26 Nov 2010 14:59
iPoint Media Plc ("iPoint Media" or the "Company") Posting of Circular
iPoint Media announces that it has today posted a circular to shareholders proposing a restructuring of the Company. This involves, inter alia, the disposal of the Company's subsidiaries, which constitutes both a fundamental change in the Company's business pursuant to AIM Rule 15 and a related party transaction pursuant to AIM Rule 13. If the resolutions to accept these proposals are passed, the Company will be classified as an Investing Company pursuant to AIM Rule 15.
Extracts from the circular are set out below. The full circular is available for download from the Company's website, www.ipoint-media.com, and any defined terms found in this announcement are defined therein.
INTRODUCTION
Your Board announced, on 4 November 2010, a proposal to raise additional finance for iPoint Media's operating businesses through a restructuring of iPoint Media, including the restructuring of its liabilities and the creation of a new holding company for its operating businesses, resulting in iPoint Media becoming an Investing Company (within the meaning of AIM Rule 15) with a residual stake in the operating businesses it currently owns.
The purpose of this letter is to provide you with (i) the background leading to this proposed transaction, and (ii) details on the proposed transaction and its implications in relation to both the Company and its Shareholders. The Resolutions which we are asking you to vote on at the General Meeting to be convened on 14 December 2010 are set out in Part III of this document.
Should the required approvals not be received or should the Company not be able to raise funding in the manner described, there is a strong possibility that the Company will not be able to repay the amounts due in respect of principal and interest under the Loan Notes. As a result of this, without additional third party finance, the business may become insolvent in the near term.
BACKGROUND
As stated in previous announcements, the Company's core Telecoms market has proved highly challenging during 2010, resulting in revenues being significantly below the Board's expectations. In addressing the Telecoms market, the Company has worked in cooperation with Ericsson in tendering for contracts and in implementing solutions, largely in the mobile video applications area. During 2010, the Company experienced significant revenue slippage and a decrease in contract visibility as a large number of bids and tenders in process were delayed or cancelled by potential customers.
Through the course of this year, the revenue shortfall resulting from contract slippage has significantly impacted the Company's ability to meet its working capital requirements.
As a consequence of the above, the Company implemented an aggressive cost reduction scheme during the second half of 2010, in order to conserve cash required for its working capital needs. This cost reduction scheme achieved a reduction in the monthly operating costs of approximately 50% which implies a reduction in the Company's operating expenses of more than US$ 400,000 in the second half of 2010.
These cost reduction measures included a 40% decrease in the number of employees and the acceptance by senior employees that remained with the Company of a reduction of over 50% in their salaries (for the period ending on 31 December 2010).
In parallel, the Board decided to implement a strategic repositioning of the business to address the Chinese media market. In particular, the Company is seeking to commercialise two products used in the mobile and internet television broadcasting industry, GOliveInterview and GOliveStudio, which make use of the Company's core video technologies. On 29 July 2010, the Company announced that it had entered into a strategic agreement with China Unicom in order to address this market more effectively.
Notwithstanding the measures put in place to reposition the business and to conserve cash, it is clear to the Board that for the business to survive and potentially prosper in the future, the Company needs to secure further funding.
Given the Company's financing needs, the Board considered various funding alternatives. It was apparent that in order to attract new investors to the business, the existing debt liabilities of the Company would need to be restructured. Taking this into account and based on discussions with various potential finance brokers, the Board appointed Charles Street Securities Europe LLP ("CSS") to arrange financing as well as a restructuring of the Company's debt liabilities, on a reasonable efforts basis. CSS has previously worked with iPoint Media to raise finance for the Company through the issuance of units comprising the Loan Notes and equity in August 2009 by means of a subscription offer and an open offer.
OVERVIEW OF THE RESTRUCTURING
The proposed Restructuring, which is subject to approval from Shareholders and holders of Loan Notes, involves the following key steps:
a. The creation of NewCo and the transfer of the Company's operating
subsidiaries, iPoint Israel and ANV, to NewCo, in consideration for the
issuance of 1,000,000 Ordinary Shares to the Company; this step has already
occurred.
b. An Offer, with priority to existing Shareholders and holders of Loan Notes
of the Company, to subscribe for up to £1,000,000 of Convertible Preference Shares issued by NewCo. In addition to being conditional on receipt of approval from iPoint Media's Shareholders and holders of the Loan Notes, the Offer is conditional on reaching a minimum of £300,000 gross proceeds.
c. Subject to the Offer becoming unconditional, and following the approval at
a meeting of holders of Loan Notes, the exchange of the Loan Notes issued by the Company (with an aggregate nominal value of £1,408,000 and accrued interest of £57,201) into 1,465,201 Redeemable Preference Shares and 2,541,985 Ordinary Shares of NewCo.
d. The repayment of the existing bank debt of iPoint Israel, totalling
approximately £335,123, by Nisko, the guarantor of this bank debt, in
exchange for 264,000 Redeemable Preference Shares and 458,015 Ordinary
Shares in NewCo being issued to Nisko.
e. The appointment of the Executive Directors of the Company as directors of
NewCo and the resignation of the same as directors of iPoint Media. As part of their Retention Agreements with NewCo, the Executive Directors and senior management of iPoint Media will waive any claims outstanding against the Company or any of its subsidiaries and receive the right to subscribe for 2,000,000 Ordinary Shares at par (the Executive Directors will receive the right to subscribe to 1,016,990 out of these 2,000,000 Ordinary Shares), all subject to certain vesting requirements as set out in the Retention Agreements (detailed in section 8 below).
f. £100,000 of the proceeds of the fundraising will be used to capitalise the
Company with cash to meet its operating expenses as an Investing Company.
It is intended that the Company will continue to be admitted to the AIM
market.
Following the completion of the proposed Restructuring, the Company will be an Investing Company pursuant to AIM Rule 15, which will have a minority interest of between 8.89% and 5.48% in NewCo (depending on the level of subscription to the Offer). A table setting out the ownership of NewCo (assuming Subscription in Full) is set out below.
AIM RELATED PARTY
The steps set out in section 3(d) above, i.e. a transaction with Nisko which is a substantial shareholder in the Company, and section 3(e) above, i.e. a transaction with the Executive Directors of the Company (collectively, the "Transactions"), are deemed to be related party transaction pursuant to AIM Rule 13, accordingly the Independent Directors are required to consult with the Company's nominated advisers and state that they believe that the terms of such related party transactions are fair and reasonable insofar as the Company's Shareholders are concerned.
The Independent Directors, having consulted with the Company's nominated advisers, Cairn Financial Advisers LLP, believe that the terms of the Transactions are fair and reasonable insofar as the Company's Shareholders are concerned.
This conclusion has been arrived at having taken into account the limited financing options available to the Company, the current need for additional investment in order to continue to operate the business, the substantial debt liabilities of the Company and the potential negative consequences of a failure to secure additional financing.
THE RESTRUCTURING OF THE COMPANY AND THE FUNDAMENTAL CHANGE OF BUSINESS
The Restructuring being proposed involves the transfer of the Company's operating activities to NewCo, by way of the transfer to NewCo of iPoint Israel, ANV, and iPoint USA, a dormant subsidiary, and the injection of new funds into the business pursuant to the Offer. Newco then intends to focus its business on the Chinese media market and, with the funding provided by the Offer, grow and develop this business.
Following the proposed Restructuring, the Company's Shareholders will be left with ownership of the Company, which will become an Investing Company pursuant to the AIM Rules and which will retain its admission to the AIM market. The business will have approximately £80,000 in cash, net of liabilities. The current debt liability of £1,800,324 will be eliminated from the balance sheet of the Company (pursuant to the Exchange Offer detailed in section 6 below and the conversion of the Nisko Guarantee detailed in section 7 below). In addition, all inter-company loans between the Company and its operating subsidiaries, iPoint Israel and ANV, have been or will be assigned to NewCo. Finally, the Company will also retain a residual stake in NewCo of between 8.89% and 5.48% which, following the Offer, will be recapitalised and able to grow and generate shareholder value.
Financial information on ANV and iPoint Israel, comprising the principal assets transferred to Newco, including the latest unaudited accounts for the six months ended on 30 June 2010 are set out in Part II of this document.
As part of the Restructuring, the Executive Directors will be appointed to NewCo and will cease to be directors of iPoint Media. In addition, the Executive Directors will receive the right to subscribe for up to 1,016,990 Ordinary Shares in NewCo, subject to certain vesting conditions. As a result, the Executive Directors are deemed under the AIM Rules to be "Related Parties" and the Company is subject to the AIM Rules, in particular Rule 13 'Related Party Transactions' (See section 11 below for further details).
The Restructuring will represent a fundamental change of business under Rule 15 of the AIM Rules. This change is therefore conditional on the approval of the Company's Shareholders at the General Meeting, details of which are set out in Part III of this document. Following the Restructuring and subject to, inter alia, the Shareholders' approval, the Company will be classified under the AIM Rules as an Investing Company. Details of the Company's intended strategy, including its Investing Policy, are set out in section 10 below.
THE FUND RAISE: THE OFFER OF CONVERTIBLE PREFERENCE SHARES
Under the proposed transaction, NewCo is raising up to £1,000,000 through the issue of up to 10,000,000 Convertible Preference Shares of 0.1 pence each, at an issue price of 10 pence per Convertible Preference Share payable in full on application.
The Offer is subject to a Minimum Subscription of £300,000. Should the Minimum Subscription not be raised by 31 January 2011, the Offer will lapse and applicants for the Offer will have any monies paid in relation to the Offer returned to them.
The Offer is also conditional on (i) the passing of an extraordinary resolution approving the Exchange Offer at a duly convened meeting of the holders of Loan Notes of iPoint-Media, in accordance with the Loan Note Instrument, by a majority of not less than three fourths of the persons voting at such meeting upon a show of hands or, if a poll is demanded, by a majority of not less than three fourths of the votes cast on such poll; and (ii) the passing of an ordinary resolution approving the Restructuring at a duly convened meeting of the Shareholders of iPoint-Media by a simple majority of the persons voting at such meeting upon a show of hands or, if a poll is demanded, by a simple majority of the votes cast on such poll.
The Convertible Preference Shares will have an annual accruing dividend of 15% per annum and will convert, including accrued dividends, into Ordinary Shares at 10 pence per Ordinary Share at any time at the holder's option. Should NewCo achieve an Exit IRR in excess of 50% per annum for the Convertible Preference Shares, upon a Sale or Listing of NewCo, the Convertible Preference Shares shall convert automatically into Ordinary Shares in NewCo.
The Offer is open to both Shareholders of iPoint Media as well as holders of Loan Notes, both of whom will be given priority in allocation over new Investors.
The Offer will be open from 24 November 2010 and may close at anytime thereafter, or when the Offer is fully subscribed, but in any event no later than 31 January 2011. Further information on the Offer and details on Newco's strategy are set out in a Private Placement Memorandum prepared by CSS. Copies of the PPM are available to Shareholders free of charge by contacting the Company at the Company's registered office at Liberty House, New Greenham Park, Newbury, Berkshire, RG19 6HW, by email ppm@ipoint-media.com or phone (+44 (0) 1635 817 341), or by contacting CSS at the offices of CSS Partners LLP, 18-20 Appold Street, London EC2A 2AS.
INVESTING POLICY OF THE COMPANY
The Company intends to undertake a transaction or a series of transactions that will constitute a reverse takeover in accordance with the AIM Rules. The Company will seek to acquire or invest in companies in the technology sector in Europe, the Far East and North America, but may consider other geographic areas if necessary.
The Directors may choose to modify or amend the Investing Policy, either generally or in relation to any particular investment, but may not do so in a manner that would materially change the overall objective and risk profile of the existing Investing Policy.
The Directors believe that their broad collective experience together with their extensive network of contacts will assist them in the identification, evaluation and funding of suitable investment opportunities. When necessary, other external professionals will be engaged to assist in the due diligence of prospective opportunities. The Directors will also consider appointing additional Directors with relevant experience if the need arises.
The Company may be either a passive or active investor and will typically seek to acquire majority interests in businesses. The Directors anticipate that the management of any investment will have the expertise necessary to operate and develop the business. The Company may provide strategic direction to businesses.
The Company will generate revenue by receiving dividends from its investee companies. Investments will be held for the long term.
The Directors intend to pursue a conservative borrowing strategy.
The objective of the Directors is to generate capital appreciation and any income generated by the Company will be applied to cover costs or will be added to the funds available to further implement the Investment Policy. In view of this, it is unlikely that the Directors will recommend a dividend in the early years. However, they may recommend or declare dividends at some future date depending on the financial position of the Company.
The Directors confirm that, as required by the AIM Rules, they will at each annual general meeting of the Company seek shareholder approval of the Investment Policy.
GENERAL MEETING
The notice of a General Meeting of the Company to be held at the premises of Libertas Capital Corporate Finance Limited, 16 Berkeley Street London W1J8DZ, UK, on 14 December 2010, at 10.00 a.m., which is set out at the end of this document, sets out the Resolutions to be approved at the GM.
Action to be taken by Shareholders
A Form of Proxy for use in connection with the GM accompanies this document. The Form of Proxy should be completed in accordance with the instructions thereon and returned to the Company at its registered office (Liberty House, New Greenham Park, Newbury, Berkshire, RG19 6HW) as soon as possible, but in any event so as to be received by no later than 10.00 a.m. on 12 December 2010. The completion and return of a Form of Proxy will not preclude Shareholders from attending the GM and voting in person should they so wish.
Recommendation
The Independent Directors unanimously recommend that you vote in favour of the Resolutions, to be proposed at the GM.
Enquiries:iPoint Media Plc +972 (0) 544 450667 Muki Geller Cairn Financial Advisers LLP +44 (0) 20 7148 7900 Liam Murray / Avi Robinson
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