RNS Number:0655I
Freeplay Energy PLC
20 November 2007
20 November 2007
FREEPLAY ENERGY PLC
("Freeplay" or "the Group")
PLACING AND SUBSCRIPTION
The Board of Freeplay Energy plc, the original and leading global brand of
clean, dependable energy products, is pleased to announce that, subject inter
alia to shareholders' approval, the Group proposes to raise approximately #1.47
million (before expenses) by way of a Placing and Subscription of 34,709,751 new
ordinary shares at a price of 5 pence per ordinary share ("New Ordinary
Shares").
Background and reasons for the Placing and Subscription
On 2 August 2007, Freeplay announced a restructuring programme to improve the
performance of the Group and better position it for 2008 and beyond. The
restructuring programme is focusing on maximising the benefits of the
acquisition of Dixie Sales and exploiting the synergies between the two
operating divisions of Freeplay to reduce costs throughout the business. The
restructuring programme will also see the Group exit certain non-core areas and
consolidate sales operations where appropriate.
The planned changes will have no negative effect on the future growth of the
business, with manufacturing, product development and sales functions remaining
unchanged.
In the announcement on 2 August, the Group indicated that good progress had been
made in the following areas:
* Approximately US $1.5 million of cost-savings had been achieved to date,
with the total reduction in Group overhead expected to be up to US $4
million annually;
* Dixie Sales discontinued its motorcycle business unit, the distribution
of Husaberg and Gas Gas products, with effect from 1 September 2007; and
* Dixie Sales had consolidated its warehousing locations in the US from
three to two with no impact on customer service levels.
As part of the restructuring programme, the Board has refined its approach to
its two divisions, Freeplay Energy and Dixie Sales. Based on the complexities of
the different business models, the key focus is to increase revenue in the
Freeplay Energy division and improve profitability and margin on existing sales
in Dixie Sales.
Since August 2007, Freeplay Energy has made further progress in securing
contracts and listings in major retailers. Freeplay Energy continues to trade in
line with management's expectations and had achieved revenue of approximately US
$5.7 million in the ten months to 31 October 2007, as extracted from management
accounts, which represents a 16 per cent. increase over the same prior year
period.
The division has orders of approximately US $1.3 million, which are expected to
be delivered in the current year and includes orders for 10,000 Lifeline radios
for National Initiative for Civic Education, 5,000 Lifeline radios for Unicef
and a US $800,000 order for multiple products for Dixons. Freeplay Energy has
also secured a further order with the Freeplay Foundation, for 119,000 Scout
radios and 2,000 Lifeline radios to the National Democratic Institute for
International Affairs, which are expected to be delivered by May 2008.
As announced in September 2007, Dixie Sales revenues were slightly behind the
prior year as a result of the severe drought conditions in the southeastern
United States negatively impacting its core Outdoor Power Equipment parts
business and a general economic downturn effecting Dixie's planned expansion of
the Power Sports category. However, new business activity continues at a good
pace and Dixie Sales has been successful in attracting a number of new clients,
including Bye Bye Standby Plc, ATK Industries and American Lawn Mower Products.
The Directors estimate that the annual revenue from recent new business wins is
estimated at US $3 million.
Dixie Sales implemented a significant cost reduction program in the latter part
of the second quarter in response to declining business activity outlined above
and current monthly operating expenses have been reduced by approximately 20 per
cent. compared to the first half of the current financial year.
In order that the Group can take advantage of certain new opportunities to
support the development of the Group, and in particular to fund the short-term
inventory and operating costs associated with the contracts outlined above,
Freeplay has an immediate funding requirement of approximately US $3 million.
The Directors estimate that a total of US $6 million will be required to fund
all the working capital requirements of the Group for the next twelve months and
that funding of approximately US $3 million will be sufficient to finance the
Company until April 2008. Therefore in addition to the Placing and Subscription
the Board is exploring alternative funding requirements in the short-term to
provide the further US $3 million funding requirement, which they anticipate may
include one or more of the following alternatives:
* Conversion of the existing Freeplay Energy bank overdraft to a term
loan;
* Disposal of certain assets that may include the divestment of non
strategic components of the Group's business; and
* A further placing of new Ordinary Shares.
Shareholders should be aware that if the Resolutions are not passed at the
General Meeting, the Board will be forced to consider urgently the options
available to it in order to obtain alternative sources of working capital.
Shareholders should note that there can be no guarantee that the Board will
secure the additional US $3 million funding requirement as a result of the
implementation of alternative funding options outlined above.
Details of the Placing and Subscription
The Board is pleased to announce that 34,709,751 New Ordinary Shares have been
placed with/subscribed for by certain institutional and other investors,
including Directors at 5 pence per ordinary share, conditional, inter alia, on
the passing of the Resolutions. The Placing and Subscription will raise
approximately #1.47 million before expenses.
The New Ordinary Shares will represent 41.0 per cent. of the entire issued share
capital of the Company immediately following Admission. The Placing and
Subscription is conditional on the passing of the related Resolutions set out in
the Notice of General Meeting. Application will be made to the London Stock
Exchange for the New Ordinary Shares to be admitted to trading on AIM. The New
Ordinary Shares will, when issued, rank equally in all respects with the
Existing Ordinary Shares, including the right to receive any dividend or other
distribution declared, made or paid following Admission. It is expected that
Admission will become effective and that dealings in the New Ordinary Shares
will commence on 14 December 2007.
Certain Directors and shareholders have made loans to the Company by way of
promissory notes and secured by a charge over the Company's and its UK
subsidiaries assets as follows:
Director/shareholder Amount of loan
Flambard Holdings Limited* #300,000.00
Thomas Gordon Roddick #300,000.00
Andy Polansky #24,390.20
Vincent Mai #146,341.45
John Garcia #97,560.95
Barrett Marketing Group Limited #268,292.65
*Flambard Holdings Limited is a company in which Mr. R.M. Stear is interested.
Except for Flambard Holdings Limited and the promissory note due to Barrett
Marketing Group, each of the loans outlined above have been made by way of
non-interest bearing promissory notes. Flambard Holdings Limited has agreed to
loan a total of #132,924.05 to Freeplay in respect of consultancy fees in
respect of Mr. R.M. Stear's services provided to the Company and, pursuant to a
loan agreement with Freeplay, has provided the balance of #167,075.95 in cash.
In connection with the acquisition of Dixie Sales, Freeplay granted a promissory
note to Barrett Marketing Group Limited in the total amount of US $1,084,500
(#529.024.39) ( "The Note"). The Note matures on the earlier of 20 July 2011 and
the date on which Freeplay issues additional shares in connection with a
financing. The proposed Placing and Subscription would trigger an early
repayment of a substantial amount due under the Note. The total amount
outstanding under the Note as at the date of this document is US $832,509.92.
Barrett Marketing Group has agreed to convert US $550,000 (#268,292.68) of the
outstanding amount due by way of application for new Ordinary Shares at a price
of 5 pence per Ordinary Share, subject to the resolutions at the GM being passed
by Shareholders. The balance of the Note of US $282,309.92 will continue to be
due under the terms of the Note and Barrett Marketing Group Limited has agreed
to waive any obligation to make any earlier repayment of the Note by virtue of
the proposed Placing and Subscription.
Pursuant to the Subscription Agreements, each of the persons referred to above
have agreed to apply the total amounts of their loans by way of application for
new Ordinary Shares at a price of 5 pence per ordinary shares, subject to the
resolutions at the General Meeting being passed by Shareholders. The resolutions
proposed at the General Meeting provide the Board with the authority to issue
the 22,731,705 Subscription Shares pursuant to the conversion of the loans
outlined above.
In addition Richard Court, David Floyd, Rahul Sharma, John Hutchinson, William
Barrett, Edward Barrett and Harold Reiter have entered into Subscription
Agreements to subscribe for 5,478,046 New Ordinary Shares in aggregate.
Certain of the Directors have agreed to participate in the Placing and
Subscription as set out below:
Director Current New Ordinary Number of % of enlarged
Shareholding Shares Ordinary issued ordinary
Shares on share capital
Admission on Admission
R.M. Stear1 2,363,471 6,000,000 8,363,471 9.90%
H. Reiter - 975,609 975,609 1.15%
T.G. Roddick2 2,829,962 6,000,000 8,829,962 10.45%
A. Polansky 120,689 487,804 608,493 0.72%
R.A. Court - 975,609 975,609 1.15%
D. Floyd - 200,000 200,000 0.24%
W. Barrett3 3,443,346 1,951,219 5,394,565 6.38%
E. Barrett3 3,443,346 975,609 4,417,955 5.23%
1. Mr. Stear's current shareholding is held by the Flambard Settlement of which
he is a beneficiary and by Wild Investments Limited in which he is
interested.
The New Ordinary Shares attributable to Mr. R.M. Stear will be owned by
Flambard Holdings Limited, a company in which Rory Stear is interested.
2. Mr. Roddick's current shareholding includes 1,000,000 Ordinary Shares held by
Wild Investments Limited, in which he is interested.
3. The ordinary shares beneficially held by W. Barrett and E. Barrett are held
by Barrett Marketing Group Limited.
The Placing is not a rights issue or open offer and the New Ordinary Shares will
not be offered generally to shareholders, whether on a pre-emptive basis or
otherwise. The Directors believe that the considerable extra cost and delay
involved in a rights issue or open offer would not be in the best interests of
the Company, and accordingly, the Board considers that it is in the best
interests of the Company and its shareholders for the funds to be raised by the
Placing and Subscription.
Related Party Transaction
As set out above, Flambard Holdings Limited, a company in which Roderick Morton
Stear is interested, Barrett Marketing Group Limited, Thomas Gordon Roderick,
Harold Reiter, Richard Court, David Floyd, William Barrett, Edward Barrett and
Andy Polansky have entered into the Subscription Agreements and as such are
considered to be related parties for the purpose of the AIM Rules. Charles
Stanley Securities, the Company's Nominated Adviser, considers that the terms of
the promissory notes and the Subscription Agreements entered into by the Company
with the Directors are fair and reasonable insofar as shareholders are
concerned.
General Meeting
A General Meeting of the Company will be held at 11.00 a.m. on 13 December 2007
at the offices of Edwin Coe LLP, 2 Stone Buildings, Lincoln's Inn, London, WC2A
3TH at which Shareholders will be asked to consider the resolutions, necessary
to approve and implement the proposals.
- ends -
For further information, please contact:
Freeplay Energy plc 020 7851 2630
Rory Stear, Chairman
Weber Shandwick Financial 020 7067 0700
Louise Robson or James White
Charles Stanley (Nominated Adviser) 020 7149 6000
Mark Taylor
Notes to Editors
Freeplay Energy plc is the original and leading global brand of clean,
dependable energy products. Freeplay Energy's clean, patented technology
harnesses human, solar and rechargeable energy and converts it into electricity
to power unique portable, consumer products replacing conventional disposable
battery-powered systems that are environmentally toxic and expensive. The
current product range includes radios, torches, lanterns, mobile phone chargers
and standalone foot powered generators. Freeplay Energy's "Lifeline" radio is
distributed throughout the developing world by The Freeplay Foundation
(www.freeplayfoundation.org) and other AID and Humanitarian organisations such
as Unicef and other United Nations' agencies. Further information about Freeplay
Energy plc and its products can be found at www.freeplayenergy.com.
Freeplay Energy - Best in the World, Best for the World
This information is provided by RNS
The company news service from the London Stock Exchange
END
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