7DIG.L Regulatory News (7DIG)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

20 September 2019

7digital Group plc

Subscription to raise £1.88 million

7digital Group plc (AIM:7dig) ("7digital", the "Company" or together with its subsidiary undertakings, the "Group") announces that it has conditionally raised gross proceeds of £1.88 million through a subscription of 937,900,000 new ordinary shares of 0.01 pence each ("Ordinary Shares"), (the "Subscription Shares") at a price of 0.2 pence per share (the "Subsciption Price") with certain new and existing investors (the "Subscription") and additional £1.0 million in intended future facility.

The Subscription is conditional upon the admission of the Subscription Shares to trading on the AIM Market of the London Stock Exchange plc ("AIM") becoming effective ("Admission").

Mark Foster, Senior Independent Non-executive Deirector of 7digital, said:

"We are delighted to have secured further funding from our supportive Chairman, Tamir Koch and non-executive director David Lazurus as well as new shareholders. On behalf of the Board, I would like to thank them for their continued support at this crucial time as this financing secures the Company's working capital needs as 7Digital prepares itself to embark on its next phase of development and achieve for the first time operational profitability in 2020. "

Paul Langworthy, Chief Executive Officer, of 7digital, said:

"The music industry has experienced continued growth, which has been led by the expansion in streaming services. Having reduced our operational costs and secured this new funding, we are in a good position to benefit from this industry trend and expedite the scale up of the business. With the additional financing we are able to implement our plan to build a new partner programme to drive new customer growth; expand sales and support in US Market as well as invest in market-driven product development thereby delivering sustained growth and shareholder value."

Use of funds

The net proceeds of the Subscription and the intended debt facility described below when aggregated with the net proceeds of the initial subscription of £1.3 million and the debt for equity swap of £0.6 million announced on 7 June 2019 means that the Company has raised £4.8 million to fund the Company's new strategy. The net proceeds of the Subscription will be applied to implement the strategy set out in that announcement and in the Company's annual accounts for the year ended 31 December 2018, as follows:

Develop strategic industry-specific sales and marketing functions

•Build a robust partner (reseller) program to drive new customer growth

•Establish a marketing function to support a streamlined sales model

•Expand sales and support in US Market

•Invest in market-driven product development

Reduce operational overhead

•Bring creditors up to date

•Reduce overheads through consolidation of technology and resources

Working capital

Tamir Koch and David Lazarus have stated to the board of directors of the Company (the "Board" or the "Directors") that they intend to arrange a credit facility for the Group of £1.0m, for a total planned financing of £2.88 million. The fundraising will remain open for a period to accommodate any further demand from institutional and other investors. The Board is confident that this financing secures the Company's working capital needs to reach for the first-time operational profitability by mid 2020.

Directors' dealings and related party transaction

Shmuel Koch Holdings Limited ("SKH"), whose directors are Ruth Koch and Yaron Asher Koch, Tamir Koch's mother and brother respectively, has agreed to subscribe for 20,800,000 Subscription Shares at the Subscription Price. Following Admission, SKH will have a beneficial interest in 442,612,126 Ordinary Shares, representing approximately 19.1 per cent. of the enlarged issued share capital of the Company.

Magic Investments S.A. ("Magic"), a company which David Lazarus is a director of, has agreed to subscribe for 199,600,000 Subscription Shares at the Subscription Price. Following Admission, Magic will have a beneficial interest in 742,436,219 Ordinary Shares, representing approximately 32.0 per cent. of the enlarged issued share capital of the Company.

The participation in the Subscription by Magic is deemed to be a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies. The Directors, with the exception of David Lazarus, consider, having consulted with the Company's nominated adviser, Arden Partners plc, that the terms of the participation by Magic in the Subscription are fair and reasonable insofar as the Company's shareholders are concerned.

Admission and follow-on protection

Application has been made to the London Stock Exchange plc for the Subscription Shares to be admitted to trading on AIM. It is currently expected that Admission will become effective, and that dealings in the Subscription Shares will commence on AIM, at 8.00 a.m. on 26 September 2019. The Subscription Shares will, when issued, rank pari passu with the Company's existing Ordinary Shares in issue.

Following Admission, the Company's enlarged issued share capital (the "Enlarged Share Capital") will consist of 2,319,070,834 Ordinary Shares with voting rights. This figure may be used by shareholders of the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules. 7digital does not hold any Ordinary Shares in treasury.

Under the terms of each of the individual Subscription agreements, if within 12 months of Admission the Company enters into, or agrees to enter into, a legally binding agreement with any person other than the relevant subscriber to issue new Ordinary Shares for a subscription price lower than the Subscription Price (the "New Subscription Price"), the Company has undertaken to, subject to the receipt of the relevant subscription monies, issue at nominal value a number of Ordinary Shares to the relevant subscriber to put them in the position they would have been in had they subscribed for the Subscription Shares at the New Subscription Price, provided that the number of additional Ordinary Shares shall not exceed 310,000,000 in aggregate.

Implications of the transaction under the City Code

The Company is subject to the City Code on Takeovers and Mergers (the "City Code"). Under Rule 9 of the City Code, any person who acquires an interest (as defined in the City Code) in shares which, taken together with shares in which he is already interested in and which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the City Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares.

Similarly, when any person, together with persons acting in concert with him/her, is interested in shares which in the aggregate carry not less than 30 per cent. of the voting rights of such a company but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interests in shares are acquired by any such persons. Such a General offer must be made in cash and at the highest price paid by the persons required to make the offer for any interest in shares of the company during the 12 months prior to the announcement of the offer.

When members of a concert party hold more than 50 per cent. of the voting rights in a company, no obligation to make such a general offer will normally arise from acquisitions by any member of the concert party. They may accordingly increase their aggregate interests in shares without incurring any such obligation to make a general offer, although individual members of a concert party will not be able to increase their percentage interests in shares through or between a relevant general offer threshold without Panel consent.

As previously announced on the 7 June 2019 and detailed further in the Company's circular to shareholders, Magic, SKH, Tamir Koch and David Lazarus are deemed to be acting in concert (the "Concert Party"). As a result of the Subscription, Alan Da Costa (who is general counsel for Magic and for David Lazarus' holding company) and certain others are considered to be acting in concert with the Concert Party for the purposes of the City Code (the "New Concert Party").

As the New Concert Party will hold over 50 per cent. of such voting rights, no obligation to make such a general offer will normally arise from acquisitions by any member of the New Concert Party. Any member of the New Concert Party may accordingly increase their aggregate interest in Ordinary Shares without incurring any such obligation to make a general offer, although individual members of the New Concert Party will not be able to increase their percentage interests in Ordinary Shares through or between a relevant general offer threshold without the Takeover Panel's consent.

The person responsible for arranging the release of this announcement on behalf of the Company is Paul Langworthy, a director of the Company.

IMPORTANT NOTICES

This announcement has been issued by, and is the sole responsibility of, the Company. No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by the Company or Arden Partners plc. Subject to the AIM Rules for Companies, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this announcement or that the information contained in it is correct at any subsequent date.

Arden Partners plc, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company and no one else in connection with the Subscription and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Subscription and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Subscription or any matters referred to in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on Arden Partners plc by the Financial Services and Markets Act 2000 or the regulatory regime established thereunder, Arden Partners plc does not accept any responsibility whatsoever for the contents of this announcement, and makes no representation or warranty, express or implied, for the contents of this announcement, including its accuracy, completeness or verification, or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company or the Subscription Shares or the Subscription, and nothing in this announcement is or shall be relied upon as, a promise or representation in this respect whether as to the past or future. Arden Partners plc accordingly disclaims to the fullest extent permitted by law all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.

No statement in this announcement is intended to be a profit forecast or profit estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share of the Company.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the Directors' current intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the Company's markets. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual results and developments could differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this announcement are based on certain factors and assumptions, including the Directors' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. Whilst the Directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Save as required by applicable law or by the AIM Rules for Companies, the Company undertakes no obligation to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the Directors' expectations or to reflect events or circumstances after the date of this announcement.