TIDMFLX
RNS Number : 3046X
Falanx Group Limited
05 May 2016
Falanx Group Limited ("Falanx" or "the Company")
Acquisition of Advanced Security Consulting Limited
and
Placing and issue of Loan Notes to raise GBP1.55 million
Falanx Group (AIM:FLX) announces that on 5 May 2016, the Company
agreed to acquire the entire issued share capital of Advanced
Security Consulting Limited ("ASC") for a total consideration of
approximately GBP435,000 ("Acquisition"). Falanx also announces a
placing ("Placing") of new ordinary shares of no par value in the
capital of the Company ("Ordinary Shares") and the issue of senior
unsecured zero coupon convertible loan notes ("Loan Notes") raising
total gross proceeds of approximately GBP1.55 million.
Acquisition
ASC is a market leading cyber security services organisation
offering consulting, managed services, penetration testing and
training. The organisation utilises senior trusted advisors and
true industry experts with over 18 years of experience covering
multiple sectors including financial services, pharmaceuticals and
healthcare. ASC recorded unaudited revenue and pre-tax profits of
GBP348,000 and GBP222,000 in the year ended 30(th) September 2015.
The net assets of ASC at 30(th) September 2015 were GBP46,000. ASC
has continued to trade well since its last financial year and the
Acquisition will be immediately earnings-enhancing.
ASC was founded in 2012 by Jay Abbott, its Managing Director and
sole shareholder. Mr Abbott previously led the UK National Threat
& Vulnerability Management Practice of PriceWaterhouseCoopers.
Jay is also the chair of the Competitions Board for the UK Cyber
Security Challenge and a member of the Defence and Security Board
of TechUK. He will now become Managing Director of the Falanx Cyber
Division, driving commercial market penetration, technology roadmap
and innovation.
To satisfy the consideration for the Acquisition, Falanx will
issue 7,125,536 new Ordinary Shares and pay GBP150,000 in cash to
Mr Abbott, valuing the entire issued share capital of ASC at
approximately GBP435,000[1]. The Ordinary Shares to be issued to Mr
Abbott, which represent approximately 10% of Falanx's existing
issued share capital, are subject to lock-ins expiring on 4 May
2018 with a subsequent 12 month agreement of orderly market
provisions via Falanx.
Placing and Loan Notes
On 5 May 2016, Falanx also placed 25,106,250 new Ordinary Shares
with certain existing shareholders and new investors at a price of
4 pence per Ordinary Share to raise gross proceeds of approximately
GBP1,000,000. The PrimaryBid.com platform was used to raise
GBP415,000 of the total gross proceeds. The Ordinary Shares to be
issued pursuant to the Placing represent approximately 35.2% of the
Company's existing issued share capital and, together with the
Ordinary Shares to be issued pursuant to the Acquisition will
represent, in aggregate, approximately 31.1% of the Company's then
enlarged issued share capital.
The Company will also issue participants in the Placing with
warrants exercisable over a further 25,106,250 Ordinary Shares
("Warrants"). The Warrants are exercisable at 6 pence per Ordinary
Share between 11 May 2016 and 10 May 2019.
On 5 May 2016, the Company issued the Loan Notes to Darwin
Capital Limited ("Loan Note Holder" and also a participant in the
Placing), raising net proceeds of GBP495,000 for the Company. The
Loan Notes, which carry a fixed and floating senior charge over the
assets of the Company, fall due for redemption on 5 November 2016
("Redemption Date") in the sum of GBP550,000 ("Principal
Amount").
Falanx will use the proceeds from the Placing and issue of the
Loan Notes to partially fund the Acquisition and provide further
capital for the Company as enlarged by the Acquisition to execute
its growth strategy.
Loan Notes - further terms
The Loan Note Holder can, at its choosing, convert any or all of
the Loan Notes in the Principal Amount on or prior to the
Redemption Date into Ordinary Shares at the rate of 10 pence per
share. On conversion of the Loan Notes into Ordinary Shares, the
Company will also issue the Loan Note Holder with one Warrant for
each newly issued Ordinary Share, exercisable on the same terms as
for Warrrants issued to participants in the Placing except that the
expiry date for exercise shall be 10 May 2021.
The Company can redeem the Loan Notes for cash at any time prior
to the Redemption Date for 105% of the Principal Amount, in which
case the Company may elect to cancel or enforce exercise of half of
the Warrants issued to the Loan Note Holder (in the case of the
latter, subject to the arithmetic average of the daily volume
weighted average price for the preceding 20 consecutive trading
days being equal to or greater than 8 pence per Ordinary Share).
The terms of the Loan Notes contain anti-dilutive, cross default,
change of control, negative pledge and other provisions in favour
of the Loan Note Holder that Falanx's directors consider standard
for an instrument of this nature.
Should the Loan Note Holder convert its Loan Notes in full and
exercise all of its Warrants, its interest would be in 13,500,000
Ordinary Shares, representing approximately 11.7% of the Company's
then enlarged issued share capital (as also enlarged by the issue
of the Ordinary Shares pursuant to the Placing and Acquisition and
assuming no other changes).
Related Party Transaction
Ruffer LLP ("Ruffer") is a related party under the AIM Rules for
Companies ("AIM Rules") by virtue of being a substantial
shareholder in the Company as defined in the AIM Rules. The issue
of 3,225,000 Ordinary Shares and 3,225,000 Warrants to Ruffer
pursuant to the Placing constitutes a related party transaction as
defined in the AIM Rules. AIM Rule 16 also requires all
transactions between the Company and Ruffer completed during the
twelve months prior to the latest transaction to be aggregated.
Accordingly, Ruffer's participation in the Placing and the issue of
Warrants to Ruffer constitute a related party transaction for the
purposes of Rules 13 and 16 of the AIM Rules.
Accordingly, as required by the AIM Rules, the directors of the
Company consider, having consulted with the Company's nominated
adviser, Panmure Gordon (UK) Limited, that the terms of Ruffer's
participation in the Placing and the issue of Warrants to Ruffer
are fair and reasonable insofar as the Company's shareholders are
concerned.
Admission of the new Ordinary Shares to trading on AIM
Application will be made for admission of the 32,231,786 new
Ordinary Shares to be issued pursuant to the Placing and
Acquisition to trading on the AIM Market of the London Stock
Exchange, which is expected to take place on or around 8.00 a.m. on
11 May 2016 ("Admission"). Completion of the Acquisition and the
Placing is conditional on Admission becoming effective. The new
Ordinary Shares will, when issued, be credited as fully paid and
will rank equally in all respects with the existing Ordinary
Shares, including the right to receive any dividend or other
distribution declared, made or paid after Admission.
Following Admission, the Company's enlarged issued share capital
will comprise 103,487,154 Ordinary Shares carrying one vote per
share. The Company does not hold any Ordinary Shares in
treasury.
Chairman of Falanx, Mike Read said:
"I am delighted to announce the acquisition of ASC. We are very
excited to be working with Jay Abbott, who is a very highly
regarded authority in cyber security. The acquisition will help us
to offer new services to our existing blue-chip Falanx Intelligence
clients and to a wider range of organisations."
Falanx's CEO, John Blamire, said:
"Falanx recently restructured to enhance its cyber security
services and we now have the foundations in place to offer cost
effective solutions to a full range of clients. We are working at
Government level, advising five current UK Government Departments
and Agencies, as well providing solutions to blue chip
organisations and SMEs. ASC's capabilities are entirely
complementary to our own and will allow us to offer a compelling
and integrated cyber security solution to organisations of all
types, delivered by highly qualified experts."
Enquiries:
Falanx Group Limited
John Blamire, Chief Executive
www.falanxgroup.com
www.falanxassuria.com + 44 (0) 20 7856 9457
Panmure Gordon (UK) Limited
Nominated Adviser & Broker +44 (0) 20 7886 2500
Andrew Godber / Peter
Steel
Redleaf Communications +44 (0) 20 7382 4730
Charlie Geller falanx@redleafpr.com
Susie Hudson
Notes to Editors
-- Falanx Group Limited, is a global intelligence, security and
cyber defence provider working with blue chip and government
clients.
-- The Group has three business divisions:
- Falanx Intelligence: Political & Security Risk and
Business Intelligence services
- Falanx Cyber: Comprehensive cloud-based cyber security
services
- Falanx Resilience: Security Consultancy, Crisis Management and
asset and facility security
-- The Group listed on AIM in June 2013 under ticker FLX
-- For more information: http://www.falanxgroup.com/
[1] Based on a deemed price of 4 pence per Ordinary Share, being
the price of each Ordinary Share issued pursuant to the Placing
This information is provided by RNS
The company news service from the London Stock Exchange
END
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May 05, 2016 02:00 ET (06:00 GMT)
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