TIDMCTAG
RNS Number : 5377O
CloudTag Inc.
07 November 2016
CloudTag Inc.
("CloudTag" or the "Company")
Fundraising of up to GBP4.05 million and European sales
update
CloudTag (CTAG:LN), the company that brings personal monitoring
to the wellbeing, fitness and digital health markets, is pleased to
announce that it has secured up to GBP4.05 million (before
expenses) of additional funding. The Company also provides a
European sales update.
Up to GBP4.05 million of funding
The Company has agreed to issue senior unsecured zero coupon
convertible notes with a term of 12 months ("Notes"), to raise up
to GBP4.05 million (before expenses), to an overseas Institutional
Investor ("Investor"). The Notes have an aggregate nominal value of
up to GBP4.5 million and will be issued at a 10% discount to
nominal value in up to two tranches. If the Notes are converted
into new ordinary shares in the Company ("Conversion Shares"), the
Company will also issue the Investor with one warrant ("Warrant")
for each Conversion Share, details of which are set out below.
The issue of the Notes is subject to the terms and conditions as
summarised below. It is expected that the first tranche of up to
GBP2.5 million in nominal value of Notes will be issued to raise
GBP2.25 million (before expenses) on or around 9 November 2016. The
net proceeds of the first tranche (including the escrow amount
referred to below and net of expenses) is GBP2.08 million. The
issue of the proposed second tranche of GBP2.0 million in nominal
value of Notes is conditional upon, inter alia, the Company
obtaining sufficient authorities from Shareholders to disapply
pre-emption rights such that the Company may issue the Conversion
Shares (the "Shareholder Approvals").
A circular and notice of general meeting to propose, amongst
other matters, appropriate resolutions to Shareholders, will be
sent to Shareholders as soon as practicable.
European sales update
CloudTag is actively pursuing its strategy of obtaining product
purchase orders by the end of 2016 and continues to work closely
with its European distributor, Second Chance Limited, ("SC").
CloudTag is pleased to report that it has recently received an
indicative, non-binding purchase order from SC for the Company's
first product (the Cloudtag Track). This order, which is subject,
inter alia, to manufacturing and a delivery date being agreed
would, if finalised, have a value of GBP880,000 and would represent
20% of SC's total order commitment of $5.2 million for 2016.
Whilst no firm purchase orders have as yet been received from SC
or otherwise and therefore the $5.2m of orders stated by SC in the
agreement in January 2016 is now unlikely to be achieved, the Board
is optimistic that with the GBP4.05 million of financing in place
it should be able to finalise the indicative purchase order
referred to above during 2016.
Subject to the finance referred to in this announcement being
put in place, the Company is minded to extend the terms of the
agreement with SC in order to accept orders placed by SC in 2017
against the balance of SC's order commitments for Q3 and the Q4
2016, subject to SC agreeing to such extension.
CloudTag continues to actively pursue its stated strategy of
obtaining further product orders by the end of 2016 as outlined in
announcements previously made although the Board emphasises that
additional purchase orders may not be forthcoming.
The delay in SC placing purchase orders is partly attributable
to the decision by CloudTag to move its manufacturing capabilities
to a larger scale manufacturer, as announced on 12 September 2016.
The Company has also taken the opportunity to continue to improve
the product using its newly recruited specialists, including the
Company's Chief Creative Officer Peter Griffiths and the creative
team. The Company has bolstered the European sales efforts with the
addition of Bhav Dattani as Director of Sales, as announced on the
12 September 2016. With more than 20 years' experience in the
consumer electronics retail sector, Bhav has built a substantial
network of major UK and European retailer, e-tailer and enterprise
channels which he is currently converting to sales for
CloudTag.
Terms and conditions of the Notes
The Company has entered into agreements relating to the issue of
up to two tranches of Notes and associated Warrants. Subject to
fulfilment of the conditions set out below, the Notes will be
issued at a 10% discount to their nominal value. The first tranche
of Notes has a nominal amount of GBP2.50 million and a subscription
price of GBP2.25 million ("Tranche 1 Notes") and the second tranche
has a nominal amount of GBP2.00 million and a subscription price of
GBP1.80 million ("Tranche 2 Notes"). The conditions for the Tranche
1 Notes are satisfied except in respect of the issue of the
relevant certificate which is expected to take place today.
Of the Tranche 1 Notes, upon issue, an amount of approximately
GBP640,000 will be placed in escrow ("Escrow Amount") for up to 40
days (the "Escrow Period") and released to the Company on the
earlier of either (i) announcement that the Company has obtained
the Shareholder Approvals or (ii) the volume weighted average price
of the Company's ordinary shares ("Shares") for any five
consecutive trading days during the Escrow Period having exceeded
14 pence per Share. If these conditions are not satisfied within
the Escrow Period, the Escrow Amount will be repaid to the Investor
and the subscription price for the Tranche 1 Notes will be reduced
to GBP1.46 million and the nominal value of the Tranche 1 Note will
be deemed to be reduced to GBP1.75 million with effect from 17
December 2016.
The net proceeds of the Tranche 1 Notes (including the Escrow
Amount and net of expenses) are expected to be approximately
GBP2.08 million and the proceeds (net of expenses) of the Tranche 2
Notes, GBP1.8 million.
At the option of the Company and subject to the conditions
below, the Tranche 2 Notes may be issued 40 days following the
issue of the Tranche 1 Notes. The Issue of the Tranche 2 Notes is
conditional upon, among other things: (i) no event of default or
potential event of default having occurred under the terms of the
Notes; (ii) certain repeating representations and warranties given
by the Company remaining correct (including that no event has
occurred which has had or would be likely to have a material
adverse effect on the Company); (iii) the value of the outstanding
Tranche 1 Notes and the proposed Tranche 2 Notes does not exceed
7.5% of the Company's market capitalisation and the Company having
sufficient authority to issue the relevant number of Conversion
Shares, the Escrow Amount having been released and there being no
changes to the capital structure of the Company. The date for the
issue of the Tranche 2 Notes may be extended to the date (the
"Extension Date") which is 90 days following the date of issue of
the Tranche 1 Notes (or such later date as the Company and the
Investor may agree) subject to certain conditions, including (in
addition to those set out above) that the market price of the
Company's shares does not drop below 10 pence per Share, and that
the value of the outstanding Tranche 1 Notes and the proposed
Tranche 2 Notes has not exceeded 5% of the Company's market
capitalisation during any three consecutive trading days.
The nominal value of each tranche of Notes issued is convertible
into Conversion Shares at the election of the Investor at a
conversion price of either (i) 125% of the closing mid-market price
per Share on 4 November 2016 of 14.25 pence; or (ii) the lowest
closing bid price per Share during the three consecutive trading
days immediately prior to the date on which the Investor elects to
convert some or all of its Notes. The Notes may be mandatorily
converted (at the option of the Company and subject to satisfaction
of certain conditions) into Conversion Shares if the share price
exceeds 150% of the volume weighted average price per share (as
determined on 7 November 2016) for 15 consecutive trading days. Any
outstanding Tranche 1 Notes and the Tranche 2 Notes are repayable
at 100% of nominal value 12 months following the issue of the
relevant tranche, further details will be set out in the
forthcoming circular.
If an event of default occurs under the terms of the Notes, then
the Notes become repayable within 5 days at 120% of nominal value.
An event of default will occur if (amongst other things): (i) any
tranche of the Notes is not repaid on the due date for repayment;
(ii) an event occurs or a circumstance comes to subsist which would
in the reasonable opinion of the Investor be likely to have a
material adverse effect on the Company; or (iii) the Company is
subject to certain forms of enforcement action by its creditors or
undergoes certain events of insolvency.
The conversion price of the Notes may be adjusted by the
Investor in the event that, inter alia, the Company issues Shares,
which in the Investor's opinion, has a dilutive effect on the
Investor's position.
The Company may effect early repayment of the nominal value of
the Notes at 105% of nominal value (provided that the Investor may
instead elect to convert the Notes to Shares upon being notified
that the Company intends to repay the Notes early). The Investor
may require the Company to repay the Notes at 120% of nominal value
in the event that the Company becomes subject to a change of
control.
Under the terms of the Notes, the Company provides certain
undertakings which last for so long as the Notes remain
outstanding, including that the Company shall not issue any debt,
equity or equity-linked securities (including options and warrants)
that are convertible at a conversion rate that varies or may be
reset, or which grant the right to receive additional securities on
more favourable terms.
Warrant Issue
The terms of the Note provides for one Warrant to be issued for
each Conversion Share issued on each conversion (in whole or in
part) of the Notes. Each Warrant may be exercised within three
years from the date of issue at the lesser of (a) 90% of the
closing bid price per Share on the day immediately prior to the
date of exercise or (b) 125% of the closing bid price per Share on
the day immediately preceding the date of issue of the relevant
conversion notice in relation to conversion of either the Tranche 1
Notes or the Tranche 2 Notes as the case may be.
The exercise price of the Warrants and the number of Shares
arising on exercise of such Warrants shall be adjusted to
neutralise the impact of future capital changes.
Use of proceeds of the Notes
The proceeds of this fundraising will be used by the Company for
general working capital purposes.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Enquiries
CloudTag Inc. +1 345 949 45 44
Amit Ben-Haim contact@cloudtag.com
Cairn Financial Advisers
LLP
(Nominated Adviser)
Tony Rawlinson, Jo Turner +44 (0) 20 7213 0880
Tavistock Communications
Limited (Financial PR)
Mike Bartlett, Andrew Dunn +44 (0) 20 7920 3150
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCQDLFBQFFXFBZ
(END) Dow Jones Newswires
November 07, 2016 11:37 ET (16:37 GMT)
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