TIDMCTAG
RNS Number : 0032Q
CloudTag Inc.
24 November 2016
24 November 2016
CloudTag Inc.
("CloudTag" or the "Company")
Posting of Circular
Posting of Circular
CloudTag (CTAG:LN), the company that brings personal monitoring
to the wellbeing, fitness and digital health markets hereby
announces that it has posted a circular to shareholders convening
Extraordinary General Meeting of the Company to be held at the
offices of Collas Crill, 40 Don Street, St Helier, Jersey JE1 4XD
at 11.30 a.m. on 12 December 2016.
The circular may be downloaded from the Company's website at
www.cloudtag.com/investors.
An extract from the letter to shareholders from the Chairman of
the Company is detailed below:-
"Dear Shareholder,
Issue of Loan Notes Director Fee Shares and
Notice of Extraordinary General Meeting
1. Introduction
CloudTag Inc. announced on 7 November 2016 that the Company has
conditionally agreed with an overseas Institutional Investor, L1
Capital Global Opportunities Master Fund ("L1"), to issue up to
GBP4,500,000 Senior Unsecured Zero Coupon Convertible Notes to
raise gross proceeds of up to GBP4.05 million ("Fundraising"). The
Company will issue L1 with one warrant for each conversion share
with a three year exercise period. Pursuant to this, on the 10
November 2016, the Company announced that it had issued GBP2.5
million of loan notes of nominal value to L1, subsequently GBP1.3
million of loan notes were converted into 13,684,212 new ordinary
shares and L1 were issued with 13,684,212 warrants.
As announced on the 7 November 2016, a second tranche of loan
notes may be issued 40 days following the issue of the first
tranche. In order to facilitate this issue the Board is seeking the
approval of Resolution 1 (as set out in the Notice of EGM which is
set out at the end of this document ("Notice")) to authorise the
Company to dis-apply the pre-emption rights in the Articles in
respect of the allotment and issue of new Ordinary Shares in
respect of conversion rights and the associated warrants.
The Board is also seeking approval of Resolution 2 to authorise
the Company to dis-apply the pre emption rights in the Articles in
respect of the allotment and issue of shares to certain directors
of the Company pursuant to their service agreements ("Director Fee
Shares").
The purpose of this document is to provide an operational and
commercial summary, information on the proposed loan notes and on
the Director Fee Shares and convene the EGM for 12 December 2016,
notice of which is set out at the end of this document, at which
the Resolutions will be proposed in order to facilitate the
above.
2. Operational & Commercial Summary
The Board confirms that its strategy is to launch products
initially in the USA, Canada, the UK, Germany and France and the
Company continues its activities with the distribution and sales
partners in those territories.
Europe
CloudTag reports that it received an indicative, non-binding
purchase order on 24 October 2016 from Second Chance Limited ("SC")
for the Company's first product (the Cloudtag Track). This order,
which is subject to, inter alia, manufacturing and a delivery date
being agreed would, if finalised, have a value of GBP880,000.
North America
As announced on the 8 August 2016, the Company entered into
binding Head of Terms with Cities Market Studios ("Cities") in
relation to the sale and marketing of Cloudtag's product in the USA
and Canada. This Heads of Terms is for an initial period of 1 year
from the date of signature of a final form agreement ("Final
Agreement"). The Final Agreement is currently being finalised with
Cities. Whilst it is hoped that this will be concluded in the
coming weeks the timing of entering into the Final Agreement is not
yet certain and a further update will be made in due course.
Cities is one of the largest commercialisation and distribution
service providers in North America with over 30 years' experience.
Subject to entering into the Final Agreement and product samples
being available, CloudTag and Cities intend to execute a go-to
market strategy initially targeting two major consumer electronics
e-tailers in the USA.
The Company intends to continue recruiting key executives to
join the Cloudtag team. The Company is looking to establish
operations in the USA in 2017 and it is anticipated that the new
individuals recruited will form part of the management team based
in the USA. It is expected that the role of the USA office will
primarily focus on building commercial opportunities for consumer
sales as well as B2B and enterprise partnerships.
Manufacturing
CloudTag has now commenced production of its wearable device
with its manufacturer in Malaysia.
B2B & Enterprise
The Company has appointed Yuval Lange as Chief Business
Development Officer to drive forward the Company's B2B and
enterprise strategies. Yuval's strategy is to target different
enterprises and industries in the USA, UK and certain European
countries including but not limited to multinational healthcare
aggregators, leading sports, footwear and equipment manufacturers,
corporate wellness providers, government and private healthcare
providers and health insurance companies.
Intellectual Property Estate
Earlier this year in January 2016, the Company announced that it
had submitted a number of new patent applications relating to the
proprietary designed sensors and communications package utilising
the signal processing algorithm. Further, a preliminary filing was
submitted in July 2016, covering technological innovations,
including, but not limited to, motion sensors and the next
generation of new products. The Company continues to monitor its
technological innovations and intends to apply for design patents
and registered designs in the USA and EU before the year end and
the exhibition at CES 2017.
These patent applications are in addition to the exclusive
worldwide license granted to CloudTag by Imec for the algorithms
developed for use in the Company's hardware devices. Source code
relating to a mobile application, Cloud analytics and user dynamic
feedback loop, have largely been developed in-house by the
Company.
CES & ISPO 2017
CloudTag is pleased to confirm that it will be exhibiting the
CloudTag Track along with other new products and features at CES
January 2017 in Las Vegas USA and ISPO Munich in February 2017. For
CES, the Company has reserved a stand in the centre of the wearable
technology sector.
3. Loan Notes
On 7 November 2016, the Company announced that it had agreed to
issue senior unsecured zero coupon convertible notes with a term of
12 months ("Notes"), to L1 Capital Global Opportunities Master Fund
("L1") to raise up to GBP4.05 million (before expenses). The Notes
have an aggregate nominal value of up to GBP4.5 million and have
and will be issued at a 10% discount to nominal value in up to two
tranches. Upon conversion of the Notes into new ordinary shares in
the Company ("Conversion Shares"), the Company will also issue L1
with one warrant ("Warrant") for each Conversion Share, which are
governed by the terms of a Warrant Instrument. The Notes and the
Warrant Instrument are referred to herein as the "Conditional
Subscription Agreements".
As announced on 10 November 2016, the first tranche of up to
GBP2.5 million in nominal value of Notes has been issued to L1 at a
total subscription price of GBP2.25 million (before expenses)
("Tranche 1 Notes"). The Company confirms that it has received
GBP1.44 million (net of expenses and the Escrow Amount herein
described) pursuant to this issue and GBP637,500 has been placed in
escrow ("Escrow Amount") until 17 December 2016 (the "Escrow
Period"). The Escrow Amount is expected to be released to the
Company subject to L1 notifying the Company in writing that the
"Escrow Release Condition" has been met. The Escrow Release
Condition shall be satisfied on the earlier of: (i) an announcement
that the Company has sufficient share authority, approved by
Shareholders at a general meeting, to issue at least 70,000,000
Ordinary Shares (free from pre-emptive or other preferential rights
or restrictions) or (ii) the volume weighted average price of the
Company's ordinary shares having exceeded 14 pence per share for
any five consecutive trading days.
The Company announced on 14 November 2016 that GBP700,000 of
Tranche 1 Notes (based on the nominal value of such notes) had been
converted into 7,368,422 new ordinary shares of the Company and
that 7,368,422 warrants had been issued to L1 with an exercise
price the lower of a) 90% of the closing bid price per ordinary
share on the day immediately prior to the date of exercise of such
warrants or b) 11.25 pence per share.
The Company further announced on 23 November 2016 that
GBP600,000 of Tranche 1 Notes (based on the nominal value of such
notes) had been converted into 6,315,790 new ordinary shares of the
Company and that 6,315,790 warrants had been issued to L1 with an
exercise price the lower of a) 90% of the closing bid price per
ordinary share on the day immediately prior to the date of exercise
of such warrants or b) 13.125 pence per share. Application for
admission of 6,315,790 new ordinary shares to trading on AIM has
been made and is expected to occur on or around 28 November
2016.
The issue of the proposed second tranche of GBP2.0 million in
nominal value of Notes ("Tranche 2 Notes") (for which the
subscription price is GBP1.80 million) 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"). The
Issue of the Tranche 2 Notes is also conditional upon (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
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 during the extended period, 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.
Further detail on the terms and conditions of the Notes and the
Warrants are set out in the Company's announcement dated 7 November
2016. Following the two conversions of the Tranche 1 Notes to date
the remaining nominal balance of the outstanding Tranche 1 Notes
held by L1 is GBP1.2 million.
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.
As noted above, following the issue of the Tranche 1 Notes,
13,684,212 warrants have to date been issued to L1.
4. Director Fee Shares
Messrs Wakely, Bereika and Ben-Haim, all directors of the
Company, have agreed to be paid all or part of their remuneration
in new ordinary shares with the most recent share payments to them
having been announced on 29 April 2016. Mr Ben-Haim is paid a
combination of cash and shares. A payment for the interim period to
30 September 2016 will be made to them if Resolution 2 is approved.
Looking forward, payments are expected to be made immediately
following the end of each calendar quarter except if the Company is
in a Close Period at that time ("Director Fee Shares").
Historically, the Company has utilised its authority granted at the
2016 AGM (Resolution 7c) to issue shares such as this in relation
to fees to directors, employees and certain third party
contractors. The Directors will not use this existing authority for
directors fees in the future but will retain said authority where
possible for the issue of shares for the settlement of third party
invoices for general working capital purposes. Accordingly, it is
proposed in resolution 2, that a specific authority to disapply
pre-emption rights be sought in respect of the Director Fee
Shares.
5. Recommendation
The Directors believe that the Resolutions are in the best
interests of the Company and 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 30,725,507 Ordinary Shares, representing approximately
7.97% of the current issued share capital of the Company (assuming
the 6,315,790 new ordinary shares are admitted to trading on AIM
pursuant to the conversion of GBP600,000 of Tranche 1 Notes by L1
announced on 23 November 2016)."
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
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