AIM RULE 26

Spectra Systems Corporation was founded in 1996 to commercialize technology licensed from Brown University; the Company is incorporated in, and its main country of operation is, the United States of America. The Company has since successfully developed a number of technologies and products based on our core capabilities in optical materials and their interaction with light.

Spectra manufactures and markets advanced technology-based products for marking, tracking, and authentication applications across many markets and is a world leader in banknote authentication. Our innovative solutions are comprised of consumables, hardware, and software components. Most of our products have been designed based on a “lock and key” relationship among the materials and hardware components, with the goal of providing our customers with a single source of solutions, consumables, and services.  Our patented products are currently in use by two G7 central banks which are part of our larger user base.

Virtually all of our products are protected by composition of matter, process, and systems patents or through trade secrets and confidentiality agreements. We currently have a sizable issued global patent portfolio as well as a large number of pending patent applications.

Spectra Systems has assembled a world-class R&D and engineering team with a broad scope including optical physics, chemistry, electrical and mechanical engineering, and material science. This team is comprised of scientists, engineers, and applications support specialists. Spectra’s facilities include state-of-the-art optical characterization, chemical synthesis, materials testing, engineering design, prototyping, manufacturing, and service capabilities.

Complementing our leading position in banknote authentication, we have invented and fully demonstrated a number of technologies for the broader authentication markets which are ready for commercialization directly or through licensing and corporate partnership arrangements.

Visit our Director’s Biographies page for more information on our board of directors.

Chairman’s Statement

The Board of Directors recognizes the importance of sound corporate governance to give our shareholders and other stakeholders confidence in our business. As Chairman of the Board, I have ultimate responsibility for ensuring that the Board adopts and implements a recognized corporate governance code in accordance with our stock market listing on the AIM market of the London Stock Exchange. Accordingly, during 2018, the Board has adopted the Quoted Companies Alliance (QCA) Corporate Governance Code 2018. The Chief Executive Officer (CEO) has responsibility for the implementation of governance throughout our organization under the direction of the Board.

The QCA Corporate Governance Code 2018 has ten key principles and we set out below how we apply those principles to our business. More detailed information is provided each year in our Annual Report.

The Honorable BJ Penn
Chairman of the Board

 

Principle 1

Establish a strategy and business model which promote long-term value for shareholders

Please refer to our most recent annual report for the details of our strategy and business model.

 

Principle 2

Seek to understand and meet shareholder needs and expectations

The Board is committed to understanding and meeting the needs and expectations of its shareholders and believes that maintaining good communications is the best way to do so. The Company informs shareholders though regulatory news announcements and on its corporate website. All shareholders are encouraged to attend the Annual General Meeting. Subject to confidentiality and regulatory restrictions, the CEO meets with shareholders by appointment which the Board believes has been successful.

 

Principle 3

Take into account wider stakeholder and social responsibilities and their implications for long-term success

The long-term success of the Company is dependent on its relationships with its various stakeholders; customers, suppliers and employees amongst others. The Company has built strong relationships with its customers and considers itself a business partner, helping its customers develop solutions to meet their needs. The management team is in constant contact with its customers and seeks feedback to determine customer needs. The Company also maintains relationships with its key suppliers to ensure it is updated on new developments that may be utilized to the benefit of our customers. Our employees are also a key factor in the successful growth of the Company.  Management is in constant contact with its employees and encourages employees to generate new ideas. To align employees with the long term success of the Company, employees have been granted stock options.

 

Principle 4

Embed effective risk management, considering both opportunities and threats, throughout the organization

As a small cap company quoted on the AIM market of the London Stock Exchange, the Board is sensitive to the impact of risks upon the Company. The Board meets with Company management on a regular basis to monitor the risks facing the Company and identify appropriate measures to mitigate any potential impact. The Board assures itself of the efficacy of risk management and related control systems through corporate performance and periodic audit reports.

 

Principle 5

Maintain the board as a well-functioning, balanced team led by the chair

The Board is responsible for formulating, reviewing and approving the Company’s strategy, budgets, and corporate actions.  Please refer to our most recent annual report for the details of our board structure and committees. Given the size of the Board, committee topics are often discussed by the full Board rather than limited to each committee’s members. This allows the full Board to stay informed of the particular issues being addressed by each committee. Through September 2018, there have been five Board meetings and one Audit Committee meeting. Each director attended 100% of the Board meetings and the committee meetings to which they are members.

 

Principle 6

Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

The Board of Directors bring a broad range of skills to address the challenges faced by a company that sells its products worldwide. The Board consists of highly experienced professionals with complimentary backgrounds that meet the needs of the Company. Each Director is responsible for maintaining his or her own skill set, part of which is achieved by remaining active in industry. The Nominating Committee of the Board is tasked with finding and nominating qualified candidates to serve on the Board. Visit our Director’s Biographies page for more information on our board of directors. In addition to the Directors, our Chief Financial Officer and outside legal counsel attend all board meetings and bring financial, legal and business acumen to Board discussions. The Board and its committees will also seek external expertise and advice where required.

 

Principle 7

Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

The Board evaluation process is designed to identify opportunities for improving the performance of the board and to ensure it has the necessary skills and experience to fulfil its responsibilities both today and in the future, through adequate succession planning to the degree appropriate given the size of the Company. Given the current size of the Company, the evaluation process is performed internally, by the Board, on an ongoing basis. Any deficiencies identified will be addressed in a constructive manner and if necessary, changes to the Board will be considered in conjunction with the Nominating Committee.

 

Principle 8

Promote a corporate culture that is based on ethical values and behaviors

The trans-national nature of our business operations requires firm action on our part to work with integrity. As a company, we strive to conduct ourselves according to the highest standards of ethical conduct. Throughout its operations, Spectra seeks to avoid even the appearance of impropriety in the actions of its directors, officers, employees, and agents. The Board has implemented policies to promote ethical conduct and relies on the management team to ensure ethical values and behaviors are respected.

 

Principle 9

Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

The Board takes responsibility for the performance of the Company and ensures that all decisions are taken in the best interest of the Company. Although the Board has delegated the operational management of the Company to the CEO and other senior management, the Board retains oversight of their actions and retains approval authority for acquisitions, dividend payments and significant expenditures and contracts.

The Chairman is responsible for leadership of the board and ensuring its effectiveness. The Chairman with the assistance of the CEO sets the Board’s agenda and ensures that adequate time is available for proper discussion of all items.

The CEO is responsible for running the business and implementing the decisions and policies of the Board. The CEO is also responsible for accurate, appropriate and timely communications with shareholders.

While not a Board member, the CFO attends all Board meetings. The CFO is responsible for the Company’s finances, human resources and compliance activities. The CFO seeks the advice of outside legal counsel when necessary.

The Non-Executive Directors are appointed to provide strategic advice and independent oversight as well as to challenge the CEO.

The Board may create or disband committees depending on the operations of the Company. The Board has established the following committees to assist with oversight and governance: Audit, Compensation, Nominating and Government Security.

The audit committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Company is properly measured and reported on. It will receive and review reports from the Company’s management and auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Company. The audit committee will meet no less than three times each financial year and will have unrestricted access to the Company’s auditors. The audit committee comprises Martin Jaskel as Chairman, Donald Stanford and Nabil Lawandy.

The compensation committee reviews the performance of executive directors and makes recommendations to the Board on matters relating to their remuneration and terms of employment. The committee also makes recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any share option scheme or equity incentive scheme in operation from time to time. The compensation committee comprises Donald Stanford as Chairman, Martin Jaskel and BJ Penn.

The nominating committee comprises Martin Jaskel, as Chairman, BJ Penn and Donald Stanford. The committee seeks and nominates qualified candidates for election or appointment to Spectra’s Board of Directors.

The security committee is responsible for ensuring the implementation within the Company of all procedures, organizational matters and other aspects pertaining to the security and safeguarding of information, including the exercise of appropriate oversight and monitoring of operations to ensure that protective measures are effectively maintained and implemented. The security committee comprises BJ Penn as Chairman and Nabil Lawandy.

 

Principle 10

Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Board is committed to maintaining good communications with all of its stakeholders, including shareholders. The Company’s website, and its Investor Relations section in particular, provide useful information to assist stakeholders in assessing the performance of the Company.

Results of shareholder meetings and details of votes cast will be publicly announced through the regulatory information system. The Board will seek to understand the reasons behind any significant votes cast against a resolution at any general meeting.

Board Committee Reports will be included in the Company’s Annual Report.

Nominated Advisor

WH Ireland Limited
24 Martin Lane
London EC4R 0DR
United Kingdom
+44 (0) 207 220 1666

Broker

WH Ireland Limited
24 Martin Lane
London EC4R 0DR
United Kingdom
+44 (0) 207 220 1666

Auditors and Reporting Accountants

Miller Wachman
100 Cambridge Street, 13th Floor
Boston, MA 02114
United States of America
+1 617 338 6800

Legal Counsel to the Company as to English Law

Adler Pollock & Sheehan PC
One Citizen Plaza, 8th Floor
Providence, RI 02903
United States of America
+1 401 274 7200

Covington & Burling LLP
265 Strand
London WC2R 1BH
United Kingdom
+44 (0) 207 067 2000

Registrar

Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey JE1 1ES
United Kingdom
+44 (0) 870 707 4040

Website Last Updated: 04 September 2017

321 South Main Street, Suite 102
Providence, RI 02903
United States of America
Telephone: +1 (401) 274-4700

Please view our Certificate of Incorporation and Admission Document for more information.

Please visit our Regulatory News page for more information.

Shareholder Information

Spectra is not incorporated in the UK and therefore the rights of shareholders may be different from the rights of shareholders in a UK incorporated company. The articles of association for Spectra can be accessed here.

Shares Issued

There are 45,468,623 shares in issue (as of 18 Oct 2018).

Significant shareholdings as of 18 Oct 2018:

Name  Shareholding
Mercantile Investment Company Ltd. 14.96%
Mr. & Mrs. N. Slater 9.00%
Oussama Salam 7.91%
Herald Investment Management Limited 6.44%
Nabil M. Lawandy (Director) 4.14%
Hans F. Heye 3.99%

Insofar as it is aware, at 25 Sep 2018, 54.54% of the Company’s AIM securities were not in public hands.

The securities of the Company are solely traded on the AIM market operated by London Stock Exchange Plc. Its shares have not been admitted, nor have any applications been made, for any of its shares to be admitted or traded on any other exchanges or trading platform.

537,690 Ordinary Shares (AIM:SPSC) trade with the following restriction:

The newly issued common shares, $.01 par value per share, of the Company (“Common Shares”) which were issued pursuant to an exemption from registration under Regulation S promulgated under the US Securities Act of 1933 (the “US Securities Act”) and certain previously issued Common Shares which were issued pursuant to an alternative exemption from registration promulgated under the US Securities Act are restricted securities as defined in Rule 144 of the US Securities Act and may not be offered, sold or otherwise transferred except pursuant to an effective registration statement or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act.

The remaining 44,930,933 Ordinary Shares (AIM:SPSY) trade without transfer restrictions.

Website Last Updated: 25 September 2018.

The securities of the Company are solely traded on the AIM market operated by London Stock Exchange Plc. Its shares have not been admitted, nor have any applications been made, for any of its shares to be admitted or traded on any other exchanges or trading platform.

Shares Issued

There are 45,468,623 shares in issue (as of 25 Sep 2018).

As the Company is incorporated under the laws of the state of Delaware in the US and its registered office and its place of central business are outside of the UK, the Channel Islands and the Isle of Man, the provisions of the Takeover Code will not apply to the Company. As a result, certain of the protections that are afforded to shareholders under the Takeover Code, for example in relation to a takeover of a company or certain shareholding activities of shareholders, do not apply to the Company. Certain provisions have been inserted into the Bylaws which adopt similar procedures to the Takeover Code in the event of any party (or parties acting in concert) obtaining an interest in the issued Common Shares carrying 30 percent or more of the voting rights. However, there is no assurance that the courts of the State of Delaware, USA will uphold or allow the enforcement of the provisions.