Acquisition and Fundraising

 

TIDMTQC 
 
RNS Number : 0116R 
Third Quad Capital PLC 
12 August 2010 
 

 
                            Third Quad Capital Plc 
                            ("TQC" or the "Company") 
          Acquisition of VSA Capital Ltd and Softline Holdings Limited 
                            Appointment of Director 
     Equity Placing and issue of Convertible Loan Notes to raise GBP600,000 
 
Shareholders will be aware that the Board of TQC (the "Board") has been 
evaluating a number of potential acquisitions over several months.  These have 
included companies in the software distribution and support services sectors, to 
complement our existing activities, together with businesses authorised and 
regulated by the Financial Services Authority ("FSA").  The Directors are 
pleased to announce progress on both of these fronts. 
 
ACQUISITIONS 
 
The Board is pleased to announce that TQC has acquired the entire issued share 
capital of VSA Capital Ltd ("VSA") and agreed terms to acquire the entire issued 
share capital of Softline Limited ("Softline"), (together the "Acquisitions") 
 
VSA 
VSA is authorised and regulated by the FSA and is a London based firm founded in 
1989 which provides specialist corporate finance and broking services to 
companies, particularly those involved in the global resources, oil and gas 
industries. VSA is a member of the London Stock Exchange and is a PLUS markets 
corporate adviser. 
 
This acquisition provides the group with an FSA regulated entity.  With the 
proven experience and reputation of the management team of TQC, the Board is 
confident it can grow VSA organically to become a significant part of the group. 
 
VSA will retain its focus on global resources and the oil and gas industries to 
create a specialist firm and will not seek to compete directly against the 
generalist UK institutional brokers that have become prevalent over the last 
decade. 
 
TQC has acquired VSA for a nominal consideration of GBP1.  VSA's audited 
accounts for the year ended 31 March 2010 showed it had gross assets of 
GBP131,177 and generated a loss before tax of GBP99,292.  The Board believes it 
can return VSA to profitability in its first full year of ownership. 
 
Softline 
The Board is also pleased to announce that it has agreed terms for the 
acquisition of the entire issued share capital of Softline, a leading 
distributor of Macintosh based software based in the Crawley area and which is a 
complementary fit to TQC's PC based software subsidiary, Formjet Innovations 
Limited. By integrating the two businesses the Board anticipates cost savings 
and significant synergies will be generated over time. Furthermore, the Board 
believes the acquisition will provide Formjet Innovations Limited with critical 
mass and diversity across both the Macintosh and PC product arenas. 
 
Softline's trading subsidiary, Softline UK Limited, was founded in 1989 and is 
an approved Macintosh distributor and brings with it an experienced team of 
staff who have many years of experience in the software markets. 
 
Softline UK Limited's accounts for the year ended 30 June 2009 showed a profit 
before tax and management charge (which will be non recurring) of GBP240,005 and 
gross assets of GBP1,331,829. 
 
The consideration payable for Softline amounts to an aggregate of GBP1.3 
million, payable as follows: 
 
1)   GBP550,000 in cash payable at completion, which the vendor, will lend to 
the Company as a medium term loan; 
2)   GBP500,000 in cash payable in the following manner: i) GBP25,000 payable on 
completion; ii) GBP175,000 payable on 15 Jan 2011; and iii) the balance payable 
in instalments of GBP25,000 per month commencing 15 Feb 2011; and 
3)   GBP250,000 by the issue of 50 million shares in the Company at 0.5p 
 
together with a further GBP200,000 (to be satisfied by the issue of 40 million 
ordinary shares) if the enlarged software division, comprising Softline UK 
Limited and Formjet Innovations Limited, achieves aggregate profits before tax 
of not less than GBP500,000 in the year to 31st August 2011. 
 
The vendor loan will be secured on the Company's property at Innovation House, 
Windsor Place, Crawley, and is repayable on 30 June 2015, with interest in the 
meantime at 8.6% per annum. 
 
The acquisition of Softline is expected to be completed on 19 August 2010. 
 
APPOINTMENT OF DIRECTOR 
We are delighted that the vendor of Softline, John McCartney, will be joining 
the Board of TQC as an Executive Director.  His appointment is expected to 
become effective on 19 August 2010. 
 
John will be paid a basic salary of GBP25,000 per annum and will be eligible for 
bonus awards should certain performance targets be achieved.  John will also be 
awarded 25 million share options in the Company at 0.75p. His service contract 
will be terminable by three months notice given by himself, or twelve months by 
the Company. 
 
FUNDRAISING 
To fund these acquisitions TQC has raised GBP600,000, before expenses, via an 
equity placing and the issue of Convertible Loan Notes. 
 
Placing 
The Company has raised GBP300,000 before expenses by way of a placing of 
60,000,000 new ordinary shares of 0.01p each in the capital of the Company ("new 
Ordinary Shares") at 0.5 pence ("Placing Price") per new Ordinary Share (the 
"Placing").  The Placing was undertaken under existing authorities primarily 
with existing shareholders in the Company. 
 
The net proceeds of the Placing will be used to assist in the funding of the 
acquisitions and for working capital purposes. The new Ordinary Shares to be 
issued pursuant to the Placing will rank pari passu in all respects with the 
existing issued ordinary share capital of the Company.  Application has been 
made for the new Ordinary Shares to be admitted for trading on AIM and trading 
is expected to commence on 19 August 2010. 
 
 
Issue of Convertible Loan Notes 
The Company has raised GBP300,000 before expenses by way of an issue of 
convertible loan notes of GBP1.00 each ("Loan Notes"). 
 
Terms 
The Loan Notes will accrue interest at a rate of nine per cent. per annum, 
payable six monthly in arrears on 30 June and 31 December of each calendar year. 
The Loan Notes are repayable on the fifth anniversary of their issue, but the 
Company may at any time redeem the Loan Notes in full or in part (on a pro rata 
basis) giving not less than 20 business days' prior notice. 
 
The Loan Notes are secured by an equitable charge over the shares of VSA. 
 
The Loan Notes have attached to them warrants over ordinary shares, on the basis 
of 5 million ordinary shares for every GBP100,000 nominal value of Loan Notes 
held. The warrants are exercisable at any time within three years at an exercise 
price of 0.5p per ordinary share. 
 
Conversion 
Holders of the Loan Notes may at any time convert the principal amount of the 
Loan Notes into new Ordinary shares in the Company at a conversion price of 
0.55p per Ordinary Share. 
 
Subscribers 
The Loan Notes have been subscribed for by Andrew Monk (GBP100,000), who is a 
director of the Company, and The SF T1PS Smaller Companies Gold Fund 
(GBP200,000). 
 
 
 
 
 
DIRECTORS' HOLDINGS 
 
Set out below are the interests of the Directors in the Company's issued share 
capital following completion of the Placing: 
 
+--------------+--------------+--------------+--------------+ 
| Director     |    Aggregate |    Aggregate |   Percentage | 
|              |    interests |    interests |       of the | 
|              |     prior to |    following |     enlarged | 
|              |   completion |   completion | issued share | 
|              |       of the |       of the |      capital | 
|              | Acquisitions | Acquisitions |              | 
+--------------+--------------+--------------+--------------+ 
| Lyndon       |    5,000,000 |    5,000,000 |          1.1 | 
| Chapman      |              |              |              | 
| (Non         |              |              |              | 
| Executive    |              |              |              | 
| Chairman)    |              |              |              | 
+--------------+--------------+--------------+--------------+ 
| Andrew Monk  |   83,000,000 |   83,000,000 |         18.4 | 
| (CEO)        |              |              |              | 
+--------------+--------------+--------------+--------------+ 
| Peter Joy    |   10,000,000 |   10,000,000 |          2.2 | 
| (Finance     |              |              |              | 
| Director)    |              |              |              | 
+--------------+--------------+--------------+--------------+ 
 
 
TOTAL VOTING RIGHTS 
 
Following the Placing, the issued share capital of the Company will increase by 
approximately 15 per cent to 450,153,145 Ordinary Shares of 0.01p each.  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 share capital of the Company under the 
Disclosure and Transparency Rules (as applied to the Company by AIM Rule 17). 
 
Commenting on the Acquisitions and fundraising, Andrew Monk, Chief Executive 
said "These acquisitions transform the group and with minimal dilution to the 
interests of existing shareholders.  By creating two divisions in very different 
industries I have given the group a diversification of earnings and also given 
it a size and profit stream that we intend to grow. 
"I am delighted that John McCartney is joining the Board and I believe his 
experience in and knowledge of the software industry will rapidly exploit the 
potential of Ability Office, the core product at Formjet Innovations Limited. 
"My personal background is in the Broking Industry and I am relishing the 
opportunity to renew old contacts and acquaintances to help us develop VSA over 
the coming weeks and months." 
 
 
For further information, please contact 
Third Quad Capital Plc 
Andrew Monk, CEO 
012 9384 8860 or 07973 224 283 
 
 
Shore Capital and Corporate Limited 
Nominated Adviser 
Andrew Raca or Edward Mansfield 
020 7408 4090 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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