Krm22 Plc Regulatory News (KRM)

THIS ANNOUNCEMENT, INCLUDING THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, CANADA, JAPAN, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION. PLEASE SEE THE IMPORTANT NOTICES AT THE END OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND SHALL NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY NEW ORDINARY SHARES OF KRM22 PLC IN THE UNITED STATES, CANADA, JAPAN, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL

KRM22 plc

("KRM22" or the "Company")

Fundraising

KRM22 plc, (AIM: KRM) the technology and software investment company that focuses on risk management for capital markets, is pleased to announce that it has conditionally raised gross proceeds of up to £1.8 million through a conditional placing of up to 1,601,318 new ordinary shares of 10 pence each in the Company ("Ordinary Shares") (the "Placing Shares") at a price of 85 pence per Ordinary Share (the "Issue Price") (the "Placing") and a subscription of up to 529,414 new Ordinary Shares (the "Subscription Shares" and together with the Placing Shares, the "Fundraising Shares") at the Issue Price (the "Subscription" together with the Placing, the "Fundraising").

Of the 1,601,318 Placing Shares, 129,412 have been conditionally placed with finnCap, and admission of these shares is subject to and conditional on an order being placed in the market by Fidelity Investments on behalf of Stephen Casner, Chief Executive Officer USA of the Company, to purchase the 129,412 Ordinary Shares at the Issue Price from finnCap. A further announcement will be made when appropriate.

Of the total 529,414 Subscription Shares, the subscribers for 235,295 of these Subscription Shares are completing the requisite subscription paperwork in order to complete their investments. Should this not complete by 30 April 2019, Keith Todd, Executive Chairman and CEO of the Company, has irrevocably undertaken to subscribe for those 235,295 Subscription Shares at the Issue Price in addition to his participation in the Placing as detailed below. A further announcement will be made when appropriate.

Application has been made for the remaining 1,471,906 Placing Shares, the remaining 294,119 Subscription Shares which have been placed firm and a further 117,647 new Ordinary Shares to be issued to certain advisers in lieu of fees (the "Adviser Shares") to be admitted to trading on AIM. Admission of those shares is expected to become effective on or around 5 April 2019 ("First Admission"). Following First Admission, KRM22 will have 18,260,060 Ordinary Shares in issue. All Ordinary Shares have equal voting rights and none of the Ordinary Shares are held in treasury. The total number of voting rights in the Company immediately following First Admission will therefore be 18,260,060.

Only once the order for 129,412 Ordinary Shares at the Issue Price from Fidelity Investments on behalf of Stephen Casner has been placed in the market and the trade with finnCap confirmed, application will be made for these 129,412 Placing Shares to be admitted to trading on AIM ("Second Admission"). Further details regarding Second Admission will be provided when appropriate.

Following confirmation of the remaining subscribers for the 235,295 Subscription Shares, application will be made for these shares to be admitted to trading on AIM ("Third Admission"). Further details regarding Third Admission will be provided when appropriate.

Details of the Fundraising

finnCap Ltd ("finnCap") acted as nominated adviser, broker and sole bookrunner in connection with the Placing. No part of the Placing is underwritten.

In accordance with the terms of a placing agreement entered into between the Company and finnCap, the Company has, via finnCap as placing agent, conducted a conditional placing to raise up to approximately £1.36 million by way of the issue of up to 1,601,318 Placing Shares at the Issue Price. In addition, the Company has raised up to approximately £0.45 million through the issue of up to 529,414 Subscription Shares at the Issue Price. Certain founders and Directors of the Company have subscribed for approximately £0.43 million pursuant to the Fundraising (including the proposed participation by Stephen Casner and assuming the 235,295 Subscription Shares are not subscribed for by Keith Todd).

The Placing Agreement is conditional, inter alia, upon:

a) the performance by the Company of its obligations under the Placing Agreement insofar as the same fail to be performed or satisfied on or prior to Admission (as defined below);

b) the Subscription in respect of the 294,119 Subscription Shares becoming unconditional in all respects, save for Admission; and

c) First Admission having occurred by 8.00 a.m. on 5 April 2019.

The Company continues to execute on its business plan and recently launched its Enterprise Risk Cockpit. The Company also remains in discussions with a pipeline of numerous investment targets in-line with its investment policy and partnerships to deliver applications on its Global Risk Platform.

The Company had identified three acquisition targets that it was actively pursuing, however the funding required to conclude these acquisitions has not been secured at this time. Subject to securing the debt finance, details of which are outlined below, the Company intends to continue to pursue two of the three acquisition targets. The net proceeds of the Fundraising are being used for the general working capital requirements of the Company and its existing businesses.

Since admission of the Company's shares to trading on AIM in April 2018, the Company has accelerated the development of the Global Risk Platform and Risk Cockpit. As a direct result it has been able to launch its proprietary Enterprise Risk Cockpit in March 2019. This area of the business has required a substantial amount of capital allocated to development and marketing of this core product. In addition to this, the Company expanded its infrastructure to scale up to capitalise on the many investment opportunities identified at the time of the listing. As a result, the Company has made a number of advantageous investments and partnerships in the period with the integration substantially complete. Given these milestones, the Company will now be focusing on its existing business as well as securing new partnerships to add to the existing footprint and as a result, the Company has reduced overhead costs to reflect the size and focus of the business today.

In addition to the Fundraising, the Company is pursuing discussions with alternative sources of funding including strategic partnerships and debt funding to support the Company's investment policy. The Company is in preliminary discussions with a venture debt provider for a facility of up to £10.0 million of which an initial £1-2.5 million will be drawn down on completion or shortly thereafter. The balance of the facility will become available in tranches conditional on the Company's rate of recurring revenues, which would include acquired recurring revenue. The interest rate payable pursuant to this facility is in the range of 10-12 per cent. and the proposed arrangement also includes the issue of a warrant over a number of Ordinary Shares with a value equal to a maximum of £1.0 million of which 50 per cent. would be issued upon the initial draw down. There can be no certainty that these discussions will result in additional new funding for the Company however, the Directors remain confident of concluding these arrangements. Should the Company be successful in obtaining appropriate financing, the Company will then actively pursue the pipeline of investment targets.

The two potential acquisitions under consideration, which are subject to the above outlined debt funding being agreed, are both based in the US and provide risk management software within the Market Risk domain. Together they would provide the Company with an aggregate c.$2.0m of annual recurring revenue and an additional 29 customers and are both breakeven at the profit level. The total consideration payable for each acquisition would comprise an initial consideration (of which an aggregate of c.£0.8m would be payable in cash) and an earn-out consideration payable in cash and shares. The total consideration payable would be between 2-3x annual recurring revenues, in-line with the Directors' expectations at the time of the IPO in April 2018. Further details will be provided once the proposed debt funding is agreed and negotiations with the vendors finalised. There can be no assurance at this time that both or either acquisition will complete.

The Issue Price represents a discount of approximately 3.4 per cent. to the closing mid-market price of the Ordinary Shares of 88 pence on 1 April 2019 (being the last practicable dealing day prior to the date of this announcement).

The 1,883,672 new Ordinary Shares to be issued upon First Admission will represent approximately 10.32 per cent. of the enlarged issued share capital of the Company following First Admission and will rank pari passu in all other respects with the Company's existing Ordinary Shares.

The Fundraising Shares are being issued pursuant to the authorities granted to the Directors at the general meeting held by the Company on 21 January 2019 and as such, the issuance of the Fundraising Shares is not subject to shareholder approval.

Related Party Transactions

Keith Todd and persons closely associated with him have subscribed for an aggregate of 235,296 new Ordinary Shares at the Issue Price. Following this subscription, Keith Todd will have a beneficial interest in 1,775,296 Ordinary Shares in the Company, representing approximately 9.72 per cent. of the enlarged issued share capital on First Admission. Should the subscribers (as described above) not participate in the Subscription by 30 April 2019, Keith Todd has irrevocably undertaken to acquire a further 235,295 new Ordinary Shares at the Issue Price. Following this additional subscription, Keith Todd would have a beneficial interest in 2,010,591 Ordinary Shares in the Company, representing approximately 10.80 per cent. of the enlarged issued share capital assuming First, Second and Third Admission.

Sandy Broderick, Non-Executive Director of the Company, has subscribed for an aggregate of 11,765 new Ordinary Shares at the Issue Price. Following this subscription, Sandy will have a beneficial interest in 11,765 Ordinary Shares in the Company, representing approximately 0.06 per cent. of the enlarged issued share capital on First Admission.

As described above, Stephen Casner will acquire 129,412 of the Placing Shares at the Issue Price shortly following First Admission. These 129,412 Placing Shares have been conditionally placed with finnCap and admission of these shares is subject to and conditional on an order being placed in the market by Fidelity Investments on behalf of Stephen Casner, to purchase the 129,412 Ordinary Shares at the Issue Price from finnCap. Following this intended acquisition, Stephen Casner will have a beneficial interest in 636,555 Ordinary Shares in the Company representing 3.46 per cent. of the enlarged issued share capital on Second Admission.

Keith Todd, Stephen Casner and Sandy Broderick are considered "related parties" as defined under the AIM Rules due to their Board positions. Keith Todd, Stephen Casner and Sandy Broderick's participations in the Fundraising constitute related party transactions for the purposes of Rule 13 of the AIM Rules.

In addition, Canaccord Genuity ("Canaccord"), has subscribed for 352,942 new Ordinary Shares at the Issue Price. Following this subscription, Canaccord will in aggregate hold 2,796,585 Ordinary Shares in the Company (including its shares held by Hargreave Hale AIM VCT and Canaccord Wealth), representing approximately 15.32 per cent. of the enlarged issued share capital on First Admission.

Canaccord is considered a "related party" as defined under the AIM Rules as a result of its substantial shareholding in the Company. Canaccord's participation in the Placing constitutes a related party transaction for the purposes of Rule 13 of the AIM Rules.

The Independent Directors (being the Directors of the Board, other than Keith Todd, Stephen Casner and Sandy Broderick) consider, having consulted with the Company's nominated adviser for the purposes of the AIM Rules, finnCap, that the terms of Keith Todd's, Stephen Casner's and Sandy Broderick's and Canaccord's subscription for shares fair and reasonable insofar as the Company's shareholders are concerned.

Keith Todd, Executive Chairman and CEO of the Company, commented:

"The past months have validated the KRM22 business proposition and we are well placed to continue our development and growth supported by this fund raising."

About KRM22 plc

KRM22 is a closed-ended investment company which listed on AIM on 30 April 2018. The Company has been established with the objective of creating value for its investors through the investment in, and subsequent growth and development of, target companies in the technology and software sector, with a focus on risk management in capital markets.

Through its investments and the Global Risk Platform, KRM22 helps capital market companies reduce the cost and complexity of risk management - a fundamental challenge that erodes their profitability and constrains opportunities to generate alpha.

Through the KRM22 Global Risk Platform, KRM22 offers a modular application portfolio addressing risk management challenges across risk domains, covering market, regulatory, technology and operations risk, and across these domains as enterprise risk to assess, monitor and manage the increasing correlation between them.

Capital markets companies' partner with KRM22 to optimize risk management systems and processes to improve profitability and expand opportunities to increase portfolio returns by successfully leveraging risk as alpha.

KRM22 PLC is listed on AIM and the Group is headquartered in London, with offices in several of the world's major financial centres.

See more about KRM22 at KRM22.com.

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

IMPORTANT NOTICES

This announcement should be read in its entirety. In particular, you should read and understand the information provided in this "Important Notices" section of this announcement.

This announcement does not constitute a prospectus for the purposes of the Prospectus Rules of the FCA, nor does it comprise an admission document prepared in accordance with the AIM Rules. Accordingly, this announcement has not been approved by or filed with the FCA.

finnCap, which is authorised and regulated in the United Kingdom by the FCA, is acting as nominated adviser, broker and sole bookrunner to the Company for the purposes of the AIM Rules exclusively for the Company and no one else and will not be responsible to any other person for providing protections afforded to their customers nor for providing advice in relation to the contents of this announcement. No representation, warranty, express or implied, is made by finnCap for the accuracy of any information or opinions contained in this announcement or the omission of any material information, nor has finnCap authorised the contents of this announcement for any purpose and no liability whatsoever is accepted by finnCap. finnCap expressly disclaims all and any responsibility or liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this announcement.

 Forward-Looking Statements

This announcement contains forward-looking statements. These statements relate to the Group's future prospects, developments and business strategies. Forward-looking statements are identified by their use of terms and phrases such as "potential", "estimate", "expect", "may", "will" or the negative of such terms and phrases, variations or comparable expressions, including references to assumptions. The forward-looking statements in this announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These forward-looking statements speak only as at the date of this announcement. No statement in this announcement is intended to constitute a profit forecast or profit estimate for any period. Neither the Directors nor the Company undertake any obligation to update forward-looking statements other than as required by the AIM Rules or by the rules of any other securities regulatory authority, whether as a result of new information, future events or otherwise.

FUNDRAISING STATISTICS

* Adviser Shares means the 47,059 and 70,588 new Ordinary Shares to be issued to finnCap Ltd and Fieldfisher LLP, respectively, at the Issue Price in lieu of fees payable by the Company to such advisers in relation to the Fundraising

** Assuming the full 129,412 Placing Shares are issued pursuant to Second Admission

*** Assuming the full 235,295 Subscription Shares are issued pursuant to Third Admission