Mobile Tornado Regulatory News (MBT)

25 Sep 2006 07:01

Mobile Tornado Group PLC25 September 2006 Mobile Tornado Group plc ("Mobile Tornado" or "the Company") The Company announces that, conditionally on the passing of the resolutions tobe put to the Company's shareholders at an extraordinary general meeting to beheld on 23 October 2006 (the "EGM") (the "Resolutions"), InTechnology Plc hassubscribed for 80,000,000 new ordinary shares in the Company ("Ordinary Shares")at an issue price of 5p per share (the "Subscription"). On 27 June 2006 the Company announced that it had not received payment for theordinary shares issued to Mr Pinievsky in the placing on 26 April 2006 ("AprilPlacing"). Since the announcement of 27 June 2006, the Company's management has sought toprotect the financial position of the Company and its subsidiaries (the "Group")against the shortfall of the proceeds of the April Placing by taking action toreduce development costs, delay the Group's proposed expansion programme, managecreditors and access funding under shareholder loans. However, the Group still intends to accelerate its global marketing and extendits fixed-mobile convergence products. This requires additional funding. Inorder to secure the Group's financial position, InTechnology Plc hasconditionally agreed to subscribe for 80,000,000 new ordinary shares. The Directors have examined fundraising options available to the Company givenits current stage of development and the non-payment of the substantial elementof the consideration due from Jorge Pinievsky in respect of the April Placing.The Directors have considered the size of the funding required to sustain and tofurther expand the Group's sales and development activities, the need forsufficient working capital, and the current share price. After carefulconsideration, the Directors believe that the Proposals are in the bestinterests of Shareholders as a whole. The Directors believe that the absence of the proceeds of the Subscription wouldseriously impair the ability of the Company to expand its business. The fundsare required to support the Company's medium term growth plans and it isunlikely that short term sales targets will be met in the absence of suchfunding. The Board has considered how best to deal with the debt owed by Mr Pinievsky inrespect of his non-payment for Shares in the April Placing. In itsdeliberations, the Board has taken into account the importance of the Israelico-founders (Mr Fishler and Mr Pinievsky) to the continuing operations of theGroup. The Board is of the view that the commencement of formal debt recoveryproceedings at this time is not in the best interests of the Company. MrPinievsky's unpaid Shares, which have been surrendered to the Company, will beheld by the Company and either re-allotted or cancelled in due course. If thesurrendered Shares are not re-allotted within three years of their surrender,they must be cancelled. Mr Pinievsky remains liable to the Company for theunpaid issue price (less any amount realised by the Company if the Shares arere-allotted). In the meantime, an offer for funding has been made by InTechnology Plc by meansof the Subscription and the Directors believe that this will secure the Group'sfinancial position in the medium term. Following the issue of the new Ordinary Shares, a concert party of shareholders(the "Concert Party") will increase their interests from an interest in70,519,619 Ordinary Shares representing 76.50 per cent. of the existing issuedshare capital, to an interest in 150,519,619 Ordinary Shares, being 87.42 percent. of the enlarged share capital of the Company. Upon full exercise of theexisting options and warrants in the Company in accordance with their terms, theaggregate holding of the Concert Party would be 87.60 per cent. (assuming noother Ordinary Shares are issued). The Panel on Takeovers and Mergers (the "Panel") has been consulted and hasagreed that it will not require the members of the Concert Party, individuallyor collectively, to make a general offer under Rule 9 of the City Code in cashfor Ordinary Shares in the Company which might otherwise arise as a result ofthe issue of the new Ordinary Shares to InTechnology Plc pursuant to theSubscription, subject to Resolution 1 (as set out in the notice convening theEGM) being passed on a poll by the independent shareholders (the "Code Waiver"). The Subscription constitutes a related party transaction for the purposes of theAIM rules. Chris Akers, the independent director of the Company ("IndependentDirector") having been so advised by Corporate Synergy, the Company's nominatedadviser, considers that the terms of the subscription by InTechnology Plc andthe Code Waiver are fair and reasonable insofar as Independent Shareholders areconcerned. In providing advice to the Independent Director, Corporate Synergy has takeninto account the Directors' commercial assessments. Financial Trading and Prospects In June 2006, the Company announced that revenues for MTIL (the main tradingentity in the Group) for the 12 months to June 2006 were expected to be€290,000. The Group continues to pursue a number of significant business opportunitiesaround the world. The Group hopes that it will soon enter into a contract tosupply its Push to Talk service to its first small US mobile operator. It hasentered into small, paid-for trials/developments with a European mobile operatorand a significant North American mobile operator. Together with existingcontracts, the Directors expect that these new contracts should result in asignificant improvement in the Group's operating performance over the next 18months. Use of Funds The net proceeds of the Subscription are expected to be approximately £3.8m andthe Directors intend to use such net proceeds to expand the Group's sales anddevelopment activities, including the emerging hosted PTT services market, andto provide additional working capital. Board Changes Mark Hughes has expressed his intention to resign as Finance Director andSecretary following the EGM and has entered into a compromise agreement with theCompany to that effect. It is intended that Richard James be appointed asSecretary with effect from the date of Mr Hughes' resignation. The Companyexpects to announce a successor Finance Director shortly. The Subscription Pursuant to a subscription agreement dated 22 September 2006 (the "SubscriptionAgreement"), InTechnology Plc has conditionally agreed to subscribe for80,000,000 new Ordinary Shares at 5p per share. The new Ordinary Shares willrepresent approximately 43.38 per cent. of the enlarged ordinary share capital.Peter Wilkinson and Richard James, directors of InTechnology Plc, will togetheralso own approximately 14.91 per cent. of the enlarged share capital. PeterWilkinson is also a 57 per cent. shareholder in InTechnology Plc. The Subscription Agreement is conditional on the Resolutions being passed at theEGM and the new Ordinary Shares to be issued pursuant thereto being admitted toAIM. Admission to AIM Application will be made to the London Stock Exchange for all of the newOrdinary Shares to be admitted to trading on AIM. Conditional upon the passingof the Resolutions, Admission is expected to become effective and trading in theNew Ordinary Shares will commence on 24 October 2006. For further details please contact: Mobile Tornado Group plcJohn Swingewood, Chairman Tel: +44 (0) 208 104 1992 Corporate SynergyRomil Patel / Rhod Cruwys Tel: +44 (0) 207 448 4400 Buchanan CommunicationsJames Strong Tel: +44 (0)20 7466 5000 This information is provided by RNS The company news service from the London Stock Exchange