TIDMBOOM
RNS Number : 0223V
Audioboom Group PLC
25 January 2017
25 January 2017
Audioboom Group plc
("Audioboom" or the "Company")
Acquisition of NLP and AI development company SONR News Limited
("SONR")
Issue of GBP1m convertible loan note
Audioboom, the leading spoken word audio on-demand platform for
hosting, distributing and monetising content, has entered into a
conditional sale and purchase agreement to acquire the
Neuro-linguistic Programming ('NLP') and Artificial Intelligence
('AI') development company, SONR. The consideration for the
acquisition will be approximately GBP1.42 million, to be satisfied
by the issue of shares in Audioboom at an equivalent of 2.5p per
share.
A new GBP1m convertible loan note has been issued to support the
working capital requirements of the combined Audioboom group and
SONR businesses.
The global spend on radio advertising is around US$19 billion
(source: WPP & IAB research). By the end of 2017, it is
estimated that 40% of audio will be consumed digitally (source:
Edison & NPR research), creating a potential digital audio
advertising market worth US$7.6 billion. Access to this nascent,
fast growing market is being hampered by a lack of technology that
is fit for purpose; advertising agencies are suffering from a lack
of real time data to inform their programmatic buying
platforms.
SONR is developing algorithms which will allow Audioboom to
accelerate the creation and phased introduction of industry
leading, plug-in, intelligent data management platforms that will
better inform programmatic ad-serving solutions and audio
recommendation engines over the next 12 months.
SONR's algorithms are currently capable of generating vast
numbers of audience specific data-points and future development
plans will see these algorithms being developed specifically for
brand advertising targeting. The Board believes that this, combined
with the further development and integration of audio to text
transcription technologies, will allow Audioboom to build ad-server
solutions and, ultimately, a proprietary ad-server that will
facilitate programmatic ad placement in the digital audio space
through targeted advertising in scale.
SONR also has a suite of proprietary social media search and
discovery products, which the Board believes will further enhance
Audioboom's syndication and distribution of audio to its target
consumer users, with the aim of increasing user engagement and
raising CPM (cost per thousand listens that advertisers pay)
rates.
In addition, Audioboom has issued a GBP1,000,000 convertible
loan note to Candy Ventures SARL (an investment vehicle controlled
by Nick Candy). The loan note can be drawn down before 30 June
2017, attracts interest at a rate of 10% per annum which is payable
on the redemption, repayment or conversion of the loan notes and is
convertible into ordinary shares in the Company at 2.5p per share
or, if lower, a 20% discount to the price of any future funding
round of the Company greater than GBP2 million (subject to a
minimum price of 1.75p per share). The loan note will be used to
fund the working capital requirements of the Audioboom group and
SONR businesses. Taking account of the full proceeds of the
convertible loan note, the Company will have cash, or cash
equivalents, of approximately GBP1.31 million. The Board has
previously stated that it is targeting positive cash-flow in Q1
2018 and it will consider further financing options this year to
fund it through to that breakeven cash position.
Rob Proctor, CEO of Audioboom, said:
"We believe that the acquisition of SONR is a true game changer,
enabling a step-change in our technical development capabilities.
NLP and AI are set to affect all key elements of the digital
industry and, therefore, all of our lives. Audioboom already has
first mover advantage in digital audio ad placement. SONR's
ground-breaking sentiment and context analysis algorithms will
allow us to place Audioboom in the vanguard of this burgeoning
market.
The continued support of Candy Ventures, via the convertible,
demonstrates their confidence in the management's strategy and
future plans for the Company. The funds will be used to integrate
SONR's leading edge NLP and AI technologies into Audioboom's
ad-server solutions and platform and support the working capital
requirements of the combined Audioboom and SONR businesses."
Acquisition Agreement
Audioboom has made an offer to the shareholders of SONR to
purchase the entire issued share capital of SONR ("Acquisition").
Pursuant to such offer, the holders of 76% of the issued share
capital in SONR have entered into a sale and purchase agreement
with Audioboom ("Acquisition Agreement").
The Acquisition Agreement is conditional on:
-- the offer to purchase the entire issued share capital of SONR
being accepted by holders of not less than 90% of the issued share
capital of SONR; and
-- the receipt of all third party, regulatory or taxation
consents, orders, clearances, authorisations or approvals required
in connection with the Acquisition or the issue of the
Consideration Shares (as defined below).
In the event that these conditions are not satisfied (or, where
possible, waived) by 31 March 2017, the Acquisition Agreement will
terminate and the Acquisition will not complete.
Upon the acquisition of not less than 90% of the issued share
capital of SONR becoming unconditional, Audioboom intends to
exercise, if required, the squeeze-out rights available to it under
section 979 of the Companies Act 2006 to acquire the remaining
balance of the issued share capital of SONR on a compulsory
basis.
Subject to adjustment, the aggregate consideration for the
Acquisition will be GBP1,423,455.39 (being an agreed acquisition
price of GBP1.8 million less net liabilities of GBP376,544.61),
which will be satisfied by the allotment and issue of up to
56,938,216 million ordinary shares of no par value each in the
capital of Audioboom ("Ordinary Shares") credited as fully paid at
2.5 pence per Ordinary Share ("Consideration Shares"). The
Consideration Shares will be allotted and issued following
determination of completion accounts. The Consideration Shares,
when admitted to trading on AIM, will rank pari passu in all
respects with Ordinary Shares already in issue.
The Acquisition Agreement provides for a post-completion net
tangible asset adjustment in favour of Audioboom. In the event that
the net tangible assets are less than the estimated net tangible
assets stated in the Acquisition Agreement ("Negative Adjustment
Amount"), the consideration payable by Audioboom will be reduced by
the Negative Adjustment Amount and the number of Consideration
Shares issuable will be reduced accordingly. Except in limited
circumstances, each of the recipients of Consideration Shares will
not be entitled to dispose of their Consideration Shares for a
period of nine months after the date of admission to AIM of the
Consideration Shares.
For the 12 month period to 31 December 2015 (the latest date to
which statutory accounts have been prepared), SONR recorded a loss
after tax of GBP1,486,383. Its net assets as at that date were
GBP4,347,097.
Related Party Transaction - Acquisition
Candy Ventures SARL currently holds approximately 29.5% of the
issued share capital of SONR. Candy Ventures SARL is a substantial
shareholder of Audioboom, having an interest in approximately 12.7%
of the voting rights of Audioboom, and is therefore a related party
of Audioboom as defined by the AIM Rules for Companies ("AIM
Rules"). Nick Candy (90% shareholder of Candy Ventures SARL) is
also considered to be a related party of Audioboom by reason of his
shareholding in Candy Ventures SARL and because of his having been
a director of Audioboom within the twelve month period preceding
the date of entry into the Acquisition Agreement. Steven Smith, a
director of the Company, is also a director and 10% shareholder of
Candy Ventures SARL and accordingly he too is a related party of
Audioboom.
Robert Proctor, Chief Executive Officer of the Company, is also
deemed to be a related party of Audioboom by reason of his previous
material shareholding in SONR which was transferred to Candy
Ventures SARL on 3 August 2016 for nominal consideration. In
addition, Amanda Brown, director of SONR, is also deemed to be a
related party of Audioboom by reason of her being an associate of
Robert Proctor.
As such, the Acquisition constitutes a related party transaction
pursuant to AIM Rule 13. The directors of Audioboom (with the
exception of Robert Proctor and Steven Smith) consider, having
consulted with Audioboom's nominated adviser, Liberum Capital
Limited, that the terms of the Acquisition Agreement and the
Acquisition are fair and reasonable insofar as Audioboom's
shareholders are concerned.
Loan Note Instrument
In order to fund the working capital requirements of the
combined Audioboom group and SONR businesses, Candy Ventures SARL
("Noteholder") has agreed to subscribe for up to GBP1,000,000
convertible loan notes ("Convertible Loan Notes") which have been
created pursuant to a loan note instrument ("Instrument"). The
Convertible Loan Notes attract interest at a rate of 10% per annum
which is payable on the redemption, repayment or conversion of the
Convertible Loan Notes. The Convertible Loan Notes will be secured
by a debenture over all the undertaking and assets of Audioboom
("Debenture"). The Convertible Loan Notes are convertible at the
conversion price (as detailed below) in whole (but not part) into
fully paid Ordinary Shares:
-- at the election of the Noteholder at any time; and
-- at the election of Audioboom on or at any time after the
completion of the fundraising next following the date of the
Instrument pursuant to which Audioboom raises over GBP2,000,000 in
one transaction from the issue of Ordinary Shares to any person(s)
(excluding the conversion of any Convertible Loan Notes into
Ordinary Shares) ("Relevant Fundraising").
The conversion price will be the lower of:
-- 2.5p; and
-- (if applicable) a price equivalent to 80% of the price at
which Ordinary Shares are issued to investors pursuant to a
Relevant Fundraising, subject to a floor price of 1.75p.
Pursuant to the terms of the Instrument the Noteholder will
subscribe for GBP400,000 of Convertible Loan Notes on the date of
the Instrument and the Company may require the Noteholder to
subscribe for:
- a further GBP400,000 of Convertible Loan Notes not earlier
than 30 days from the date of the Instrument; and
- a further GBP200,000 of Convertible Loan Notes not earlier
than 60 days from the date of the Instrument,
providing that the Noteholder will not be required to subscribe
for any Convertible Loan Notes after 30 June 2017.
The obligation of the Noteholder to subscribe for the
Convertible Loan Notes is subject to there being no event of
default having occurred, and which is continuing, on the due date
for payment of any subscription for Convertible Loan Notes. The
Noteholder's conversion rights are limited to the extent that the
Company has adequate shareholder authority to convert.
Unless the Noteholder has given prior notice to convert, the
Convertible Loan Notes will be repaid immediately prior to the
acceptance of an offer or the making of an agreement pursuant to
which any person or those acting in concert is or becomes bound to
acquire the whole of the ordinary share capital of Audioboom or a
controlling interest in the share capital of Audioboom. For these
purposes a controlling interest means shares conferring in the
aggregate 50% or more of the total voting rights conferred by all
the shares in the capital of Audioboom in issue and conferring the
right to vote at all general meetings of Audioboom.
Unless previously repaid or converted the Convertible Loan Notes
will be redeemed at par by Audioboom on the date falling two years
after the date of the Instrument. In addition, Audioboom has the
right to prepay any of the Notes on 5 business days' prior notice
in writing to the Noteholder.
Related Party Transaction - Loan Note Instrument
Candy Ventures SARL will be the Noteholder. Candy Ventures SARL
is a substantial shareholder of Audioboom, having an interest in
approximately 12.7% of the voting rights of Audioboom, and is
therefore a related party of Audioboom as defined by the AIM Rules.
Nick Candy (90% shareholder of Candy Ventures SARL) is also
considered to be a related party of Audioboom by reason of his
shareholding in Candy Ventures SARL and because of his having been
a director of Audioboom within the twelve month period preceding
the date of the Instrument and the Debenture. Steven Smith, a
director of the Company, is also a director and 10% shareholder of
Candy Ventures SARL and accordingly he too is a related party of
Audioboom.
As such, the Instrument and the Debenture constitute related
party transactions pursuant to AIM Rule 13. The directors of
Audioboom (with the exception of Steven Smith and, given his
interest in the Acquisition, Robert Proctor) consider, having
consulted with Audioboom's nominated adviser, Liberum Capital
Limited, that the terms of the Instrument and the Debenture are
fair and reasonable insofar as Audioboom's shareholders are
concerned.
Enquiries:
Audioboom Group plc
Rob Proctor, Chief Executive Tel: +44 (0)20 7403 6688
Officer
David McDonagh, Chief
Financial Officer
Liberum (NOMAD and Broker) Tel: +44 (0)20 3100 2222
Neil Patel / Richard Bootle
Hudson Sandler
Cat Valentine / Jocelyn Tel: +44 (0)20 7796 4133
Spottiswoode
About Audioboom
Audioboom is the leading spoken--word audio platform for
hosting, distributing and monetising content.
Audioboom works with more than 3,000 active broadcasters,
content creators and podcasters around the world -- including
Cumulus, the BBC, NewsCorp, Associated Press, NBC Sports Radio,
Undisclosed and Global -- hosting approximately 9,500 content
channels.
Audioboom's hosting and distribution platform allows partners to
embed, share via social channels and re--syndicate their content.
Audioboom content receives more than 40m unique file requests per
month, and growing. Additionally, Audioboom works with its partners
to monetise their audio via live in--reads, the dynamic insertion
of pre and post roll audio adverts, and video ads.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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January 25, 2017 02:00 ET (07:00 GMT)
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