TIDMNKTN
RNS Number : 2326R
Nektan PLC
25 October 2019
25 October 2019
NEKTAN PLC
("Nektan", the "Company" or the "Group")
Result of Placing
and
Update on Inter-Conditional Transactions
Result of Placing
Further to the Company's announcement on 18 October 2019, Nektan
plc (AIM: NKTN), the fast-growing international gaming technology
platform and services provider, is pleased to announce that it has
successfully secured subscription agreements and an intention to
subscribe from certain investors ("Subscription Agreements") to
raise GBP2.6 million, before expenses, through the issue of an
aggregate of 52 million new ordinary shares of 1 penny each in the
Company ("Ordinary Shares") at a price of 5 pence per share (the
"Placing Price"), conditional, inter alia, on the passing of
resolutions ("Resolutions") at an extraordinary general meeting of
the Company's shareholders ("EGM") (together, the "Placing"). As
announced on 18 September 2019, the unsecured loan of GBP0.35
million which was extended to the Company ahead of the Placing as
part of the support received from certain shareholders forms part
of the Subscription Agreements. Following a proposed restructure,
the Company is pleased that the overall working capital
requirements prior to the Company becoming cash flow positive, as
set out below, have been reduced to GBP2.5 million (net of
expenses) enabling a reduced fund raise. The Directors believe that
given the short-term commercial prospects referred to below in
addition to the reduced dilutive effect, the reduction in the size
of the fund raise will be in the best interests of
shareholders.
In addition, and inter-conditionally, the Company is delighted
to have received commitments to:
-- convert all of the remaining Series A CLNs and interest
thereon (subject to further amendment of the instrument) at the
Placing Price;
-- to amend the interest rate, waive interest and to extend the term of the Series B CLNs; and
-- for Gary Shaw and VTA to amend their director loans, entered
into in July 2017 ("Facility Agreements").
Background to the Placing
As announced in the Company's trading update on 31 July 2019,
during FY19 total revenue increased by 14.8 per cent. over FY18
with good growth across both the B2C and B2B segments despite the
headwinds experienced in the second half. As stated in the update,
management has taken decisive action to ensure the Group is
structured appropriately to these market conditions, whilst
providing the strategic platform for planned expansion and growth
in international markets. This, in conjunction with a further
realignment towards higher margin activities, will, the Board
believes, deliver an improvement in the Company's profitability. As
announced 18 September 2019, in the B2B division, the Group was
live with over 12 partners in 6 markets across Asia and Africa and
had integrations underway with 19 new partners in these markets.
The Group is pleased to report that 5 partners have launched since
then and a further agreement has been reached to launch with
another operator in Europe. The Group now has 17 partners live with
a further 15 scheduled to launch before the end of January
2020.
However, despite this improved annual revenue result, due to the
decline in H2 FY19 performance and continued investment in the
development of the Company's operations, the Group continues to be
loss making and, the Group requires further funding in order to
support the integrations outlined above, which the Directors
believe, once fully ramped up, should result in the Group becoming
cash flow positive in the second half of its current financial
year.
Having considered the available funding options and taking the
continuing cash requirements of the Group into consideration, the
Board decided to undertake the Placing, amendment and conversion of
the Series A CLN, restructure of the Series B CLN and extending the
maturity of the Facility Agreements. This will result in an
improved working capital position for the Group and also
significantly strengthen the balance sheet.
In addition, all outstanding Remote Gaming Duty ("RGD") payment
issues have been identified and communicated to HMRC and the
Company's auditors, with a view to agreeing a payment plan as soon
as possible for the Company's subsidiary Nektan Gibraltar Limited
("NGL") with whom the liability to HMRC lies. The Company and NGL
will require confirmation from HMRC regarding a payment plan for
the outstanding RGD to be agreed as part of auditor sign off of its
annual report and accounts. Should HMRC refuse a payment plan or
take further steps to enforce payment more quickly than NGL can
afford, then further funding may be required or restructuring steps
may be taken in respect of NGL.
The Placing
The Company has entered into the Subscription Agreements, under
which the subscribers will invest a minimum of GBP2.5 million (net
of expenses) into the Company, subject to shareholders passing the
Resolutions.
The Facility Agreement Amendments and debt conversion
Gary Shaw, Executive Director of the Company, and VTA, a company
associated with Sandeep Reddy, a Non-Executive Director of the
Company, have agreed with the Company to amend the Facility
Agreements such that their redemption date shall be extended to 29
April 2021. In consideration of this further amendment of the
redemption date and the amendments made to the interest rate and
redemption date in February 2019, Gary Shaw will be issued with
330,000 warrants and VTA 500,000 warrants at the Placing Price
("2019 Debt Warrants"). Each 2019 Debt Warrant will confer on the
warrant holder the right to subscribe for one new Ordinary Share at
an exercise price of 5 pence for up to 5 years. Any transfer of
2019 Debt Warrants must be in minimum tranches of 20,000 warrants
or, if lower, the entirety of the 2019 Debt Warrant holding.
In addition, VTA is owed GBP90,000 by the Company for the set-up
costs of the Company's India operations. This liability to VTA, as
recorded in the accounts, will be settled through the issue of 1.8
million new Ordinary Shares at the Placing Price.
The Series A CLN Amendment and Conversion and the Series B CLN
Amendment
Pursuant to a deed of amendment and a resolution of holders of
the CLNs ("Noteholders"), signed by the requisite number of
Noteholders and the conversion notices received by the Company, the
remaining principal balance of GBP3,447,267 of the Series A CLNs,
plus all outstanding interest of GBP470,936 at 18 November 2019
(the proposed date of the EGM), will convert into new Ordinary
Shares at the Placing Price resulting in a total of 78,364,063 new
Ordinary Shares being issued.
Pursuant to a deed of amendment signed by the Noteholders of the
Series B CLN, the principal balance of GBP1,100,000 of the Series B
CLN, which currently has interest paid quarterly on a coupon of 10
per cent., will have its terms amended such that:
-- the repayment date is extended by 3 years from 29 April 2020 to 31 March 2023; and
-- the noteholders will waive their right to the coupon until 1
January 2021, from when a coupon of 5 per cent. per annum will
become payable.
All other conditions of the Series B CLNs will remain as per the
original agreement, with the Company having the ability to convert
the Series B CLNs where the Company's share price for 10 dealing
days prior to serving the notice to convert is equal to or above
the conversion price, which is defined as 125% of the price at
which new ordinary shares were last issued.
Use of proceeds and working capital
The funds raised by the Placing will be used to support working
capital requirements of the Company's operations; to allow the
Company to support the continued growth of its European managed
gaming solutions business and the continued development of its B2B
software licensing and games distribution business.
As the Placing, the Series A CLN amendment, the CLN conversion,
the Series B CLN amendment, Facility Agreement amendment and other
matters are conditional, inter alia, upon the passing of the
Resolutions, shareholders should be aware that, if the Resolutions
are not passed, the proceeds of the Placing will not be received by
the Company. In such circumstances, the Company would need urgently
to pursue additional or alternative funding sources which, if they
are available at all, may be expensive and/or onerous for the
Company and/or asset sales or part sales.
Related party transactions
Gary Shaw, Executive Director of the Company, and Sandeep Reddy,
a Non-Executive Director of the Company, have, either directly or
through their associated companies, current holdings of 17,996,291,
and 6,779,485 Ordinary Shares respectively (representing 16.1 per
cent. and 6.1 per cent. of the Company's issued share capital
respectively). Gary Shaw and Sandeep Reddy directly or indirectly,
have outstanding loans of GBP535,000 and GBP800,000 respectively to
the Company under the Facility Agreements. As Directors, their
initial participation in the debt fundraise constituted a related
party transaction under the AIM Rules for Companies and the
amendment of those Facility Agreements now constitute further
related party transactions under the AIM Rules for Companies.
The grant of the 2019 Debt Warrants as consideration for the
amendment of the Facility Agreements and the payment of the VTA
liability of GBP90,000 by the issue of new Ordinary Shares
represent related party transactions under the AIM Rules for
Companies.
In addition, VTA is a holder of GBP1,000,000 Series A CLNs with
accrued interest of GBP271,918 at 18 November 2019 (the proposed
date of the EGM) and therefore the Series A CLN Amendment
represents a further related party transaction under the AIM Rules
for Companies
Pursuant to the Placing, the Company has entered into
subscription agreement with Tosca Master, a fund managed by
Toscafund Asset Management LLP ("Toscafund"), which has subscribed
for, in aggregate, 26,700,000 new Ordinary Shares at the Placing
Price. In addition, John de la Hey (via Cheviot Capital), an
individual connected to Toscafund, has subscribed for 9,000,000 new
Ordinary Shares at the Placing Price. As at the date of this
announcement, Toscafund, along with its connected parties, holds
31,623,020 Ordinary Shares representing approximately 28.27 per
cent. of the issued share capital of the Company. As such,
Toscafund is a substantial shareholder of the Company and its
participation in the Placing is a related party transaction under
the AIM Rules for Companies.
Jim Wilkinson (the "Independent Director") considers, having
consulted with the Company's nominated adviser, Shore Capital, that
each of the amended terms of the Facility Agreements, the issue of
the 2019 Debt Warrants, the Series A CLN Amendment, the conversion
of the debt owed to VTA and the terms of Toscafund's participation
in the Placing are fair and reasonable insofar as the Company's
shareholders are concerned.
EGM
An Extraordinary General Meeting of the Company is expected to
be convened at the offices of K&L Gates LLP, One New Change,
London, EC4M 9AF and by telephone using telephone number 0800 528
2077 for callers in the UK and +44 (0)20 7855 3285 for callers from
outside the UK and passcode 15175426 on 18 November 2019 at 11.00
am (UK time) to consider and, if deemed fit, to approve the
resolutions put to shareholders. A circular and notice to
shareholders convening the Extraordinary General Meeting, together
with a form of proxy and form of direction is expected to be posted
later today.
Admission
Application will be made to the London Stock Exchange for the
admission of the 127,474,063 new Ordinary Shares to trading on AIM
(other than the Deferred Settlement Shares as defined
below)("Admission"). It is expected that Admission will occur and
that dealings will commence at 8.00am on 19 November 2019. The new
Ordinary Shares, when issued, will rank pari passu with the
existing Ordinary Shares. On Admission, the Company will have
239,325,665 Ordinary Shares in issue and admitted to trading on
AIM. This figure may be used by shareholders as the denominator for
the calculations by which they will determine if they are required
to notify their interest in, or a change to their interest in, the
Company under the Financial Conduct Authority's Disclosure Guidance
and Transparency Rules.
The Company has agreed that settlement be deferred in respect of
GBP234,000, forming part of the Placing, until 31 January 2020. As
such, 4,690,000 new Ordinary Shares ("Deferred Settlement Shares")
are expected to be admitted to trading on AIM and it is expected
that dealings will commence at 8.00am on 3 February 2020. The
Deferred Settlement Shares, when issued, will rank pari passu with
the then existing Ordinary Shares.
Further announcements will be made as appropriate.
For further information on the Group, please contact:
Nektan
Jim Wilkinson, Non-Executive Chairman
Gary Shaw, Executive Director and Interim CEO +44 203 478 2648
Shore Capital (Nominated Adviser, Joint Broker and Joint Bookrunner)
Tom Griffiths / David Coaten +44 20 7408 4050
-----------------
Whitman Howard (Joint Bookrunner)
Nick Lovering +44 20 7659 1234
-----------------
Further information on Nektan can be found on the Group's
website at www.nektan.com.
About Nektan:
Nektan is a fast growing, international gaming technology and
services provider, specialising in mobile casino. It licenses its
proprietary technology to leading operators, including BetVictor,
and provides end-to-end technology and white label casino services
for leading brands, including News International's The Sun
Play.
Nektan's full end-to-end technology platform, Evolve, enables
the management of the full customer experience and back-office
operations, allowing partners to focus on marketing the product to
their consumers.
The E-Lite platform is Nektan's B2B gaming content aggregator
and bonusing platform that delivers a wide range of premium content
from the world's leading game studios. It is an easily-integrated
add on module for operators, giving them an array of options and
flexibility on how they manage and distribute a breadth of premium
gaming content across their networks.
Nektan has a material stake in US-based interactive gaming
operator Rapid Games, which provides US land-based casinos with an
in-venue mobile gaming solution. It allows operators to add mobile
technology and content making products accessible to players across
both cabinets and mobile devices inside casinos.
Headquartered in Gibraltar, Nektan is regulated by the Gibraltar
Licensing Authority, the UK Gambling Commission and the Information
Commissioners Office. As a socially responsible license holder,
Nektan endeavours to deliver a safe, secure and robust player
gaming experience.
Nektan plc was admitted to the AIM market of the London Stock
Exchange in November 2014.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ROILLFLRIVLEFIA
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