Acquisition, Name Change and Notice of AGM

RNS Number : 1227G

One Delta PLC

01 May 2014

 



1 May 2014

One Delta plc

("One Delta" or the "Company")

Proposed Acquisition of Audioboo Limited
Proposed Change of Name to Audioboom Group plc

Notice of Annual General Meeting

One Delta (AIM: ONE), announces that it has entered into a conditional agreement to acquire Audioboo Limited ("Audioboo"), the digital social media audio platform - "the audio equivalent of YouTube" - for £2.62m to be satisfied by the allotment of shares and the issue of warrants.

The Acquisition constitutes a reverse takeover under the AIM Rules and thus completion of the Acquisition is conditional on, inter alia, receiving the approval of Shareholders. In addition, One Delta will seek shareholder approval to change the name of the Company to "Audioboom Group plc". Following Admission the Company's AIM trading symbol will become BOOM.

These approvals will be sought at the Annual General Meeting to be held at 10.00am on 19 May 2014 at the offices of Fladgate LLP at 16 Great Queen Street, London WC2B 5DG. The Directors recommend Shareholders to vote in favour of the Resolutions as they intend to do in respect of their own beneficial holdings which amount, in aggregate, to 15,290,863 Ordinary Shares representing approximately 5.3 per cent. of the Existing Ordinary Shares.

About Audioboo - Reinventing audio for the digital age

Audioboo is a social media, SaaS based, digital audio platform with 2.4 million registered users that allows professional and amateur content producers to create and broadcast original and exclusive, largely non-music audio content. Current channel partners include the BBC, Sky News, The Telegraph, The Guardian newspapers, and the Premier League. Users listen to content via i) the Audioboo app or website; ii) embedded Audioboo proprietary software within the channel partner's website or iii) social media sites such as Twitter and Facebook.

Roger Maddock, Chairman of One Delta, commented:"Social Media has become a global phenomenon with businesses such as Twitter, Facebook, Snapchat and Whatsapp becoming household names, generating huge valuations. We believe Audioboo's innovative social media platform has the opportunity to establish itself as a global player and become the audio equivalent of YouTube."

Enquiries:

One Delta plc	www.onedeltaplc.com
Roger Maddock, Chairman	Tel: [phone]
Roger King, Director
Arden Partners plc	Tel: [phone]
Chris Hardie, Corporate Finance
Walbrook PR	Tel: [phone] or [e-mail]
Paul McManus	Mob: [phone]
Bob Huxford	Mob: [phone]

Below are extracts from the Admission Document which will be sent to shareholders today. The full Admission Document will be available on the Company's website: www.onedeltaplc.com 

Definitions in this announcement are the same as those included in the Admission Document.

Introduction

On 17 March 2014 the Company announced that it had raised approximately £3.5 million with new and existing investors and that it had signed non-binding heads of agreement to acquire Audioboo which resulted in trading in the Ordinary Shares being suspended. A further announcement on 14 April updated Shareholders by informing them that shareholders accounting for 78.86 per cent. of the issued share capital in Audioboo had signed irrevocable commitments to enter into a share sale agreement in respect of their holdings.

Your Board is now pleased to announce that the Company has today conditionally agreed to acquire Audioboo subject to, inter alia, Shareholder approval.

Audioboo is a digital social media audio platform which enables the creation, broadcast and consumption of audio content across multiple global media platforms. The Directors and Proposed Directors believe that Audioboo's operations are compatible with the Company's stated aims of making investments within the technology and media sector. Audioboo has many opportunities for growth which, if achieved, would be value enhancing for shareholders.

The Company has agreed conditionally to purchase Audioboo from the Vendors for an aggregate consideration of £2.62 million, to be satisfied by the allotment of 174,537,998 Acquisition Shares (at a deemed price of 1.5 pence per share) and the issue of 18,003,696 Acquisition Warrants. In addition, a further 1,000,000 Additional Warrants are being issued to Audioboo's CEO and Proposed Director of the Enlarged Group, Robert Proctor. On Completion, the Vendors will own, in aggregate, approximately 37.4 per cent. of the Enlarged Share Capital.

The Acquisition constitutes a reverse takeover under the AIM Rules and thus completion of the Acquisition is conditional on, inter alia, receiving the approval of Shareholders.

Shareholders should note that the Proposals are inter-conditional. If the Resolutions are duly passed at the AGM, the Company's existing trading facility on AIM in respect of the Existing Ordinary Shares will be cancelled and the Company will apply for the Enlarged Share Capital to be admitted to trading on AIM. It is expected that Admission will take place and that dealings in the Enlarged Share Capital will commence on 20 May 2014.

Irrevocable undertakings to vote in favour of the Resolutions have been received from the Directors, Proposed Directors and Shareholders in respect of 74,963,781 Existing Ordinary Shares, representing approximately 26.2 per cent. of the Company's existing issued share capital.

Background to and reasons for the Acquisition

On 3 December 2013, the Board announced its belief that it would be in the best interests of Shareholders and the Company as a whole to widen the Company's business scope and to consider whether there were any other opportunities available to increase Shareholder value. The Company had received a limited number of approaches from third parties interested in obtaining a listing, however none of these progressed beyond initial discussions. Despite the initial lack of progress, the Board maintained its belief that the Company would be of interest to third parties in the future and consequently sought authority from Shareholders to issue and allot 300,000,000 Ordinary Shares on a non-pre-emptive basis. The Company also sought authority to change its business and investment strategy to one which included investments in technology and media companies and/or assets where the Directors believed there to be opportunities for growth. These proposals were passed by Shareholders at an extraordinary general meeting of the Company held on 18 December 2013.

In the view of the Board, Social Media has become a global phenomenon in a short period of time with businesses such as Twitter, Facebook, Snapchat and Whatsapp becoming household names. These businesses have experienced huge growth in user numbers and market penetration around the world, helped by changing social trends, cheaper communication and technological improvements. As well as their social impact, many of these platforms have created companies with substantial market capitalisations and valuations as existing companies and investors have invested to acquire innovative technology or strategically valuable assets to gain market penetration.

The Company announced on 17 March 2014 that it had raised approximately £3,500,000 through the issue of 233,333,333 new Ordinary Shares at a subscription price of 1.5 pence per shares from new and existing investors.

The Company also announced that it had reached a non-binding agreement in principle to acquire Audioboo. Audioboo is a Social Media audio platform with 2.4 million registered users which allows professional and amateur content producers to create and broadcast audio content. Current Channel Partners include the BBC, The Telegraph, The Guardian and the Premier League.

On 14 April 2014, the Company further announced that it had obtained irrevocable commitments from Slovar Limited and UBC, who together held 78.86 per cent. of the issued share capital in Audioboo at that time, to enter into a share sale agreement with the Company on terms broadly consistent (unless otherwise agreed) with the non-binding agreement in principle announced on 17 March 2014 in respect of their entire holdings of shares in Audioboo. The Company has entered into a loan agreement with Audioboo pursuant to which it has made a loan of £150,000 (the "Loan") to Audioboo (the "Loan Agreement").

The Loan Agreement provides for an unsecured, interest free, loan of £150,000 to Audioboo, the proceeds of which will be used by Audioboo to fund further development of its technical infrastructure and user interface. The initial term of the Loan is one year unless the acquisition of Audioboo is not completed by the end of June 2014 in which case the term of the Loan will be extended to 18 months or shortened so that it becomes repayable on 1 August 2014 depending on the cause of the Acquisition not proceeding.

The Loan Agreement was entered into in the expectation that the Company acquires the entire issued share capital of Audioboo before the end of June 2014.

Given the background and progress of Audioboo, the Directors and Proposed Directors believe that Audioboo's operations are compatible with the Company's stated aims as it is in the technology and media sector and has many opportunities for growth, which, if achieved, would be value enhancing for Shareholders.

Information on the Company

The Company was originally admitted to trading on AIM in 2005 as the Off-Plan Fund Limited. The fund was a Jersey-domiciled closed-end investment company that sought to generate capital gains by investing in residential "off-plan" contracts. Having undertaken an orderly disposal of its assets, the Company returned approximately £7 million to shareholders between 2009 and 2011. On 24 November 2010, the Company announced that it had received settlement in full in respect of an insurance claim, which resulted in the Company's only asset being cash. Accordingly, since the Company had no assets other than cash it became an investing company pursuant to Rule 15 of the AIM Rules. On 31 March 2011, shareholders approved resolutions at the Company's extraordinary general meeting to allow the Company to continue as an investing company with the stated objective of identifying and acquiring a company or business in the waste or waste to energy sector.

In December 2011, the Company acquired ODL and changed its name to One Delta plc and was re-admitted to trading on AIM in January 2012. ODL specialised in flood defence products and environmentally friendly fencing and defence solutions. The fencing passed rigorous testing for fire, ultra-violet, thermal, acoustic and ballistic threats which gave it applications including reducing noise pollution from transport, building and live events. Whilst a number of fencing and construction products were well received by utility and transport companies it proved difficult to convert interest into commercial success and minimal levels of revenue were generated. In addition, as announced on 3 December 2013, ODL's principal suppliers of recycled plastic entered into administration.

As a result of this, the Board decided to broaden its business and investment strategy to consider alternative opportunities within the technology and media industries to increase Shareholder value. Following approval from Shareholders at an extraordinary general meeting of the Company on 18 December 2013, this strategy was put in place. The Directors and their advisers considered a number of investment opportunities within the technology, media and telecommunications sector, with a particular emphasis on the social media and internet technology areas.

The Company has today announced its results for the year ended 30 November 2013 which shows a loss before tax of £546,660 and turnover of £22,022. The net assets of the Group were £1,417, which has subsequently been boosted by the £3,500,000 fundraising referred to above which will provide the funding for acquisitions and ongoing development.

Information on Audioboo

Social Media - the Market Opportunity

Social Media is the interaction among people in which they create, share or exchange information and ideas in virtual communities and networks or through groups of internet-based applications that allow the creation and exchange of user-generated content. Mobile and web-based technologies allow the creation of highly interactive platforms through which individuals and communities share, co-create, discuss and modify professional and user-generated content. Social Media has rapidly introduced substantial and pervasive changes to communication between organisations, communities and individuals.

A 2014 GlobalWebIndex study showed that usage rates of market leading sites including Google+, LinkedIn, Twitter, Instagram and Reddit have all increased, demonstrating how diverse and competitive social networking has become. Facebook is still the dominant, most popular social network, with YouTube second and Twitter third.

The move to mobile applications is an emerging trend. Video and messaging Apps, such as WhatsApp, WeChat, SnapChat and Vine, which are designed to be used on mobile devices rather than computers, now attract the most users compared to 2013 figures.

One of the key revenue streams that can be generated by a large social platform is targeted digital advertising, which is anticipated to be one of the fastest growing sectors of the digital media sector. The Internet Advertising Bureau and Pricewaterhouse Coopers recently reported that US advertising spending was $42.8 billion in 2013, including a mobile advertising spend of $7.1 billion. This represented an increase of 100 per cent. on the same figures for 2012. Changes in technology and demographics combined with cheaper communication costs and the proliferation of smart phones and tablets with internet access have combined to increase the popularity of social media platforms in recent years. Relevancy, speed, ease of use and the ability to provide near instant communication within chosen communities drive ever increasing usage.

Advertisers like the direct, targeted groups that Social Media provides, leveraging efficiencies beyond more traditional 'top down' forms of advertising. Its advent has facilitated an interactive relationship between product and customer, resulting in a more forensic approach to marketing campaigns, allowing directly measurable metrics and return on investments to be analysed.

Audioboo's business and technology

Audioboo Limited was incorporated on 9 September 2009. The Audioboo product is a social media, SaaS based, digital audio platform which allows professional and amateur content producers to create and broadcast largely non-musical audio content; the audio equivalent of YouTube. Users listen to content via i) the Audioboo app or website; ii) embedded Audioboo proprietary software within the Channel Partner's website or iii) Social Media sites such as Twitter and Facebook.

Audioboo was originally conceived as a platform for User Generated Content and whilst UGC is still an important part of the platform, a decision was taken in early 2013 to make the change to providing more professionally produced content. Professional content is produced by media, sports or other official organisations with access to valuable, unusual or high profile information, for example, a sports body or major news agency. Audioboo's approach to target professional content gained traction very quickly as demonstrated by the fact that in the year to December 2013, monthly Listens ncreased from four million to approximately 20 million, with approximately 2.4 million registered users at 16 April 2014. Around 2,500 new posts are created every day by approximately 900 different content providers, each lasting an average of 148 seconds.

Audioboo was one of the first websites to provide seamless dynamic insertion of advertising for certain partners; rather than simply playing an advertisement clip, then clicking over to a piece of content, the advertisement is inserted into the content file in-stream as the user is playing it. This provides a smoother user experience, reduces timeouts and lag, and reduces user advertisement skipping. Dynamic insertion, rather than a fixed pre-roll sponsor message, also means advertisements can be selected contemporaneously for specific markets, and can be different every time content is played. 

The site itself was created using the Ruby programming language and the 'Ruby On Rails' framework. All of Audioboo's user data is stored in MySQL databases, and the whole of the primary website and service runs on Solaris and SmartOS servers. The vast majority of audio content is served to the user as MP3 files from Amazon S3 storage, using Amazon's CloudFront distribution technology to ensure smooth and speedy delivery worldwide. The advertising systems, designed jointly with AdsWizz, run on a Linux-based Microsoft Azure platform. This ensures rapid delivery of dynamic content while keeping bandwidth usage (and associated expenses) under control.

When new content is created, it is uploaded to the Audioboo and Channel Partners' Apps (which are compatible with applications such as iOS, Android Windows8 & Blackberry10) and websites, whilst automatic notifications are posted on content partners' Facebook and Twitter pages. Channel Partners' content covers all aspects of popular interest, including sport, politics, news, films, music, and business. Content partners include the BBC (which services multiple target channels), Sky News, talkSPORT, The Premier League, Wall Street Journal, ESPN, The Guardian, Mirror Group and CNBC.

At March 2014 the geographic breakdown of listeners was 38 per cent. UK-based, 19 per cent. US-based, 10 per cent. Australia-based and 33 per cent. the rest of the world. This international profile is another indicator of the potential to expand the Audioboo platform as quality audio content has global appeal.

The Directors and Proposed Directors expect to leverage the Audioboo platform, allowing partners to monetise their content through advertising revenue via in-mobile, website and social networks (Twitter and Facebook) audio advertising, with supporting visual banner advertising, delivered "on demand". Audioboo will retain a proportion of this revenue and will also take advantage of e-commerce revenue opportunities such as audiobook sales.

Subscription revenue will be generated from individuals or smaller organisations posting content and from users accessing branded channel content, per the established YouTube model.

Competition

The onlineaudio market is expanding rapidly. Audioboo's direct competitors include Soundcloud and Mixcloud, whilst in the broader audio market, commercial music streaming services such as Spotify, Pandora and Deezer provide more indirect competition. Soundcloud, which provides content with a strong music bias under a freemium subscription model, had approximately 40 million registered users in July 2013. In January 2014, Soundcloud announced it had raised a further $60 million, at a pre-money valuation of $700 million. Mixcloud, with a similar music focus, had approximately ten million active users in May 2013.

Summary financial information on Audioboo

The following is a summary of Audioboo's financial information for the three years ending 31 December 2013:

	2013 £,000	2012 £,000	2011 £,000
Revenue	45	60	31
Administrative and other expenses	(1,606)	(1,122)	(631)
Loss before tax	(1,561)	(1,062)	(600)

To date, Audioboo has deliberately concentrated its resources on the expansion of its listener, content and partner base, both in terms of quantum and quality and the construction of a robust, scalable back-end architecture including embedded advertising software, which the Directors and Proposed Directors expect will generate initial revenues during 2014.

Audioboo's business operates from offices near Tower Bridge in London with an additional two employees in San Francisco, in the United States. Audioboo has recently employed one person in New York and one person in Sydney. Audioboo's business is run by Robert Proctor, one of the Proposed Directors who continues to focus on the collection of content and adding new Channel Partners. Audioboo intends to invest in its user interface in the near term to enhance the "ease of use" for users. The Audioboo Group currently employs 15 people with the expectation that this will scale up as the business expands. Over 60 per cent. of costs are employment costs with the balance being deployed to cover bandwidth and administrative costs which are currently approximately £350,000 per annum.

Since Robert Proctor's appointment as CEO in September 2012 Audioboo has shifted its focus away from user generated content and towards professionally produced content from branded media owners.

The Enlarged Group's strategy

Using the funds raised by the Company, Audioboo will seek to grow rapidly the volume of content through the development of existing channels and the attraction of new content partner relationships. Enhanced content and the consequent growth of monthly listens from their current volume of approximately 14 million per month will position Audioboo as a key destination site for users, Social Media partners and advertisers. Funds will also be applied to upgrading back-end technology infrastructure to enhance resilience, responsiveness and capacity.

Assuming that ambitions for growth in the number of Listens and users are achieved, and that there is sufficient interest from potential investors, the success of the platform is likely to mean that the Enlarged Group will seek to raise further funds in due course.

Current trading and prospects for the Enlarged Group

Audioboo has generated minimal revenues to date, and it is not anticipated that material revenues will be generated during 2014. In addition to using funds to rapidly grow the volume of content, the cash resources of the Company will also be used to invest in technology, both consumer-facing and back-end infrastructure to improve the Audioboo offering, for content partners and in particular for consumers.

Investment will also be made to increase the number of registered users, listens-per-user and content partners. Particular attention will be given to increasing penetration within the United States. The Vertical content channels will continue to be developed, centred on sport, news and business and entertainment. If the Company is successful and able to build sufficiently significant verticals to generate large numbers of users and listens, it will potentially be able to generate material revenues from advertising and sponsorship. It is expected that the verticals will be attractive to advertisers not just because of the number of users but also the highly targeted audience that the specialised nature of the Verticals provide to media buyers.

Directors, Proposed Directors, senior management and employees

On completion of the Acquisition, Roger King will resign and, subject to Shareholders approving the relevant resolutions at the AGM, each of the Proposed Directors will be appointed to the Board. Brief biographical details of the Directors, Proposed Directors and senior management are set out below.

Directors

The current composition of the Board of the Company is as follows:

Roger Maddock (Chairman)

Mr. Maddock has worked in the finance industry in Jersey since 1981, specialising in fund administration. He was a partner in a local chartered accountancy practice and a director of Worthy Trust Company Limited until it was sold to Allied Irish Banks (CI) Limited in 1999, he was a director of that bank's trust and fund administration companies until 2001. He was the Managing Director of Equitilink International Management Limited and a director of several of the underlying funds of that group. Since 2005 he has held a number of directorships of fund management and investment companies.

Roger King FCA (Executive Director)

Mr. King was a partner in Jackson Fox (Chartered Accountants) from 1982 to 2001 and from 2012 to date. He was director and a principal shareholder in Worthy Trust Company Limited in Jersey from 1982 until it was sold to Allied Irish Banks (CI) Limited (AIB) in 1999. He continued as a director and subsequently as a consultant to AIB's Jersey trust operations until 2005, when he established Anglo Saxon Trust Limited, a regulated trust business in Jersey. He was a director of the Jersey licensed fund functionary Professional Consultancy Services Limited from 1986 to 2004 and of AIB Fund Managers Jersey Limited from 2000 to 2001. He has served as a non-executive and an executive director of AIM and CISX listed companies.

Proposed Directors

On Completion it is intended that the following will be appointed to the Board:

Robert Proctor (Chief Executive)

Prior to joining Audioboo in September 2012, he was COO of US social media platform Reality Digital, Inc. for four years, with clients such as Sony Pictures, YouTube, MTV and ITV. He was also Senior Vice President International for Adify Corporation, a US provider of online advertising to networks and advertising agencies. From 1996 to 2001, he was founder and CEO at Simply Internet Limited which he grew to be one of the world's largest public internet access companies, employing over 700 people.

Simon Cole (Non-executive Director)

Simon Cole founded Unique Broadcasting in 1989 in partnership with Tim Blackmore, having pioneered the market for national sponsored programmes whilst at Picadilly Radio, where he was head of Programmes. He is currently CEO of UBC Media Group plc which is the majority owner of Audioboo and which will have an 18.7 per cent. holding in the Enlarged Group upon completion of the Acquisition. Simon has been awarded a fellowship of the Radio Academy.

Rodger Sargent, ACA (Non-executive Director)

Rodger Sargent has been the founder and finance director of a number of quoted and private companies over the past fifteen years, including Sports Internet Group plc and Hydrodec Group plc. He ran the private family office of Andrew Black, the co-founder of Betfair, for three years until 2013. Prior to this he qualified as an accountant with Pricewaterhouse in London in 1996 and worked at Merrill Lynch as an analyst.

The Directors and Proposed Directors are seeking to appoint further non-executive directors with relevant media experience and it is expected that they will be appointed following the AGM. It is the intention of the Directors and Proposed Directors to make an executive financial appointment in the future. Audioboo's finance function has largely been overseen by UBC and a financial appointment is expected to develop a separate finance function for the Enlarged Group.

Senior management

In addition to the Board, details of key senior management personnel within the Enlarged Group are set out below:

Jonathan Del Strother (Chief Technical Officer)

Jonathan holds a first class masters degree in cybernetics and has been Chief Technology Officer ("CTO") since Audioboo was founded, having previously been CTO at the entity responsible for the creation of Audioboo's proprietary technology platform. Prior to this, he was a software engineer at BAE Systems, and has over 10 years' experience in commercial programming and managing teams of developers. He is credited with the invention of 'cover flow' technology for smart phones and tablets.

Amanda Brown (Head of Content)

Amanda Brown is an award-winning radio documentary creator with over 15 years' radio, television and print media experience. She brings a wealth of knowledge as a journalist for publications such as The Guardian, The Daily Mail and The Irish Times and as a radio and television producer for companies such as the BBC, National Public Radio and RTE. As well as managing Audioboo's content acquisition, account management and editorial teams, Amanda is directly responsible for the day-to-day account relationship with the BBC, who now have over 60 separate channels on the Audioboo platform.

Principal terms of the Acquisition

Pursuant to the Acquisition Agreement, the Company has agreed conditionally to purchase Audioboo from the Vendors for an aggregate consideration of £2.62 million, to be satisfied by the allotment and issue of the Acquisition Shares (at a deemed price of 1.5 pence per share) and the Acquisition Warrants. As part of the arrangement, holders of options over shares in Audioboo have waived their rights to these shares. The Directors have granted Options over shares in the Company conditional upon Admission.

On Completion, the Vendors will own 174,537,998 Ordinary Shares, representing 37.4 per cent. of the Enlarged Share Capital.

The Acquisition Shares will rank equally in all respects with the Existing Ordinary Shares.

Amongst other things, the Acquisition Agreement is conditional on:

1.       the passing of the Resolutions at the AGM necessary to approve the purchase of Audioboo, and to authorise the Company to issue the Acquisition Shares, to approve the appointment of the Proposed Directors and to change the name of the Company to Audioboom Group plc;

2.       the completion of the Admission Agreement except for any condition relating to Admission; and

3.       the Company obtaining all regulatory authorisations or consents required in respect of the issue of the Acquisition Shares and the Acquisition Warrants.

The Company has the ability to terminate the Acquisition Agreement prior to Completion if there is a material breach of the Acquisition Agreement by the Vendors (or any of them), including a material breach of any warranty or pre-completion undertaking, or upon the occurrence of any event which would result in a material breach of the warranties upon their repetition at Completion, or upon the occurrence of certain other adverse events in respect of Audioboo, provided that any such event or events have or is likely to have a material adverse effect on Audioboo.

All of the Vendors have given warranties to the Company regarding their title to the Audioboo shares and their ability to transfer them to the Company. UBC, Slovar Limited, Robert Proctor and Sir Donald Cruickshank have given customary warranties to the Company in relation to the business and affairs of Audioboo.

The Acquisition Warrants will be issued, upon completion of the Acquisition, in registered form and governed by the terms of a warrant instrument to be executed by the Company and by the Articles. The Acquisition Warrants will entitle the Vendors to subscribe for, in aggregate, 18,003,696 Ordinary Shares at 1.5p. The exercise price and the number of Ordinary Shares issuable upon exercise are both subject to adjustment in certain circumstances, including a subdivision or consolidation of the Ordinary Shares. Warrants will be exercisable at any time between the first and third anniversaries of the Acquisition, after which time the Acquisition Warrants will expire.

Shareholding structure of the Company and Lock-in Agreement

Following the subscription by institutional and private investors on 17 March 2014, the share register of the Company changed significantly but with no one holder owning more than 10 per cent. of the issued share capital of the Company.

The majority of Audioboo's share capital is held by two separate shareholders - UBC and Slovar Limited, the private investment vehicle of Kingsley Duffy who together held 78.86 per cent. of Audioboo at the time of the announcement made by One Delta on 14 April 2014.

UBC is the holding company for a range of companies working in related fields of production, content creation and software design. These companies include Unique (production) Entertainment News (content) and Unique Interactive (software). Following the Acquisition, UBC will own 87,029,307 Ordinary Shares representing 18.7 per cent. of the Enlarged Share Capital. Slovar Limited will own 43,823,649 Ordinary Shares representing 9.4 per cent. of the Enlarged Share Capital.

The Company, Arden Partners, the Directors, Proposed Directors, Jonathan Del Strother and UBC have entered into the Lock-in Agreement, which is conditional upon Admission. The Directors, Proposed Directors, Jonathan Del Strother and UBC have undertaken to the Company and Arden Partners not to dispose of any interest in their Ordinary Shares in the 12 months following Admission, except in the limited circumstances provided for in the AIM Rules.

Corporate governance

The Directors and the Proposed Directors are committed to maintaining high standards of corporate governance and, in so far as is practicable and appropriate given the Company's size and nature, ensuring that the Company is in compliance with the Quoted Companies Alliance ("QCA") Corporate Governance Code for Small and Mid-Size Quoted Companies (the "Corporate Governance Code").

The Company has adopted the Share Dealing Code for the Directors, Proposed Directors and future directors and key employees and will take steps to ensure compliance by the Board and any relevant employees with the terms of the Share Dealing Code.

The Directors have implemented such corporate governance procedures and established such committees of the Board, including audit and remuneration committees, as they believe are required for the Board to comply with the terms of the Corporate Governance Code upon completion of the Acquisition, in so far as is appropriate for a company of its size.

The Directors have established financial controls and reporting procedures which are considered appropriate given the size and structure of the Company following Completion. It is the intention of the Directors and Proposed Directors that these controls will be reviewed as the business develops.

Dividend policy

As Audioboo is an early stage company, it is the current intention of the Directors and Proposed Directors to retain any earnings arising from the Enlarged Group's activities to fund further investment in order to maximise capital growth. Accordingly, they do not intend to pay dividends in the immediate future. The declaration and payment by the Company of any future dividends and the amount of them will depend upon the Company's financial condition, future prospects, profits legally available for distribution and other factors deemed by the Board to be relevant at that time.

Settlement and dealings

Application will be made for the Enlarged Share Capital, including the Acquisition Shares to be admitted to AIM. Subject to completion of the Acquisition, Admission is expected to take place, and dealings in the Enlarged Share Capital to commence, on 20 May 2014.

Admission Agreement

The Company, Arden Partners, the Directors and the Proposed Directors have entered into the Admission Agreement, pursuant to which Arden Partners agreed to use its reasonable endeavours to procure Admission. The Company has agreed to pay all costs and expenses relating to the application for Admission. The Admission Agreement is conditional upon, amongst other things, Admission having occurred on or before 31 May 2014. The Admission Agreement contains certain warranties and indemnities by the Company in favour of Arden Partners. It also contains provisions entitling Arden Partners to terminate the agreement prior to Admission if, among other things, a breach of any of the warranties occurs or on the occurrence of an event fundamentally and adversely affecting the position of the Company.

Share Option Schemes

The Board believes that it is important that directors, employees of, and consultants to, the Group and the Enlarged Group are appropriately and properly motivated and rewarded.

On 14 March 2014, the Company adopted the Option Scheme pursuant to which eligible persons would be invited to participate at the discretion of the Board. The Option Scheme was announced on 17 March 2014 and is limited to 10 per cent. of the Company's issued share capital from time to time. The Board intends that it will allot and issue options under the Option Scheme in accordance with performance-related criteria to be determined by the remuneration committee of the Board.

The Company will grant Options over 32,235,865 new Ordinary Shares at 1.5 pence per share representing 6.92 per cent. of the Enlarged Share Capital on Admission. These Options will be granted to replace options held by the management of Audioboo in that company and reflect the high value that the Directors and Proposed Directors place on their continued involvement with the business. The principal grant is to Robert Proctor who will be granted Options over 27,630,741 new Ordinary Shares representing 5.92 per cent. of the Enlarged Share Capital. Jonathan Del Strother will be granted Options over 4,605,124 new Ordinary Shares (one per cent. of the Enlarged Share Capital).

The exercise price of the Options will be the same price as the recent fundraising and the notional price for the Acquisition Shares. The grants will be subject to exacting performance conditions set by the Remuneration Committee which are likely to include operational as well as financial targets and the performance of the Company's Ordinary Shares. In view of time constraints of the Acquisition these have yet to be established however the performance conditions will be discussed with major shareholders in accordance with best practice.

Annual General Meeting

The AGM will be held at 10.00 a.m. on 19 May 2014 at the offices of Fladgate LLP at 16 Great Queen Street, London WC2B 5DG at which resolutions will be proposed to:

(a)     approve the Acquisition;

(b)     receive the financial statements and the Directors' and Auditors' reports for the year ended 30 November 2013;

(c)     re-appoint the auditors;

(d)     authorise the issue and allotment of the Acquisition Shares, the Fee Shares, the Acquisition Warrants and the Additional Warrants;

(e)     appoint each of the Proposed Directors as a director of the Company;

(f)      change the name of the Company to "Audioboom Group plc";

(g)     authorise the general disapplication of pre-emption rights in respect of the issue and allotment of 360,000,000 Ordinary Shares; and

(h)     make a minor amendment to article 58 of the Articles to remove reference to the Directors being in Jersey.

Under the AIM Rules, if Shareholders approve the Acquisition at the AGM, the Company will be admitted to AIM as a new applicant on the business day after the AGM. If Shareholder approval is not given, the Acquisition will not complete and trading in the Existing Ordinary Shares will continue as normal.

The Directors believe that the Acquisition and the Proposals as a whole are in the best interests of the Company and its Shareholders.  Accordingly, the Directors recommend Shareholders to vote in favour of the Resolutions as they intend to do in respect of their own beneficial holdings which amount, in aggregate, to 15,290,863 Ordinary Shares representing approximately 5.3 per cent. of the Existing Ordinary Shares.

 

END

 

 

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