from the offices of Mills & Reeve LLP, 130 Fenchurch Street, London EC3M 5DJ following admission.

This announcement does not constitute an offer to sell or issue, or the solicitation of an offer to subscribe for or buy, Ordinary Shares to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation. In particular, this announcement is not for distribution in or into the United States of America, Canada, Japan, the Republic of Ireland, the Republic of South Africa, Australia or New Zealand. The issue of the Ordinary Shares has not been, and will not be, registered under the applicable securities laws of the United States of America, Canada, Japan, the Republic of Ireland, the Republic of South Africa, Australia or New Zealand and the Ordinary Shares may not be offered or sold directly or indirectly within the United States of America, Canada, Japan, the Republic of Ireland, the Republic of South Africa, Australia or New Zealand or to, or for the account or benefit of, any persons within the United States of America, Canada, Japan, the Republic of Ireland, the Republic of South Africa, Australia or New Zealand.

This announcement may contain forward-looking statements. These statements relate to the Company's future prospects, developments and business strategies. Forward looking statements are identified by their use of terms and phrases such as "belief", "could", "would", "envisage", "estimate", "intend", "may", "plan", "will", "should" or the negative of those, variations or comparable expressions, including references to assumptions. Any such forward looking statements in this announcement are based on current expectations and intentions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements.

BACKGROUND INFORMATION

1. Introduction

Ubisense is a world leader in providing end to end (hardware, software and services) real-time location solutions to companies allowing them to track people and assets with a high degree of accuracy. In addition, Ubisense’s solutions give enterprises the ability to bring visibility and control to business processes by using the data generated from the tracking of such assets to lower costs and drive logistical efficiencies.

The Group operates in two divisions; RTLS and Geospatial.

The RTLS division uses Ubisense’s proprietary technology to target high value manufacturing businesses. Ubisense’s RTLS products are used to track assets, such as tools, people and vehicles, in factories and other indoor environments with an accuracy that satellite based systems cannot currently achieve. Ubisense’s ultra-wideband ("UWB”) based RTLS is currently one of the few systems that delivers both reliable accuracy and the ability to track resources in three dimensions in real-time.

The Geospatial division uses Ubisense’s expertise in location solutions to deliver applications, software and other solutions primarily in the utilities and telecom sectors. The Geospatial division focuses on the detailed mapping of network assets and provides, on behalf of its customers, network management planning and design and has particular expertise in GE Smallworld software and solutions.

Demand for RTLS technologies is increasing due to industrial manufacturers and others recognising the benefits of real-time asset tracking. The market for RTLS is estimated to be worth over $2.7 billion by 2018 and the Directors believe that the Group is very well positioned to be a significant supplier to this market.

Notable customers of the Group include Atlas Copco, BMW, Aston Martin and Airbus in the RTLS division and Deutsche Telekom, Duke Energy, Swisscom and ExxonMobil in the Geospatial division.

The Company has raised approximately £4.2 million (net of expenses) by issuing 2,777,778 New Placing Shares at the Placing Price representing approximately 13.0 per cent. of the Enlarged Issued Share Capital. In addition, Canaccord Genuity, as agent for the Selling Shareholders, has used reasonable endeavours to procure placees for the Selling Shareholder Shares. The proceeds of the Placing will principally be used to provide working capital for the Group to expand its RTLS offering to new customers and enter new markets whilst continuing to grow steadily its Geospatial division both organically and potentially through acquisition.

2. Background and funding history

The Group was founded in 2002 by Andrew Ward, Paul Webster, Rupert Curwen and Peter Steggles who remain employees of the Group. The four founders were joined shortly thereafter by Professor Andrew Hopper CBE, who is currently the Chairman of the Company.

Following a merger with Ten Sails LLP, the Group expanded out of pure technology and became an end to end location solutions provider. Ten Sails itself was set up by four former Smallworld employees, including Richard Green, Ubisense’s current Chief Executive Officer, following the acquisition of Smallworld by GE in 2000.

The business of Ten Sails that merged into Ubisense became Ubisense’s Geospatial division and is the origin of the Group’s particular expertise in GE Smallworld software and solutions. Through the acquisition, Ubisense gained an established team with extensive experience of building and selling software systems globally in the location technology sector, and the Geospatial division’s staff provided the beginnings of its customer relations network and the consulting expertise needed to deliver an integrated suite of solutions.

Over recent years, the profitability of the Geospatial division has done much to help fund the development of the RTLS division and existing Geospatial consulting work has helped fund the development of the Group’s RTLS technology. This, in conjunction with external funding has been used to support the Group’s growth.

Since November 2006, the Company has raised a total of approximately £7.9 million from a number of investors including founders, employees of the Group and institutional investors. Approximately £2.9 million was raised in three tranches of convertible loan that were issued between November 2006 and December 2008. Two of these tranches have been fully repaid or converted into Ordinary Shares and the third tranche, the Convertible Loan, will automatically convert into 963,320 Ordinary Shares on Admission.

In November 2010, the Company raised gross proceeds of £5.0 million by way of a pre-Admission equity fundraising. The fundraising was led by Canaccord Genuity who arranged for a number of new institutional investors to participate in the fundraising alongside existing shareholders of the Company. The additional funding enabled Ubisense to further capitalise on a growing and significant list of opportunities in specific markets and to enable the Company to address the growing demand for its RTLS technologies.

Part of the additional funding raised in November 2010 was used specifically to enhance the Company’s growing relationship with the leading industrial tool company, Atlas Copco, and since the funding, the Company, working in conjunction with Atlas Copco, has initiated pilot schemes with some of Atlas Copco’s global automotive customers, including GM, Hyundai and Audi.

The Group entered into a facility agreement with HSBC Bank plc on 22 February 2008 pursuant to which HSBC Bank plc, as lender, made available to the Group a facility of up to £2,000,000. As at 31 December 2010, £894,643 was drawn down and as at 16 June 2011 (being the latest practicable date before the date of this document) £728,968 was outstanding pursuant to this facility. No further drawdown is permitted under this facility and any amounts, once repaid, are not available for further drawing.

3. Business overview

The Company employs 125 staff based in the UK, Germany, US, France and Canada and is, in addition, using approximately 50 contractors.

The RTLS division

Product

The Group’s RTLS division primarily serves the automotive, aerospace and transport industries providing complete end to end location solutions comprising hardware products to enable real-time location of people and assets, software to enable the collection and processing of the data received by the hardware, applications to generate business benefits from the data gathered and services to implement the solution in the customer’s environment.

The RTLS division supplies location tags, which are either attached to an asset directly (direct tracking) or to the equipment handling the asset (indirect tracking). These location tags are extremely durable and transmit UWB radio signals to a network of Ubisense’s fixed sensors and mobile detectors which then use the incoming signals to locate the position of the tags. These positions can be used to trigger events (such as when an asset enters or exits a particular area) and the positions and events can be represented graphically, in real-time, in interactive 2D and 3D models using the Group’s proprietary software. The Group’s applications, implemented on top of the core system, enables, amongst other things, Ubisense’s customers to control devices like tools on production lines, track and manage assets across large indoor factory areas and match the actual assembly progress against plan. Typical benefits are reductions in cost, improvements in efficiency and quality and reduction of work in progress.

The use of UWB and the Company’s proprietary sensor technology results in solutions which display a high level of accuracy and reliability in difficult manufacturing environments where alternative radio technologies and systems often fail. The tags and sensors have been proven to operate reliably around the clock which is a sought after requirement in a number of the markets (such as manufacturing and transport facilities) in which the Group operates.

The software applications implement the customer’s business rules using the location data and events generated by the RTLS ensuring that deployments are rapid and cost effective.

Ubisense’s RTLS technology has successfully been adopted within the automotive industry by several large scale manufacturers (including BMW and Aston Martin) and within the aerospace industry by the EADS Group (notably Airbus and Eurocopter). The adaptability of Ubisense’s RTLS means that the Group has also won orders from the transport industry with the likes of Amtrak, Chicago Transit Authority and Metro Transit of Minneapolis-St-Paul, US. Ubisense’s RTLS tags may also be worn by people and have, for example, also been adopted by various departments of the US and French military for the purpose of analysing training exercises.

Strategic partnership with Atlas Copco

Atlas Copco is one of the world’s leading industrial tool manufacturers and an estimated one in every three cars is assembled using Atlas Copco tools.

Ubisense has developed a tool location system ("TLS”) in conjunction with Atlas Copco which allows tools to be tracked, either in a production line as they are being used on the item being manufactured, or located in a stationary environment. TLS is fully integrated with the Atlas Copco Tools Talk system and is marketed by Atlas Copco as part of their product line. Atlas Copco, supported by representatives from Ubisense, have been launching the product to Atlas Copco’s 1,000 strong sales staff globally. Through the Atlas Copco relationship, new contracts have been won and pilots are currently being conducted or are planned to commence shortly with Daimler, GM, Hyundai Kia and Audi. The Directors believe that there is significant opportunity to leverage Atlas Copco’s brand, customer base, sales channels and on-site support to accelerate growth in the manufacturing sector.

The Geospatial division

Ubisense’s Geospatial division uses the Group’s expertise in location solutions to manage some of the largest and most complex Geospatial projects worldwide on software and hardware platforms that are not proprietary to the Group, most notably and significantly those of GE Smallworld.

The Geospatial consulting services team, consisting of around 56 permanent members of staff and up to a further 50 contractors, has offices in Germany, the US and Canada and this enables multi-territory projects to be supported. The division serves the utilities, telecommunications and petrochemical industries, providing consulting and solutions, including integration with other enterprise systems, around location data. The Company’s team of software engineers provide all aspects of Geospatial development and support services including: planning, project management, implementation, custom applications, upgrades, test automation, training and system management.

The Group’s employees are experts in location solutions and its application to real-world problems. Practically, this involves consulting on one or all of the following areas:

Software installation

Ubisense has a number of consultants dedicated to the GE Smallworld technology suite in North America and Europe and has one of the leading GE Smallworld delivery teams. Its consultants each have between five and fifteen years of experience with the GE Smallworld product suite across a broad range of industries and applications, as well as direct involvement on GE Smallworld product development teams.

GE Smallworld’s software is used by businesses to digitize, map, manage and analyze their network components and data. GE Smallworld has a customer base that spans electric, gas, nuclear and the telecommunications markets where the software is well-entrenched and critical to the operations of a number of its customer companies.

The Geospatial division is uniquely positioned to service the GE Smallworld customer base as a number of key employees at Ubisense were employees of Smallworld prior to its acquisition by GE Energy in 2000 (including Richard Green who was a founder of Smallworld).

Analysis of data

The Group is able to increase the benefit of the data collated by the software platform by implementing changes to existing system configurations as well as advising on new application areas or integration possibilities.

Once the data is obtained, the next step is to view the results. With the arrival of Google, Microsoft and others into the mapping space, there has been something of a geospatial industry revolution, providing greater availability of rich datasets, including base maps, satellite imagery, streetview imagery and traffic information. This is combined with ease of use, improved scalability, and lower costs for "simple” applications.

Ubisense offers the ability to integrate its customers’ geospatial data with technologies like Google Maps. This can be a modular solution that will facilitate the implementation of multiple technologies and use open source solutions such as OpenLayers, combined with multiple spatial data repositories, including GE Smallworld (GSS), Oracle, PostGIS or cloud-based solutions. Ubisense myWorld provides the world on Google Maps. Geospatial data, outage information, work orders, and other information from a customer’s enterprise system can be overlaid on the familiar Google Maps base. End users from all levels of an organization can access geospatial information from any internet enabled device.

Managed services

As applications become increasingly complex, the knowledge of staff required to operate them for maximum overall value continues to grow. Building and retaining the technical knowledge base required to maintain an enterprise geospatial product is a major challenge in today’s economic environment and IT organisations are being pressed to take on more responsibilities with fewer staff.

Ubisense offers its customers the option of a managed service which applies a service level based approach to operating and maintaining applications providing ongoing maintenance, management, conversion, enhancement and support of an application portfolio.

Through this managed service offering, Ubisense augments its customers’ teams with the most experienced consultants. The managed service approach is designed to provide a vehicle for Ubisense to work with its customers’ IT organisations to manage the operation of their system, with appropriate expertise and best practices from both teams melded into the final solution.

This business has been a consistent cash generative division of the Company and has provided blue chip customers, such as Duke Energy, Swisscom and HLBG, with long term managed service contracts, each of which have the potential to be leveraged by the RTLS division.

The Geospatial division’s current customer base includes Deutsche Telekom, Swisscom, HLBG, GE, ExxonMobil, Duke Energy, Atmos, Cox, Cablevision, Exelon, Dominion and UGI.

4. Key strengths of the Group

Platform

The Group has a secure platform on which to develop its business and has progressed to date by leveraging the profitable, cash generative Geospatial business whilst developing its RTLS technologies. The Geospatial contracts typically have a duration of 1-2 years and a substantial number of those contracts are recurring. The revenue generated by the Geospatial business has allowed Ubisense to reduce its need for outside investment in the early stages of its development.

Customer Base

Ubisense has large manufacturing and industrial companies in its existing customer base. The Directors believe considerable opportunities exist for further revenue generation within its current customer base by developing global framework contracts (as has been done with BMW). Key customers of the Group’s RTLS division include:

• Atlas Copco, a strategic partner with an OEM contract and Atlas Copco has installations in almost every automotive manufacturing plant around the globe
• EADS has selected Ubisense’s product as its strategic RTLS and several Airbus programs including the A380, A350, A320 and A400M have begun deployments
• BMW Group, where BMW has installed Ubisense’s product in a number of its plants

The Geospatial division has high customer loyalty not least because the cost of a customer switching to an alternative software provider is often prohibitive due to the large effort and unreliability of migrating data to a new software package. Key customers of the Group’s Geospatial division include:

• Deutsche Telekom, where Ubisense is its strategic network partner
• Duke Energy, where Ubisense is its strategic network partner

Reputation

Ubisense’s RTLS product is proven in industrial environments and Ubisense currently has numerous blue chip customers and has received a number of awards in recent times including:

• DTI Smart Award 2003 & DTI R&D Grant 2004
• EU FP7 project awards
• Frost and Sullivan – Product Innovation of the Year 2007
• RTLS won 2009 "Best British Inside” DTI iAward
• IET 2009 innovation finalist
• Ranked 8th in the Sunday Times Microsoft Tech Track 100 2009
• Deloitte Technology Fast 50 for the third successive year
• Richard Green – Ernst & Young Science and Technology Entrepreneur of the Year 2010
• Business Weekly – International Trade Business of the Year 2010
• Cambridge Computer Ring – Business of the Year 2010

Management

The Board has experience in growing early stage technology businesses into successful and profitable companies. Several members of the Board have previously founded, grown and then subsequently sold technology businesses. The Directors intend to apply the experience and knowledge they have gained with a view to driving the Group’s future corporate growth and increasing shareholder value.

Experience

A number of employees of the Group have over 20 years of experience in the location solutions space and its technology is backed up by highly skilled and experienced consultants.

Technology

The Directors believe the Group’s RTLS product is currently one of the most accurate and reliable solution available to support high value manufacturing and industrial processes indoors. The Directors believe competing technologies do not currently provide a solution as accurate and reliable as Ubisense’s RTLS product.

Intellectual Property

Ubisense has assembled a considerable set of proprietary intellectual property relating to its RTLS product. This set includes patents (both granted to the Company and licensed by the Company), trade secrets and know-how, and trademarks. This intellectual property serves to act as a barrier to prevent other companies from easily and/or quickly developing systems which match the performance and reliability of Ubisense’s RTLS.

Ubisense has been granted three patents relating to its RTLS technology and applications thereof in the US (for a "System for detecting intruders in a populated space”, a "Location device and system using UWB and non-UWB systems”, and a "Location system”). Ubisense has also been granted equivalent patents in Europe for the "System for detecting intruders in a populated space”. In addition, the Company has applied for a number of patents worldwide to protect important aspects of its RTLS technology.

The Company has also licensed a number of patents from Cambridge Consultants Limited (a company owned by Altran Technologies) which include the patents relating to the UWB sensor. These licenses have been granted until 31 December 2025.

Application into other markets

Although Ubisense’s RTLS technology has, to date, been most widely accepted by large scale industrial manufacturers and transport companies, the technology has also been used in other environments such as agriculture (dairy animal welfare) and theatre. The Directors believe Ubisense’s technology could be increasingly adopted into a variety of new markets such as energy, defence, security, healthcare, retail, sport and shipping.

5. Market size

RTLS

The Directors believe that the market for indoor dynamic RTLS has the potential to grow rapidly. A study by IDTechEx in 2008 stated that the RTLS market could be worth over $2.7 billion by 2018.

Automotive industry

In 2008-2009 alone, an estimated 61 million vehicles were produced in 570 automotive assembly plants across the globe. With traditional systems delivering an accuracy of several metres in non-Ubisense plants (accurate enough to identify the approximate parking slot of a vehicle in the car park), the potential for additional savings by using Ubisense’s far more accurate solution in process control and monitoring applications are compelling and this represents a significant market opportunity which Ubisense is well positioned to exploit.

Aerospace industry

The global economic downturn had a significant adverse impact on the aviation manufacturing market with worldwide shipments of aircraft declining in each of the last three years. This does not reflect the fact that deliveries of large-cabin long-range aircraft remained relatively stable. In 2010, 2,015 aircraft were delivered to customers around the globe, an average of 5.5 aircraft delivered every day. Total aggregate revenue for aircraft manufacturers in 2010 was $19.7 billion.

Airbus and Boeing dominate the large jet airliner market, delivering 510 and 462 airplanes respectively in 2010. Boeing has three assembly lines located at Everett, Renton and North Charlestown, US. The major Airbus plants are located at Toulouse in France, Hamburg in Germany and Tianjin in China. Parts for each airplane are delivered to these assembly lines from component manufacturers globally.

The applications of RTLS are wide ranging and Ubisense is well positioned to capitalise on the proven, expanding RTLS markets with its existing customers and partners and also to diversify and apply the technology to new markets.

Geospatial

Traditional GIS provides mapping, geocoding, routing and reporting alongside a service and consulting offering. The worldwide market for GIS/Geospatial services in the telecommunications and utility sector was estimated at being worth US$490 million in 2010 and is expected to grow to US$522 million in 2011. The static outdoor location technology market that the Geospatial division covers is estimated to be worth more than $5 billion by 2018 (source: Daratech).

Ubisense has a strong relationship with GE Smallworld, a market leading player in the telecommunication and utility markets. Smallworld provides the foremost Geospatial solution for sophisticated utility network applications and accounts for an estimated 38.7 per cent. of that market (source: Daratech). Integration, through Smallworld, with software such as Google Maps and the ability to operate Ubisense myWorld on smart phones and tablets gives Ubisense a strong competitive position in a rapidly developing market.

6. Competition

Whilst GPS-based tracking solutions work well outdoors, they are not well suited for indoor use because, in order to operate with reasonable accuracy, they require a line-of-sight to satellites.

In indoor environments, there are three types of location solution which are commonly used for tracking:

• Passive RFID systems which locate the presence of a tag in close proximity to the location of the signal reader/energiser. Transport for London’s Oystercard is an example of this kind of ‘chokepoint’-type solution
• Dedicated active identification systems using radio or ultrasound to determine proximity of a tag to a reader over a longer distance. These systems, sometimes categorised as "active RFID” can detect the presence of a tag some distance (e.g. 30 metres) away from the reader(s)
• Active identification systems which ‘piggy-back’ on existing wireless services, such as WiFi. Signals from the network participants (e.g. WiFi cards) are monitored to determine their location relative to the basestations (which normally have been installed for communications purposes). Although in principle these systems can re-use existing indoor communications infrastructure for location purposes, they again are typically unable to provide a precise location for objects inside buildings.

7. Ubisense’s technology

The existing technologies described in section 6 above can typically track an object to within a few metres. However, Ubisense’s precise tracking differs because it is able to track objects to within just 15 cm (6 inches). The multiple sensors in the Ubisense RTLS operating environment enable tracking in three dimensions and the Board believes that UWB based RTLS delivers reliable accuracy together with the ability to track resources in real-time in three dimensions.

Wireless technology can be used to continuously determine and track the location of assets and personnel in real-time. Ubisense’s RTLS solution typically utilises battery-operated radio tags and a cellular locating system to detect the presence and location of the tags using angle-of-arrival and time-difference-of-arrival measurement technology. Ubisense’s locating system is usually deployed as a matrix of locating devices (or sensors) that are installed at a spacing of anywhere from 20 to 100 metres depending on the site layout. These sensors determine the locations of the radio tags.

Ubisense tags employ a unique dual-radio architecture. Tags transmit UWB radio pulses, which are used to determine location, and have a conventional bi-directional 2.4GHz radio which is used as a control and telemetry channel.

The Ubisense RTLS solution consists of the following four major components:

• Tags;
• Sensors;
• Location platform; and
• Application software.

Ubisense tags are small rugged devices specifically designed for use in harsh industrial environments, or other specific applications, and are attached to the object to be tracked. The Group supplies a number of different tags (e.g. Compact Tag, Slim Tag, Industrial Tag, Intrinsically Safe Tag, Tool Tag and Tag Module). The tags have controllable update rates from as fast as 33 updates per second to as slow as one update every 7 minutes. Update rates can be varied in real time by application programs in response to tag activity or external events. Ubisense tags include a sensitive tremble switch that enables a "sleep mode”. Using sleep mode, a tag consumes almost no battery when stationary, but can be tracked many times a second when moving.

Ubisense sensors (e.g. Series 7000 sensor with various ingress protection (IP) ratings) contain an array of antennas and UWB radio receivers to calculate the location of the tags based on reception of the detected UWB signals transmitted from the Ubisense tags. The sensors pass the location information they generate over standard Ethernet networks to Ubisense’s platform software which manages and processes the information to generate application-relevant spatial events (such as "Tool X is now being used to assemble Car Y”).

Cellular techniques through the hardware and software architecture help the system maintain the required real-time response even when large numbers of location events are being processed. The software service elements run on Microsoft Windows (XP, Vista or Windows 7) or Linux, and the platform presents a .NET API that allows easy development of location-driven applications that use the Ubisense RTLS.

Ubisense’s UWB tracking systems use combined angle-of-arrival and time-difference-of-arrival measurement technology. When compared with competitors’ systems, that use only time-difference-of-arrival technology, Ubisense gathers more readings from each sensor for better error elimination and higher accuracy. Ubisense also provides systems operators with full visibility of sensor operation. Ubisense tools display all sensor readings graphically in 2D or 3D, and simulate the effects of configuration changes, making it easy to spot errors and optimise performance.

8. Business strategy and future opportunities

Ubisense’s business strategy is to build upon its existing customer relationships and secure new customer relationships whilst expanding and diversifying its RTLS and Geospatial offerings.

RTLS

There are an estimated 570 automotive assembly plants worldwide which produced an estimated 61 million vehicles produced globally in 2008-9. Multiple options of the same model mean that there are enormous possible production variants leading to increased potential for human error or sub-optimal process efficiencies. As such, the Directors believe there is a significant opportunity to increase the penetration of the Group’s RTLS offering within the automotive sector by leveraging its existing customers as well as targeting new manufacturers seeking cost savings and efficiency improvements. For example, BMW currently uses Ubisense’s RTLS systems in two of its assembly plants and is due to commence installation in its Shenyang plant in China and has recently begun in the Mini plant at Cowley, Oxford. The Group, together with its partner IBS AG in Germany, recently signed a global licence agreement with BMW which will mean that the Group has the framework to provide RTLS to all assembly plants across the BMW Group.

The opportunity also exists to target new customers, including, Daimler, GM, Hyundai Kia and Audi through the strategic partnership that the Group has developed with Atlas Copco. The Group’s ability to leverage Atlas Copco’s brand, customer base and sales capabilities will be important in maximising the value from the strategic partnership. Through its relationship with Atlas Copco, the Company is carrying out pilot schemes with Daimler at its Rastatt assembly plant, with GM at its Lansing plant, with Hyundai Kia at its Montgomery assembly plant and with Audi in Ingolstadt and Neckarsulm. In total, Daimler has 12 assembly plants, GM has 19 assembly plants, Hyundai Kia has 10 assembly plants and Audi has 6 assembly plants (although Audi is part of the much larger VW group which the Group also intends to target). Additionally, Ubisense and Atlas Copco are in discussions with other major motor manufacturers such as Ford and Volvo.

Beyond the automotive industry, Ubisense is seeking to expand on its existing relationship with Airbus and its ultimate parent company EADS Group. The Group signed a framework agreement in 2009 which set out strategic purchasing conditions. Specifically, Ubisense is currently in discussions with EADS Group regarding extending the RTLS solution into further sites as well as further work for Eurocopter in asset management.

The Directors believe that, having seen the beginnings of significant demand for high precision location solutions within the automotive industry, that this trend will not only continue within that industry but will continue to expand to other industries, such as the aerospace and transport industries, and that this will provide the Group with significant opportunity for growth.

Ubisense’s RTLS solutions have the potential to be used extensively in a number of different areas for example, in agriculture, military training, logistics and health and safety. Ubisense has also found opportunities for its technology in the nuclear power industry (where managers overseeing nuclear clean-up decommissioning work can use the location technology combined with their existing technology to map radiation profiles and provide information to plan work assignments).

Ubisense’s RTLS has also been deployed in areas as diverse as military training and simulation of urban combat, tracking and analysing hospital patients’ movements to help diagnose early dementia, assist with rehabilitation from brain injuries, to record biological and cognitive reactions to pieces of art in a Swiss museum and to identify potential customers at international trade shows. Additionally, Ubisense’s RTLS solution has been used to track opera singers to optimise sound balance in the O2 Arena.

Geospatial

The Geospatial division remains an integral part of the Group’s business and the Group will seek to grow this business over the medium term. The Geospatial division will aim to establish a leadership position in the geospatial industry and look to continue to grow revenues through accretive investment in new geographic territories and complementary intellectual property.

9. Reasons for the Placing and use of proceeds

The net proceeds of the Placing receivable by the Company are expected to be approximately £4.2 million and are intended to be used as follows:

• To repay the Company’s outstanding debt facility;
• To market and develop new relationships;
• To allow the development of additional intellectual property in the Group; and
• To allow the Group to develop, if relevant opportunities arise, through selective acquisition opportunities.

10. Board of Directors

Professor Andrew Hopper CBE– Non-Executive Chairman (aged 58)

Andy is one of the foremost leaders in the technology industry having co-founded twelve successful companies, including Acorn Computers Limited acquired by Olivetti, Virata, Inc. listed on NASDAQ, Adaptive Broadband Limited, acquired by California Microwave, Inc., Cambridge Broadband Limited, Level 5 Networks and RealVNC Limited. Andy is the Professor of Computer Technology and is currently Head of the University of Cambridge Computer Laboratory and a member of the University’s Council. Andy has worked on location systems for over 20 years. He was elected as a Fellow of the Royal Society in 2006 and the Royal Academy of Engineering in 1996. Andy was made a CBE in 2007 for services to the computer industry.

Richard Terence Green – Chief Executive Officer (aged 53)

Richard initially trained as a mechanical engineer and has over twenty-five years of experience in the software industry. Having established Smallworld as one of the leading geographic information system companies serving utility and telecoms companies in Europe and the US, the company subsequently listed on NASDAQ in 1996 and was acquired by GE in 2000 for $214 million. Richard was Ernst & Young UK’s Science and Technology Entrepreneur of the Year in 2010. Richard is a Fellow of the Institute of Mechanical Engineers and sits on the Institute of Mechanical Engineers Manufacturing Industries Board. He is also Entrepreneur in Residence at Judge Business School, Cambridge and a Fellow of the Royal Society of Arts.

Gordon Michael Campbell – Chief Financial Officer (aged 43)

Gordon is a Fellow of the Institute of Chartered Accountants in England & Wales. After qualifying with Deloitte in 1995 he moved into the technology industry with Smallworld, where he was part of the team involved in the NASDAQ listing. After leaving Smallworld in 2000 he joined UbiNetics, a 3G telecoms technology company and spin out from PA Consulting, where he was involved in private fundraisings of £65 million. Gordon joined Ten Sails LLP in 2004 which merged into Ubisense in 2005. He became CFO in 2009 and joined the board in 2010. He has an M.A. in Engineering from the University of Cambridge.

Peter George Harverson – Non-Executive Director (aged 65)

Peter has held a number of senior international sales and marketing roles in the IT industry. These included Regional Director, Intel Corporation and Vice President Europe, Cadence Design Systems. In 1995 he joined Sun Microsystems where he was responsible for the development of the company’s European Corporate Accounts programme. More latterly he became Director of Services Sales – EMEA with a charter to develop new areas of business, including professional services. Peter retired from Sun Microsystems in December 2005. Currently, Peter is a non-executive director of each of Brady plc and CRFS Limited, and a non-executive director and chairman of each of eoSemi Limited and Aspex Semiconductors Limited. Peter is also an adviser to Pulsic Limited and Cambridge IP Limited.

Jonathan Keith Lomas – Non-Executive Director (aged 41)

Keith has more than eighteen years senior management experience in both small and medium sized entrepreneurial and extensive multinational companies. Keith was appointed Managing Director of CLPL in 1996 and, after leading the successful acquisition of UltraVision International in 2003, Keith was appointed as President and CEO of the UltraVision CLPL group. The combined group is one of the largest independent manufacturers and suppliers of contact lenses in Europe. Prior to his involvement in the contact lens world, Keith was an investment banker at S.G. Warburg, Kleinwort Benson and Daiwa Europe. Keith is an active investor in other technology start-up companies. Keith accepted the Queen’s Award for Enterprise: Innovation 2006 and 2010 on behalf of UltraVision CLPL.

Dr Richard Gordon Newell – Non-Executive Director (aged 68)

Dick has spent over 30 years in the software industry in Computer aided design (CAD) and

Geographic Information Systems (GIS). He co-founded his first company, Cambridge Interactive Systems Limited (CIS) in 1977. CIS was part of what became known as ‘The Cambridge Phenomenon’. Dick was a co-founder of Smallworld in 1988. Dick was Chairman of both CIS and Smallworld. He was the original project manager of PDMS, a core product of AVEVA Group plc and is also a Non-Executive Director of UltraVision CLPL.

Dr Robert Daniell Sansom – Non-Executive Director (aged 51)

An active angel investor and mentor to start-ups, Robert is founder of the Cambridge Angels, a group of seasoned technology and bio-technology entrepreneurs who invest in and mentor technology start-ups in the Cambridge area. Previously, Robert was co-founder, CTO and Director of FORE Systems, Inc, a leading provider of networking equipment. FORE was listed on NASDAQ in 1994 and subsequently acquired by Marconi for $4.5 billion in 1999. Additionally, Robert served as the Chief Technology Officer at Marconi in 1999. Robert is a member of the board of directors of Azuro, Inc., CRFS Limited, Fetch Inc., Moviestorm Limited and Netronome Systems, Inc. He holds a Ph.D. in Computer Science from Carnegie Mellon University and an M.A. in Computer Science from the University of Cambridge.

Paul Ronald Taylor – Non Executive Director (aged 46)

Paul Taylor is a Fellow of the Association of Chartered Certified Accountants. Paul joined AVEVA Group Plc in 1989 and was heavily involved in the flotation process and was responsible for UK accounting and for the development of AVEVA’s overseas subsidiaries including adherence to group standards. Between 1998 and 2001, Paul was also UK Director of Human Resources and was appointed to the position of Finance Director and Company Secretary of AVEVA Group plc on 1 March 2001. Before joining AVEVA, Paul trained within the accountancy profession before moving to Philips Telecommunications (UK) where he was responsible for the management accounts of its Public Sectors division. Paul was a recipient of the FTSE250 Finance Director of the Year award and is also a Non-Executive Director of Anite plc.

11. The Placing and the Additional Shares

Under the Placing Agreement, Canaccord Genuity, as agent for the Company, has used reasonable endeavours to procure placees for the New Placing Shares at the Placing Price.

In addition, pursuant to the Selling Shareholder Agreements, Canaccord Genuity, as agent for each Selling Shareholder, has used reasonable endeavours to procure placees for the Selling Shareholders Shares at the Placing Price.

The Placing comprises an aggregate 2,777,778 New Placing Shares being issued by the Company and 2,040,089 Selling Shareholder Shares being sold by the Selling Shareholders.

The aggregate proceeds of the Placing of the New Placing Shares will be approximately £5.0 million before expenses, of which £4.2 million (net of expenses) will be receivable by the Company. Canaccord Genuity has received conditional commitments from institutional and other investors for 4,817,867 Placing Shares at the Placing Price.

The Placing is conditional, amongst other things, upon Admission and the Placing Agreement becoming unconditional and not being terminated in accordance with its terms.

As a result of arrangements entered into between the Company and the holders of the Convertible Loan and the Company and HSBC Bank plc, on Admission, the Convertible Loan will automatically convert into 963,320 Ordinary Shares and 115,350 Ordinary Shares will be issued pursuant to the exercise of the HSBC Warrants. Accordingly, on Admission, the Company will have 21,421,758 Ordinary Shares in issue and a market capitalisation of approximately £38.6 million on the basis of the Placing Price. Application has been made to the London Stock Exchange for the Enlarged Share Capital to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings will commence on 22 June 2011.

The New Placing Shares and the Additional Shares will rank pari passu with the Existing Ordinary Shares including the rights to all dividends and other distributions declared, paid or made after the date of issue.

The Placing has not been underwritten.