19 May 2009 16:16
Amteus plc
("Amteus" or the "Company")
Proposed Placing of 32,244,866 New Ordinary Shares
Acquisition
Revised Intellectual Property Arrangements
Capital Reorganisation
Change of Name
New Articles of Association
(together the "Proposals")
Trading Update
Directors Dealings
Directorate Change
and
Notice of General Meeting
Amteus plc (AIM:AUS), the digital educational networking and media business, is pleased to announce that it proposes to raise approximately £2.26 million, before expenses, through the issue of 32,244,866 new ordinary shares of 1p each (the "Placing Shares") at a placing price of 7p per Placing Share (the "Placing Price") (the "Placing"). The Placing Shares have been conditionally placed by Daniel Stewart & Company Plc ("Daniel Stewart"). Strand Partners Limited ("Strand Partners") is acting as Nominated Adviser to the Company.
A capital reorganisation of the Company is needed to complete the Placing. Details of the Proposals are set out in a circular to be sent to shareholders on 20 May 2009. The Placing is subject to the satisfaction of certain conditions and to the shareholder approvals which will be sought at a General Meeting ("GM"). Further details of the GM are set out below.
The Directors believe that the Proposals are fundamental to the future of the Company. Shareholders should be aware that, if the resolutions to approve the capital reorganisation and the Placing are not passed at the GM, the Company will have insufficient financial resources to continue to trade in its current form and may not be able to continue as a going concern. In this event the value attributable to shareholders would be severely reduced.
Irrevocable undertakings have been received by the Company from Jeffrey Morris and members of his family as well as from those Directors who hold shares in the Company which show that such persons intend to vote in favour of the resolutions to be proposed in connection with the Proposals in respect of their own beneficial holdings of ordinary shares amounting, in aggregate, to 34,905,978 ordinary shares (representing approximately 57.0 per cent. of the ordinary shares currently in issue).
The Company has entered into conditional agreements which will give it exclusive rights to exploit the intellectual property which underpins the imJack technology platform in key sectors (the "Intellectual Property"), which the Company is currently rolling out across the educational sector, and to acquire The Day Limited, further details of which are set out below.
The Company also proposes to adopt new articles of association and to change its name to imJack Plc.
About imJack
imJack is a Web 2.0 based communication and collaboration platform that enables teachers and parents to communicate securely with, and guide, students, while removing the many dangers of using unregulated public websites. It operates on what the Directors believe to be a secure system by separating a defined user network from general internet traffic and by using secure socket layer encryption technology to maintain privacy and security for all users.
Students can use imJack to upload and download homework, share ideas and collaborate with teachers and peers through messaging or video conferencing, which is an integral part of the system. The platform is centrally administered, so the school alone decides who can and cannot be part of the network. imJack automatically logs and creates a permanent record of communication between the parties on the system. This is only accessible by the administrator for safety, security and legal reasons.
imJack facilitates live interactive collaborative working with features including real-time drawing exchange, video conferencing and document management allowing teachers and pupils to exchange documents and sketches, while maintaining a video conference link. The software is offered as a package by Amteus hosted on open source technology. Additional modules include an interactive calendar, real time surveys and polls, as well as educational content, tutorials, news aggregation and explanatory journalism.
The Amteus business model is to provide imJack free to schools, colleges and universities and aims to generate income from both sponsorship and digital news. The Directors believe that this will increase the rate at which imJack is taken by schools and as such increase the rate at which active users are secured. The Directors believe that a higher number of active users will increase the Company's potential to generate advertising and sponsorship revenue from the imJack platform.
Trading Update
Since the financial year ended 30 September 2008, significant progress has been made in the roll out of the imJack technology platform to UK schools.
The Company has secured approval from the Department for Children, Schools and Families ("DCSF") for all schools applying for redesignation through the Specialist Schools and Academies Trust ("SSAT") to be offered imJack. Each redesignating school taking up the imJack platform will be eligible for a £15,000 credit towards the £25,000 qualifying criteria for a £25,000 DCSF capital grant. The Government supported agreement with the SSAT covers over 80 per cent. of secondary schools in England. The SSAT has set an initial target to roll out imJack to 1,115 of its 5,000 schools by September 2009.
The e-Learning Foundation ("e-LF"), a national charity dedicated to ensuring that every child in the UK has home access to technology for their studies, has also signed an agreement with the Company for the roll out of imJack to approximately 312 e-LF affiliated schools by the end of 2009. This agreement is expected to secure around 312,000 new imJack user licences by the end of 2009.
JD Connect Limited, on behalf of the Company, is also in negotiations with the British Olympic Association for a contract which could result in Amteus providing communication and training for all those participating in Olympic sports including schools, clubs and training academies, albeit there can be no guarantee that the agreement will be concluded or the actual terms of such agreement.
Revised imJack Intellectual Property Arrangements and new Development Agreement
The Intellectual Property has been developed by The Media Buzz Limited ("TMB"), a company ultimately owned by Jeffrey Morris and his wife, Debra Morris, who, together are 44.4 per cent. shareholders in the Company. The Company is currently contracted to pay a royalty of 10 per cent. to TMB in respect of all revenues generated via the imJack platform. TMB has now transferred the Intellectual Property to Tellbrook Limited ("Tellbrook"), another company owned by Jeffrey Morris. The Company has today entered into a conditional agreement under which the Company will be granted a sole and exclusive, irrevocable, perpetual, worldwide royalty free licence over the Intellectual Property. This agreement will allow the Company to exploit the Intellectual Property in the education and training sector and in relation to a website for the British Olympic Association and to avoid paying any further royalty payments to TMB or Tellbrook in consideration of a maximum payment of £350,000. This is split as to £300,000 on completion of the Proposals ("Completion") and £50,000 in June 2010 subject to there being 3.8 million registered users of the imJack product. The licence contains usual protections for the licensee on insolvency or change of control of Tellbrook and requires Tellbrook to effectively police its rights over the Intellectual Property.
The Company has also conditionally entered into a three year development agreement with Wamey Limited, a company wholly owned by Jeffrey Morris, under which its in-house development team (comprising 16 people, dedicated to this project) will, inter alia, continue to develop and support the imJack technology platform (the "Development Agreement"). The Development Agreement provides for all new and improved Intellectual Property to be owned by Amteus. The Development Agreement is terminable after 12 months and, in addition to hosting costs, £60,000 per month is payable by the Company. Wamey Limited has agreed to allow certain amounts of such sums to be deferred during the first year and in addition will be issued 2,500,000 new ordinary shares of 1 pence each ("New Ordinary Shares") at the Placing Price (the "IP Consideration Shares") at the time of the Placing in lieu of £175,000 cash which would otherwise fall due under the Development Agreement during the first seven months following Completion.
As Jeffrey Morris is a substantial shareholder in the Company, the acquisition by the Company of the Intellectual Property licence and the entering into of the Development Agreement, constitute related party transactions for the purposes of the AIM Rules.
The Directors consider, having consulted with Strand Partners, the Company's Nominated Adviser, that the proposed arrangements in relation to the Intellectual Property and the entering into of the Development Agreement are fair and reasonable insofar as the shareholders are concerned. Strand Partners has taken into account the Directors' commercial assessment of the proposed arrangements in relation to the Intellectual Property and the entering into of the Development Agreement.
Acquisition of The Day Limited
The Company has today entered into a conditional agreement to acquire The Day Limited, a company which has researched and developed a new approach to news media, for a consideration of up to 10,000,000 New Ordinary Shares, 5,000,000 of which ("The Day Limited Shares") will be issued on Completion with the remaining 5,000,000 New Ordinary Shares to be issued only if the Company's cumulative profit before tax for the years ended 30 March 2010 and 30 March 2011, in aggregate, exceeds £1,000,000.
In the financial year ended 31 May 2008, The Day Limited reported an unaudited accumulated carried forward loss of £79,041. As at 31 May 2008 it had net liabilities of £76,984. The vendors of The Day Limited have agreed to transfer the company free of all liabilities.
The vendors of The Day Limited include Len Sanderson and Richard Addis, Directors of the Company. Accordingly, the acquisition of The Day Limited constitutes a related party transaction for the purposes of the AIM Rules. The Independent Directors, being the Directors other than Len Sanderson and Richard Addis, consider, having consulted with Strand Partners, the Company's Nominated Adviser, that the terms of the acquisition of The Day Limited are fair and reasonable insofar as the shareholders are concerned. Strand Partners has taken into account the Independent Directors' commercial assessment of The Day Limited.
The acquisition of The Day Limited is conditional upon shareholder approval and Admission.
Agreements regarding JD Connect Limited
On 24 September 2008 the Company entered into a three year agreement with John Devonshire Connect Limited ("JDC") under which JDC agreed to act as exclusive reseller of the imJack technology platform in the UK and certain other regions, the effective result of which was that revenue (net of costs) would be split on an agreed basis between JDC and Amteus. The agreement contains challenging annual performance targets which, if not met, entitles the Company to revoke the exclusivity granted to JDC within six months following the end of the relevant period end.
The Company will, on Completion, enter into a call option agreement with the shareholders of JDC ("JDC Shareholders") under which the Company has the option to purchase the shares in JDC at any time within 9 months of Completion to be satisfied by the issue to the JDC Shareholders of up to 10,000,000 New Ordinary Shares. In addition, if the Company exercises its option, the JDC Shareholders will be entitled to receive up to £1.85 million in cash (or, at the option of the Company, further New Ordinary Shares in the Company to the same value) if the Company achieves certain very challenging targets in terms of users and revenue generation from those users by 31 July 2011.
Under the agreement, the Company is to pay the JDC Shareholders £20,000 per month to be used solely for the working capital requirements of JDC until the option is exercised (subject to a maximum of nine months).
The Placing
The Placing is to be effected on behalf of the Company by Daniel Stewart pursuant to the Placing Agreement. Daniel Stewart have agreed, subject to certain conditions, to use their reasonable endeavours to procure subscribers for the Placing Shares in aggregate. Under the Placing Agreement the conditions must be satisfied by no later than 3 July 2009.
The Placing Shares will, on admission to trading on AIM, be credited as fully paid and rank pari passu in all respects with the New Ordinary Shares in the Company in existence following the capital reorganisation, including the right to receive all dividends and other distributions declared, made or paid on the New Ordinary Shares after that date.
The Placing Agreement contains warranties in favour of Daniel Stewart and Strand Partners given by the Company, the Directors and Jeffrey Morris with respect to its business and certain matters connected with the Placing. In addition, the Company has given customary indemnities to Daniel Stewart and Strand Partners in connection with the Placing and their performance of services in relation to the Placing. Strand Partners and Daniel Stewart have certain rights to terminate the Placing Agreement in specified circumstances.
Under the Placing Agreement, Strand Partners will be allotted 500,000 New Ordinary Shares at the Placing Price ("Strand Shares") in satisfaction of charges for previous services to the Company, such shares will be credited as fully paid and rank pari passu in all respects with the existing issued Ordinary Shares. Strand Partners will also be issued with an option to subscribe for 880,215 New Ordinary Shares at the Placing Price (the "Strand Warrant").
Pursuant to the Placing, Jeffrey Morris will subscribe for 2,142,857 New Ordinary Shares at the Placing Price (the "Jeffrey Morris Commitment").
In addition, Jeffrey Morris will capitalise loans amounting to £110,000 into 1,571,428 New Ordinary Shares (the "Jeffrey Morris Conversion Shares") at the Placing Price. Following Admission, Jeffrey Morris, together with his wife Debra Morris, will be interested in 33,536,479 New Ordinary Shares, representing 30.8 per cent, of the Company's issued share capital on Admission.
As Jeffrey Morris is a significant shareholder in the Company, the subscription for, and conversion of loans into, New Ordinary Shares by Mr Morris is a related party transaction under the AIM Rules. The Directors consider, having consulted with Strand Partners, that the terms of the subscription and conversion by Jeffrey Morris are fair and reasonable insofar as the shareholders are concerned.
In addition, pursuant to the Placing certain consultants to the Company will be issued 2,785,714 New Ordinary Shares at the Placing Price ("Consultant Shares") and certain other advisers will be allotted 714,285 New Ordinary Shares at the Placing Price ("Adviser Shares"), each in satisfaction of charges for services to the Company, such shares to be credited as fully paid and rank pari passu in all respects with the existing issued New Ordinary Shares. In addition a further 1,500,000 New Ordinary Shares will be issued to certain consultants if the Company's cumulative profit before tax for the years ended 30 March 2010 and 30 March 2011, in aggregate, exceeds £1,000,000.
Directors Dealings and Directorate Change
Michael Abrahams, who is non-executive Chairman of the Company and Michael Howard, a non-executive Director of the Company, have agreed to capitalise loans and outstanding emoluments amounting to, in aggregate, £63,000 into 900,000 New Ordinary Shares (the "the Directors Conversion Shares") at the Placing Price.
Immediately following Completion, the Directors will have the following shareholdings in the Company;
| Number of Ordinary Shares | Per cent. of issued share capital on Admission | |
| Michael Abrahams | 1,961,592 | 1.8 |
| Michael Howard | 238,430 | 0.2 |
| Len Sanderson | 1,999,980 | 1.8 |
| Richard Addis | 1,500,010 | 1.4 |
Under the Placing Agreement, if monies due under the Jeffrey Morris Commitment have not been received by the Company within 45 days of Completion, Michael Abrahams has undertaken to meet £65,000 of the commitment in cash (the "Michael Abrahams Commitment"). In addition, certain Directors have agreed to forego the payment of their remuneration on a month by month basis and to receive New Ordinary Shares at the Placing Price in lieu thereof (the "Remuneration Waiver") to the extent that Jeffrey Morris fails to meet his obligation under the Jeffrey Morris Commitment. Accordingly, Mr Sanderson and Mr Abrahams have agreed to take remuneration in New Ordinary Shares for a maximum period of seven months from the date of the Placing if so required and Mr Addis will take the first £25,000 of remuneration due to him in the form of New Ordinary Shares if so required.
The New Ordinary Shares issued pursuant to the Jeffrey Morris Commitment will be held in escrow by the Company's broker until such time as the relevant proceeds have been received from Jeffrey Morris or, failing that, pursuant to the Michael Abrahams Commitment and the Remuneration Waiver. These shares will be issued to any of Jeffrey Morris, Michael Abrahams, Len Sanderson or Richard Addis (as the case may be) in accordance with the funds paid or waived by them.
The Company also announces that Peter Rackham, Technology Director, will resign his position as a Director of the Company with immediate effect. The Board would like to wish Mr Rackham well in the future.
Pursuant to the Placing Mr Rackham will also be issued up to 1,200,000 New Ordinary Shares at the Placing Price (the "Peter Rackham Shares") in satisfaction of charges for previous services to the Company, such shares will be credited as fully paid and rank pari passu in all respects with the existing issued Ordinary Shares.
Lock-in and Orderly Market Arrangements
The Company has entered into lock-in and orderly marketing deeds with Strand Partners, Daniel Stewart and certain shareholders in respect of 6,500,000 New Ordinary Shares (comprised of 1,500,000 of the Consultant Shares and The Day Limited Shares). The lock-in and orderly marketing deeds restrict the sale of The Day Limited Shares for a two year period from Admission and the sale of 900,000 of the Consultant Shares for a period of one year from Admission while a further 600,000 of the Consultant Shares are subject to orderly marketing restrictions with the Company, Daniel Stewart and Strand Partners for a period of two years from Admission.
The Company has also entered into orderly marketing deeds with Strand Partners, Daniel Stewart and certain shareholders in respect of 6,480,215 New Ordinary Shares (representing 1,000,000 of the Consultant Deferred Shares, the New Ordinary Shares subject to the Strand Warrant, the Peter Rackham Shares, the IP Consideration Shares and the Directors' Conversion Shares). Jeffrey and Debra Morris have also agreed with the Company, Daniel Stewart and Strand Partners to enter into orderly marketing arrangements in respect of the Loan Shares, the Jeffrey Morris Conversion Shares, the shares issued pursuant to the Jeffrey Morris Commitment and in respect of the 27,179,337 Ordinary Shares held by them as at the date of this document. The orderly marketing deeds provide that any sales of relevant New Ordinary Shares must be through the Company's broker and are subject to the approval of the broker and Nominated Adviser for a period of 12 months from Admission.
Shareholder Loan
Mr Morris has entered into a conditional loan agreement with the Company (the "Loan") pursuant to which he will provide up to £500,000 to the Company in certain circumstances. The Loan will be on normal commercial terms having regard to the Company's prospects and will include a facility fee of £10,000 payable pursuant to the Placing as 142,857 New Ordinary Shares in the Company at the Placing Price (the "Loan Shares"). As Jeffrey Morris is a substantial shareholder in the Company, the Loan is a related party transaction under the AIM Rules.
The Directors consider, having consulted with Strand Partners, the Company's Nominated Adviser, that the Loan is fair and reasonable insofar as the shareholders are concerned. Strand Partners has taken into account the Directors' commercial assessment of the proposed arrangements in relation to the Loan.
Use of Proceeds
The net proceeds of the Placing of £1.95 million will be used to satisfy the consideration for the licence of the Intellectual Property and for general working capital purposes, which will allow the Company to continue moving towards the full commercialisation of its business plan utilising the imJack technology platform.
Working Capital
Subject to market conditions and various assumptions the Company's current business model assumes that sufficient revenue will be generated in the final quarter of 2009 and beyond such that no further external funding will be required in addition to the Loan provided by Jeffrey Morris. However, as is customary for a business in the early stages of development, it is difficult to predict the timing of revenues with accuracy and in the event that revenues are materially delayed, or are materially less than those anticipated by the Directors, further funding may be required to finance working capital. There can be no guarantee that such funding will be available.
General Meeting
Due to the size of the Placing relative to the Company's existing authority to allot shares and the need for the Capital Reorganisation, the Placing is conditional, inter alia, upon the passing of certain resolutions by the Company's shareholders at a GM of the Company to be held on Friday 5 June 2009 at 10am. A circular containing a notice of the GM is being posted to the Company's shareholders on 20 May 2009.
Capital Reorganisation
The Company's existing ordinary shares have a nominal value of 10p per share and, in order to enable the Placing to take place, the Board is seeking the approval of shareholders for, inter alia, a capital reorganisation of the Company's authorised share capital. Under the proposed reorganisation each ordinary share of 10p will initially be subdivided into 10 new ordinary shares of 1p each to reduce the nominal value of the Company's share capital to 1p per ordinary share. Then 9 of the 10 newly subdivided ordinary shares will be redesignated as deferred shares (the "Deferred Shares"). The Deferred Shares will have no rights to vote or receive dividends nor to a return of capital unless on liquidation and only then after each New Ordinary Share has received £15,000,000.. Existing share certificates will continue to be valid and no certificates will be issued in respect of the Deferred Shares. The Company intends to either redeem, cancel or purchase the Deferred Shares in accordance with the Company's proposed new articles of association.
Following implementation of the capital reorganisation, the New Ordinary Shares will have identical rights to the currently existing ordinary shares (and not the Deferred Shares), including their ranking for dividends.
The Board is also seeking shareholder approval at the GM to increase the Company's authorised share capital, to renew the Directors' authority to allot shares pursuant to section 80 of the Act, to disapply section 89(1) of the Act, replace the Company's articles of association and to change the Company's name to imJack Plc.
The GM will be held at Fladgate LLP, 25 North Row, London, W1K 6DJ on Friday 5 June 2009 at 10 am. Pursuant to the AIM Rules, a copy of the Circular incorporating notice of GM will shortly be available to download from the Company's website at www.imjack.com.
Subject to the approval of the resolutions contained within the Circular, application will be made for the New Ordinary Shares of 1p each to commence trading on AIM with effect from 8 June 2009. All existing share certificates will remain valid and the Company's ISIN number will remain unchanged.
Admission
Application will be made to the London Stock Exchange to admit the New Ordinary Shares, the Placing Shares, the Strand Shares, The Day Limited Shares, the Consultant Shares, the Peter Rackham Shares, the Jeffrey Morris Conversion Shares, the Loan Shares, the Adviser Shares, the IP Consideration Shares and the Directors' Conversion Shares totalling in aggregate 108,822,473 Ordinary Shares (together the "Total Shares") to trading on AIM ("Admission"). It is expected that, subject to the passing of the resolutions to be proposed in connection with the Proposals at the GM, admission of the Total Shares will become effective on AIM and dealings in will commence at 8.00 am on 8 June 2009 or such later time as the Company, Strand Partners and Daniel Stewart may agree in accordance with the Placing Agreement being not later than 3 July 2009.
New Articles of Association
It is proposed that, conditional on the Placing, the current articles of association of the Company will be amended and replaced by new articles of association. The reason for the change is to accommodate the changes necessary for a Company that has ordinary and deferred classes of shares and to make various other changes necessary or appropriate as a result of the implementation of the Companies Act 2006. The proposed new articles of association will shortly be made available on the Company's website, www.imjack.com. A summary of material amendments to the articles is set out in the circular to be sent to shareholders on 20 May 2009.
Recommendation
The Directors consider the Proposals to be in the best interests of shareholders and recommend that shareholders vote in favour of the resolutions to be proposed in connection with the Proposals. Those Directors who hold shares in the Company intend to vote in favour of such resolutions in respect of their own beneficial holdings of ordinary shares amounting, in aggregate, to 1,300,023 ordinary shares (representing approximately 2.1 per cent. of the ordinary shares in issue).
Timetable of Principal Events
The expected timetable of principal events is summarised below:
| Notice of GM and proposed new articles of association available on www.imjack.com | 20 May 2009 |
| Latest time and date for receipt of forms of proxy for the GM | 10am on 3 June 2009 |
| GM | 5 June 2009 |
| Record date for Capital Reorganisation | 5 June 2009 |
| Admission effective and dealings in the Enlarged Issued Share Capital expected to commence on AIM | 8 June 2009 |
| Expected date on which CREST accounts are to be credited with all new shares to be issued | 8 June 2009 |
| Expected date new share certificates will be despatched in respect of all new shares to be issued | 12 June 2009 |
Unless the context otherwise requires, defined terms in this announcement shall have the meanings given to them in the Circular sent to shareholders of the Company on 20 May 2009 and available on the Company's website, www.imjack.com.
For further information, please contact:
| Amteus plc Len Sanderson, CEO | Tel: 01653 618016 www.imjack.com |
| Strand Partners Limited (Nomad) James Harris/ Paul Cocker | Tel: 020 7409 3494 |
| Daniel Stewart & Company plc (Broker) Martin Lampshire/ Stewart Dick | Tel: 020 7776 6550 |
| Rawlings Financial PR Limited Catriona Valentine | Tel: 01653 618016 |