Proposed Issue of Equity

RNS Number : 1265N

Imaginatik PLC

14 May 2015

 



14 May 2015

Imaginatik Plc

("Imaginatik" or the "Company")

Proposed issue of equity

Imaginatik plc (AIM: IMTK.L), the world's first full service innovation provider offering a range of technology products and consultancy, is pleased to announce that, following a strong show of support from existing and new investors, it intends to conditionally raise £504,000 (before expenses) to provide additional working capital to fund the development of the Group's business until the Company receives significant cash receipts following anticipated contract renewals later this year.

The Fundraising will be effected through the issue of a total of 18,663,330 new Ordinary Shares to new and existing investors, including two of the Directors. In addition 950,475 new Ordinary Shares will be issued to a supplier in lieu of cash payments. All new Ordinary Shares will be issued at the Issue Price, being 2.7 pence per new Ordinary Share.

The Issue Price represents a discount of 13.7 per cent. to the closing mid-market price of 3.13 pence per Ordinary Share on 13 May 2015, the latest practicable dealing day prior to the publication of this document. The New Ordinary Shares will represent in aggregate 23.71 per cent. of the Enlarged Share Capital.

The Placing was conducted in conjunction with Daniel Stewart & Company and the Board are pleased to announce that Daniel Stewart has been appointed as the Company's Broker with immediate effect.

The Fundraising is subject, amongst other things, to the passing of the Resolution to be put to a General Meeting of Shareholders to be held at 10.30 a.m. on 1 June 2015. Further details of the General Meeting are set out below. The Notice of General Meeting which convenes the General Meeting will be set out in a Circular to be published to shareholders as soon as possible.

Matt Cooper, Executive Chairman of Imaginatik, commented:

"We are delighted to announce that Imaginatik has been supported in raising a small amount of additional working capital. This working capital will allow the Company to be operationally self-sufficient until contract renewal revenues are recognised later on this year. This backing, from both existing and new investors, validates the Company's strategy and supports Imaginatik as a global full service innovation provider."

For further information please contact:  

Imaginatik plc	Tel: [phone]
Matt Cooper Non-Executive Chairman Ralph Welborn, CEO Shawn Taylor, CFO
finnCap Ltd	Tel: [phone]
Stuart Andrews / Giles Rolls
Daniel Stewart & Company	Tel: [phone]
Martin Lampshire / David Coffman
Newgate	Tel: [phone]
Adam Lloyd / Ed Treadwell / Jasper Randall

About Imaginatik

Imaginatik provides a range of Innovation solutions comprised of consultancy, enterprise software and program management to deliver innovation results to companies such as The World Bank, The Chubb Group of Insurance Companies, Exxon Mobil, Altria, Shell, Mayo Clinic, Goodyear, the Yorkshire Building Society, Pitney Bowes and Cargill. Few companies possess the internal capability to consistently generate fresh ideas, identify those worth pursuing and reliably transform them into real, value-enhancing assets. Imaginatik's mission is to help these companies build sustainable innovation competencies.

Imaginatik is a public company whose shares are traded on the AIM market of the London Stock Exchange (LSE:IMTK.L) and is a World Economic Forum Technology Pioneer with offices in Boston, MA, and Fareham, UK. For more information visit www.imaginatik.com

Background to and reasons for the Fundraising

We remain committed to our previously stated strategy and the Company's repositioning as a global full service innovation provider, helping our clients develop a sustainable company wide innovation capability. We achieve this through a variety of technology products, several of which have been recently developed in addition to our strategic and operational consultancy offerings.

Our operational marketplace continues to develop, with sector coverage by industry analysts increasing, as a response to client requirements wanting to further understand how innovation can be institutionalised within their businesses. As recently as five years ago, the notion that large corporations would have a C-level officer devoted to innovation was not credible. This growing class of executive now has a title, the Chief Innovation Officer (CINO), and a rising slate of conferences, publications, and services are targeting them. By one measure, over 40% of the Forbes Global 2000 now have a CINO or a close equivalent.

On 1 December 2014 Ralph Welborn joined Imaginatik as our Chief Executive Officer, based in Boston, US. The Board is delighted that Ralph's appointment has had an immediate beneficial impact on the strategy and direction of the Company. With his senior consulting background, Ralph is elevating conversations within the existing and prospective client base and assisting the sales and consulting teams to demonstrate that Imaginatik's services encompass more than that of a technology vendor.  Ralph has also been instrumental in several of the Company's most recent technology and consulting contract wins and we expect his positive influence to continue.

Following the interim results announcement on 8 December 2014, the Group has continued to trade well and the Board expects to report an increase in revenues for the year to 31 March 2015 of approximately 15% at £3.34m (FY2014: £2.90m). The improved revenue for the full year to 31 March 2015 follows a stronger trading performance in the second half, with gross bookings of £2.2m achieved over the 6 month period versus £1.04 in the first half. This improved second half performance has been driven by higher revenues in our consulting division, in addition to several new technology contracts.

The loss after tax is expected to be similar to last year (FY2014: £1.4m) as the Company continues investment in consulting and sales capacities as well as the addition of a full time CEO.

In the year ended 31 March 2015 the Company added a further 12 new customers on annual or multi-year technology contracts increasing the Company's annual client base to 42 (March 2014: 31). These new customers cover a wide range of sectors, including manufacturing, professional services, pharmaceuticals, biotechnology and media. This growing customer base increases the annualised value of the company's renewals business by 29% to £3.1m at 31 March 2015 (March 2014: £2.40m at constant currency). Additionally, the Company has secured 9 new customers on pilot projects or consulting engagements, several of which the Board expects to convert in due course to annual or multi-year technology contracts.

The sales pipeline of opportunities continues to grow and is valued at £8.8m at 30 April 2015, compared with £7.7m a year ago and £4.47m two years ago. The sales pipeline includes further consulting led opportunities than previously as the Company seeks to exploit this route as an initial value offering to customers. By proving Imaginatik's value to the customer in this way, this can develop into a longer term partnership, providing a stable annuity stream.

The financial year ending 31 March 2016 contains a large array of renewal revenue for the Company, with 34 of the existing customer base available for renewal. This represents the confluence of the Company's hard work over the prior 2 to 3 years, demonstrated by customers having built out their technology environments substantially over the last few years. We see this as a great opportunity to further embed our technology and consulting offerings within our customer base with additional multi-year commitments as well as presenting us with excellent upsell opportunities.

The Placing and Subscription

The Company intends to conditionally raise approximately £504,000 in aggregate (before expenses) pursuant to the Placing and the Subscription.  The net proceeds of the Placing and the Subscription receivable by the Company are estimated to be approximately £470,000.

The Directors have concluded that effecting the Company's recapitalisation by way of the Fundraising is the most efficient way to source the funds required. As previously, the Directors did consider the possibility of effecting the recapitalisation by way of an open offer to all existing Shareholders, but considered that given (i) the considerably greater expense to the Company involved in effecting an open offer, (ii) the greater length of time it would take to effect an open offer in contrast to the relatively swift timetable of a Placing, and (iii) the Company had previously undertaken the expense and time of seeking a recapitalisation by way of an open offer in the past which did not generate a material uptake, (iv) the feedback given to the Company by or on behalf of certain Placees (whose commitments comprise a material part of the Placing) that they would not participate in circumstances where the Placing were linked to such an offer (which would have had the effect of reducing the sums raised from the Placing below the minimum required by those and other Placees for the Placing to proceed), it was considered the Fundraising to be the preferable and efficient way to source the present funds required.

Pursuant to the terms of the Placing Agreement, Daniel Stewart has conditionally agreed, as agent for the Company, to use its reasonable endeavours to procure subscribers for 9,074,071 Placing Shares with institutional and other investors at the Issue Price. The Issue Price represents a discount of 13.7 per cent. to the closing mid-market price of an Ordinary Share on 13 May 2015, being the last dealing day prior to the publication of this document.  In addition, it is intended that later today Simon Charles, myself and employee of the company will enter into subscription agreements for a total of 9,589,259 Subscription Shares at the Issue Price. The Placing Shares and the Subscription Shares will represent in aggregate 23.71 per cent. of the Enlarged Share Capital.

The Placing has not been underwritten. The Placing Agreement is and the Subscription Agreements will be conditional, inter alia, upon:

1.         the Resolution being duly passed at the General Meeting;

2.         Admission becoming effective on or before 8.00 a.m. on 2 June 2015 or such later time and/or date as Daniel Stewart may agree in its absolute discretion, but in any event by no later than 8.00 a.m. on 30 June 2015; and

3.         each of the Placing Agreement and Subscription Agreements becoming unconditional save only for Admission.

The New Ordinary Shares will upon their issue rank pari passu in all respects with the Existing Ordinary Shares including the right to receive all dividends or other distributions declared, made or paid by the Company following Admission.

The Ordinary Shares currently have a nominal value of 5p each and the Issue Price is 2.7p.  Company law prohibits the issue of new shares by a company at a price below the nominal value of those shares and, accordingly, the Company is required to reduce the nominal value of the Ordinary Shares to enable the Fundraising to be implemented.

To give effect to the Share Capital Reorganisation, the Articles will need to be amended to make changes to allow the creation of deferred shares and these amendments will require Shareholders' approval at the General Meeting.

It is therefore proposed that each of the existing Ordinary Shares will be subdivided into one new Ordinary Share of 1 penny each and one Deferred Share of 4p each ("Deferred Share").

Immediately following the Share Capital Reorganisation becoming effective, each Shareholder's holding of Ordinary Shares will be the same as their number of existing Ordinary Shares. Therefore, each Shareholder's proportionate interest in the Company's issued ordinary share capital will, and thus the aggregate value of their holding should remain unchanged as a result of the Reorganisation.

No new share certificates representing the Ordinary Shares will be sent to Shareholders who hold existing Ordinary Shares in certificated form. Accordingly, share certificates for the existing Ordinary Shares will remain valid, and will only be replaced by share certificates for Ordinary Shares when the old share certificates are surrendered for cancellation following the transfer, transmission or other disposal of Ordinary Shares.

Shareholders who hold the existing Ordinary Shares in uncertificated form through CREST should expect to see the security description updated for the existing ISIN number, in order to reflect their holding in Ordinary Shares on 1 June 2015.

The Deferred Shares created will be effectively valueless as they will not carry any rights to vote or dividend rights. In addition, holders of Deferred Shares will only be entitled to a payment on a return of capital or on a winding up of the Company after each of the holders of Ordinary Shares have received a payment of £100,000,000 on each such share. The Deferred Shares will not be traded on AIM or listed and will not be transferable without the prior written consent of the Board. No share certificates will be issued in respect of the Deferred Shares, nor will CREST accounts of shareholders be credited in respect of any entitlement to Deferred Shares.

Expected Admission Date

Application will be made to the London Stock Exchange for the 19,613,805 New Ordinary Shares to be admitted to trading on AIM. It is expected that Admission will occur at 8.00 a.m. on 2 June 2015. Following Admission, the total number of shares in issue will be 82,698,095.

Directors' participations in the Fundraising

Simon Charles and I later today intend to subscribe in person or by a nominee, for Subscription Shares as follows:

Director	Number of Existing Ordinary Shares  (excluding interests in options)	Percentage of Existing Ordinary Shares	Number of Subscription Shares to be acquired	Number of Ordinary Shares after Completion	Percentage of Enlarged Share Capital
Matt Cooper	13,420,317	21.27	9,259,259	22,679,576	27.42
Simon Charles	2,083,182	3.30	320,000	2,403,182	2.91

Directors' Authority to issue and allot further Ordinary Shares

In the light of the encouraging response to the Fundraising, the Board considers that it would also be beneficial to both the Company and Shareholders if the Company were authorised to retain an element of flexibility to allot and issue (outwith the Fundraising), as a whole or in tranches, Ordinary Shares (and/or rights to subscribe to them) up to the aggregate nominal value of £165,395 (representing 20 per cent. of the Enlarged Share Capital) to meet any unforeseen future working capital requirements or opportunities which the Board believes would be earnings enhancing for the Company.

Related Party Transactions

The proposed participation of two Directors and the participation by Hargreave Hale Limited (the latter as a substantial shareholder in the Company owning 12,272,618 Ordinary Shares comprising 19.45 per cent. of the Company's current issued share capital), in the Fundraising constitute related party transactions for the purposes of Rule 13 of the AIM Rules (the "Related Party Transactions"). The independent directors, having consulted with finnCap, the Company's nominated adviser, consider that the terms of the Related Party Transactions are fair and reasonable insofar as Shareholders are concerned. 

Circular and Notice of General Meeting

A circular setting out the background to and further details of the Fundraising will today be sent to Shareholders along with a notice convening the General Meeting to be held at 10.30 a.m. on Monday 1 June 2015 at the offices of Marriott Harrison LLP, 11 Staple Inn, London WC1V 7QH, at which the Resolution will be proposed for the purposes of implementing the Fundraising.

The Resolution is required to grant the Directors sufficient authority under the Act to allot and issue the New Ordinary Shares and the Director's Future Subscription Shares and additional new Ordinary Shares (and rights to subscribe therefor) up to an aggregate nominal amount of £165,395, representing 20 per cent. of the Enlarged Share Capital and to effect the Share Capital Reorganisation.

Capitalised terms used in this announcement and not otherwise defined shall have the same meaning given to them in the circular to be dated 14 May 2015 ("Circular").  The Circular shall be available on the Company's website: www.imaginatik.com.

The distribution of this document in or into jurisdictions other than the United Kingdom may be restricted by law and therefore any person who is subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe such restrictions. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction.

The Ordinary Shares have not been, and will not be, registered in the United States of America under the United States Securities Act of 1933 (as amended) (the "Securities Act") or qualified for sale under the laws of any state of the United States or under the applicable laws of any of Canada, Australia, the Republic of South Africa, or Japan and, may not be offered or sold in the United States of America, Canada, Australia,  the Republic of South Africa, or Japan or to, or for the account or benefit of, US persons (as such term is defined in Regulation S under the Securities Act) or to any national, resident or citizen of Canada, Australia, the Republic of Ireland, the Republic of South Africa, or Japan.    In addition, the securities to which this document relates must not be marketed into any jurisdiction where to do so would be unlawful.

 

END

 

 

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