LONDON (Alliance News) - New World Oil & Gas PLC Thursday said it has provided another loan to the video content management company it is hoping to takeover so it can support its "rapid growth" as it reiterated its confidence in the deal that will formally take the business out of the natural resources sector.
New World Oil made a decision to leave the oil and gas sector last year when it succumbed to the pressure on global oil prices that had created the downturn in markets that began in the middle of 2014, as it attempted to make better use of its cash balance before it dwindled within the loss-making business.
The company offloaded its licenses in Denmark and is now only left with the Blue Creek production sharing agreement in Belize, which is due to expire at the end of October this year. New World Oil is still attempting to sell the asset, but looks likely to lose it when that contract expires next month.
New World Oil made a USD4.2 million pretax loss in 2015 but still had a cash balance of USD3.6 million which it wanted to use to springboard the company into a new era. Soon after, however, it became clear that the management of the business was not welcomed by all shareholders as a group requested an extraordinary general meeting in an attempt to oust three directors.
The company did not take long to succumb to those demands from the shareholder group, which held a collective 10.5% stake in the business, as it revealed soon after the request was lodged that the directors in question had resigned, making the meeting request moot.
Still, the pursuit of Big Sofa Ltd continues and in May this year the pair signed a deal for New World to takeover the video content management firm.
As a precursor to the deal, New World Oil agreed to provide Big Sofa with a GBP500,000 loan to provide the company with working capital whilst the takeover progressed, and its shareholders approved the takeover in June.
In the second half of July this year, New World said the GBP500,000 loan had been fully drawn down by Big Sofa and also revealed that Nicholas Lee had taken over as the chairman of New World following the loss of directors.
Just over one month later, New World Thursday said it has provided Big Sofa with another GBP100,000 loan on the same terms as the initial loan in order to "provide additional working capital to support this rapid growth".
"The company is continuing to make good progress with the possible reverse takeover of Big Sofa and the board remains of the view that this acquisition is an attractive proposition for New World shareholders. Big Sofa is continuing to win new mandates from a number of leading companies and is expanding internationally, particularly in the US where a number of its important clients are based," said New World.
"Big Sofa is now becoming increasingly well-established within the fast growing global video insight and analytics sector. The company has also recently made a number of key appointments and is therefore now well-resourced to capitalise on its recent contract wins and convert a number of new business opportunities," New World added.
New World did not provide any guidance about when the takeover could be completed, stating further updates will be published "in due course".
New World shares have been suspended since May when the takeover was unveiled but, if the production sharing agreement in Belize expires or is offloaded before the takeover is completed, then New World will have to convert to a cash shell under AIM rules.
The company plans to hold its annual general meeting shortly and will send out details to shareholders in the immediate future, when the main vote will be on the approval of the company's financial accounts for the year to the end of 2015.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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