Falcon Regulatory News (FAL)

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30 May 2018

Falcon Media House Limited

("Falcon" or the "Company")

Delisting

Falcon Media House (LSE:FAL), the global digital media group focused on the over-the-top ('OTT') market, announces today that it intends to apply to the FCA to seek a cancellation of the listing of its ordinary shares on the standard segment of the Official List and to trading on the London Stock Exchange's Main Market ("Delisting" or "Cancellation"). It is anticipated that the effective date of the cancellation will be on or around 27 June 2018.

Background to and reasons for the Delisting

On 27 March 2017 the ordinary shares of the Company of £0.01 each ("Shares") were readmitted to the standard listing segment of the Official List and to trading on the Main Market (the "Readmission") and offered to institutional investors at an initial offer price of 25p per Share. This implied a market capitalisation, as at such date, of the share capital of the Group of approximately £13.9 million. As at 29 May 208, the closing trading price of the Shares was £0.027, implying a market capitalisation of the share capital of the Group of approximately £1.5 million, a decrease of 89% from the offer price at Readmission.

The Company is focussed on the commercialisation of its proprietary and patented Q-Flow technology and the Q-OTT platform to drive the Company´s primary business focus. The offering provides significant potential and a clear path to market for global brands, operators and rights-holders that are underserved by existing providers. The Company recognises that the best returns in the video streaming market will come from accelerating the development of the core Quiptel technology, which has already generated significant interest from potential customers, subject to the Company's delivery of such with a robust service approach.

However, delays in revenue generation due to contracts taking longer to sign than originally anticipated led to a funding gap, which the Company sought to initially address with the issue of a convertible loan note in October 2017 ("Note"). Since then, the Board has been working to identify and execute an additional financing that will allow the Company to move to a position of financial stability. Over the last weeks the Board has managed to secure additional funding into the convertible loan note from existing shareholders as an interim measure, but additional liquidity is still required by the Company.

The Board has given careful consideration to the best way to raise capital and provide financial stability to the business and finds that the continued listing of the Shares incurs significant cost while presenting an obstacle to potential sources of funding. 

Based on extensive and careful consideration, including consulting with the Company's legal and financial advisers, the Board has concluded that it is in the best interest of all stakeholders (including but not limited to the shareholders) to proceed with the Delisting for the following reasons:

· Building a realistic valuation for a small company

The Board believe that the market is not well placed to value an early stage company such as Falcon - a fact which is exacerbated by the low liquidity of the Shares. The Board has given serious consideration to the poor Share trading performance, low liquidity and low market capitalisation of the Shares and has worked as effectively as possible trying to find the best way forward. Financial analysis and valuations from the industry have been considered as part of this process. These analyses provide further support to the Board's view that the on-going market capitalisation of the Company (as implied by the trading price of the Shares) and subsequent funding restrictions limit the exploration of its potential value and the value of its unique patented technology in a fast-paced and dynamic video distribution and streaming market.

The Board has carefully considered the strategic options available to the Company to address the additional funding needed to capture the true value of the Company. The Board has concluded that as an unlisted company, the Company would be in a better position to maximise potential shareholder value while still meeting its operational and financial objectives.

· Reducing costs to protect cash

The cost of maintaining the systems, procedures, staff and advisers to comply with listed company requirements is not the optimal use of the Company's financial resources. The Board believe that cash can be more usefully utilised in business-facing activities aimed at generating income and providing more cash headroom to enable the business to execute.

· Maximising the potential to raise funding in the immediate term

The Company is restricted from issuing equity or converting Notes that would result in Falcon issuing more than 20% of its current Shares in issue in any 12-month period - without a prospectus being prepared. This restricts the amount that can be raised at the current share price to less than £300,000 without a prospectus or would require the Company to incur significant legal cost associated with the preparation of such a document, without the certainty of raising funds from such effort. The Board does not believe that preparing a prospectus would be a sensible use of Company resources at this time, given other competing demands on the funds and capabilities of the business.

· Potential suspension of trading

In addition, should the Company secure funding, it is highly likely that it will no longer meet the free float requirements of the London Stock Exchange. In this case, the Shares would likely be suspended from trading before the end of July 2018.

Update on Position of the Company

Substantial steps have been taken since November 2017 to reduce the costs of the Company, including:

· Closing the development office in Shenzhen, China. Development work and core technology as well as IT administration has been moved to a small team in Cambridge and final arrangements are being taken to close the China office. Focus has been on maintaining support for existing clients in this process, ensuring a professional and proper process for the dedicated team in China and finding the best options for them in taking on new assignments;

· Reducing personnel and overhead costs in the London office to reflect the focus on technology, including salary adjustments for key personnel including the CEO;

· The earlier-reported closing down of development activities in Pakistan and Vietnam; and

· Closing of the Company's office in Zurich and move of the finance function to London.

As disclosed above, the Company has generated significant interest in its proprietary technology and is currently commencing on the first proof of concept trials in the US and India. When successfully closed, these proof of concept data points could stimulate further customer interest and revenue creation.

The Company is currently focused on deploying its services in two main jurisdictions - India and the US. The Company is, in parallel with delivering the first proof of concepts in those markets, in the process of building up a pipeline of potential customers.

The Board has discussed different financing options and believe that a delisting will provide access to investor groups not likely to invest in public companies. The Board intends to continue these discussions once the Company is delisted. 

Effect of the Delisting

Following the Delisting, the Shares will no longer be traded on a regulated market. As a result, a holder of Shares will not be able to trade its Shares on the LSE and, consequently, the opportunity for holders of Shares to sell their interest in the Company will be limited and there will be no public valuation of Shares. Following Cancellation, holders of Shares will continue to be entitled to transfer such Shares in accordance with the requirements of the Articles and Guernsey law.

The shares will continue to be settled through CREST, or shareholders can request they be converted into certificated form.

The Company believes that the delisting will ultimately produce a more realistic valuation of the Company, which will accrue to the benefit of the shareholders of the private company.

Following the Delisting, the Company will no longer be subject to the regulatory and statutory regime which applies to Guernsey companies admitted to the standard segment of the Official List and traded on the Main Market. As a result:

i. holders of Shares will no longer be afforded the protection given by the Listing Rules and the Disclosure Guidance and Transparency Rules, such as the Company will not be required to:

a. publish all circulars, notices, reports or other documents to which the Listing Rules apply or any resolutions passed by the Company other than in the ordinary course;

b. publish information relating to any proposed change in the Company's capital structure other than the required filings and publication thereof upon the increase or decrease of the share capital of the Company in general;

c. publish its annual financial report within four months of the Company's financial year end (but will be required to file such information with the Guernsey Registry ultimately within 12 months of the financial year end). However, please see the Board's proposal, below;

d. include a corporate governance statement in its annual report; and

e. publish its semi-annual financial report within two months of the first six months of its financial year;

ii. the Company will no longer be subject to the Market Abuse Regulation, such as:

a. the Company will not be required to notify the public of inside information which concerns the Company;

b. persons discharging managerial responsibilities within the Company (including members of the administrative, management or supervisory board of the Company) (the "PDMRs") will not be required to notify the Company and the public of every transaction on their own account in the Shares; and

c. PDMRs will not be required to refrain from dealing (directly or indirectly) in the Shares during the period 30 days before announcement of the Company's annual financial statements.

The City Code on Takeovers & Mergers ("Takeover Code") will continue to apply to the Company and its shareholders following the Delisting.

Following the Delisting, the Company intends to implement the following corporate governance steps:

· Provide the Annual Report and an Interim statement to shareholders on a regular basis; and

· Hold its AGM in the UK, providing shareholders with the opportunity to meet the Board and discuss progress.

Owing to its current financial position, the Company is not able to provide investors that do not want to remain as shareholders of a private company with a cash alternative. However, the Board believes that any such cash alternative based on the current trading price of the shares would significantly undervalue the Shares in any event.

**ENDS**

For more information visit www.falconmediahouse.com or enquire to: