Proposed Placing and Subscription

RNS Number : 4934F

Imaginatik PLC

25 April 2014

 



Imaginatik Plc

("Imaginatik" or the "Company")

Proposed Issue of Equity and Notice of General Meeting

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 has conditionally raised £1.338m (before expenses) to provide additional working capital to fund the development of the Group's business.

The Fundraising will be effected through the issue of 1,911,428,572 new Ordinary Shares with new and existing investors, including certain of the Directors, in each case at the Issue Price, being 0.07 pence per new Ordinary Share. The Issue Price represents a premium of 12.0 per cent to the issue price per Ordinary Share the last time the Company raised capital, a year ago. The Board believes that, whilst small, this nevertheless represents a significant indication of the increased confidence which investors have in our Company, confidence which the Board very much shares. This is borne out by the fact that each member of the Board is participating in the Fundraising.

The Issue Price is equal to the closing mid-market price of 0.07 pence per Ordinary Share on 24 April 2014, the latest practicable dealing day prior to the publication of this document. The New Ordinary Shares will represent in aggregate 36.75 per cent. of the Enlarged Share Capital.

Matt Cooper, Executive Chairman of Imaginatik, commented:

"In any business breaking new ground with relatively new offerings, it takes time to gain real and sustainable traction and the Board feels Imaginatik is making good progress. We have seen growth in new customer wins, strong customer retention and a solid increase in the sales pipeline over the past year. This confidence means that each of the Board members has participated in the fundraising and we are delighted that several of our largest shareholders have similarly shown their support and belief in the Company through investing. The funds raised last year have enabled us to recruit high calibre individuals into the sales team and we expect to see the benefits of this in the year ahead. These new funds will enable us to recruit a new CEO to lead the Company through this next phase of growth. We are confident we have a sensible strategy to succeed in the emerging innovation market."

Background to and reasons for the Fundraising

The market for the provision of innovation technology and consulting services continues to develop well, with industry analysts Forrester and Gartner now following and writing about the sector.  The Directors believe that the Company's repositioning within the space over the last couple of years as a provider of a range of innovation solutions combining both technology and consulting rather than pure technology is a sensible strategy that will benefit the Company in the long run. This repositioning has removed the reliance on a single offering and has allowed the Company to move away from selling to technologists with a limited budget, to selling into more senior executives with a longer term vision for how a sustained innovation competence can help benefit their businesses. 

In the last year the Company has increased both the size and capability of the sales team in the US. The impact on the Company's business of this new team is yet to be felt, but the sales pipeline has grown substantially in the last year, from approximately $6m in April 2013 to $10.8m in April 2014.

As the Company stated in its trading statement released on 14 April 2014, it continues to add new clients and its roster of blue chip clients grows, adding 15 in the year to March 2014 in a mixture of annual license contracts as well as consulting engagements. The Company is witnessing its consulting revenues becoming a more important part of the Company's overall revenue mix, and the Company has added a series of additional consulting offerings in the last 12 months, which are being well received by its client base.

Client retention has been very good; 14 clients out of 16 whose contracts were up for renewal in the year to 31 March 2014 chose to re-contract with the Company, four of which entered into multi-year contracts.

In any business breaking new ground with relatively new offerings, it takes time to gain real and sustainable traction, but the Board feels the Company has made good progress since the beginning of the Company's last financial year in further establishing and restructuring the sales team and adding further service offerings. However, the business is still in need of cash in order to continue its development and make progress towards reaching that break-even point and becoming a self sustaining business. The Company proposes to invest some of the proceeds of the Fundraising in hiring a new CEO as referred to in the paragraph below and on increasing the Company's marketing activities by hiring additional personnel as and when the Board considers it is prudent to do so.

It is the Board's intention to hire a full time CEO for the business. With the assistance of a US based search firm which the Company has engaged, that process is now underway, and the Board expects to be in a position to advise shareholders on progress later in the year. At the point that the Company secures the services of a suitable candidate, Matt Cooper will become the Non-Executive Chairman of the Company. Furthermore, David Gammon has indicated that he intends stepping down as a non-executive director of the Company upon completion of the Placing as he feels that he has overseen and contributed to a key stage of the Company's development. The Board thanks him hugely for his strategic and wise counsel since the time of his appointment and wishes him well for the future. At that point, Mr Charles will assume the chairmanship of the audit committee in addition to that of the remuneration committee.

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 has previously been the case, 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 the Fundraising, 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, it was considered the Fundraising to be the preferable and most efficient way to source the present funds required.

The Placing and Subscription

The Company has conditionally raised approximately £1.263m 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 £1.19m.

Pursuant to the terms of the Placing Agreement, finnCap has conditionally agreed, as agent for the Company, to use its reasonable endeavours to procure subscribers for 861,428,572 Placing Shares with institutional and other investors at the Issue Price. The Issue Price is equal to the closing mid-market price of an Ordinary Share on 24 April 2014, being the last dealing day prior to the announcement of the Placing. In addition, the Company has procured subscribers for 942,857,143 Subscription Shares at the Issue Price pursuant to the Subscription Agreements. The Placing Shares and the Subscription Shares will represent in aggregate 36.75 per cent. of the Enlarged Share Capital. This is the first time in the Company's history of issuing equity that it has agreed to issue Ordinary Shares at a higher price per Ordinary Share than the previous fundraise. The Directors believe this shows that the Company is now in a much more confident and stable place than it has been for some time.

The Placing has not been underwritten. The Placing Agreement and Subscription Agreements are 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 13 May 2014 or such later time and/or date as finnCap may agree in its absolute discretion, but in any event by no later than 8.00 a.m. on 30 May 2014.

The Placing 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.

Director's Future Subscription

In addition to the £1.263m conditionally raised with new and existing investors pursuant to the Placing and Subscription, Simon Charles, a non-executive director of the Company, has irrevocably agreed to subscribe for 107,142,857 new Ordinary Shares at the Issue Price on or before 31 October 2014. Accordingly, together with the proceeds raised from the Placing and Subscription, the Company has conditionally raised, in aggregate, £1.338m gross and £1.265m net of estimated expenses. This subscription (and share issue) is deferred due to Mr Charles having to implement appropriate financial arrangements to enable full settlement of his subscription obligations to occur and accordingly he will not be issued any new Ordinary Shares until the Company is fully in funds in respect of his subscription commitments. The Director's Future Subscription is conditional upon, inter alia, the Resolution being duly passed at the General Meeting.

Working Capital

The Directors believe that the net proceeds of the Fundraising will be sufficient for the Company's present and anticipated requirements for a period of not less than twelve months following Admission.

Expected Admission Dates

Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. It is expected that Admission will occur at 8.00 a.m. on 13 May 2014. Following Admission, the total number of shares in issue will be 4,908,980,456.

Application will be made to the London Stock Exchange for the Director's Future Subscription Shares to be admitted to trading on AIM before 31 October 2014.

Directors' participations in the Fundraising

David Gammon, Shawn Taylor and Matt Cooper have in aggregate given commitments 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	311,821,407	10.0%	714,285,715	1,026,107,122	20.9%
David Gammon	140,442,564	4.5%	85,714,286	226,156,850	4.6%
Shawn Taylor	17,903,558	0.6%	7,142,857	25,046,415	0.5%

As announced by the Company on 14 April 2014, Mr Cooper has provided loans to the Company of an aggregate value of £96,666 and as part of the Subscription, it is agreed that he pay the Company a net balance of £403,334 and capitalise the loan amount currently outstanding so his aggregate participation under the Subscription is an amount of £500,000, equating to 714,285,715 Subscription Shares at the Issue Price.

In addition, Simon Charles has committed to subscribe for the Director's Future Subscription Shares. His interest in the Ordinary Shares now and following the Director's Future Subscription is as follows:

Director	Number of Existing Ordinary Shares  (excluding interests in options)	Percentage of Existing Ordinary Shares	Number of Director's Future Subscription Shares	Number of Ordinary Shares following issue of Director's Future Subscription Shares	Percentage of enlarged share capital following issue of Placing Shares and Director's Future Subscription Shares
Simon Charles	59,511,771	1.9%	107,142,857	166,654,628	3.4%

Note:                The above tables exclude the Directors' interests to subscribe for new Ordinary Shares under options granted to them by the Company.

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 (out with the Fundraising), as a whole or in tranches, Ordinary Shares (and/or rights to subscribe to them) up to the aggregate nominal value of £613,623 (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 participation of the Directors and the participation by Hargreave Hale Limited, as a substantial shareholder in the Company, in the Fundraising constitute related party transactions for the purposes of Rule 13 of the AIM Rules (the "Related Party Transactions"). There are no independent directors for the purposes of providing the fair and reasonable statement required under Rule 13 of the AIM Rules. finnCap, the Company's nominated adviser, considers 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 12 May 2014 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) for a par value of £613,623 representing 20 per cent. of the Enlarged Share Capital.

Capitalised terms used in this announcement and not otherwise defined shall have the same meaning given to them in the circular dated 25 April 2014 ("Circular").  The Circular is available on the Company's website: www.imaginatik.com.

For further information please contact:  

Imaginatik plc	Tel: [phone]
Matt Cooper, Executive Chairman / Shawn Taylor, CFO
finnCap	Tel: [phone]
Charlotte Stranner/ Victoria Bates
Newgate Threadneedle	Tel: [phone]
Caroline Forde / Hilary Millar

About Imaginatik

Imaginatik® is the world's first full-service innovation provider. We have 16 years of experience building innovation into a sustainable competence at some of the world's largest and most respected companies. Through a mix of consulting and advisory, hands-on innovation projects and program management, and our award-winning enterprise software platform, we help clients develop innovation capability into a permanent competitive advantage. Imaginatik is the trusted partner of leading organisations including Blue Cross Blue Shield, CSC, Cargill, The World Bank, Mayo Clinic, The Chubb Group of Insurance Companies, HCA, Dow Chemical and Goodyear.

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.

 

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