LBB.L Regulatory News (LBB)

LiteBulb Group Limited

("LiteBulb" or the "Company" or the "Group")

Proposed acquisition of Go Entertainment Group Limited

Proposed Issue of up to £2.0m secured convertible loan notes

& Notice of Annual General

LiteBulb (AIM: LBB), the brand and product development specialist, announces it had entered into a conditional share purchase agreement to acquire the entire issued share capital of Go Entertainment Group Limited ("Go") (the "Acquisition"), which designs, develops and manufactures consumer products for an initial consideration of £0.5m in cash and 182,008,761 Ordinary Shares.

The Acquisition is expected to enhance the Company's sales over the next 12 months and be earnings enhancing before interest, tax, depreciation and amortisation.

Go designs, develops and manufactures consumer products focusing on DVDs, books, magazines and other gift products. Go has been operating in the consumer products market for over five years and brings a track record of strong financial performance, having been profitable for the last four years. Pro forma consolidated audited accounts for Go for the year ended 31 March 2013 show turnover of £9.0m and earnings before tax of £583k.

LiteBulb also announces that it intends to raise expansion capital by the issue of up to £2m secured, convertible loan notes ("Loan Notes"), in respect of which conditional subscription letters have been entered into by Henderson Volantis Capital and Novum Securities Limited for £2m of Loan Notes in aggregate.

Completion of the Acquisition and the issue of the Loan Notes is conditional on, amongst other things, approval by the Company's shareholders ("Shareholders") of the resolutions (the "Resolutions") to be proposed at the annual general meeting of the Company ("AGM") to be held at the offices of Fladgate LLP at 16 Great Queen Street, London WC2B 5DG at 10.00 a.m. on 22 April 2014.

The Directors recommend that shareholders vote in favour of the Resolutions, as they intend to do so in respect of their aggregate holding of 332,085,039 Ordinary Shares, representing c. 14.54% of the Company. The Circular, which includes the Notice of Annual General Meeting, will be posted to Shareholders today, and is available on the Company website: www.litebulbgroup.com

Simon McGivern, CEO of LiteBulb, commented:

"The acquisition of Go is another example of a highly complementary addition to the business. Not only will Go widen our product offering, strengthen our relationships with our retail partners, but it will add to our growing overall turnover and will be immediately EBITDA enhancing to the Group.

"Some of our largest Shareholders have again supported us through their participation in the Loan Notes subscription and this will provide the working capital necessary to maximise the opportunities for the combined group."

Below are extracts from the Circular. The full document is available on the Company's website: www.litebulbgroup.com

About Go Entertainment Limited

Background to and details of the Acquisition

Go:

· designs, develops and manufactures consumer products focusing on DVDs, books, magazines and other gift products;

· works with major media brands to find new product lines for its customers and key retailers to create exclusive product ranges for the entertainment industry;

· works with blue-chip brands including Discovery Channel, History Channel, David Attenborough, The Imperial War Museum, UEFA, Tour de France, Welsh Rugby Union, ESPN, Transport for London and The National Railway Museum;

· distributes to major retailers including WHSmith, Debenhams, BHS, HMV, Marks & Spencer, Boots and supermarkets;

· has strategic partnerships in South Africa and Australia and distributes directly into the US to Walmart, Amazon, Cost-Co and Target;

· distributes across digital platforms and sells its programmes to television;

· has been operating in the consumer products market for over five years and brings a track record of strong financial performance, having been profitable for the last four years. Pro forma consolidated audited accounts for Go for the year ended 31 March 2013 show turnover of £9.0m and earnings before tax of £583k.

The Acquisition is expected to enhance the Company's sales over the next 12 months and be earnings enhancing before interest, tax, depreciation and amortisation.

Benefits of the Acquisition

The Acquisition is expected to provide a number of benefits to the enlarged group, these include:

· enhancing the Company's position as one of the leading providers of niche innovative consumer brands and products;

· expanding the Company's portfolio of high quality brands and products;

· providing cross-selling opportunities within the Company's existing client base and the additional customer relationships established by Go;

· bolstering existing relationships with mutual customers, increasing the range of products the Company's sells to these customers; and

· providing cost savings through business synergies going forward.

Terms of the Acquisition

On 1 April 2014, the Company entered into a conditional share purchase agreement (Agreement) with Tim Exell, Neil Harrington, Leigh Webb, Colin Simpson, Juliet Stainforth and Stephen Ayres (Sellers) pursuant to which, subject to, amongst other things, the approval of Resolutions 7 and 8 at the AGM, it has agreed to purchase and the Sellers have agreed to sell the entire issued share capital of Go for the initial aggregate consideration of £500,000 payable in two tranches, the first tranche of £250,000 on Completion (as defined below) (Completion Payment) and £250,000 payable following the agreement of completion accounts (Deferred Payment) and 182,008,761 Ordinary Shares (each a Consideration Share). The 182,008,761 Consideration Shares will equate to 7.38 per cent. of the issued share capital of the Company immediately following completion of the Acquisition (Completion) (Enlarged Share Capital).

In addition to the Consideration Shares issued to the Sellers at Completion, up to 351,324,572 further Ordinary Shares (each an Earn Out Share) may be issued to the Sellers following the conclusion of the Earn Out Period (as defined below), subject to the following earn out arrangements (Earn Out).

Earn Out

The Sellers will be entitled to receive Earn Out Shares if the aggregate EBITDA of Go and its subsidiaries (Go Group) exceeds £341,266 during the period commencing on 1 April 2014 and ending on 31 March 2015 (Earn Out Period).

Depending on the EBITDA of the Go Group during the Earn Out Period, the maximum number of Earn Out Shares which the Sellers can receive under the Earn Out is 351,324,572 Earn Out Shares.

Completion adjustment

Following Completion, the Sellers will produce a consolidated completion balance sheet in respect of the Go Group. If this balance sheet shows net tangible assets which are less than £850,000, the Deferred Payment will be adjusted so that the Deferred Payment is reduced by an amount equal to the deficit. If the net tangible assets of the Go Group are less than £600,000 the amount by which the net tangible assets are less than £600,000 will be clawed back from the Completion Payment (Adjustment Amount). The Sellers will pay the Adjustment Amount (if any) to the Company within seven days of its determination. The Adjustment Amount cannot exceed £250,000.

Other terms

The Sellers have given customary warranties to the Company (Warranties). Amongst other things, the Warranties concern Go's annual and management accounts, taxation affairs, contracts, employees and assets. The Sellers' collective liability under the Warranties is limited to the amount payable to the Sellers under the Agreement. Any claim under the Warranties must be initiated by the Company on or before 18 months after Completion (unless such claim relates to a breach of any of the Warranties given regarding taxation, in such case a claim must be initiated by the Company on or before the date seven years after Completion). 

The Company has given a number of warranties to the Sellers which, amongst other things, concern the Company's accounts and the operation and financial performance of the Company since 31 December 2013. The Company's liability under these warranties is limited to the market value of the Consideration Shares on the date on which these shares are allotted. 

Completion is conditional upon amongst other things:

· the approval of Resolutions 7 and 8 by the Shareholders at the AGM; and

· the Company obtaining all regulatory authorisations and consents required in respect of the issue of the Consideration Shares and the Earn Out Shares.

The conditions must be satisfied on or before 30 April 2014, failing which the Agreement will lapse.

Each of the Sellers have severally undertaken, subject to customary carve-outs, that they will not for a period of 12 months after Completion dispose of their respective holding of Consideration Shares without the prior written consent of the Company's broker. Further, each of the Sellers has severally undertaken, subject to customary carve-outs, that for a period of 24 months from Completion they will only dispose of their respective holding of Consideration Shares through the Company's broker.

Following Completion, Neil Harrington and Tim Exell will continue to act as directors of Go and, on Completion, will each enter into new executive service contracts with Go. The composition of the Litebulb board will not be affected by the Acquisition. Pursuant to the terms of the Agreement and on the basis that the maximum number of Earn Out Shares are issued to the Sellers, Neil Harrington and Tim Exell will hold 3.25 per cent. and 5.05 per cent. Of the enlarged share capital respectively.

The Fundraising

The Board also announced today that it intends to raise expansion capital by the issue of up to £2m secured, convertible loan notes (Loan Notes), in respect of which conditional subscription letters have been entered into by Henderson Volantis Capital and Novum Securities Limited for £2m of Loan Notes in aggregate.

The issue of the Loan Notes is conditional upon the approval of Resolution 8 at the AGM and the completion of the Acquisition. Subject to the satisfaction of these conditions, the Loan Notes will be issued subject to the following terms:

· the Loan Notes will be redeemable three years from the date of issue;

· the Loan Notes will bear interest from the date of issue of the Loan Notes to the date of redemption of the principal amount of the Loan Notes at the rate of 10 per cent per annum, payable quarterly in arrears. Interest will be paid in cash or at the election of the holder of the Loan Notes in Ordinary Shares at the conversion price of one penny per share;

· on redemption, in addition to payment of accrued but unpaid interest, the holders of the Loan Notes will be entitled to a redemption premium of 130% of the principal of the Loan Notes, less the amount of the principal repaid;

· the Loan Notes may be converted into new Ordinary Shares at any time at a conversion price of one penny per new Ordinary Share. The conversion price is subject to adjustment if, amongst other things, the Company issues new Ordinary Shares at a discount to the conversion price or the then prevailing price of the Ordinary Shares; and

· the Loan Notes will be secured by the grant of fixed and floating charges in favour of the holders of the Loan Notes over the assets of the Company and certain of its subsidiaries. In addition, certain of the subsidiaries of the Company will guarantee the performance of the obligations assumed by the Company in respect of the Loan Notes.

In order to have sufficient authority to allot new Ordinary Shares to effect the conversion of the Loan Notes into new Ordinary Shares, the Board is seeking the approval of the shareholders of Resolution 8 at the AGM.

Annual General Meeting

Completion of the Acquisition and the Fundraising are conditional on, amongst other things, the approval of Resolutions 7 and 8 by shareholders at the AGM to be held at the offices of Fladgate LLP at 16 Great Queen Street, London WC2B 5DG at 10.00 a.m. on 22 April 2014, notice of which is set out in the Circular. 

Recommendation

The Directors believe that the matters to be considered at the AGM (including the Acquisition and the Fundraising) are in the best interests of the Company and the Shareholders as a whole and accordingly recommend that shareholders vote in favour of the Resolutions, as they intend to do so in respect of their aggregate holding of 332,085,039 Ordinary Shares, representing approximately 14.54 per cent. of the issued share capital of the Company.

About LiteBulb Group (www.litebulbgroup.com)

LiteBulb Group designs, manufactures and distributes innovative brands and products to the global retail market.

LiteBulb Products, including Ila, Scootrix and Silly Socks, are sold in over 30 countries through blue chip retailers including: ASDA, BHS, Tesco, Sainsbury's, WH Smith, Halfords, Morrisons, QVC, Next, Fenwicks and Toys R Us.

LiteBulb Creative is a creative agency with global reach, delivering compelling and agile brand extension programmes to the entertainment industry. LiteBulb Creative has designed products and campaigns for clients around the world, including Disney, Hasbro and Miramax.