26 Apr 2013 07:00
26 April 2013
Imaginatik Plc
("Imaginatik" or the "Company")
Proposed placing
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 up to £1.26m (before expenses) to provide additional working capital to fund the development of the Group's business.
The fundraising will be effected through the Placing of up to 2,013,110,000 new Ordinary Shares with new and existing investors, including certain of the Directors, in each case at the Placing Price, being 0.0625 pence per new Ordinary Share. Of these, 1,981,110,000 new Ordinary Shares have been placed or subscribed for firm.
In addition to the £1.26m, certain of the Directors have committed toswapping a proportion of their salary for equity (pursuant to the Remuneration Re-investment Programme described below) to subscribe for up to 262,400,000 new Ordinary Shares at the Placing Price (the "Directors' Future Subscription Shares") which will raise a further £164,000.
The Placing Price represents a discount of approximately 67 per cent. to the closing mid-market price of 0.19 pence per Ordinary Share on 25 April 2013. The Placing Shares and the Directors' Future Subscription Shares will represent approximately 73 per cent. of the Enlarged Share Capital.
As announced by the Company on 16 April 2013, given the stated intentions of the Company's principal shareholders, and in the light of the Placing, the Company has no intention of seeking approval for its delisting from AIM following admission of the Placing Shares and the Directors' Future Subscription Shares to trading on AIM ("Admission").
Matt Cooper, Executive Chairman of Imaginatik, commented: "We have been delighted by the strong support shown by existing and new investors. These funds will enable Imaginatik to continue to develop its innovation offering while remaining a public company on AIM. We believe that with innovation and enterprise-wide collaboration now moving into the mainstream our unique consultancy-led business model means our market opportunity is considerable and we therefore look to the future with optimism."
Background to and reasons for the Placing
The Directors consider that the global market for innovation competency is growing and will continue to grow. The Directors believe that innovation and enterprise-wide collaboration are becoming integral parts of many large organisations' business practices and operational requirements.
As announced on 7 February 2013, during the second half of the financial year ended 31 March 2013 the Company experienced lower revenues than expected. This was a result of a mixture of slippage in contract signatures and the loss of some older pure technology contracts.
However, the Directors consider that Company's key differentiator from that of its competitors, its consulting offering, is showing very encouraging signs: the financial year ended 31 March 2013 saw a strong increase in the percentage of revenue generated through consulting. Furthermore, more than 50 per cent. of contracts closed in that year had some form of consulting component (2012 : 25 per cent.). It is also encouraging that the Company has contracted with 24 new clients in the same financial period, substantially more than the previous year, comprising a mixture of pure consulting contracts, pilot projects and 13 new annual contracts. The net customer gain during the period was 17 customers.
In Europe, sales traction is making solid progress and the Directors believe that this market represents a potentially significant opportunity for future growth.
With additional working capital, the financial position of the Company will be strengthened, providing reassurance to existing and new clients as to the Company's continued ability to provide and to develop its software and consulting services.
Accounting policy change
As a result of discussions with shareholders in connection with the Placing, the Company has decided to change the way it accounts for its software licence fees. Previously, the Company had recognised such licence fees in the month in which any contract was signed, largely aligning revenues with cash. In future, however, the Company will recognise such licence fees evenly over the term of the contract. This represents a more conservative accounting policy and one which the Directors believe will make forecasting company performance more achievable.
This change in policy will result in a restatement of the Company's revenues for the years from 31 March 2010 up to and including 31 March 2013. The Directors believe, subject to the conclusion of the audit process, that the effect of this restatement will be to bring forward from prior years approximately £1.6m to be recognised as additional deferred revenue on the Company's consolidated balance sheet as at 31 March 2013. This additional deferred revenue will be credited to the Company's consolidated statement of comprehensive income in the years ended 31 March 2014 through 2016 as to approximately £1m for the 2014 financial year, approximately £400,000 for the 2015 financial year and approximately £200,000 for the 2016 financial year. This restatement will also have the effect of increasing prior year losses by an equivalent amount.
Current trading and prospects
Since the Company last updated the market as to its trading position on 7 February 2013, trading has been satisfactory, with several new customer wins in the US. The most significant of these was the conversion of The Society of Petroleum Engineers ("SPE") into an annual customer. Our work with SPE began with a strategic innovation consulting engagement in May 2012 and moved on to further consulting work in the late summer. SPE became an annual customer in March 2013. In addition to this, the Company has secured a pilot project at Yale University, a new consulting engagement with Covidien as well as upsell into both Exxon Mobil and John Deere.
The effect of the accounting policy change on the results to be reported for the financial year ended 31 March 2013 is to reduce revenues by approximately £120,000 with a corresponding increase in losses before tax. The Directors expect that, taking into account the effect of the accounting policy change, the results to be reported for the financial year ended 31 March 2013 will be in line with market expectations.
Our presence in Europe continues to develop well with the signing of a three year contract with Yorkshire Building Society, the result of a successful pilot engagement from earlier in the year.
We expect to be in a position to announce a number of other new customer wins in due course.
The Placing
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 1,690,310,000 Placing Shares with institutional and other investors (including the Directors) at the Placing Price.
The Placing has not been underwritten. The Placing Agreement is conditional, inter alia, upon:
1. the Resolution being duly passed at the General Meeting;
2. the terms of the Remuneration Re-investment Programme being documented to the satisfaction of finnCap and approved and adopted by the Company by no later than the day immediately prior to the General Meeting; and
3. Admission becoming effective on or before 8.00 a.m. on 14 May 2013 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 31 May 2013.
Certain investors are subscribing in aggregate for 322,800,000 Placing Shares (representing 16.03 per cent. of the Placing Shares) under the Subscription Agreements at the Placing Price. The total number of Placing Shares is therefore 2,031,110,000.
Directors' participation in the Placing and the Directors' Future Subscription
David Gammon and Matt Cooper have in aggregate given commitments to subscribe in person or by a nominee, for 96,000,000 and 80,000,000 Placing Shares respectively, a total of 176,000,000 Placing Shares representing 8.74 per cent. of the Placing Shares.
It is the intention of the Directors other than Mr Gammon to subscribe for up to 262,400,000 new Ordinary Shares under the Directors' Future Subscription by way of the Remuneration Re-investment Programme, at the Placing Price. The nature of this reinvestment programme remains to be agreed by the Company but the Company expects to have concluded these arrangements prior to the date of the General Meeting in order to satisfy a condition of the Placing Agreement. The participations of the Directors are expected to be as follows:
Director | Intended approximate re- investment amount | Number of new Ordinary Shares at the Placing Price |
Matt Cooper | £112,000 | 179,200,000 |
Shawn Taylor | £9,000 | 14,400,000 |
Nick Goss | £10,000 | 16,000,000 |
Luis Solis | £8,000 | 12,800,000 |
Simon Charles | £25,000 | 40,000,000 |
Total | £164,000 | 262,400,000 |
The Directors' Future Subscriptions will each occur at the Placing Price per new Ordinary Share. It is proposed that subject to the passing of the Resolution, the Company itself funds these participations by way of the Directors' Loans. It is not proposed that the Directors' Loans be subject to any interest payment obligation. Subject to professional advice which the Company is presently obtaining, it is proposed that an element of each Director's remuneration be applied towards the discharge of the principal amount of each of these loans. It is proposed that in certain circumstances the relevant loan would be repayable immediately on the Director ceasing to be a Director.
It is proposed that the participation of the Directors referred to in the table immediately above by way of the Remuneration Re-investment Programme would be in respect of Ordinary Shares which would comprise Future Subscription Shares.
The following table sets out the interests of the Directors in the Existing Ordinary Shares and in the Enlarged Share Capital:
Director | Number of Existing Ordinary Shares (excluding interests in options) | Percentage of Existing Ordinary Shares | Number of Placing Shares to be acquired | Estimated Number of Directors' Future Subscription Shares to be acquired | Number of Ordinary Shares after Completion
| Percentage of Enlarged Share Capital |
Matt Cooper | 90,525,613 | 10.70% | 80,000,000 | 179,200,000 | 349,725,613 | 11.20% |
David Gammon | 27,442,564 | 3.24% | 96,000,000 | _ | 123,442,564 | 3.95% |
Shawn Taylor | 6,605,300 | 0.78% | _ | 14,400,000 | 21,005,300 | 0.67% |
Nick Goss | _ | _ | _ | 16,000,000 | 16,000,000 | 0.51% |
Simon Charles | 19,511,771 | 2.31% | _ | 40,000,000 | 59,511,771 | 1.91% |
Luis Solis | _ | _ | _ | 12,800,000 | 12,800,000 | 0.41% |
Note: | The above table excludes (i) the Directors' interests to subscribe to new Ordinary Shares under options granted to them by the Company, and (ii) the interest of Mr Charles in 54,053,815 Ordinary Shares which he holds on trust for the benefit of the Company following the conclusion of the litigation proceedings in the Company's favour against its former chief executive, Mark Turrell. |
Related party transactions
The Directors consider that it is unlikely that the Company would be able to continue as a going concern if the Company were unable to raise the funds required under the Placing. The Placing would not be feasible if the Company provided an opportunity for Shareholders to subscribe for new ordinary shares at the Placing Price by means of an open offer. The Directors therefore consider that the Placing is the preferable and more efficient way to source the present funds required. The Placing Agreement is conditional on the participations of the Directors in the Placing and the Directors' Future Subscription.
The proposed participations of the Directors in the Placing and the Directors' Future Subscription constitute related party transactions for the purposes of Rule 13 of the AIM Rules ("Related Party Transactions"). There are no independent directors for the purposes of providing the fair and reasonable statement required under Rule 13. Northland Capital Partners Limited, the Company's Nominated Adviser, considers that the terms of the Related Party Transactions are fair and reasonable insofar as the shareholders of the Company are concerned.
General Meeting
The Placing, the participation of the Directors in the Placing and the issue of the Directors' Future Subscription Shares, if any are subject, amongst other things, to the passing of the Resolution to be put to a General Meeting of Shareholders to be held at 11.00 a.m. on Monday 13 May 2013 at the offices of Marriott Harrison LLP, 11 Staple Inn, London WC1V 7QH.
The Placing Shares and the Directors' Future Subscription 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.
Application will be made to the London Stock Exchange for the Placing Shares and the Directors' Future Subscription Shares to be admitted to trading on AIM. It is expected that Admission will occur at 8.00 a.m. on 14 May 2013.
For further information please contact:
Imaginatik plc | Tel: 020 7917 2975 |
Matt Cooper, Executive Chairman / Shawn Taylor, CFO | |
finnCap Ltd | Tel: 020 7220 0500 |
Victoria Bates | |
Northland Capital Partners Limited | Tel: 020 7796 8800 |
Edward Hutton / William Vandyk | |
Newgate Threadneedle | Tel: 020 7653 9850 |
Caroline Evans-Jones / Hilary Millar |
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, State Farm, Exxon Mobil, Pfizer, 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.