Touchstar Plc Regulatory News (TST)

THIS ANNOUNCEMENT (AND THE INFORMATION CONTAINED HEREIN) IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, WITHIN, IN OR INTO THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), CANADA, AUSTRALIA, JAPAN, NEW ZEALAND AND SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

This announcement does not constitute an offer of, or a solicitation to subscribe for or purchase, any securities in any jurisdiction including in the United States.

Securities may not be offered or sold in the United States absent registration under the United States Securities Act of 1933, as amended (the "Securities Act"), or an exemption from, or in a transaction not subject to, registration. The Company has not and does not intend to register any securities under the Securities Act, and does not intend to offer any securities to the public in the United States unless registered under the Securities Act or an exemption from such registration is available. No public offering of securities of the Company is being made in the United States.

No communication or information relating to the issue and offering of securities may be disseminated to the public in jurisdictions other than the UK where prior registration or approval is required for that purpose. No action has been taken that would permit an offer of securities in any jurisdiction where action for that purpose is required, other than in the UK.

17 January 2018

TOUCHSTAR PLC

("Touchstar" or the "Company")

FIRM PLACING OF 630,840 NEW ORDINARY SHARES

CONDITIONAL PLACING OF 639,158 NEW ORDINARY SHARES

PROPOSED OPEN OFFER OF UP TO 901,250 NEW ORDINARY SHARES

AND

NOTICE OF GENERAL MEETING

Touchstar plc (AIM: TST), is pleased to announce details of a fundraise consisting of a firm placing, a conditional placing and an open offer to raise in aggregate up to £1.3 million, before expenses.

The Chairman, Ian Martin, said: "We have refocused Touchstar to be a business that enables data to be captured, moved and used, which is a good place to be in the modern world. This successful fund raising allows the development and growth of the business to be faster. It is an exciting time for us."

This announcement includes inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations. 

Information to Distributors

With respect to the product governance rules as set out in the Markets in Financial Instruments Directive 2014/65/EU ("MiFID II") and supplementing texts, as a manufacturer of financial instruments WH Ireland Limited ("WHI") has taken steps to maintain, operate and review a process for the approval of the following proposed financial instruments: (i) the Firm Placing Shares; (ii) the Conditional Placing Shares; and (iii) the Open Offer Shares (together the "Financial Instruments"). This approval process has been used to determine an appropriate target market for the Financial Instruments (the "Target Market Assessment"). The purpose of the Target Market Assessment is to ensure that the distribution of the Financial Instruments is consistent and congruent with an appropriate end target market. 

Following the Target Market Assessment, WHI has concluded that the Financial Instruments are compatible with retail clients, professional clients and eligible counterparties, each as defined in MiFID II. WHI has further concluded that the Financial Instruments are eligible for all distribution channels permitted under MiFID II.

Notwithstanding the Target Market Assessment, distributors of the Financial Instruments ("Distributors") should be aware that the Financial Instruments may also be compatible with clients: (i) with basic capital markets knowledge or experience about shares; (ii) who have the ability to bear up to 100% capital loss; (iii) who are willing to accept price fluctuations in exchange for the opportunity to receive higher returns and who have a medium to high risk tolerance; and (iv) who seek capital growth in liquid instruments which are easily disposable and can be suitable for any investment horizon.

The Financial Instruments do not offer: (i) capital protection or the full repayment of the amount invested; or (ii) a fully guaranteed income or a fully predictable return profile. WHI considers that the Financial Instruments are inappropriate for clients who are fully risk averse or who have no risk tolerance.

For the avoidance of doubt, the Target Market Assessment does not constitute a recommendation to any investor or group of investors to invest in, purchase, or take any other action whatsoever with respect to the Financial Instruments or otherwise act as an assessment of suitability or appropriateness for the purposes of MiFID II, and WHI disclaims all and any liability whether arising in tort, contract or otherwise in respect of the assessment of the Financial Instruments, this announcement or any such statement. 

Furthermore, the Target Market Assessment shall be without prejudice to any selling restrictions applicable to the Financial Instruments as identified within the terms of and conditions to such Financial Instruments.

In addition, notwithstanding the Target Market Assessment, WHI will only solicit investors who meet the criteria of professional clients and eligible counterparties.

Each distributor is responsible for undertaking its own target market assessment in respect of the Financial Instruments and determining appropriate distribution channels.

Firm Placing of 630,840 New Ordinary Shares

Conditional Placing of 639,158 New Ordinary Shares

Proposed Open Offer of up to 901,250 New Ordinary Shares

and

Notice of General Meeting

1. Introduction

The Company has today announced the terms of a fundraising by WH Ireland, acting as the Company's Nominated Adviser and Broker, to raise a total of up to approximately £1.3 million (before expenses) by way of:

· a firm placing;

· a conditional placing; and

· an open offer

in each case of new ordinary shares of 5 pence each ("Ordinary Shares") issued at an issue price of 60 pence per share.

The issue price of 60 pence per new Ordinary Share ("Issue Price") represents a discount of 24 per cent. against the mid-market price of 79 pence per share at which the Ordinary Shares were quoted on AIM as at close of trading on 16 January 2018, the last trading day prior to announcement of the Fundraising.

The firm placing comprises the placing of 630,840 new Ordinary Shares (the "Firm Placing Shares") at the Issue Price (the "Firm Placing"). A total of £378,504 (before expenses) has been raised by way of the Firm Placing utilising the existing share authorities granted at the 2017 AGM. The Firm Placing is conditional only upon compliance by the Company in all material respects with its obligations under the Placing Agreement and the admission of the Firm Placing Shares to trading on AIM.

The conditional placing comprises the placing of 639,158 new Ordinary Shares (the "Conditional Placing Shares") at the Issue Price (the "Conditional Placing"). The Conditional Placing will raise approximately £383,495 (before expenses). The Conditional Placing is conditional, inter alia, upon Shareholders approving Resolution 1 at the General Meeting, compliance by the Company in all material respects of its obligations under the Placing Agreement and the occurrence of First Admission and Second Admission.

The Open Offer comprises an offer of 901,250 new Ordinary Shares to Qualifying Shareholders pursuant to the Open Offer at the Issue Price. The Open Offer is conditional, inter alia, upon Shareholders approving Resolution 2 at the General Meeting, compliance by the Company in all material respects of its obligations under the Placing Agreement and the occurrence of First Admission and Second Admission.

A circular setting out the details of the Conditional Placing and Open Offer and convening a general meeting of the Company will be posted to shareholders later today (the "Circular").

2. Background to and reasons for the Fundraising

The Company has made considerable progress since the appointment of Ian Martin as Chairman in June 2015. Achievements since then include:

· a restructuring of the Board;

· a restructuring of operations which has seen:

o the closure of a production and repair facility in Bradford,

o a reduction in office space and the closure of the Henley office of a group subsidiary,

o the closure of administrative functions in Bradford and Midlands, and

o the transition by the Group from using three enterprise resource planning systems to a single enterprise resource planning system;

· a new product strategy, developing 'IPR' owned solutions, which has seen:

o a reduced reliance on hardware and support revenues,

o the design of complete end to end business solution software which increases recurring revenues,

o the design of robust android devices for Transport and Logistics,

o the migration of existing applications to android, and

o the utilisation of outsourcing software development;

· the launch and delivery of new products including:

o a transport proof of delivery and resource allocation system,

o a mobile point of sale and control system for the airline industry, and

o an android based rugged mobile computer.

The Directors believe the Company now has a platform upon which it can deliver growth. However, to accelerate this growth the Directors believe the Company needs to invest in additional sales personnel and marketing initiatives across its market sectors. The Directors have identified an investment programme to be implemented over a three year period between 2018 and 2020 with approximately £0.96 million, £0.92 million and £0.67 million to be invested in 2018, 2019 and 2020 respectively. The Directors expect that approximately two-thirds of the investment each year will be of an overhead expense nature with the balance being capital expenditure. The Directors consider that of the total funds amounting to approximately £2.55 million, £1.4 million will be generated internally with the balance being generated by the Fundraising.

These funds will be used to:

· invest in sales and marketing;

· improve solution delivery capability; and

· complete the product upgrade cycle.

The majority of the funds will be deployed across the market sectors of on-board retail, Podstar transportation and Access Time and CCTV which are anticipated to receive investment of £736,000, £884,000 and £564,000 respectively over the three year period. The balance will be spent on other Group activities.

The benefits of the investment programme are expected to include:

· a material strengthening of sales ability,

· growth in revenue,

· enhancing the Group's ability to be a true solutions provider,

· increasing the proportion of revenue derived from software, and

· increasing recurring revenue,

the combination of which may make Touchstar a more highly rated technology company.

4. Use of the proceeds of the Fundraising

The Net Proceeds of the Fundraising are expected to be approximately £1.2 million (assuming full subscription under the Open Offer). These proceeds will provide resources to support the investment programme, and in particular the sales and marketing activities of the Group, described in paragraph 3 above.

5. Details of the Firm Placing and the Conditional Placing, and the Open Offer

Details of the Firm Placing and the Conditional Placing

Subject to the satisfaction of the conditions under the Firm Placing and the conditions under the Conditional Placing, inter alia, the passing of Resolution 1, the Company will place a total of 1,269,998 new Ordinary Shares raising in aggregate approximately £0.76 million (before expenses). The Placing Shares have been conditionally placed by WH Ireland, as agent for the Company with institutional and other investors. The Placing Shares will be allotted at the Issue Price. The Issue Price of 60 pence per New Ordinary Share represents a discount of 24 per cent. against the average mid-market price of 79 pence per share at which the Ordinary Shares were quoted on AIM as at close of trading on 16 January 2018, the last trading day prior to announcement of the Fundraising.

The Conditional Placing is conditional upon, inter alia, Second Admission occurring no later than 8.00 a.m. on 14 February 2018 (or such later date as the Company and WH Ireland shall agree, being no later than 28 February 2018).

Details of the Open Offer

The Company considers it important that, where reasonably practicable, Shareholders have an opportunity to participate in its equity fundraisings. Accordingly, the Company is proposing to raise up to £540,750 (before expenses) by way of the Open Offer. This will provide Qualifying Shareholders with an opportunity to participate in the proposed issue of Open Offer Shares on a pre-emptive basis whilst providing the Company with additional capital to invest in its business.

Subject to the terms and conditions of the Open Offer, the Company invites Qualifying Shareholders (being only Shareholders who are resident in the United Kingdom on the Record Date) to apply for their Basic Entitlement of Open Offer Shares at the Issue Price. Each Qualifying Shareholder's Basic Entitlement has been calculated on the basis of:

1 Open Offer Share for every 7 Existing Ordinary Shares held at the Record Date

Qualifying Shareholders are also invited to apply for additional Open Offer Shares in accordance with the Excess Entitlement. Any Open Offer Shares not issued to a Qualifying Shareholder pursuant to their Basic Entitlement will be apportioned between those Qualifying Shareholders who have applied for the Excess Entitlement at the sole discretion of the Board, provided that no Qualifying Shareholder shall be required to subscribe for more Open Offer Shares than he or she has specified on the Application Form or through CREST.

Entitlements to apply to acquire Open Offer Shares will be rounded down to the nearest whole number and any fractional entitlement to Open Offer Shares will be disregarded in calculating the Basic Entitlement.

The Open Offer Shares have not been and are not intended to be registered or qualified for sale in any jurisdiction other than the United Kingdom. Accordingly, unless otherwise determined by the Company and effected by the Company in a lawful manner, the Application Form will not be sent to Shareholders with registered addresses in any jurisdiction other than the United Kingdom since to do so would require compliance with the relevant securities laws of that jurisdiction. Applications from any such person will, save with the consent of the Company and provided it is lawful to do so, be deemed to be invalid. If an Application Form is received by any Shareholder whose registered address is elsewhere but who is in fact a resident or domiciled in a territory other than the United Kingdom, he/she should not seek to take up his/her allocation.

Qualifying Shareholders should note that the Open Offer is not a rights issue and therefore any Open Offer Shares which are not applied for by Qualifying Shareholders will not be sold in the market for the benefit of Qualifying Shareholders who do not apply under the Open Offer. The Application Form is not a document of title and cannot be traded or otherwise transferred.

Shareholders who do not take up their Basic Entitlements in full will experience a dilution to their interests of approximately 26.6 per cent. following the Fundraising (assuming full subscription under the Open Offer). Shareholders who take up their Basic Entitlements in full will suffer a dilution to their interests of 15.0 per cent. on the same basis.

Qualifying Shareholders should note that the Open Offer is not underwritten, and that the Open Offer is not conditional upon the number of applications received under the Open Offer. It should also be noted that the Conditional Placing is not conditional on a certain level of acceptances made under the Open Offer.

The Open Offer is subject to the satisfaction, inter alia, of the following conditions on or before 14 February 2018 (or such later date, being not later than 8.00 a.m. on 28 February 2018, as the Company and WH Ireland may decide):

· the passing of the Resolutions at the General Meeting (or any adjournment thereof); and

· Second Admission becoming effective by 8.00 a.m. on 14 February 2018 (or not later than 8.00 a.m. on 28 February 2018 or such other later time and date as the Company and WH Ireland may decide).

The Open Offer Shares to be issued pursuant to the Open Offer will (assuming full take up under the Open Offer) represent approximately 10.6 per cent. of the Enlarged Share Capital. The Open Offer Shares will, following Second Admission, rank in full for all dividends and pari passu in all other respects with the Existing Ordinary Shares and will have the right to receive all dividends and distributions declared, made or paid in respect of the issued ordinary share capital of the Company after Second Admission.

Shareholders should carefully consider the "Risk Factors" set out in Part III (Risk Factors) of the Circular before deciding whether or not to proceed with an investment in the Company.

If a Qualifying Shareholder does not wish to apply for Open Offer Shares he should not complete or return the Application Form or send a USE message through CREST.

Settlement and dealings

Application has been made to the London Stock Exchange for the Firm Placing Shares to be admitted to trading on AIM. It is expected that First Admission will become effective and that dealings will commence at 8.00 a.m. on 22 January 2018. In due course application will be made for the Conditional Placing Shares and the Open Offer Shares to be admitted to trading on AIM and, on the assumption that, inter alia, the Resolutions are passed, Second Admission is expected to become effective and that dealings will commence at 8.00 a.m. on 14 February 2018.

The New Ordinary Shares will rank, pari passu, in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared on or after the date on which they are issued. It is expected that CREST accounts will be credited with entitlements to the New Ordinary Shares as soon as practicable after 8.00 a.m. on the day of First Admission or Second Admission (as applicable) and that share certificates (where applicable) will be despatched as soon as practicable after First Admission or Second Admission (as applicable).

If you are in any doubt as to what action you should take, you are recommended to immediately seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other independent professional adviser duly authorised under the Financial Services and Markets Act 2000 (as amended) if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

6. Current trading and prospects

The Group's last reported results were the interim results for the six months ended 30 June 2017. These results reported revenues of £3.98 million and a profit, adjusted for exceptional items, after tax of £133,000 for the period.

On 8 January 2018, the Company announced a trading update in which it reported that it expected the outcome for its financial year ended 31 December 2017 to be in line with market expectations with profit, adjusted for exceptional items, after tax expected to be approximately £400,000 on turnover of approximately £8 million.

7. Intentions of the Directors

John Christmas (Non-Executive Director) intends to subscribe for 33,333 Conditional Placing Shares.

Ian Martin (Chairman) and Mark Hardy (Chief Executive officer) intend to subscribe for 333,333 and 33,000 Open Offer Shares respectively.

Ian Martin, Mark Hardy and John Christmas, all of whom are Directors, have confirmed they are subscribing for in aggregate 399,666 Shares pursuant to the Fundraising.

The Directors' participation in the Fundraising constitutes a related party transaction under the AIM Rules for Companies. Accordingly, only Jon Hall is considered to be an independent director of the Company for the purposes of this transaction and considers, having consulted with WH Ireland, the Company's nominated adviser, that the terms of the Directors' participation are fair and reasonable insofar as the shareholders of the Company are concerned.

8. Recommendation

The Directors believe both the Conditional Placing and the Open Offer to be in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend Shareholders to vote in favour of the Resolutions as they intend so to do in respect of their beneficial shareholdings amounting to 378,000 of the Existing Ordinary Shares.

7. General Meeting

The Circular will contain a notice convening the General Meeting to be held at the offices of Touchstar Technologies Limited, 7 Commerce Way, Trafford Park, Manchester M17 1HW on 13 February 2018 at 10.00 a.m. at which resolutions will be proposed to, inter alia, to grant sufficient share authorities to the Directors, to enable the Fundraising to be effected. 

Capitalised terms used in this announcement have the same meaning as in the Circular to be published by the Company on 17 January 2018 which will be available on its website at www.touchstarplc.com

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

FUNDRAISING STATISTICS

FORWARD LOOKING STATEMENTS

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "forecasts", "plans", "prepares", "anticipates", "projects", "expects", "intends", "may", "will", "seeks", or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the Company's and the Directors' intentions, beliefs or current expectations concerning, amongst other things, the Enlarged Group's prospects, growth and strategy.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. The Enlarged Group's actual performance, achievements and financial condition may differ materially from those expressed or implied by the forward-looking statements in this announcement. In addition, even if the Enlarged Group's results of operations, performance, achievements and financial condition are consistent with the forward-looking statements in this announcement, those results or development may not be indicative of results or developments in subsequent periods.

Any forward-looking statements that the Company makes in this announcement speak only as of the date of such statement, and none of the Company, the Directors or WH Ireland undertakes any obligation to update such statements unless required to do so by applicable law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

IMPORTANT INFORMATION

WH Ireland Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company in relation to the Fundraising and will not be responsible to any person other than the Company under the Financial Services and Markets Act 2000, the rules of the Financial Conduct Authority or otherwise for providing the protections afforded to its clients or for advising any other person in relation to the contents of this announcement, the Fundraising or any matter, transaction or arrangement referred to in this announcement. WH Ireland Limited is not making any representation or warranty, express or implied, as to the contents of this announcement.