Cartucho Group Ltd

Cartucho joins AIM

Cartucho Group Ltd
16 December 2005


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       United States, Canada, Japan, The Republic of Ireland or Australia


Press Release                                                   16 December 2005



                             Cartucho Group Limited

                          ('Cartucho' or 'the Group')

                               Cartucho joins AIM


Cartucho Group Limited, a growing developer and manufacturer of ink refill
kiosks, today announces the commencement of dealings of its Ordinary Shares on
the AIM market (AIM) of the London Stock Exchange.  Collins Stewart is acting as
Nominated Adviser and Broker to Cartucho.  The stock market EPIC is CTGP.


Admission Statistics
Issue Price                                                                                                 20p
Number of Placing Shares being issued                                                                50,000,000
Proportion of the enlarged issued Share Capital being issued under the Placing                            55.6%
Number of Ordinary Shares in issue at Admission                                                      90,000,200
Gross proceeds of the Placing                                                                       £10 million
Market capitalisation of the Ordinary Shares on Admission at the Issue Price                        £18 million
Estimated net proceeds of the Placing to be received by the Company                                £8.8 million


Reasons for the Placing and Admission

Cartucho is seeking Admission and conducting the Placing to further build the
Company, repay debt; provide working capital to fund the roll-out of the
OfficeMax Contract; transfer certain IP rights into the Group and raise its
corporate profile.  Cartucho has signed a major contract with OfficeMax, the
third largest office supplies chain in the USA, to roll out its kiosks across
OfficeMax's flagship stores throughout the USA, subject to certain performance
conditions.

Mike Willcocks, Chief Executive Officer of Cartucho, said:  'We are delighted to
see the start of dealings in Cartucho shares on AIM.  Cartucho is one of the
first companies to market a complete retail ink refill kiosk and the deal with
OfficeMax demonstrates keen interest from our target market.  We are well placed
to secure similar contracts with other national office supplies retailers as
well as large supermarkets, pharmacies and franchise chains in both Europe and
the US.  The listing provides us with the opportunity to reach the next stage of
growth.'

Cartucho is an applied technology business specialising in the design, sale and
support of an ink cartridge refill system (the 'kiosk').  The kiosk is a
stand-alone automated system specifically designed for the retail environment.
The kiosk enables retailers to refill consumers' cartridges on-site, to a high
quality, within minutes and with substantial savings over an Original Equipment
Manufacturer ('OEM') cartridge.  The kiosk is capable of refilling the majority
of the more popular ink jet cartridges currently available on the market and is
connected to Cartucho's support centre.  This key feature will enable Cartucho
to upgrade machines remotely to cope with new technology from the OEMs and the
introduction of new OEM products.

Currently, there are three types of replacement cartridges: brand new cartridges
from OEMs, for example HP, Lexmark and Dell; new cartridges from non-OEM
companies; and remanufactured and refilled cartridges.  Cartucho's strategy is
to target the remanufactured cartridges and refill market which has been
estimated to be worth US$4.4 billion, 20% of the total global ink cartridge
market (US$22 billion).  Whilst the OEM market has continued to grow, there is
evidence that consumers are seeking cheaper alternatives.

Integrating the kiosk into stores offers many potential benefits to the
retailer, including:  reducing the need to carry large quantities of stock;
enabling in-store own branding; and increased footfall as customers travel
specifically to refill their ink cartridges.

Cartucho is incorporated in Jersey with its headquarters in Slough, UK and
comprises (inter alia) a research and development company in Malaga, Spain and a
US maintenance and call centre company.


                                    - Ends -



For further information:
Cartucho Group Limited
Mike Willcocks, Chief Executive                        Tel: +44 (0) 799 0505 999

Collins Stewart Limited
Stephen Keys, Corporate Finance                        Tel: +44 (0) 20 7523 8312
[email protected]                                www.collins-stewart.com

Media enquiries:
Abchurch
Heather Salmond / Chris Munden                         Tel: +44 (0) 20 7398 7700
[email protected]                           www.abchurch-group.com



Note to Editors

Cartucho is the holding company for a growing applied technology business
specialising in the design, sale and support of a system which refills printer
ink cartridges. With over 1.3 billion inkjet printer cartridges forecast* to be
sold this year, the founding shareholders recognised the opportunities that
exist for a system capable of refilling spent cartridges. The Group designs and
produces its ink refill kiosk (the 'kiosk'), which is capable of refilling a
significant majority of popular inkjet printer cartridges on the market. The
Group's principal objective is to enter into revenue sharing agreements with
major retail chains which sell cartridges, with the kiosk providing an in-store
cartridge refilling solution. The Directors believe that the growing number of
smaller walk-in shops specialising in cartridge refilling has taken some market
share away from the larger office supplies retailers and that the kiosk offers a
means of partially reversing this trend. In September 2005, the Group signed an
agreement to supply the kiosk to OfficeMax, which, with nearly 1000 stores, is
the third largest office supplies retail chain in the United States.


Inkjet cartridge market

The Directors believe that the decrease in the cost of new inkjet printers, the
recent growth in working from home and increased use of the internet have been
factors in the increase in the number of inkjet printers in use, which, together
with the increase in digital photo printing in the home, have driven the growth
in ink consumption.

When buying a replacement cartridge, consumers have the choice of the following
main products:

  • OEM cartridges - many of the companies which manufacture printers,
    including HP, Lexmark, Dell and Canon, also manufacture and market
    cartridges. Typically these OEM cartridges are the most expensive means of
    replacing cartridges;
  • Compatible cartridges - new cartridges manufactured by non-OEM companies
    which are, typically, cheaper than OEM cartridges; and
  • Remanufactured cartridges - used OEM cartridges that are collected in
    bulk, refilled, repackaged and sold at a discount to OEM cartridges or
    compatible cartridges.

According to the Lyra Reports, over 1.3 billion inkjet printer cartridges ($22
billion) are expected to be sold worldwide in 2005, with approximately one third
of these sales being made in North America. Of the cartridges sold in North
America in 2004, approximately 23 per cent. were remanufactured/refilled*. This
number is forecast* to grow to 31 per cent. by 2009. Whilst the Directors
believe remanufactured cartridges to be a growth area of the market, they also
believe there to be inherent challenges associated with such products. The
economic collection of sufficient bulk quantities of empty cartridges remains a
hurdle for remanufactured cartridge suppliers and the issue of quality continues
to be a concern for retailers and customers since empty remanufactured
cartridges are often collected from large deposit bins, with a consequential
risk of damage to the cartridge.

In recognition of these problems, and with the benefit to the consumer of lower
pricing offered by refilled cartridges, there has been strong growth in recent
years in walk-in retail refill shops, where customers produce their spent
cartridges to be refilled while they wait. The Directors believe the 'refill'
approach to have the following key advantages over remanufactured cartridges in
that:

  • the retailer does not have to pay for the empty cartridge;
  • the consumer has the comfort of knowing the history of the cartridge; and
  • cartridges are more likely to have expired shortly before being refilled.
     Recent expiration or'wet fill' has been proven to aid the refilling process
    and reduce failure rates.

However, the surveys reviewed in the Lyra Reports show customers to favour
remanufactured cartridges over refill cartridges for quality and performance
reasons. The Directors believe that the use by certain refill suppliers of
unsophisticated technology and rudimentary refilling techniques, which are often
carried out in a non-vacuum environment, are the principal reasons for the
relative lack of quality and consistency.


The kiosk

Having identified the market need and opportunity for a system capable of
refilling a walk-in customer's cartridge quickly, whilst providing a quality
product, the Group has designed and manufactured the kiosk. With what the
Directors believe to be an industry-leading technology, the kiosk is aimed at
large retail chains that may have been subject to competition from the walk-in
refill shops. Following a simple training programme, shop assistants in these
outlets will be able to refill a consumer's cartridge using a computer led touch
screen in approximately two to four minutes, in vacuum conditions and with
minimal trauma to the cartridge itself. The system then tests the cartridge,
enabling the consumer to be sure that the cartridge is working correctly before
leaving. The Directors believe the kiosk has a lower failure rate than competing
refill machines.

The kiosk is designed to be upgradeable to enable it to keep track of
foreseeable changes in technology from the OEMs and the introduction of new OEM
products. The kiosk has an in-built computer allowing its software to be
upgraded remotely from Cartucho's operations headquarters via the internet.
Operator service support is also available via VoIP where appropriate broadband
connection is available. The kiosk is able to send out daily performance reports
with statistics such as number and type of refills and other data.


Competition

The Directors are aware of a number of companies offering a variety of ink
cartridge refilling solutions in what is still a fragmented and immature market.
These range from simple syringe and ink packs which can be used by the consumer,
through to high volume production machines used in the remanufacturing industry.
However, the Directors believe that the design, flexibility, ease of use and
applied technology of the kiosk make it a particularly suitable system for
deployment in large retail stores. The Directors believe the kiosk to be quiet
in operation, versatile, clean, and capable of handling significant volumes. The
Directors consider that the ability to physically and digitally integrate into
retailers' facilities and systems is highly valued by such retailers. The
Directors believe that the more established manufacturers of ink refilling
machines have focussed primarily on franchise opportunities and factory
production environments and, as such, their machines have not been optimised for
deployment in a mass retail market. Companies which the Directors regard as
potential competitors in a fragmented market include Ramora, Inkjet Cafe, InkJet
Factory, Thai France and TB Acessorios.


Legal environment and IP

Patent protection is being sought on an international basis in respect of the
VoIP element of the kiosk. This patent is in application phase and has not yet
been published. The UK application will vest in the Company conditionally on
Admission and was filed at the UK Patent Office on 12 November 2004. The Company
also filed an international application designating all available states under
the Patent Co-operation Treaty on 14 November 2005.

Some of the elements of the ink cartridge refilling station are protected by
unregistered IP rights such as copyright, design right and confidential
information only. The know-how required to manufacture and assemble the
refilling station is also part of the kiosk's IP. Arrangements are in place to
assign all of these IP rights to the Company conditionally on Admission.

The test printers are key components of the kiosk. The intellectual property
rights in the test printers are owned by one of the Group's key suppliers,
Circad Design Limited but the Group has options to acquire this IP in certain
circumstances.

In the US, some state law, as well as pending Federal legislation, renders any
provision in agreements prohibiting the reuse, remanufacture or refill of inkjet
cartridges unenforceable as a matter of public policy. The Magnusson-Moss Act in
the US prohibits printer manufacturers from making their written or implied
warranties conditional upon the consumer's use of only 'authorised' OEM
cartridges. Manufacturers may exclude liability for defects or damage to
printers caused by 'unauthorised' cartridges but only if it can be demonstrated
that the 'unauthorised' cartridges caused the defect or damage.

Cartucho has conducted searches for third-party patent rights in the US with
respect to the kiosk and the ink Cartucho uses to refill the cartridges. Based
on the results of these searches, the Directors are not aware that any
third-party patent rights would affect materially Cartucho's operation of the
kiosk in the US.

The Group is trading under the name 'Cartucho'. The Group has not applied to
register this name as a trade mark. All IP rights in the Group's current logo
have been assigned to the Company by the designer commissioned to create the
logo.


Directors

Cartucho has a Board with strong operational and industrial expertise
complemented by international experience.


Ian Diery, non-executive Chairman (aged 56)

Ian has held a number of senior executive positions in leading global technology
corporations and joined Wang Laboratories in 1978, becoming Executive Vice
President worldwide by the time he left the company to join Apple Computers in
1989. As Executive Vice President at Apple, Ian was responsible for worldwide
finance, sales, marketing, manufacturing and hardware engineering of Macintosh
products. Ian is a founder of eScrip, a marketing company specialising in
loyalty programmes for large retailers, where he is Chairman & CEO. He is also a
non-executive director of The Timberland Company. A native Australian, Ian moved
to the US in 1986.


Michael Willcocks, Chief Executive (aged 57)

Mike has more than 25 years experience in high technology products and services
businesses, and extensive experience in International Management roles. Mike
joined Wang Laboratories in 1976 and in the 12 years that he was with the
company, he held a number of sales, sales management and operational support
roles in the UK and US.   On returning to the UK in 1989, Mike joined Interleaf
Inc., a document management software company where he held the positions of
Managing Director U.K. and General Manager Northern Europe.

In 1993, Mike joined Apple Computer as Vice President Global Accounts, and was
thereafter appointed to the role of Enterprise and Government Marketing. Mike
subsequently became Vice President Asia Pacific for AST Research Inc. and Vice
President Gateway Partners of Gateway Inc., based in the US.  In 1999, Mike
joined FORE Systems as Vice President EMEA, and, following the acquisition of
FORE by Marconi, Vice President of Marconi International. Mike subsequently was
a founder of a technology consulting and executive search company and a company
specialising in security software.


Mark Fletcher, Finance Director (aged 38)

Mark qualified as a chartered management accountant in 1995 and has more than
ten years' experience in international services businesses. In 1993 he joined
United Communications Group and remained there until he moved to Axon Group plc
as Group Finance Manager in 1997. In 2001, Mark was appointed Chief Financial
Officer of Vio Worldwide Limited before moving to Mobiltron (Europe) Limited as
Finance Director in 2003. Earlier this year Mark was appointed interim Finance &
Systems Director of People 1st. Mark is a director of TMS Research Limited.


Roger Pellew, executive Director (aged 49)

Having started his career with Mann Egerton in 1974, Roger joined the management
buy out of UK self catering holiday company, Vere Leisure Limited in 1986, the
holding company of English Country Cottages. Vere was sold to Country Holiday
Group in 1995. Since that time Roger has pursued a variety of business angel
investments and he is a founder investor in Cartucho Holdings Limited.


Joseph Norberg, non-executive Director (aged 59)

Joseph's early career was in computing but he joined Ernst & Young as a junior
accountant in 1971, becoming a senior manager by the time he left to join Wang
Laboratories in 1979 as European Controller based in Brussels. He returned to
the US in 1982 and was later promoted to Vice President, Controller of US
Operations. In 1986 Joseph was appointed Chief Financial Officer of Hill,
Holliday which was sold to Interpublic Group in 1998. Joseph is chairman of the
audit committee of Dana-Farber Cancer Institute, a principal teaching affiliate
of Harvard Medical School and a federal cancer centre.


Peter Richardson, non-executive Director (aged 49)

Peter is resident in Jersey, Channel Islands. A director of regulated Trust
Companies in Jersey, he also acts as director of fund management and special
purpose structured finance vehicles. He has previously been Corporate Trust
Manager at The Royal Bank of Scotland Trust Company (Jersey) Limited. Prior to
this position he had more than ten years' experience with major international
banking groups holding senior positions at each.



* -Source: The Lyra Reports


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