Fundraising and Conversion of Debt

RNS Number : 5396C

Zoo Digital Group PLC

18 April 2017

 

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA, THE REPUBLIC OF IRELAND, NEW ZEALAND OR JAPAN OR INTO ANY OTHER JURISDICTION WHERE TO DO SO WOULD BREACH ANY APPLICABLE LAW OR REGULATION.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN ZOO DIGITAL GROUP PLC OR ANY OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR THE FACT OF ITS DISTRIBUTION, SHALL FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH ANY INVESTMENT DECISION IN RESPECT OF ZOO DIGITAL GROUP PLC.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION EU 596/2014 ("MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THE INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS SHALL THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION IN RELATION TO THE COMPANY AND ITS SECURITIES.

18 April 2017

ZOO DIGITAL GROUP PLC

("ZOO", the "Group" or the "Company")

Proposed Placing, Subscription, Capitalisation of Loan Stock and Loan Note, Extensions and Amendment of Convertible Loan Stock Instruments, Subdivision and Notice of General Meeting

ZOO Digital Group plc, the provider of subtitling and digital distribution services for the global entertainment industry, is pleased to announce that it is proposing to raise gross funds of approximately £2.58 million, through a Placing and Subscription comprising the issue of 28,611,111 New Ordinary Shares at 9 pence per New Ordinary Share. The Company has further announced that it is proposing to issue 12,222,223 New Ordinary Shares at 9 pence per New Ordinary Share in respect of the Capitalisation and by way of the Extensions, to extend the terms of its outstanding CLN1 and CLN2 by a period of three years.

The Placing, Subscription, Capitalisation and Extensions are expected to significantly strengthen the Company's balance sheet, reduce its debt burden, and to provide growth capital to enable the Company to capitalise on the growing pipeline of opportunities.

The Board is also proposing to undertake a restructuring of the Company's share capital to take effect in order to allow the Company to issue ordinary shares at a price of less than their current nominal value of 15 pence per ordinary share.

In addition, the Company has received approval (by way of resolutions in writing, which are extraordinary resolutions in accordance with the terms of each CLN Instrument) from at least 75 per cent. in nominal amount of each class of CLN1, CLN2 and CLN3 in relation to the Resolutions and (in respect of CLN1 and CLN2) the Extensions.

The Placing, Subscription, Subdivision and future authority to allot Ordinary Shares in accordance with the terms of the Convertible Loan Notes are conditional upon, inter alia, shareholder approval.

Capitalised terms carry the meaning set out below.

Notice of General Meeting

The Circular (containing the notice of general meeting) will today be posted to shareholders, a copy of which will shortly be available on the Company's website www.zoodigital.com. The General Meeting has been convened for 11.30 a.m. on 4 May 2017 and will take place at the offices of finnCap, 60 New Broad Street, London EC2M 1JJ.

Directors Participation and Related Party Transactions

Roger Jeynes (Chairman) is participating in the Subscription and the wife of Stuart Green (Chief Executive Officer) is participating in the SG Loan Capitalisation and the beneficial interests of the Directors (including their spouses but excluding their participation in the ZOO Digital Group Share Incentive Plan) in Existing Ordinary Shares as at the date of this announcement and following the Placing, the Subscription, and the Capitalisation are set out below:

	Current		Immediately following the Placing, Subscription and Capitalisation
Director	Number of Existing Ordinary Shares	Percentage of existing issued share capital	Number of Ordinary Shares	Percentage of Enlarged Share Capital
Stuart Green	4,857,335	14.87%	11,524,002	15.68%
Roger Jeynes	120,000	0.37%	342,222	0.47%
Helen Gilder	56,019	0.17%	56,019	0.08%
Gordon Doran	-	-	-	-
Total	5,033,354	15.41%	11,922,243	16.22%

Related Party Transactions

Herald

Herald has an interest in approximately 6,350,685 Existing Ordinary Shares (representing an interest of approximately 19.4 per cent. of the issued share capital). Herald has agreed to subscribe for further ordinary shares through its participation in the Placing and Capitalisation. Pursuant to the Placing and Capitalisation, Herald has subscribed for 2,611,111 Placing Shares and 5,555,556 Capitalisation Shares at the Placing Price and accordingly, upon Admission, will be interested in an aggregate of 14,517,352 ordinary shares in the Company (representing approximately 19.75 per cent. of the Enlarged Share Capital). By virtue of Herald's current interests in the Company, Herald is considered to be a "related party" as defined under the AIM Rules, and accordingly Herald's participation in the Placing, Capitalisation and the Extensions (as a holder of CLNs issued pursuant to the CLN1 Instrument and the CLN2 Instrument) constitute a related party transaction for the purposes of Rule 13 of the AIM Rules ("Herald Related Party Transaction").

The Directors, having consulted with the Company's nominated adviser, finnCap, consider that the Herald Related Party Transaction is fair and reasonable insofar as the Company's shareholders are concerned.

Stuart Green

By virtue of being a Director of the Company, Stuart Green is considered to be a "related party" as defined under the AIM Rules, and accordingly Stuart's wife's participation in the SG Loan Capitalisation and Stuart's participation in the Extensions (as a holder of CLN1) constitute a related party transaction for the purposes of Rule 13 of the AIM Rules ("Stuart Green Related Party Transaction").

The Independent Directors, having consulted with the Company's nominated adviser, finnCap, consider that the Stuart Green Related Party Transaction is fair and reasonable insofar as the Company's shareholders are concerned.

Roger Jeynes

By virtue of being a Director of the Company, Roger Jeynes is considered to be a "related party" as defined under the AIM Rules, and accordingly Roger's participation in the Subscription and participation in the Extensions (as a holder of CLN1) constitute a related party transaction for the purposes of Rule 13 of the AIM Rules ("Roger Jeynes Related Party Transaction").

The Independent Directors, having consulted with the Company's nominated adviser, finnCap, consider that the Roger Jeynes Related Party Transaction is fair and reasonable insofar as the Company's shareholders are concerned.

Stuart Green, Chief Executive Officer of the Company, commented:

"The proceeds of the Placing will enable ZOO to further the momentum in our business, as demonstrated by the Company's recent trading performance. We are experiencing strong demand for our localisation services and increased investment in people and our solutions will allow us to take full advantage.

On behalf of the Board, I would like to thank our loyal shareholders for their continued support and also welcome new institutional shareholders at a very exciting time for ZOO."

For further enquiries please contact:

ZOO Digital Group plc	0114 241 3700
Stuart Green - Chief Executive Officer
Helen Gilder - Chief Finance Officer
finnCap	020 7220 0500
Henrik Persson / Emily Watts / Alex Price(corporate finance) Camille Gochez (corporate broking)
Alma PR	0778 090 1979
Josh Royston / Hilary Buchanan

About ZOO Digital Group plc:

ZOO Digital is a provider of services allowing quality TV and movie content to be subtitled in any language and prepared for sale with all major online retailers. ZOO's clients are some of the best-known brands in the world including major Hollywood studios, global broadcasters and independent distributors.

ZOO's point of difference in the marketplace is its development and use of innovative cloud technology. This ensures that content is subtitled in any language and delivered to all the major online platforms such as Amazon, iTunes, Google and Hulu with reduced time to market, higher quality and lower costs.  ZOO's agile, cloud-based business model enables clients to respond to market trends, scale easily with business growth and capitalise on new routes to market in the fast moving and evolving digital industry.

ZOO operates from the entertainment hubs of Los Angeles and London with a development and production centre in Sheffield. Its full-service proposition includes digital distribution, subtitling & captioning, metadata creation & localisation, dubbing, artwork localisation, workflow and asset management.

www.zoodigital.com 

The below information has been extracted from the Circular:

1.  Background to the Proposals

The Group provides services allowing quality television and movie content to be subtitled in any language, and prepared for sale by both major online retailers and as physical products. Its full-service proposition includes digital distribution, subtitling and captioning, metadata creation and localisation, dubbing, artwork localisation, workflow, asset management, compliance editing and electronic screeners. ZOO's clients include major Hollywood studios, global broadcasters and independent distributors.

In recent years, online retailers, such as Apple, Amazon, Netflix and Google have contributed to a much enlarged market opportunity for the Company, due to their global distribution. Research from Adobe and the Diffusion Group indicates that US consumers now spend 42 per cent. of television viewing time watching streaming video services. Furthermore, growth of video captioning services in the US has been brought about by legislation, including recent changes in Federal Communications Commission (FCC) regulations.The Company's cloud technology enables content providers worldwide to meet increasing regulatory requirements for the delivery of online entertainment. As a result, the Directors believe the Company is well positioned to capitalise on this growth market. The proceeds from the Placing and Subscription will allow the Company to pursue a growth strategy to further penetrate this market.

Use of Proceeds

The net proceeds of the Placing and the Subscription will be used by the Company for general working capital purposes, as well as maintaining its investment in software development, additional sales resource, expansion of the service delivery team and to increase its marketing, in order to capitalise on the growing pipeline of opportunities including its new dubbing service, with focus on project managers, English editors, language managers and technical QC operators. The Directors believe that the Company has a competitive advantage over established video localisation service providers and that its full service offering means the Company differs from specialist technology providers. The Directors believe further funding for investment in the Company's software development and its end-to-end solution will enable the Company to continue to benefit from its competitive position in the marketplace.

2.  Summary of Convertible Loan Notes and the SG Loan

On 27 September 2006 the Group issued £3,541,000 CLN1 which was due to mature on 31 October 2011. Following an agreement with the loan stock holders in August 2011, £1,770,500 CLN1 was converted into Existing Ordinary Shares and the maturity date in respect of the remaining £1,770,500 CLN1 was extended to 31 October 2013.

On 31 October 2013 the maturity of CLN1 was further extended to mature on 31 October 2017.

On 24 November 2014 further loan stock (being CLN2) was issued. The aggregate nominal value of CLN2 in issue is £800,000 and it is due to mature on 31 October 2017. On 17 December 2015 further loan stock (being CLN3) was issued. The aggregate nominal value of CLN3 in issue is £500,000 and it is due to mature on 31 October 2017.

Pursuant to each CLN Instrument, the loan stock holder is entitled, before the redemption date, to convert all or part of the relevant Convertible Loan Notes into fully paid ordinary shares on the basis of 1 ordinary share for every £0.48 of principal amount of the applicable Convertible Loan Notes.

The CLN3 Instrument and the CLN3 will be discharged in full through the CLN3 Capitalisation, subject to Admission having taken place, and conditional upon but effective immediately after the completion of the Placing.

On 31 January 2013 Sara Green, wife of Dr Stuart Green, made a loan to the Company of £200,000. This amount was extended by £400,000, to a total of £600,000, with effect from 19 November 2013. The loan currently attracts interest at a rate of 10 per cent. The underlying value of the loan was £600,000 and the full amount remained outstanding at 31 March 2017. This loan is secured by a fixed and floating charge over the assets of the Group. Subject to Admission having taken place, and conditional upon but effective immediately before completion of the Placing this loan will be discharged in full through the SG Loan Capitalisation.

Subject to the passing of the Resolutions and completion of the Placing, the Company intends to undertake the Extensions and the Capitalisation.

Further details of these arrangements are set out in paragraph 3 below. The Company has obtained written consent from the requisite majority of the holders of each class of CLN1 and CLN2 to approve the relevant Extensions.

3.    Details of the Placing, Subscription, Extensions and Capitalisation

The Company proposes to raise, in aggregate, approximately £2.58 million (before expenses) by way of a Placing of 28,388,889 Placing Shares and a Subscription of 222,222 Subscription Shares with certain new and existing investors representing in aggregate 38.93 per cent. of the Enlarged Share Capital, at a price of 9 pence per New Ordinary Share. It was further announced that the Company proposes to issue the Capitalisation Shares in relation to the Capitalisation.

The Placing Price of 9 pence per New Ordinary Share represents a discount of 20 per cent. to the closing mid-market price of 11.25 pence on 13 April 2017, being the last Business Day prior to the publication of this announcement and represents a discount of 15.1 per cent. to the volume weighted average price of 10.6 pence over the preceding 30 calendar days (Source: Bloomberg, 13 April 2017). Therefore, the Board unanimously agrees that the level of discount is appropriate to secure the investment necessary in order to undertake the Placing, the Subscription and the Capitalisation.

Each of the Placing and the Subscription is conditional upon the completion of the Subdivision, details of which are set out in paragraph 4 below.

3.1.  The Placing Agreement

In connection with the Placing, the Company has entered into the Placing Agreement with finnCap, pursuant  to which finnCap has agreed to use its reasonable endeavours on behalf of and as agents for the Company, to procure placees to subscribe for the Placing Shares at the Placing Price. The Placing is conditional, inter alia, on:

·      the passing of the Resolutions at the General Meeting, including in respect of the Subdivision;

·      the conditions in the Placing Agreement being satisfied or (if applicable) waived and the Placing Agreement not having been terminated in accordance with its terms prior to Admission;

·      the Subscription Agreement having been duly executed and having become unconditional in all respects prior to Admission (save for any conditions as to the Placing Agreement having become unconditional or Admission having taken place) and not having been terminated;

·      the Capitalisation Agreements having been duly executed and having become unconditional in all respects prior to Admission (save for any conditions as to the Placing Agreement having become unconditional or Admission having taken place) and not having been terminated; and

·      Admission becoming effective by no later than 8.00 a.m. on 5 May 2017 (or such later date as finnCap and the Company may agree, being not later than 8.00 a.m. on 31 May 2017).

Accordingly, if any of these conditions are not satisfied or, if applicable, waived, the Placing will not proceed and the Placing Agreement and the rights and obligations contained in it shall terminate.

The Placing has not been underwritten by finnCap or any other party.

Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. The New Ordinary Shares will rank pari passu in all respects with all other Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid in respect of any Ordinary Shares of the Company following Admission. It is expected that Admission will become effective, and that dealings on AIM will commence, at 8.00 a.m. on or around 5 May 2017.

The Placing Agreement contains customary warranties given by the Company to finnCap in relation to, inter alia, the accuracy of the information in the Circular, certain financial information and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify finnCap and its Affiliates (as such term is defined in the Placing Agreement) in respect of all losses and liabilities that finnCap and its Affiliates may suffer or incur in connection with the Proposals (subject to certain exceptions). finnCap is entitled to terminate the Placing Agreement prior to Admission in certain customary circumstances, including, inter alia:

·      the occurrence of an event or omission which (in the reasonable opinion of finnCap), materially adversely affects the financial position and/or prospects of the Group or which is or will or is likely to materially and adversely affect the Group, the Placing or Admission or the subscription for Placing Shares by placees;

·      a change in national or international financial, monetary, economic, political, environmental, or stock market conditions which in the reasonable opinion of finnCap will or is likely to materially prejudice the Group, the Placing or Admission or the subscription for Placing Shares by placees and in each case whereby, in the reasonable opinion of finnCap, it is unreasonable for placees to subscribe for Placing Shares at the Placing Price;

·      any warranty in the Placing Agreement being untrue, inaccurate or misleading;

·      the failure of the Company to comply with any of its obligations under the Placing Agreement, FSMA, the AIM Rules or other applicable law; and

·      the Group's situation is such that Admission is likely, in the reasonable opinion of finnCap, to be detrimental to the ordinary operation or reputation of AIM.

If this right is exercised, the Placing will not proceed. The Placing Agreement is not subject to any right of termination after Admission. The Placing Agreement provides for payment by the Company to finnCap of certain commissions relating to the Placing Shares.

3.2.  Amendment to CLN3 and the CLN3 Capitalisation

Pursuant to the CLN3 Capitalisation Agreement, the Company has agreed with Herald that, conditionally in all respects and effective immediately after the Placing becoming unconditional and being completed:

·      the terms of the CLN3 Instrument be amended so that the Company is obliged to repay the whole of CLN3 (together with the CLN3 Accrued Interest) on written demand;

·      Herald makes a demand for immediate redemption of the entire principal amount of CLN3 and the CLN3 Accrued Interest; and

·      the Company shall issue to Herald 5,555,556 New Ordinary Shares at the Placing Price and undertake to repay the CLN3 Accrued Interest (which shall continue to accrue to the date of completion of the CLN3 Capitalisation) out of the Company's existing cash resources within 14 days of completion of the CLN3 Capitalisation in consideration for Herald treating CLN3 as satisfied and discharged.

3.3.  Amendment to the SG Loan and the SG Loan Capitalisation

Pursuant to the SG Loan Capitalisation Agreement, the Company has agreed with Sara Green, wife of Stuart Green that, conditionally in all respects on and effective immediately before the Placing Agreement becoming unconditional and subject to Admission having taken place:

·      the terms of the SG Loan Agreement be amended so that the Company is obliged to repay the whole  of the SG Loan (together with the SG Loan Accrued Interest) on written demand;

·      Sara Green makes a demand for immediate repayment of £600,000 of the SG Loan and the SG Loan Accrued Interest; and

·      the Company shall issue to Sara Green 6,666,667 New Ordinary Shares at the Placing Price for the SG Loan and will repay the SG Loan Accrued Interest (which is currently approximately £12,000, and shall continue to accrue to the date the SG Loan Capitalisation Agreement becomes effective) from the Company's existing cash resources in consideration for Sara Green treating the SG Loan as fully satisfied and discharged.

3.4.  Extensions to the CLN1 Instrument and CLN2 Instrument

All Convertible Loan Notes which remain in issue under the CLN1 Instrument and the CLN2 Instrument after the CLN3 Capitalisation are due to mature on 31 October 2017. On maturity, CLN1 and CLN2 will either convert into Ordinary Shares or be repaid. The Company has received conditional approval (by way of resolutions in writing, which are extraordinary resolutions in accordance with the terms of the relevant CLN Instruments) from at least 75 per cent. in nominal amount of each class of CLN1 and CLN2 in relation to the relevant Extensions.

3.5.  Details of the Subscription

Pursuant to the conditional Subscription Agreement between the Company and Roger Jeynes, 222,222 New Ordinary Shares will be issued to Roger Jeynes at a price of 9 pence per New Ordinary Share for an aggregate subscription price of approximately £20,000. The Subscription is conditional on the passing of the Resolutions and is subject to Admission.

4.   Details of the Subdivision and amendment to the Articles

4.1.  Subdivision

The Existing Ordinary Shares have recently been trading on AIM at a price below their nominal value of 15 pence per share. The issue of new shares by a company incorporated in England and Wales at a price below their nominal value is prohibited by the Companies Act and accordingly, the Company is unable to issue further Existing Ordinary Shares at a price of less than 15 pence per share.

Accordingly, the Board is proposing a reorganisation of the Company's share capital that comprises a subdivision of the Existing Ordinary Shares that will create two new classes of shares: Ordinary Shares with a nominal value of one penny and Deferred Shares with a nominal value of 14 pence. The Subdivision is expected to be implemented at close of business on the date the Resolutions are passed at the General Meeting.

The proportion of the issued ordinary share capital of the Company held by each Shareholder immediately before and after the Subdivision will remain unchanged. Other than a change in nominal value, the Ordinary Shares will carry equivalent rights as the Existing Ordinary Shares under the Articles.

No application will be made to the London Stock Exchange for admission of the Deferred Shares to trading on AIM nor will any application be made for them to be admitted to the Official List or to any other recognized investment exchange. The Deferred Shares will have no right to vote, attend or speak at general meetings of the Company and will have no right to receive any dividend or other distribution and will have only limited rights to participate in any return of capital on a winding-up or liquidation of the Company. The Deferred Shares are effectively valueless. The Deferred Shares are required to be issued in order for the aggregate par value of the Company's share capital, once sub-divided, to remain the same as prior to the Subdivision.

Subject to the provisions of the Companies Act, the Deferred Shares may then be cancelled by the Company or may be bought back by the Company for £1 and then cancelled as permitted under the Articles (as amended), leaving the number of shares in issue the same as at the date of the Circular (except for shares subsequently issued). Further particulars of the rights attaching to the Deferred Shares are set out in paragraph 4.2 below. If the Company determines to cancel or buy back the Deferred Shares, it will advise Shareholders accordingly at the relevant time.

Approval for the Subdivision will be sought by passing of resolutions 1 and 2 at the General Meeting.

Following the Subdivision, the ISIN code for the Ordinary Shares will remain GB00B1FQDL10.

4.2.  Subdivision

It is proposed to amend the Articles to permit the creation of the Deferred Shares and to set out the rights attaching to them. The rights in respect of the Deferred Shares are as follows:

·    The holders of the Deferred Shares shall not be entitled to receive any dividends made or paid.

·    On a distribution of capital, the holders of the Deferred Shares shall be entitled to receive the amount paid up on their shares after there shall have been distributed (in cash or in specie) to the holders of the Ordinary Shares the amount of £10,000 in respect of each Ordinary Share held by them respectively.

·    The holders of Deferred Shares shall not be entitled to receive notice of or attend (either personally or by proxy) any meeting of shareholders, or vote on any shareholder resolution.

·    The Company shall have the power and authority at any time to purchase all or any of the Deferred Shares for an aggregate consideration of £1.

·    The Deferred Shares shall not be listed on any stock exchange and shall not be transferable except in accordance with the Articles (as amended) or with the written consent of the Board.

·    The Company may, at its option and subject to compliance with the provisions of applicable legislation, at any time, cancel such shares by way of reduction of capital for no consideration.

·    The Company shall have irrevocable authority to appoint any person to execute on behalf of the holders of the Deferred Shares a transfer/cancellation of the Deferred Shares and/or an agreement to transfer/cancel the same, without making any payment to the holders of the Deferred Shares to such person or persons as the Company may determine as custodian thereof and, pending such transfer and/or cancellation and/or purchase, to retain the certificate(s) if any, for such shares.

·    The Company shall not be required to issue any share certificates in respect of the Deferred Shares unless specifically required to by the provisions of any applicable legislation.

5.   Current Trading and Outlook

The Company has made good progress in the current financial year, and announced a trading update for the year ended 31 March 2017 on 7 April 2017, via a Regulator Information Service and made the announcement available on the Company's website. Highlights for the period included:

·    Revenue of at least $16m (2016: $11.6m)

·    EBITDA to be at least $1.8m (2016: $0.2m)

·    Less seasonal variation than in previous years

·    Improvement in month on month cash flow

The Company continues to make progress with its strategy of winning new clients and diversifying its revenue sources. The Directors believe that the Company has the opportunity to grow consistently and win market share in digital distribution and localisation, being a large and expanding segment of the media and entertainment industry.

6.   General Meeting

A notice convening the General Meeting to be held at finnCap, 60 New Broad Street, London EC2M 1JJ at 11.30 a.m. on 4 May 2017 is set out at the end of the Circular. Set out below is an explanation of the resolutions to be considered at the General Meeting. Resolutions 2, 3, 5 and 7 will be proposed as ordinary resolutions. This means that for each of those resolutions to be passed, more than half of the votes cast must be in favour of the resolution. Resolutions 1, 4, 6 and 8 will be proposed as special resolutions. This means that for each of those resolutions to be passed, at least three-quarters of the votes cast must be in favour of the resolution.

·      Resolution 1 - amendments to the Articles

The Deferred Shares constitute a new class of share, the creation of which necessitates an amendment to the Articles. Resolution 1 in the notice of General Meeting seeks approval to amend the Articles to create the Deferred Shares as a new class of share.

·      Resolution 2 - Subdivision of the Existing Ordinary Shares

Resolution 2 in the notice of General Meeting seeks approval to the above described reorganisation of the Company's share capital by way of the Subdivision, which is conditional on Shareholders approving the amendments to the Articles (Resolution 1). If Resolution 2 is approved, the Subdivision will occur at close of business on the date of the General Meeting.

·      Resolutions 3 and 4 - authority to allot and non pre-emptive allotment of the Placing Shares, Subscription Shares and Capitalisation Shares

Resolutions 3 and 4 empower the Directors to allot the Placing Shares, the Subscription Shares and the Capitalisation Shares and that such allotments may be made for cash otherwise than in accordance with the statutory pre-emption provisions set out in the Companies Act.

·      Resolutions 5 and 6 - authority to allot and non pre-emptive allotment of shares in the capital of the Company (general authority)

Resolutions 5 and 6 empower the Directors to allot shares in the capital of the Company and that such allotments may be made for cash otherwise than in accordance with the statutory pre-emption provisions set out in the Companies Act.

·      Resolutions 7 and 8 - authority to allot and non pre-emptive allotment of shares in respect of remaining CLNs

Resolutions 7 and 8 empower the Directors to allot shares in the capital of the Company and that such allotments may be made for cash otherwise than in accordance with the statutory pre-emption provisions set out in the Companies Act in relation to the remaining CLNs.

7.   Directors' shareholdings

Roger Jeynes is participating in the Subscription and Stuart Green's wife is participating in the SG Loan Capitalisation and the beneficial interests of the Directors (including their spouses but excluding their participation in the ZOO Digital Group Share Incentive Plan) in Existing Ordinary Shares as at the date of this announcement and following the Placing, the Subscription, and the Capitalisation are set out below:

	Current		Immediately following the Placing, Subscription and Capitalisation
Director	Number of Existing Ordinary Shares	Percentage of existing issued share capital	Number of Ordinary Shares	Percentage of Enlarged Share Capital
Stuart Green	4,857,335	14.87%	11,524,002	15.68%
Roger Jeynes	120,000	0.37%	342,222	0.47%
Helen Gilder	56,019	0.17%	56,019	0.08%
Gordon Doran	-	-	-	-
Total	5,033,354	15.41%	11,922,243	16.22%

8.   Related Party Transactions

Where a company enters into a related party transaction, under the AIM Rules, the independent directors of the company are required, after consulting with the company's nominated adviser, to state whether, in their opinion, the transaction is fair and reasonable in so far as its shareholders are concerned.

Herald

As at the date of this announcement, Herald has an interest in approximately 6,350,685 Existing Ordinary Shares (representing an interest of approximately 19.4 per cent. of the issued share capital). Herald has agreed to subscribe for further ordinary shares through its participation in the Placing and Capitalisation. Pursuant to the Placing and Capitalisation, Herald has subscribed for 2,611,111 Placing Shares and 5,555,556 Capitalisation Shares at the Placing Price and accordingly, upon Admission, will be interested in an aggregate of 14,517,352 ordinary shares in the Company (representing approximately 19.75 per cent. of the Enlarged Share Capital). By virtue of Herald's current interests in the Company, Herald is considered to be a "related party" as defined under the AIM Rules, and accordingly Herald's participation in the Placing, Capitalisation and the Extensions (as a holder of CLNs issued pursuant to the CLN1 Instrument and the CLN2 Instrument) constitute a related party transaction for the purposes of Rule 13 of the AIM Rules ("Herald Related Party Transaction").

The Directors, having consulted with the Company's nominated adviser, finnCap, consider that the Herald Related Party Transaction is fair and reasonable insofar as the Company's shareholders are concerned.

Stuart Green

By virtue of being a Director of the Company, Stuart Green is considered to be a "related party" as defined under the AIM Rules, and accordingly Stuart's wife's participation in the SG Loan Capitalisation and Stuart's participation in the Extensions (as a holder of CLN1) constitute a related party transaction for the purposes of Rule 13 of the AIM Rules ("Stuart Green Related Party Transaction").

The Independent Directors, having consulted with the Company's nominated adviser, finnCap, consider that the Stuart Green Related Party Transaction is fair and reasonable insofar as the Company's shareholders are concerned.

Roger Jeynes

By virtue of being a Director of the Company, Roger Jeynes is considered to be a "related party" as defined under the AIM Rules, and accordingly Roger's participation in the Subscription and participation in the Extensions (as a holder of CLN1) constitute a related party transaction for the purposes of Rule 13 of the AIM Rules ("Roger Jeynes Related Party Transaction").

The Independent Directors, having consulted with the Company's nominated adviser, finnCap, consider that the Roger Jeynes Related Party Transaction is fair and reasonable insofar as the Company's shareholders are concerned.

9.   Enterprise Investment Scheme and Venture Capital Trusts

The Directors believe that the Company will continue to be a qualifying company for the purposes of the Enterprise Investment Scheme ("EIS") and Venture Capital Trust ("VCT") legislation, however, they can offer no certainty in this regard.

The Company has sought, and received, confirmation from Her Majesty's Revenue and Customs ("HMRC") that:

(a) the Company is a qualifying company for the purposes of the EIS and for investment by a VCT; and

(b) the ordinary shares of the Company are eligible shares.

This authorises the Company to issue certificates under Section 204 (1) Income Tax Act 2007 in respect of the shares to be issued, confirming the eligibility of the ordinary shares for the purposes of the EIS scheme.

The continuing availability of EIS relief and the status of the relevant New Ordinary Shares as a qualifying holding for VCT purposes are conditional, inter alia, on the Company continuing to satisfy the relevant requirements throughout the period of three years from the date of the investor making his investment (under EIS), and, for VCT purposes, throughout the period the New Ordinary Shares are held as a "qualifying holding". Neither the Company nor the Directors make any general warranty or give any general undertaking that relief will be available in respect of any investment in the Placing Shares or any of the other New Ordinary Shares, nor do they warrant or undertake that the Company will keep its qualifying status throughout the relevant period or that, once given, such relief will not be withdrawn.

Investors considering taking advantage of any of the relief under the EIS or relief available to VCTs should seek their own professional advice in order that they may fully understand how the rules apply in their individual circumstances.

10.  Irrevocable Undertakings

Certain of the Directors, Sara Green (Stuart Green's wife) and Herald have irrevocably undertaken to vote in favour of the Resolutions in respect of their own beneficial holdings (but, in the case of the Directors, excluding their participation in the ZOO Digital Share Incentive Plan) of 11,384,039 Existing Ordinary Shares, in aggregate representing approximately 34.86 per cent. of the Company's issued share capital on 13 April 2017 (being the last Business Day prior to publication of this announcement).

11.  Recommendation

The Directors believe that the Resolutions to be proposed at the General Meeting are in the best interests of the Company and the Shareholders as a whole and unanimously recommend that you vote in favour of the Resolutions. The Directors have irrevocably undertaken to vote in favour of the Resolutions in respect of, in aggregate, their beneficial interests in 5,033,354 Existing Ordinary Shares as more particularly described in paragraph 7 above, representing approximately 15.41 per cent. of the Existing Ordinary Shares in issue as at the date of this announcement.

TIMETABLE

Expected timetable of principal events

Announcement of the Proposals	7.00 a.m. on 18 April 2017
Latest time for receipt of Forms of Proxy	11.30 a.m. on 2 May 2017
General Meeting	11.30 a.m. on 4 May 2017
Record date for the Subdivision	Close of business on 4 May 2017
Subdivision effective	Close of business on 4 May 2017
Admission and commencement of dealings in the New Ordinary Shares expected to commence on AIM	8.00 a.m. on 5 May 2017
CREST accounts expected to be credited	5 May 2017
Definitive share certificates to be dispatched by	15 May 2017

Each of the times and dates above is a reference to the time and date in the UK and is subject to change. Any such change will be notified by an announcement on a Regulatory Information Service.

ADMISSION AND PLACING STATISTICS

Total number of Existing Ordinary Shares	32,660,660
Number of Placing Shares	28,388,889
Number of Subscription Shares to be issued pursuant to the Subscription	222,222
Number of Capitalisation Shares to be issued pursuant to the Capitalisation	12,222,223
Number of New Ordinary Shares as a percentage of the Enlarged Share Capital*	55.56 per cent.
Placing Price	9 pence
Enlarged Share Capital*	73,493,994
Gross proceeds of the Placing and Subscription	£2.58 million
Market capitalisation of the Company on Admission at the Placing Price	£6.61 million
ISIN before and after Admission	GB00B1FQDL10
SEDOL before and after Admission	B1FQDL1

* Assuming no further ordinary shares are issued prior to the date of the General Meeting and Subdivision.

DEFINITIONS

The following definitions apply throughout this announcement unless the context requires otherwise:

"Admission"	admission of the New Ordinary Shares to trading on AIM becoming effective in accordance with the AIM Rules
"AIM"	the market of that name operated by the London Stock Exchange
"AIM Rules"	together, the AIM Rules for Companies and the AIM Rules for Nominated Advisers (each as amended from time to time)
"Articles"	the articles of association of the Company in force as at the date of this announcement
"Board" or "Directors"	the directors of the Company
"Business Day"	any day on which banks are usually open in England and Wales for the transaction of business, other than a Saturday, Sunday or public holiday
"Capitalisation"	the CLN3 Capitalisation and the SG Loan Capitalisation
"Capitalisation Agreements"	the CLN3 Capitalisation Agreement and the SG Loan Capitalisation Agreement
"Capitalisation Shares"	the 12,222,223 New Ordinary Shares to be issued in relation to the Capitalisation
"Companies Act"	the Companies Act 2006 (as amended from time to time)
"Company"	ZOO Digital Group plc, a company incorporated and registered in England and Wales with company number 03858881
"CLN Instruments"	the CLN1 Instrument, the CLN2 Instrument and the CLN3 Instrument
"CLN1"	the £3,541,000 unsecured convertible redeemable loan stock (of which £1,770,500 remains in issue), with a fixed interest rate of 7.5 per cent., a maturity date of 31 October 2017 and a conversion price of 48 pence
"CLN1 Instrument"	the loan stock instrument dated 1 September 2006, as amended by deeds dated 6 September 2011 and 31 October 2013 constituting CLN1
"CLN2"	the £800,000 unsecured convertible redeemable loan stock with a fixed interest rate of 7.5 per cent., a maturity date of 31 October 2017 and a conversion price of 48 pence
"CLN2 Instrument"	the loan stock instrument dated 21 November 2014 constituting CLN2
"CLN3"	the £500,000 unsecured convertible redeemable loan stock with a fixed interest rate of 7.5 per cent., a maturity date of 31 October 2017 and a conversion price of 48 pence
"CLN3 Accrued Interest"	the outstanding accrued interest on CLN3 from time to time
"CLN3 Capitalisation"	the capitalisation of the whole of CLN3 into New Ordinary Shares at the Placing Price, on the terms of the CLN3 Capitalisation Agreement
"CLN3 Capitalisation Agreement"	the conditional capitalisation agreement dated 18 April 2017 between (i) Herald and (ii) the Company in relation to the capitalisation of the whole of CLN3 into New Ordinary Shares at the Placing Price
"CLN3 Instrument"	the loan stock instrument dated 17 December 2015 constituting CLN3
"Convertible Loan Notes" or "CLNs"	together, CLN1, CLN2 and CLN3
"CREST"	the computerised settlement system (as defined in the CREST Regulations) operated by Euroclear UK & Ireland Limited
"CREST Regulations"	the Uncertificated Securities Regulations 2001 (SI 2001/3755) (as amended from time to time)
"Deferred Shares"	the deferred shares of 14 pence each in the capital of the Company which will be created as a result of the Subdivision
"Enlarged Share Capital"	the Company's issued ordinary share capital immediately after the completion of the Proposals
"Existing Ordinary Shares"	the existing ordinary shares of 15 pence each in the capital of the Company
"Extensions"	the extension and variation to the terms of the CLN1 Instrument and the CLN2 Instrument such that CLN1 and CLN2 are to be extended and become redeemable on 31 October 2020 and effective from Admission, further details of which are set out in paragraph 3.4 above
"finnCap"	finnCap Ltd, 60 New Broad Street, London, EC2M 1JJ
"Form of Proxy"	the form of proxy attached to the Circular for use by Shareholders in connection with the General Meeting
"FSMA"	the Financial Services and Markets Act 2000 (as amended from time to time)
"GM" or "General Meeting"	the general meeting of the Company to be held at finnCap, 60 New Broad Street, London, EC2M 1JJ at 11.30 a.m. on 4 May 2017
"Group"	the Company and its subsidiaries
"Herald"	Herald Investment Trust plc (including where applicable its nominee, BNY (OCS) Nominees Limited, and /or Herald Investment Management Limited)
"Independent Directors"	the Directors other than Stuart Green and Roger Jeynes
"London Stock Exchange"	London Stock Exchange plc
"New Ordinary Shares"	the Ordinary Shares to be issued in connection with the Placing, the Subscription and the Capitalisation
"Ordinary Shares"	ordinary shares of one penny each in the capital of the Company which will be created as a result of the Subdivision
"Placing Agreement"	the conditional placing agreement dated 18 April 2017 between finnCap and the Company, details of which are set out in section 3.1 above
"Placing"	the proposed placing by finnCap, as agents for the Company, of the Placing Shares at the Placing Price on the terms of the Placing Agreement
"Placing Price"	9 pence per New Ordinary Share
"Placing Shares"	28,388,889 New Ordinary Shares to be issued pursuant to the Placing
"Proposals"	together the Placing, Subscription, Capitalisation, Subdivision and Extensions
"Resolutions"	the resolutions to be proposed at the General Meeting, as set out in the notice of General Meeting contained in Part 2 of the Circular
"SG Capitalisation"	the capitalisation of the whole of the SG Loan into New Ordinary Shares at the Placing Price, on the terms of the SG Loan Capitalisation Agreement
"SG Loan"	the £600,000 secured loan to the Company made by Sara Green, the wife of Stuart Green, bearing an interest rate of 10 per cent.
"SG Loan Accrued Interest"	the outstanding accrued interest on the SG Loan from time to time
"SG Loan Agreement"	the loan agreement in relation to the SG Loan between Sara Green and the Company on 31 January 2013 for £200,000, as amended with effect from 19 November 2013 to extend the loan to £600,000
"SG Loan Capitalisation Agreement"	the conditional capitalisation agreement dated 18 April 2017 between (i) Sara Green and (ii) the Company in relation to the capitalisation of the whole of the SG Loan into New Ordinary Shares at the Placing Price
"Shareholders"	holders of Existing Ordinary Shares
"Subdivision"	the share capital subdivision to be proposed pursuant to Resolutions 1 and 2 in the Resolutions whereby, if such Resolutions are approved by Shareholders, each Existing Ordinary Share will be subdivided into one Ordinary Share and one Deferred Share
"Subscription"	the conditional share subscription by Roger Jeynes described in section 3.5 above
"Subscription Shares"	222,222 New Ordinary Shares to be issued to Roger Jeynes pursuant to the Subscription
"Subscription Agreement"	the subscription agreement described in section 3.5 above
"UK" or "the United Kingdom"	the United Kingdom of Great Britain and Northern Ireland

All references in this announcement to "£", "pence" or "p" are to the lawful currency of the United Kingdom, all references to "US$" or "$" are to the lawful currency of the United States.

 

END

 

 

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