TIDMBLOC
RNS Number : 0213M
Blockchain Worldwide PLC
11 September 2019
11 September 2019
THIS ANNOUNCEMENT (AND THE INFORMATION CONTAINED HEREIN) IS NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY,
WITHIN, IN OR INTO THE UNITED STATES (INCLUDING ITS TERRITORIES AND
POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF
COLUMBIA), CANADA, AUSTRALIA, JAPAN, NEW ZEALAND AND SOUTH AFRICA
OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
This announcement does not constitute an offer of, or a
solicitation to subscribe for or purchase, any securities in any
jurisdiction including in the United States.
Securities may not be offered or sold in the United States
absent registration under the United States Securities Act of 1933,
as amended (the "Securities Act"), or an exemption from, or in a
transaction not subject to, registration. The Company has not and
does not intend to register any securities under the Securities
Act, and does not intend to offer any securities to the public in
the United States unless registered under the Securities Act or an
exemption from such registration is available. No public offering
of securities of the Company is being made in the United
States.
No communication or information relating to the issue and
offering of securities may be disseminated to the public in
jurisdictions other than the UK where prior registration or
approval is required for that purpose. No action has been taken
that would permit an offer of securities in any jurisdiction where
action for that purpose is required, other than in the UK.
Blockchain Worldwide plc
("Blockchain" or the "Company")
Proposed Acquisitions
Proposed 1 for 12 Share Capital Consolidation
Proposed fundraising to raise GBP8.6 million
Proposed change of name
Proposed waiver of the requirements of Rule 9 of the Takeover
Code
Proposed authorities to allot relevant securities and disapply
pre-emption rights
Admission of the Enlarged Issued Share Capital to trading on AIM
and Notice of General Meeting
Blockchain Worldwide plc (LON:BLOC), is pleased to announce that
it has conditionally agreed to purchase the entire issued share
capital of Entertainment AI, Inc, GTChannel, Inc ("GTC" or
"GTChannel") and Tagasauris, Inc ("TAG" or "Tagasauris") (together
the "EAI Group").
Highlights
-- Acquisition of EAI Group for a total consideration of
GBP12.19 million, to be satisfied through the issue of 27,092,886
Ordinary Shares at 45 pence each (equivalent to 3.75 pence per
ordinary share prior to the Share Capital Consolidation)
-- Acquisition and integration of:
o GTChannel, which combines a network of affiliated creators, a
catalogue of streaming content and a global audience, through
YouTube and other social media platforms, focusing on automotive
and lifestyle
o Tagasauris, which owns AI and machine learning intellectual
property that can deliver more video-based opportunities to
GTChannel's ecosystem of viewers and creators.
o Entertainment AI Inc, which has data analytic technology and
material contracts with strategic partners
-- The EAI Group generated $11.4m of gross advertising revenues
($6.5m net) in 2018, an increase of more than 200% on 2017
o Momentum continued into 2019 with gross advertising revenue of
$8.7m in 1H19, an increase of 107%
o Total video views across EAI Group of 8.5 billion in 2018; 6.4
billion in 1H19
-- Significant opportunities to accelerate the growth of the EAI
Group through leveraging the EAI Group's technologies allowing the
Company to position itself at the forefront of the "Third Wave" of
TV
-- EAI Group technologies, combined with existing content and
audience of GTChannel, will enable additional and deeper revenue
streams for the EAI Group, focused on enhancing viewer engagement
and interaction
-- Strategic investors, Sumitomo Corporation and Water
Intelligence plc to drive near term SaaS opportunities for use of
EAI Group software
-- Strong management team backed by a Board with strong industry and governance credentials
-- To reflect the new direction of the Company, the Board is
proposing to change the name of the Company to "Entertainment AI
plc"
Fundraising Highlights
-- A conditional placing and subscription to raise approximately
GBP8.6 million (before expenses) by the issue 16,351,102 Ordinary
Shares at 45 pence per Ordinary Share (the "Issue Price") and
3,472,222 Ordinary Shares at 36 pence per Ordinary Share
("Subscription Price")
-- Subject to, inter alia, shareholder approval and admission to
trading on AIM, the Acquisition of EAI, the placing and
subscription are expected to complete on 30 September 2019
-- Funds to be used to accelerate growth of the EAI Group, including development of technology
An admission document is being posted today to shareholders (the
"Admission Document") which sets out in more detail the background
and reasons for the acquisitions, the placing and subscription, and
certain other proposals and also includes a notice of General
Meeting. The acquisition of EAI will constitute a reverse takeover
and will require the approval of Shareholders. A General Meeting of
the Company is being convened for 10:15 a.m. on 27 September 2019
at the offices of Fladgate LLP, at 16 Great Queen Street, London,
WC2B 5DG. The Admission Document will be posted today to
Shareholders. The Admission Document will be available on the
Company's website: http://www.bloc-worldwide.com/
Rodger Sargent, CEO, said:
"The wait has been worthwhile. AI is the future of entertainment
technology and Entertainment AI is an innovative industry leader
with ambitious plans. Their unique Artificial Intelligence
technology allows frictionless purchasing directly from video. We
believe this will be a game changer.
Under the stewardship of Pat DeSouza, and the backing of several
leading UK institutional investors, we are confident that
Entertainment AI will generate significant shareholder value."
Dr Patrick DeSouza, Proposed Non-Executive Chairman of
Entertainment AI plc, said: "Entertainment AI comes at the right
time. We are now in a video-first world where audiences not only
seek to discover, consume and share short form video but also to
fulfil their intentions in the moment through purchase behaviour.
Instagram announced its beta test with brands last March to enable
purchase behaviour seamlessly from pictures. The ViacomCBS merger
in August only reinforced the rapid transformation of the
marketplace as telecoms, content and technology sectors converge.
We are excited and ready to establish a leading media platform with
a world-class board, strong management team, cutting-edge
technology, content and a rapidly growing global audience. We
appreciate the significant support of high-quality institutional
investors and global strategic partners which places our post IPO
operating plan on a strong footing."
Definitions and a glossary can be found at the end of this
announcement.
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014.
Entertainment AI Group Tel: +1 203 654 5426 or +44 (0)7775 701 838
Patrick DeSouza, Chairman
Todd Carter, CEO
Scott Schlichter, Executive Director
Adrian Hargrave, CFO
Blockchain Worldwide plc via Walbrook PR
Rodger Sargent
Jonathan Hale
WH Ireland (Nomad and Joint Broker) Tel: 020 7220 1666
Adrian Hadden
Jessica Cave
James Sinclair-Ford
Matthew Chan
Dowgate Capital Ltd (Joint Broker) Tel: 020 3903 7715
Stephen Norcross
Walbrook PR Ltd Tel: 020 7933 8780 or blockchainworldwide@walbrookpr.com
Paul Cornelius Mob: 07866 384 707
Sam Allen
1. Introduction
The Company announces that it has conditionally agreed to
purchase EAI Group through the Acquisition of the entire issued,
and to be issued, share capital of Entertainment AI, GTChannel and
Tagasauris pursuant to the terms of the Acquisition Agreement
signed today. The consideration payable for the Acquisition is
GBP12.19 million to be satisfied through the issue of 27,092,886
Ordinary Shares at a price of 45 pence each. The Company also today
announces: a conditional placing of 16,351,102 Ordinary Shares at
45 pence per share; and a GBP1.25 million investment to be made by
the Strategic Investors through the issue of 3,472,222 Ordinary
Shares at 36 pence per share, to raise a total of GBP8.61 million
before expenses in order to provide working capital for the
Enlarged Group.
Immediately following Admission, as a result of the issue of
Consideration Shares and the Cross-Over Subscription from the
Strategic Investors of GBP1.25 million, a Concert Party will hold
more than 30 per cent. and could in due course hold more than 50
per cent. of the voting rights of the Company and therefore
existing Shareholders will be asked to approve a Waiver of the
requirement for a general offer to be made in accordance with Rule
9 of the Takeover Code. Further information on the Takeover Code
and its application to the Proposals and on the Concert Party, is
set out in the Admission Document. The Board has appointed EGR
Corporate Broking Limited to provide it with competent independent
advice on the Proposals as required pursuant to the Takeover
Code.
Upon Admission, it is proposed that Patrick DeSouza (proposed
Non-Executive Chairman), Todd Carter (proposed Chief Executive
Officer) and Scott Schlichter (proposed Executive Director) will
join the board of directors of the Company. It is further proposed
that David Anton, Michael Kelly and Akiko Mikumo will join the
board of directors of the Company as Non-Executive Directors. It is
also proposed that Jonathan Hale and Rodger Sargent will resign
from the board of directors of the Company upon Admission.
Additional details in respect of the Directors and the Proposed
Directors can be found in the Admission Document.
At the same time as the Acquisition and the Fundraising, the
Directors are proposing that the Waiver also be obtained, that the
Share Capital Consolidation be undertaken and that the name of the
Company be changed to Entertainment AI Plc.
The Proposals are conditional, inter alia, upon the passing of
the Resolutions at a General Meeting to be held at the offices of
Fladgate LLP at 16 Great Queen Street, London, WC2B 5DG, at 10.15
a.m. on 27 September 2019, and, on the Acquisition and Admission
taking place. If the Resolutions are passed at the General Meeting
and the other conditions set out in the Acquisition Agreement, the
Placing Agreement and the Cross-Over Subscription Letters are met,
then it is expected that Admission will become effective and that
dealings in the Enlarged Issued Share Capital will commence on AIM
on 30 September 2019. Shareholders should note that the Resolutions
are inter-conditional and that consequently if any of the
Resolutions are not passed, completion of the Proposals will not
occur.
This document contains detailed information about the EAI Group,
the Acquisition, the Fundraising and explains why the Directors and
the Proposed Directors consider the Proposals and Admission to be
in the best interests of the Company and its Shareholders as a
whole, and recommend that you vote in favour of the Resolutions to
be proposed at the General Meeting, notice of which is set out in
the Admission Document being posted to Shareholders later
today.
2. Background on the Company
The Company was incorporated on 15 February 2017, and its shares
were admitted to trading on the standard segment of the Official
List and to trading on the Main Market on 21 September 2017 as an
investing company. The Company was originally formed to acquire a
company or business in the telecoms sector. On 19 January 2018, the
Company was renamed Blockchain Worldwide plc and the scope of the
Company's investment criteria was expanded to consider acquisitions
within the blockchain technology industry.
On 7 November 2018, the Company announced the proposed
acquisition of Chorum Group Limited, subject to due diligence and a
successful fundraise. The Company's shares were suspended pending
the outcome of this process. On 8 February 2019, the Company
announced it had withdrawn from the proposed acquisition of Chorum
Group Limited due to greatly reduced levels of activity in London's
equity markets. The suspension was lifted on 13 February 2019 and
the Company's shares began to trade again.
It was announced on 8 February 2019 that the Company would
continue to seek deals within the blockchain space but that it
would also consider other high growth opportunities within the
wider technology sector.
Since listing, the Directors have sought an appropriate
acquisition for the Company that can create significant value for
shareholders in the form of capital growth.
3. Information on the EAI Group, its marketing and growth strategy
EAI Group consists of three associated companies in the
technology and media sector that are principally headquartered in
Los Angeles with strategic relationships in the UK. The Enlarged
Group will be composed of the Company, Entertainment AI, GTChannel
and Tagasauris, which have complementary assets. GTChannel combines
a network of affiliated creators, a catalogue of streaming content
and a global audience, Tagasauris owns AI and machine learning
intellectual property that can deliver more video-based
opportunities to GTChannel's ecosystem of viewers and creators and
Entertainment AI has data analytic technology and material
contracts with strategic partners discussed herein. Together these
assets should enable GTChannel, Tagasauris and Entertainment AI
synergistically to unlock value for the creators and consumers.
EAI Group's mission is to be a first mover in a video-first
world or what is seen to be the coming Third Wave of media
distribution following the broadcast and cable eras. The Third Wave
will be marked by full mobility and interactivity with content
available 24/7 on mobile devices. One early example of the Third
Wave is Instagram's March 2019 pilot launch with select brands
enabling consumers to purchase "in-app" while viewing pictures. EAI
Group's objective is to embrace the Third Wave by enhancing
consumers' experiences on video by enabling interactivity with the
video and providing frictionless access to a multiplicity of
discovery opportunities, encouraging video sharing among social
communities, and even fulfilling impulse purchases from what
audiences see in the video.
GTChannel engages with its consumers through YouTube and other
social media platforms. More specifically, it is a multichannel
network ("MCN"). A MCN is defined as a network that affiliates with
content creators and offers services that include programming
assistance and product and audience development. As creators
deliver more content, the MCN becomes more attractive to consumers,
which in turn attracts advertisers. MCNs tend to focus on specific
audiences or themes. GTChannel's theme is automobiles and other
lifestyle goods and services.
Based on 1H 2019 actuals, GTChannel, through its MCN, catered to
a global audience of automotive and lifestyle enthusiasts
representing over 6.3 billion video views (12.6 billion on a
projected annualised basis) and a network of approximately 10,000
short-form video content creators. There are approximately 70
million non-paying YouTube subscribers across GTChannel's MCN
creator partner channels. GTChannel currently manages approximately
370,000 videos and provides for 54 billion watch minutes on a
projected annualised basis (having generated 27 billion minutes of
watch time in the first six months of 2019). As discussed below,
GTChannel's principal revenue driver today is (Google-owned)
YouTube ad revenue. In 2018, the GTChannel MCN generated US$11.4m
of gross ad revenue, (before deduction of YouTube and content
creator commissions) an increase of more than 200 per cent. from
2017 matching the growth trajectory of the MCN's video views.
Moreover, GTChannel has an Owned and Operated Site ("O&O") and,
following the merger, this site and its content offerings can be
used to harness data derived from Tagasauris' technology to provide
other value-enhancing offerings for brands, sponsors and
audiences.
Tagasauris is an AI and machine-learning technology company with
a proprietary process and intellectual property (patent with an
early priority date, trade secrets, and know-how) for enriching
videos. Tagasauris' process, a combination of AI and human
intervention (crowdsourcing), create data derivative assets from
underlying media assets in a process conceptualized as a
"Micro-moments Factory" - an extension of Google research into
consumer behaviour described below. An analysis, enrichment, and
linking process breaks apart each video by tracking objects in a
video and, then tagging and linking various object tracks or
segments in the video so that additional opportunities (related
content and products) can be identified. The resulting micromoments
can be published, indexed and discovered by search engines and
served to audiences, such as GTChannel's, interactively while they
are watching videos. Audiences can share these micromoments on
social networks and instant messaging platforms. The video
opportunities are offered in a panel underneath the GTC video
player in an unobtrusive way.
The patent for the software used by Tagasauris is US Patent No.
9,489,636 "Task Agnostic Integration of Human and Machine
Intelligence," which is jointly owned with New York University
("NYU"). NYU has granted Tagasauris an exclusive royalty-free
licence to the patent for use by Tagasauris for the field of
crowdsourced human computation related to knowledge work in online
media.
The innovation combines inputs from human processing and machine
processing and employs machine learning to improve the processing
of individual tasks based on a comparison of human processing
results. Once the performance of a particular task by machine
processing reaches a threshold, the level of human processing used
on that task is reduced. The processes based on this IP and trade
secrets integrate human computation into data processing activities
and have been used to produce data derivative annotations for some
of the world's largest media companies.
GTChannel is a human-curated ecosystem which can be enhanced
with Tagasauris and Entertainment AI technologies. The vast
majority of GTChannel's streaming content has been created by its
network of content creators and is not the result of licensing and
syndication deals, web crawling, or indexing. Applying computer
vision, natural language processing, and video sequence
understanding of GTChannel's content can help GTChannel find and
visualize patterns in the data and gain insight into how the
audience behaviour and content are related. These insights can be
used by GTChannel to inform decision making, from the colour
palette used to design promotional video poster frames, to upcoming
original content, to personalized marketing strategies.
Micromoments extend the granularity of GTChannel's insights to
concepts depicted or associated with the segmented subparts of
these videos as audience seeking and sharing behaviour can be
tracked at the micro-moment level. In this way, GTChannel's
decision-making for providing audiences the video opportunities
they seek can be increasingly driven by
data insights.
EAI Group's O&O business strategy follows research by Google
on consumer behaviour. Google has defined real-time consumer
decision-making opportunities as micro-moments: "Instances when
people reflexively turn to a device - increasingly a smartphone -
to act on a need to learn something, do something, discover
something, watch something, or buy something... Content-rich
moments when decisions are made and preferences shaped." Revenue
channels such as digital ads, paid subscriptions, brand
sponsorships, commission on contextual commerce and strategic
licensing are enhanced by the interactive nature of
micro-moments.
The objective of the Acquisition and Fundraising is to combine
Tagasauris and Entertainment AI's technologies with GTChannel's MCN
content: enriched content attracts viewers and brands which in turn
attract more creative content leading again to more viewers and
more video opportunities for discovering, sharing, and
purchasing.
While EAI Group's MCN and O&O strategy will focus in the
near-term on GTChannel's MCN and O&O automotive and lifestyle
audiences, Tagasauris may also provide brands and strategic
partners with opportunities to access these enabling technologies
to enrich video for other audience channels and passion groups.
Entertainment AI already has two licensing opportunities, which are
being developed with Strategic Investors - Sumitomo Corporation, a
global trading and investment company with various audiences from
sports to food, and Water Intelligence plc, an AIM-traded company
with stakeholders interested in water leak detection and
sustainability. Both strategic partners are participating in the
Cross-Over Round. Both also have operations and consumers in the UK
and globally and both seek video opportunities for their respective
audiences that EAI Group can source and present. Given that the
trend is toward a video-first world for many audiences,
Entertainment AI plans to launch a "software as a service"
offering. The goal of the Enlarged Group is to evolve from a global
MCN to a global multiplatform network that brings together various
audiences, brands, sponsors and creators, all exchanging
opportunities ("MPN").
EAI Group seeks to disrupt the competitive landscape emerging
from the tectonic shift taking place in the telecommunications,
media and technology markets as consumers rapidly transition to
short form video content on mobile screens. Telecom giants, such as
AT&T and Altice, and tech giants, such as Facebook and Amazon,
are moving fast to reposition themselves ahead of the Third Wave by
acquiring content, audiences and technology for direct streaming
and to harness personal audience data to create Netflix-style
platforms. The objective is to take audiences one step further:
rather than simply viewing short-form video content on mobile
devices, viewers will be able to engage interactively with
micro-moments introduced through Tagasauris' enriched video
process. Viewers can play, pause, and resume watching and share
videos and the most memorable, extreme, emotional, funny, best,
cool parts of videos that they love on social media networks such
as Facebook and Twitter.
With enriched video, GTChannel's MCN audiences around the world
may access a cornucopia of opportunities that can inspire follow-on
decisions based on micro-moments: Hypothetical illustrations
include "Jim" in New York who may use the GTChannel MCN to watch
test drives and walkthroughs while he shops for a new car. He may
share videos of his favourite cars with friends who also may want
to watch videos on the GTChannel MCN; if someone sees a car that
they want to buy, the Tagasauris and third party technologies would
enable them to do just that with fulfilment partners such as eBay
Motors or Amazon. Alternatively, "Chris" in London may watch the
GTChannel MCN for "how to" car videos and may have installed so
many of the aftermarket performance parts that he found on the
GTChannel MCN that he has gained the confidence to start his own
automotive tuning and restoration business. Alternatively, "Zak" in
Tokyo recognises that the MCN is his "path to market" for the
Japanese domestic market OEM parts he sources and then sells in the
United States and around the world. Finally, "Megan" in London
really likes the sports watch from Richard Mille that she saw on a
Jenson Button video. Rather than visiting the store in Mayfair, she
buys it on-line with a one-click from an affiliated retailer that
Tagasauris assists on the MCN. Meanwhile, from the opposite side of
the marketplace, seeing the data on the consumer experience that
the GTChannel MCN provides, corporate marketers ask Entertainment
AI to advertise their products on GTChannel's Owned and Operated
website.
Market Opportunity
Technological change, once again, has initiated a new era of
entertainment: A Third Wave characterised by direct to consumer
delivery. The objective of the Acquisition and Fundraising is to
capitalise on this shift by enhancing the direct to consumer
delivery experience, enabling increased interactivity with videos
on internet connected devices, particularly mobile, and delivering
micro-moments that motivate consumers to share content.
Looking at historic technological change, the "First Wave of TV"
was marked by general broadcast through a handful of network
broadcast channels such as the BBC in the United Kingdom and NBC in
the United States. Programming was created by media companies
producing what they believed might interest "typical" consumers.
Technological change brought about a "Second Wave of TV", which was
marked by the proliferation of channels whose content was
transmitted via cable companies such as Viacom. Programming
targeted particular consumer groups that gathered around niche
cable channels. The content created was based on external research
regarding the niche audiences of the cable channel but still was
designed to appeal to a "typical" consumer of that cable channel.
The Third Wave of TV, driven by artificial intelligence technology,
has now accelerated the personalisation of content by understanding
the individual consumer directly. Moreover, the shift to mobile
devices enables programming to be delivered anywhere, anytime.
Further, social media technology has encouraged content
customisation for smaller, tighter communities - a focus on the
"long-tail" as described by economists. Machine learning has now
reinforced this direction by automating personalisation.
Netflix, with its Quantum Theory of genre tags that facilitate
more personalised ways to discover content, is now arguably the
most visible new entertainment company. Netflix now has more
subscribers in the United States than the largest cable television
providers combined. Meanwhile, Facebook, Google and Apple are
investing into the content creation business as a way to leverage
their AI technology. YouTube Red and Amazon Prime are examples of
such offerings.
In order to remain relevant, traditional media companies, such
as Disney (Disney +), and even broadcast companies, such as CBS
(CBS All Access), are trying to reinvent their business models
first to address direct-to-consumer demand for anytime-anywhere
streaming delivery of content and then to figure out how to
personalise discovery of and access to the underlying content based
on individual consumer preferences (a further illustration can be
found within the Admission Document posted to shareholders).
Consumer Trends
There are multiple market trends driving this shift to the Third
Wave, including:
1. Internet streaming is increasingly popular and, in some
jurisdictions, has become the preferred mode of delivery for
consumers.
2. 'Cutting the cable' (i.e. ceasing to subscribe to traditional
cable services) is a global phenomenon as evidenced by the rise in
popularity of Netflix, Amazon Prime, Hulu and entrance of Disney
and others into the marketplace (NowTV is an example in the UK
market).
3. Video consumption has been largely responsible for Internet growth.
4. Consumers are utilising video, specifically reviews and
demonstrations, as part of their online shopping experience.
5. Consumers favour "one click" shopping experiences while
retailers are attempting to limit e-commerce abandonment.
The first and second trends are reinforced by data findings from
market researcher, eMarketer. According to its findings, in 2017 an
estimated 22.2 million people in the US cut the cord on cable,
satellite, and telco TV services, a 33 per cent. growth over 2016,
switching to streaming content. In Q1 2018, internet TV streaming
services like Netflix, Amazon Prime, and Now TV surpassed pay TV
for total number of subscriptions in the UK. In particular, Netflix
continues to grow at an astonishing pace around the world (except
for the United States where its growth is slowing). Netflix
reported in February 2019 that it now has over 5m subscribers in
France, ahead of the 4.76m who pay for Canal+ (as at the end of
September 2018).
Consumption data highlights the magnitude of the switch. In
2016, Zenith OptiMedia reported that the average person worldwide
spent 456 minutes daily consuming media. Of the 456 minutes,
Internet consumption amounted to 127.5 minutes while traditional TV
amounted to 174.9 minutes. By 2019, Zenith indicated that total
media consumption has increased to 479 minutes. Importantly, the
proportions have changed. Consumption of internet media jumped to
approximately 170 minutes, while traditional TV fell to 167
minutes.
Video consumption has been largely responsible for internet
growth. Video represents 75 per cent. of all Internet traffic.
YouTube revealed in press events earlier this year that more than
500 hours of new video are uploaded each minute on YouTube.
According to Cisco, video as a proportion of Internet traffic grew
rapidly from 64 per cent. in 2014 to 75 per cent. in 2017. Cisco
forecasts that globally, IP video traffic will account for 82 per
cent. of all IP traffic by 2022. Cisco expects this trend to
increase with internet video traffic growth estimated to be 33 per
cent. annually. As the market for Internet video expands, so too
will advertising spend. eMarketer reports that US$283 billion was
spent worldwide on digital advertising in 2018 and expects spending
to increase to US$517 billion by 2023. Video ads offer amongst the
highest CPM yield for content businesses.
The popularity of short-form video content has led to recent
entertainment offerings such as Instagram TV (IGTV was launched
June 2018). In July 2018, former Disney head and DreamWorks
founder, Jeffrey Katzenberg, raised US$1billion to create a studio
that would produce short-form entertainment content. Younger
consumers (Millennials and Gen-Z) increasingly demand short-form
video. Technology leaders recognise the importance of consumer
interactivity with content to fulfil audience impulses and
perceived shorter attention spans. In March 2019, Instagram
announced a pilot launch program with select brands such as Nike
and Burberry. With its new "Checkout" feature, consumers will be
able to click on a photo of a product and purchase it without
leaving the app. Instagram will make an undisclosed commission on
each purchase. As the select launch program has advanced, various
reactions have emerged. On the positive side, in-app purchases
enable a more seamless experience for consumers; for small and
medium-size brands, one-click purchases level the playing field
where big brands have more elaborate web presence. On the other
hand, some believe that the select launch test fails to address the
"discovery" and "sharing" aspects of the user journey that
Instagram's parent, Facebook, seeks to encourage. Entertainment
AI's objective is to address the "discovery" and "sharing" aspects
and enhance that user journey with purchasing opportunities.
In the changing marketplace for short-form video, investors are
looking for new ways to leverage MCN audiences. For example,
Tastemade started as an MCN and has now morphed into a proprietary
content studio producing short-form video content for food
enthusiasts. In October 2018, Tastemade undertook a Series E
financing raising approximately US$35 million, in which Amazon was
a participant. Of note, Amazon also owns the up-scale supermarket
chain Whole Foods. Now, the consumer's short-form video journey can
begin with seeing a great meal on Tastemade and within a couple of
clicks on Amazon that consumer can order the ingredients for home
delivery from Whole Foods to make that meal at home. With the
Acquisition and Fundraising, Entertainment AI seeks to create a
similar, more frictionless consumer journey for automotive and
lifestyle enthusiasts with possibilities for further expansion in
to new audiences.
As the market for Internet video expands, advertising spend will
follow. In 2017, Google reported that compared to just the prior
year, smartphone users were 50 per cent. more likely to expect to
purchase something immediately while using their smartphones. An
eMarketer report indicates that US$283 billion was spent worldwide
on digital advertising in 2018. The report forecasts this to grow
at a CAGR of 12.8 per cent. to reach US$517 billion by 2023. In
2018, in the US, the consumer-packaged goods and retail industries
accounted for approximately US$33 billion of digital advertising
spend, with automotive the next largest at approximately US$14
billion. Travel, and media & entertainment combined for digital
ad spend of US$21 billion in the US. Given this level of ad spend,
GTChannel's MCN audience of automotive and lifestyle enthusiasts
would be in a sweet spot for relevant brands. The US digital
advertising market is projected to grow to US$151 billion in 2020
from US$108 billion in 2018 according to eMarketer.
From Market Opportunity to EAI Group Growth Strategy
EAI Group seeks to tap into rising consumer preferences for
short-form video, mobility, community and in-app frictionless
purchases. For example, with respect to its core audience according
to Google, 92 per cent. of car buyers research online before they
buy. Sixty-four percent of shoppers report that new formats like
360deg video would convince them to buy a car without a test drive.
According to Google, across YouTube, in the past two years, watch
time of "test drive" videos has grown by more than 65 per cent.,
marking a trend in online video consumption similar to the surge in
electronics reviews and unboxing videos a few years ago.
Operating Plan and Growth Strategy
EAI Group's operating plan starts with adding value to
GTChannel's existing audience base - both MCN and O&O - with
Tagasauris, Entertainment AI and third party technologies. In 1H
2019, the GTChannel MCN generated over 6.3 billion video views
(12.6 billion annualised on a projected basis) and 27 billion watch
minutes (54 billion annualised on a projected basis). In addition,
the GTChannel MCN has more than 70 million subscribers across its
creator partner channels on the demand side and a network of
approximately 10,000 content creators on the supply side seeking to
feed that audience. Over the longer run, as Entertainment AI works
with its strategic partners to develop their respective audiences
by infusing Tagasauris and third party technologies, EAI Group's
vision is to expand its presence as a Third Wave media company (a
further illustration can be found within the Admission Document
posted to shareholders).
Five revenue streams for the operating plan:
-- Channel 1: MCN Advertising. As identified above, EAI Group's
priority is growing the installed audience base. Google advertising
revenue is based on audience views from videos uploaded to the
GTChannel MCN. The technology creates an expanded video opportunity
set which is expected to feed ad revenue growth: A growing audience
visits the GTChannel MCN to explore videos, attracted to the site
in part by the growing number of content creators supplying their
content through GTChannel, which in turn increases the prospect of
attracting brands and commerce brought to the table by
technology.
-- Channel 2: O&O Contextual Commerce. Through Tagasauris,
AI technologies and other third party technologies that enrich
video content, EAI Group could earn revenue from one-click commerce
transactions by its O&O audience. EAI Group would seek to
fulfill such purchases through affiliated retail partners such as
Amazon or eBay Motors. For each transaction, EAI Group would earn a
commission on the price of the product purchased. For example, the
average order of products purchased by automobile enthusiasts as
cited by Auto Parts Warehouse is approximately US$175. Products may
span an entire range of prices from small to large. Affiliates
typically provide "tokens" such that EAI Group would still get a
commission if the consumer left the brand site before purchasing
but returned to purchase within a specified time.
-- Channel 3: Machine Learning ("ML") Microservices.
Entertainment AI has strategic partners such as Sumitomo
Corporation and Water Intelligence that are interested in
activating consumer journeys based on micro-moments for their
respective audiences. Tagasauris and third party technologies could
be made accessible to its partners and deployed as a SAAS platform.
Revenue earned from such deployment could take the form of
subscription of service fees or professional services.
-- Channels 4 and 5: O&O Proprietary Content; SVOD; Brand
Sponsorships. There are more than 70 million non-paying YouTube
subscribers who are seeking more content across GTChannel's MCN
creator partner channels. GTChannel has worked with brands on
exploiting opportunities with respect to its MCN audience. Revenue
is expected to be earned on Owned and Operated content, sponsorship
agreements and premium subscription content. To this end, EAI Group
seeks to apply the growth strategies of other leading Third-Wave
technology companies for monetising subscribers such as with
YouTube Premium and Amazon Prime.
(A further illustration can be found within the Admission
Document posted to shareholders).
Growing the Revenue Channels; Entertainment AI Economics
As noted above, GTChannel's audience for its MCN is the starting
point from which to unlock shareholder value because viewers are
watching more and more video content. One way to illustrate EAI
Group's growth plan is to consider the heuristic of a "Viewership
Value Funnel." The Funnel depicted below represents four levels of
micro-moment behaviour, each a step in a linear viewer journey from
"I want to know, discover, share" (Awareness to Interest levels of
engagement) to "I want to do and buy" (Decision and Action levels
of engagement).
Because of the data that GTChannel's audience generates, EAI
Group can help viewers whether the journey is linear - step by step
through the funnel - or back and forth as the viewer enjoys the
experience and considers, explores, then reconsiders different
video opportunities (see two contrasting diagrams below). EAI
Group's priority is growing its audience base and the associated
Google advertising revenue. Tagasauris and third party technologies
should create an expanded opportunity set of videos which is
expected to feed ad revenue growth (a further illustration can be
found within the Admission Document posted to shareholders).
In terms of the economics of an MCN, YouTube monetises
viewership for GTChannel by selling ad revenue. The growth of gross
sales is a direct reflection of the growth in GTChannel's audience
views for ad placement. During 2017, gross sales for GTChannel's
MCN ad placement (before deduction of YouTube and content creator
commission) were US$3.7 million. During 2018, gross sales more than
tripled to US$11.4 million (before deduction of YouTube and content
creator commission). During the first half of 2019 gross sales
continued at a strong pace reaching approximately US$8.7 million.
From gross sales, YouTube administers the process and takes a 45
per cent. commission producing net revenue for GTChannel. From net
revenue, GTChannel pays typically 70 per cent. to 80 per cent. to
content creators as its cost of sales. To date, GTChannel has
reinvested its margin to build its audience base.
The objective of the Acquisition and Fundraising is to introduce
Tagasauris and third party technologies to reinforce the growth in
gross revenue at GTChannel and lead to improvements in net margin.
Tagasauris Micro-moments Factory processes add value for
GTChannel's MCN network of content creators by making videos more
relevant for Google search thus increasing their visibility for
GTChannel's audience. Increased relevance, in turn, is expected to
encourage more video supply from creators seeking eyeballs for
their content. With an increased supply of videos and creators
attracted to the technology, audience views would be expected to
grow further and add to gross revenue. As a result of its enhanced
technology offering, GTChannel may also have an opportunity to
reduce the percentage of fees that it pays to creators as cost of
sales for their content.
GTChannel also intends to develop its O&O property and
leverage data that its audiences provide. The data which both
GTChannel's MCN and O&O provide can be used to develop
proprietary content for GTChannel's O&O. A content strategy
driven by data science has already been deployed by Netflix (for
example, script writing for popular shows like House of Cards) and
is now being deployed by Amazon Prime.
The next stage of deepening viewer engagement after Awareness is
Interest. Car enthusiasts comprise a passion group. Currently,
there are more than 70 million non-paying YouTube subscribers
across GTChannel's creator partner channels who want more content.
"Micro-moments" expose subscribers to more Interest events with the
expectation that some portion of those subscribers will convert to
paid subscriptions. Brands and sponsors generally seek the kind of
Interest data generated by micro-moments and platforms to provide
targeted content and promotions to engage audiences.
The economics of providing video opportunities on GTChannel's
O&O differs from the economics of providing content on
GTChannel's MCN. With respect to the MCN, as noted above, the split
of gross advertising revenue is 45 per cent. for YouTube and 55 per
cent. for GTChannel. On the O&O, GTChannel retains 100 per
cent. of gross advertising revenue. The effect with respect to the
cost of sales is similar. For content delivered through the MCN,
GTChannel typically pays content creators 70 per cent. to 80 per
cent. of net revenue after YouTube's split. By contrast, for
content delivered through GTChannel's O&O typically pays
content creators 50 per cent. of net revenue. There are also
synergies between the MCN and O&O properties as GTChannel
develops more proprietary content for brands. For example, within
the YouTube ecosystem, Google is open to partners executing a
Reserved Media Placement strategy. With this strategy, GTChannel
expects to be able to purchase some of Google's ad inventory and
resell it to brands and sponsors at a higher price if the market
permits.
Moving further down the Viewership Value Funnel to Decision,
users with access to micro-moments can continue to fulfil their
intentions - "I want to do and buy". EAI Group's mission is to
enable frictionless transactions for viewers to empower them in
real-time while watching video. EAI Group believes that a subset of
those viewers who are at the Interest level of engagement - some of
the previously registered 70 million non-paying YouTube subscribers
for example - will make decisions, including purchase decisions,
ranging from paid subscriptions to e-commerce.
To a degree, EAI Group's technology, know-how and trade secrets
enable the viewer to be "in the virtual store." By deconstructing
and enriching the video content, EAI Group enables viewers to be
"in the store" rather than just viewing the store-front as would be
represented by the video itself. Such "in the moment" presence
enables the interactivity that marks the Third Wave. The unlocking
of shareholder value could be significant if viewers are
successfully guided down the Viewership Value Funnel from Decision
to Action. With a one-click transaction, fulfilment partners such
as eBay Motors would pay between 7 per cent. and 14 per cent.
commission on the purchase. To realise revenue from the Action,
GTChannel is not dependent on viewers that act on impulse.
Affiliate tracking tokens would record a visit to a commerce site
and GTChannel would receive commission credit if the viewer
returned for a purchase within a certain period of time.
Shareholder value would increase even if only a fraction of
GTChannel's audience make their way down the Viewership Value
Funnel to a purchase action producing commission.
The Viewership Value Funnel heuristic guides possible enlarged
Group investors through a proposed consumer journey illustrating
the different revenue streams that are part of EAI Group's growth
plan. The plan starts, with Awareness arising from YouTube.
However, consumers do not always proceed in linear fashion. Some
may jump directly to action and purchase "at the point of
inspiration"; others might jump to Decision, go back to share and
discover more videos to further cultivate Interest and then return
to Action. Whether consumers proceed in a linear fashion or not EAI
Group can enhance the user experience. First, the consumption of
video increases ad revenue and lead to both unpaid and paid
subscriptions. Second, viewer Interests and the data gathered about
the viewer journey is valuable to brands and sponsors that EAI
Group plans to acquire as its customers. Finally, because of the
tokens that product sites and fulfilment affiliates deploy to
encourage Action, Entertainment AI will still retain commission
opportunities for a period of time even if the consumer journey is
nonlinear.
(a further illustration can be found within the Admission
Document posted to shareholders).
Towards an MPN (Multi-Platform Network) Vision.
The economics of the Viewership Value Funnel applies to most
groups of audiences around the world. Hence, Tagasauris and third
party technologies will be utilised by Entertainment AI's strategic
partners: Sumitomo Corporation (sports, food, shopping) and Water
Intelligence plc (sustainability; home improvement). Sumitomo, has
investments in another MCN that may benefit from Tagasauris and
third party technologies. Based on the market data described above,
this direction towards video consumption and value creation is only
intensifying as media companies reposition themselves for the Third
Wave, especially to embrace interactivity at the point of
inspiration.
4. Competitive Landscape
The competitive landscape is marked by companies looking to
incorporate technology into their content offerings so as to
achieve greater "interactivity" and audience engagement. The
Enlarged Group has a more complete model with audience and content
assets through its MCN and O&O and technology assets to
integrate content and e-commerce in a frictionless way via its
proprietary Micro-moments Factory process. By comparison, Motor
Trend ("MT") is a high end automotive content publisher located in
the US. They have expanded from a magazine publisher to include web
and other digital platforms. MT has a YouTube presence but it
appears to be largely a mechanism to drive to their subscription
video on demand (SVOD) product. MT does not have technology as a
driving force for their business model. MT is not involved in
e-commerce except around merchandise for their brand - such as
Motor Trend t-shirts. Similarly, Motorvision.TV is another example
of an automotive media company. Motorvision also has its own
YouTube presence, but is also not an MCN nor does it utilise deep
technology as a key driver for their business model.
As discussed above, the Third Wave is producing a dynamic
repositioning of the marketplace as telecom, media and technology
companies are moving rapidly through partnerships and acquisitions
to address changing consumer behaviour that demands mobile, 24/7
content and interactivity.
Below is a schematic that illustrates the variety of
transactions that have shaped the marketplace over the last few
years to make the Third Wave a reality. The Enlarged Group seeks to
lead part of this shift by enabling audiences - both its current
audiences and those it seeks to attract - to discover, share and
consume short-form video 24/7 and in the moment to fulfil a deeper
user journey through the opportunities brought forward to them by
its technology (a further illustration can be found within the
Admission Document posted to shareholders).
This converging landscape of telecom, media and technology took
a leap forward with the merger of CBS and Viacom. The Wall Street
Journal reported that logic of the merger was to put the new
ViacomCBS in a stronger position "to weather the trend of cable TV
cord-cutting" (Second Wave of TV). As noted in the Wall Street
Journal's coverage, ViacomCBS is looking to build a content factory
that can supply programming to streaming leaders such as Netflix,
Amazon and Apple. As discussed above, Amazon's interest extends
from programming to e-commerce to leverage its technology platform.
With its complementary assets of audience, content and technology,
EAI seeks to lead the Third Wave and the convergence that is being
driven by consumer demand for interactivity.
5. Reasons for the Acquisition
In line with its investing policy, the Company's stated strategy
is to acquire a business that will deliver strong capital growth.
The Directors believe that in the EAI Group they have identified a
business that meets this criteria and which represents a strong and
stable platform from which to expand both organically and via
acquisition.
The Directors and Proposed Directors consider that the
opportunity represented by the Acquisition is in the best interests
of the Company and Shareholders for the following reasons:
-- the addressable market for personalised entertainment -
specifically for automotive and enthusiasts, and lifestyle content
- is global and growing rapidly;
-- the demand for innovation by traditional media companies,
such as Disney and HBO, for business to business solutions that
enable them to catch-up to next generation technology and media
companies, such as Facebook, Google, Amazon and Netflix, is strong
and growing;
-- GTChannel and Tagasauris are two well-positioned and
complementary businesses that can capture an important and growing
global audience that seeks personalised content and e-commerce
opportunities;
-- EAI Group's operating assets have valuable operating
attributes that should position it to grow given its: (i) status as
a MCN on YouTube; (ii) growing audience of more than nine billion
views in 2018; (iii) approximately 70 million unpaid YouTube
subscribers across GTChannel's MCN creator partner channels that
want more video; (iv) patented AI technology that enables more
effective personalisation; (v) principals with operating experience
in both direct to consumer execution, business to business
execution and acquisitions;
-- the principals of EAI Group's two operating businesses have
been working collaboratively on projects related to its "One Stop
Shop" business model for the last three years, thus, evidencing
that the businesses can work together and help lower barriers to
integration;
-- Entertainment AI has already identified Strategic Investors
who will provide funding for the Enlarged Group upon Admission. The
Strategic Investors may enter into strategic sales agreements which
the Directors and Proposed Directors believe will benefit the
Enlarged Group by contributing to revenue and profits; and
-- As a US business with a global addressable market, the
Enlarged Group is, in the view of the Directors and Proposed
Directors, unlikely to be adversely affected by potential UK
economic disruption as a result of Brexit.
6. Current Trading and Prospects
Blockchain
Blockchain is currently an investing company and does not trade.
Its results for the year ended 30 June 2019 were announced on 4
September 2019 and showed net assets of GBP992,421 at the balance
sheet date.
Entertainment AI
Other than transferring technology assets and material contracts
and creating the strategy of the EAI Group, Entertainment AI has
not traded since inception.
GTChannel
In the twelve months to 31 December 2018, GTChannel's MCN
generated gross advertising income of approximately US$11.4 million
(prior to deduction of YouTube and content creator commissions),
leading to net revenues of US$6.5 million from more than 8.5
billion video views. GTChannel's trading since 31 December 2018 has
remained robust with continued increases in revenues and video
views across GTChannel and its partner channels. In the first 6
months of 2019, GTChannel's MCN generated gross advertising income
of US$8.8 million (prior to deduction of YouTube and content
creator commissions), leading to net revenues of US$5.9 million, an
increase of approximately 88 per cent. over the prior year.
Tagasauris
During 2018, Tagasauris generated limited revenues as it focused
on product development to enable offerings to capture the ability
of customers to identify micro-moments and exploit these. Despite
the focus on product development, it generated approximately
US$80,000 through sales of its technology to a multi-national media
company.
Prospects for the Enlarged Group
Upon Admission, the Directors and Proposed Directors believe
that the Enlarged Group will be well positioned to fund growth in
its existing revenue channels, and invest in the O&O platform,
which is expected to substantially alter the Enlarged Group's
scalability and gross margin profile. The Directors and Proposed
Directors believe that GTChannel's organic viewership growth will
provide a strong base from which to grow the Enlarged Group revenue
streams both through existing products and new product
development.
7. Directors, Proposed Directors and Senior Management
Directors
Jonathan Edward Hale, Non-Executive Chairman (aged 46)
Jonathan Hale was chief financial officer of 32Red Plc, the AIM
listed Gibraltar-based online gaming company, between 2006 and
March 2018. As chief financial officer, Jonathan was instrumental
in several corporate transactions including the sale of the
Betdirect sports betting business to Stan James in 2007 and the
acquisition of the Roxy Palace online casino business in 2015. In
February 2017, Kindred Group Plc made an offer to acquire the
entire share capital of 32Red Plc for GBP176 million and the
takeover completed on 5 June 2017. Prior to his appointment at
32Red Plc, Jonathan qualified as a chartered accountant with
PricewaterhouseCoopers in 1998, before leaving to work in the
finance department of Capital Corporation Plc, an operator of high
roller land-based casinos. Following the sale of Capital
Corporation Plc to Stanley Leisure Plc, Jonathan co-founded
Property Internet Plc and Alan Brazil Leisure Plc, and served as
finance director of the Sports Café Group for four years between
2001 and 2005.
Rodger David Sargent, Chief Executive Officer (aged 47)
Rodger Sargent has been the founder and finance director of a
number of quoted and private companies over the past fifteen years.
Rodger has also been a director of Big Blue Broadband Plc,
Audioboom Group Plc and S4 Capital plc. He previously ran the
family office of Betfair founder, Andrew Black. He qualified as a
chartered accountant with PriceWaterhouse Cooper, London in
1996.
Proposed Directors
On Completion, it is proposed that Jonathan Hale and Rodger
Sargent will resign from the Board and that the following will be
appointed to the New Board of the Enlarged Group:
Dr. Patrick Jude DeSouza: Proposed Non-Executive Chairman (aged
61)
Since 2010 Patrick has been the Executive Chairman of Water
Intelligence plc, a rapidly growing AIM quoted business focusing on
technology transformation of the water industry. He has 25 years of
operating and advisory leadership experience with both public and
private companies in media and technology and asset management
industries. Over the last 15 years, Patrick has also invested in
and incubated technology companies centred at Yale University.
Patrick has served at the White House on the National Security
Council. He is a graduate of Columbia College, Yale Law School and
Stanford Graduate School. He is a member of the Council on Foreign
Relations.
Todd Lawrence Carter: Proposed Chief Executive Officer (aged
56)
Todd is the Co-Founder & CEO of Tagasauris. Prior to
Tagasauris, he was Co-founder/President of OWL Multimedia, Inc. a
music search technology company centred at Yale University and
Co-Founder/CTO of Busy Box, a publicly traded technology company.
He co-authored the AXS File Concatenation Protocol, an early
standard for image metadata representation that found broad
adoption in the printing and publishing industries including by
Reuters, Agence France Presse, and PressLink. Todd was also a
member of ISO/IEC JTC1/SC29/WG11, more commonly known as the Moving
Pictures Experts Group, a working group that develops international
standards for audio-visual information representation.
Stephen Scott Schlichter: Proposed Executive Director (aged
52)
Scott is the Co-Founder & CEO of GTChannel. Prior to
GTChannel, Scott launched and managed Hysteria, Inc., Dogma
Studios, and advised several start-ups including JusCollege. He has
25 years of experience in entertainment and digital video and has
launched several media focused start-ups with clients including
major Hollywood studios, network television companies and cable
channels.
David Anton: Proposed Non-Executive Director (aged 57)
David is Chief Executive Officer of Anton & Partners, a
leading advertising, branding, and marketing communication company
with a 20-year track record of creating impact for some of the
world's most notable brands in fashion, lifestyle, financial and
automotive sectors. David is a serial entrepreneur and has founded
various successful companies. He is an investor in and advisor to
Village Roadshow Productions, a leading movie production company.
He is a graduate of Columbia College.
Michael Joseph Kelly Jr: Proposed Non-Executive Director (aged
62)
Mike is the Co-Founder of Kelly Newman Ventures, LLC, an
advisory and investment firm. He was formerly Chief Executive
Officer of The Weather Channel Companies, a leading weather-focused
media and technology company owned by a consortium made up of The
Blackstone Group, Bain Capital, and NBCU, Prior to that, he served
as the President of AOL Media Networks, a division of Time Warner
where he pioneered the media network strategy through a number of
successful acquisitions such as Advertising.com and Tacoda. He
currently serves on the Board of Directors of Cars.com (NYSE:Cars),
is the non-exec Chairman of BGF backed Dianomi LTD, a UK based
marketing platform and is a member of the Board of Quantcast
Corporation, a US based technology company that specialises
real-time advertising, He is a graduate of the University of
Illinois, Champaign-Urbana.
Akiko Mikumo: Proposed Non-Executive Director (aged 66)
Akiko is a retired partner at Weil Gotshal & Manges LLP, one
of the world's leading law firms. She has over 35 years of mergers
and acquisitions, securities and governance experience. Her clients
have included some of the leading media and technology companies
and investment firms. Akiko founded the Hong Kong office of Weil
and led the growth of its London office. She served as a member of
the firm's Management Committee. Ms. Mikumo is a director of
Cambridge Science Corporation, a biotech investment company in
Cambridge Massachusetts. Recently, she served as a fellow at
Harvard's Advanced Leadership Initiative. She is a graduate of
University of California, Berkeley and New York University School
of Law.
Senior Management
Taro Koki: Proposed Senior Manager (aged 49)
Taro is currently President and Co-founder of GTChannel. Taro
was previously Chief Executive Officer of Zigzag Asia, Director of
Hungry for Words KK and started his career in Tokyo with Mitsui
& Co. Ltd. Taro was also a race reporter for ESPN during
GTChannel's partnership with the IMSA racing series. Taro has over
15 years of experience in the media space in both Asia and the US.
He is a graduate of Waseda University - Tokyo.
Adrian Laurence Hargrave: Proposed Chief Financial Officer (aged
39)
Adrian is currently VP, Corporate Development and Investor
Relations at Water Intelligence, having joined from finnCap Ltd in
2018. He was a Qualified Executive for 14 years, having previously
worked at Deloitte LLP, Citigroup and Cenkos Securities Plc. He has
extensive experience working with AIM-listed companies. Adrian
graduated from Cambridge University with a degree in Economics.
8. Principal terms and conditions of the acquisition
On 10 September 2019, the Company and MergerCo entered into the
Acquisition Agreement with each member of the EAI Group, GTC
MergerCo, TAG MergerCo and certain Vendors pursuant to which the
Company has conditionally agreed to acquire the entire issued
capital (outstanding immediately prior to the time of the
Acquisition) of each of Entertainment AI, GTChannel and Tagasauris
via a merger with each of MergerCo, GTC MergerCo and TAG MergerCo.
The consideration for the Acquisition is GBP12.19 million, to be
satisfied wholly by the issue of the Consideration Shares fully
paid up on Completion.
Completion of the Acquisition Agreement is conditional, amongst
other things, upon:
-- Shareholder approval of the Resolutions;
-- a majority of Tagasauris' shareholders approving of the terms of the Acquisition; and
-- the Company's cash and net cash position (inclusive of
recoverable value added tax, which will be recoverable post
completion of the Proposals) being not less than GBP1 million.
The Acquisition Agreement contains representations, warranties
and covenants given by the principal Vendors and also contains
representations and warranties that are given by the EAI Group,
each of which are limited in time and scope. In addition, the
principal Vendors have agreed to indemnify the Company on a several
basis for breaches of all representations and warranties given by
them and with respect to the Company within the EAI Group of which
they are stockholders on the date of the Acquisition Agreement.
Under the Acquisition Agreement the limitation period for:
-- title, authority and tax representation and warranty claims
is 6 years from completion of the Acquisition; and
-- all other representation and warranty claims is 12 months
following completion of the Acquisition.
The principal Vendors shall not be required to indemnify the
Company under the Acquisition Agreement unless the aggregate losses
in respect of any representation and warranty claim exceeds 1 per
cent. of GBP12.19 million. The principal Vendors' maximum liability
for claims relating to the representations and warranties under the
Acquisition Agreement is limited to an amount equal to 17.5 per
cent. of the value of the Consideration Shares. The Purchaser's
recourse is limited to the Consideration Shares, rather than cash
(unless from the proceeds of sale of such shares).
On the closing date of the Acquisition the Company will file
certificates of mergers with the Secretary of State of the State of
Delaware, United States of America. Upon the certificates of merger
taking effect MergerCo, GTC MergerCo and TAG MergerCo, shall be
merged with and into Entertainment AI, GTChannel and Tagasauris
respectively, with Entertainment AI, GTChannel and Tagasauris
existing as the surviving corporations.
The Acquisition Agreement is governed by the laws of the State
of Delaware.
Following Admission the Consideration Shares will rank pari
passu with the Existing Issued Share Capital (as consolidated
pursuant to the Share Capital Consolidation). Application will be
made forthe admission of the Enlarged Issued Share Capital to
trading on AIM which is expected to take place on 30 September
2019.
Financial effects of the Acquisition
An unaudited pro forma statement of net assets of the Enlarged
Group, prepared for illustrative purposes only, showing the impact
of the Acquisition on the Enlarged Group is set out in Part IV of
the Admission Document.
9. FINANCING OF THE ACQUISITION
The Company will finance the Acquisition through the issuance of
the Consideration Shares.
10. THE STRATEGIC INVESTORS
As part of the Acquisition, two strategic investors, Water
Intelligence plc and Sumitomo Corporation agreed to invest an
aggregate of GBP1.25million in the Cross-Over Round as outlined
below. The Directors and Proposed Directors believe that the
Strategic Investors will improve the prospects of the Enlarged
Group as they will provide early revenue and their support as
Strategic Investors provides third party validation for the
Enlarged Group's strategy. The Company has agreed preferential
outline terms on which the Strategic Investors will be able to
exploit the Enlarged Group's technology.
Water Intelligence is a rapidly growing AIM quoted business
focused on technology transformation of the water industry and an
existing investor in EAI Group. Patrick DeSouza, the Executive
Chairman of Water Intelligence Plc and a co-founder of EAI Group
will be on the New Board as Non-Executive Chairman. Mr DeSouza and
Water Intelligence, in which he holds a 28.3 per cent shareholding,
have entered into a relationship agreement with the Company which
is detailed in the Admission Document. Water Intelligence has a
right to a New Board observer, for so long as Water Intelligence
holds 2 per cent. of the Company's issued share capital.
Sumitomo Corporation, a member of the Fortune Global 500 with
2018 global net income of $2.9 billion, conducts business
activities in a wide range of industries on a global scale.
Sumitomo Corporation has a right to a New Board observer, for so
long as Sumitomo Corporation holds the lesser of the Cross-Over
Shares issued to it in the Cross-Over Round or 2 per cent. of the
Company's issued share capital.
11. THE FUNDRAISING
In order to fund the Enlarged Group's organic expansion plans,
the Company is seeking to raise approximately GBP8.61 million
(gross) (GBP7.31 million net of expenses) pursuant to the
Fundraising through the issue of the Cross-Over Shares at the
Cross-Over Price and the Placing Shares at the Issue Price.
The Strategic Investors, being Sumitomo Corporation and Water
Intelligence Plc, have agreed to invest in the Company pursuant to
the Cross-Over Round and have entered into binding commitments to
subscribe for the Cross-Over Shares for a total consideration of
GBP1.25 million. A summary of the Cross-Over Subscription Letters
and other associated documentation is provided in the Admission
Document. The Cross-Over Shares will represent approximately 6.95
per cent. of the Enlarged Issued Share Capital immediately
following Admission. The Cross-Over Round is not conditional on the
successful completion of the Placing, which means it will provide a
base level of working capital for the Enlarged Group following
Admission whether or not the Placing proceeds.
The Placing Shares will represent approximately 32.73 per cent.
of the Enlarged Issued Share Capital immediately following
Admission. Further details of the Placing Agreement which contains
the terms upon which the Placing is being undertaken are described
in the Admission Document. The Placing is not being underwritten.
Following Admission the Fundraising Shares will rank pari passu
with the Existing Issued Share Capital.
Application will be made for the admission of the Enlarged
Issued Share Capital to trade on AIM which is expected to take
place on 30 September 2019.
12. USE OF PROCEEDS
The funds from the Fundraising are expected to be used to
execute the Enlarged Group's growth strategy outlined above: growth
of the MCN; introduction of technology offerings to audiences;
development of content for the owned and operated site including
for subscriptions and brands; and implementation of machine
learning microservices. As noted, these dimensions of the plan are
synergistic. To that end, based on a GBP8.61 million fundraise and
existing cash from within the Enlarged Group, the Enlarged Group
expects to allocate approximately GBP3 million to execution of
products and implementation of software as services model, GBP2
million for content creation, and the remainder for working capital
and balance sheet strength that will allow the Enlarged Group to
accelerate its growth plan through new and existing
opportunities.
Should more capital be raised as part of the fund raise, the
Directors and Proposed Directors are prepared to accelerate the
Enlarged Group's growth plan with a further strengthened balance
sheet.
13. WARRANTS
The Company, WH Ireland and Dowgate have entered into a warrant
instrument whereby, conditional upon Admission, WH Ireland and
Dowgate will be issued with warrants to subscribe for in aggregate
170,940 Ordinary Shares at 130 per cent. of the Issue Price which
are exercisable over a one year period commencing on Admission,
after which time the warrants will expire and become null and void.
The exercise price and the number of Ordinary Shares issuable upon
exercise are both subject to adjustment in certain circumstances,
including a subdivision or consolidation of the Ordinary
Shares.
14. INCENTIVISATION ARRANGEMENTS
The Directors and Proposed Directors believe that the success of
the Enlarged Group will depend to a high degree on management and
other members of staff being appropriately motivated and rewarded.
To this end the Company intends to make options available to
current and future personnel up to a maximum of 15 per cent. of the
Enlarged Issued Share Capital for a period of 12 months, unless it
has received written consent from WH Ireland and Dowgate. Upon
Admission, the Company will issue options over 4,884,604 Ordinary
Shares to certain directors, staff and key contractors. These
options will be issued at the Issue Price and will vest
immediately, with half exercisable after 1 year and the remainder
after 2 years. Post-Admission the Company intends to put in place a
share option plan and it is anticipated that any Options will be
issued at a premium to the prevailing share price at the time, will
only be exercisable after three or more years and will vest subject
to relevant performance criteria at the time of issue.
15. DIVID POLICY
The Directors and the Proposed Directors believe that the
Enlarged Group will continue to have the potential to be cash
generative in the future and recognise the importance of dividend
income to shareholders. Any future dividends will depend on the
Enlarged Group's profitability, cash position and prospects, whilst
also having regard to the future cash demands of the business. The
Directors and Proposed Directors do not anticipate the proposal or
any payment of any dividends during the current financial year to
31 December 2019.
The Proposed Directors may amend the dividend policy of the
Company from time to time and the above statement regarding the
dividend policy should not be construed as any form of profit or
dividend forecast.
16. THE TAKEOVER CODE, THE CONCERT PARTY AND THE PROPOSED WAIVER
The Concert Party is made up of the GTC Concert Party Members,
being certain GTC Vendors, and the Tag Concert Party Members, being
certain TAG Vendors who are presumed under the Takeover Code to be
acting in concert, by virtue of presumption 9 of the definition of
acting in concert, whereby shareholders in a private company who
sell their shares in that company in consideration for the issue of
new shares in a company to which the Takeover Code applies, are
presumed to be acting in concert. The Panel has agreed to rebut
presumption 9 of the definition of acting in concert in respect of
the remaining GTC Vendors and TAG Vendors as these investors are
historic investors who have little or no personal, social or
business connections with the members of the Concert Party. Members
of the Concert Party include Patrick DeSouza, Stephen Scott
Schlichter and Todd Carter, who are Proposed Directors, Water
Intelligence plc, a Strategic Investor and those deemed to be
acting in concert due to their social, business or or personal
connections with the members of the concert party.
Conditional upon the Waiver Resolution, upon Admission, the
Concert Party will (excluding Options held by them) be interested
in an aggregate of 23,809,153 Ordinary Shares, representing
approximately 47.66 per cent. of the Enlarged Issued Share Capital.
Should the Concert Party exercise their options over Ordinary
Shares (and assuming no new shares are issued in the meantime), the
Concert Party will hold 26,862,824 Ordinary Shares, representing a
maximum of approximately 50.67 per cent. of the Enlarged Issued
Share Capital as enlarged by such exercise.
The Company has applied to the Panel for a waiver of the
obligation of the Concert Party under Rule 9 of the Takeover Code
that would otherwise arise as a result of the issue of the
Consideration Shares and Fundraising Shares to the Concert Party or
any subsequent exercise of Options by it in order to permit the
Acquisition and Fundraising to proceed without triggering an
obligation on the part of the Concert Party to make a general offer
to Shareholders. Subject to the approval of the Shareholders of the
Waiver Resolution, to be taken on a poll in General Meeting, the
Panel has agreed to waive the obligation to make a Rule 9 Offer. To
be passed, the Waiver Resolution will require a simple majority of
the votes cast on a poll by Shareholders attending and voting at
the General Meeting.
Further information on the Concert Party and Rule 9 of the City
Code will be set out in the Admission Document.
17. CORPORATE GOVERNANCE
The Directors and Proposed Directors support high standards of
corporate governance. Accordingly, the New Board will meet
regularly throughout the year and all necessary information will be
supplied to the New Board on a timely basis to enable it to
discharge its duties effectively. Additionally, special meetings
will take place or other arrangements will be made when New Board
decisions are required in advance of regular meetings.
The Board has established financial controls and reporting
procedures which are considered appropriate given the size and
structure of the Enlarged Group. It is the intention of the New
Board that these controls will be reviewed regularly in light of
the future growth and development of the Enlarged Group and
adjusted accordingly.
Share dealing code
The Directors and Proposed Directors intend to comply with Rule
21 of the AIM Rules for Companies relating to directors' and
applicable employees' dealings in the Company's securities.
Accordingly, the Company has adopted a share dealing code for
dealings in securities of the Company by Proposed Directors,
persons discharging managerial responsibility and applicable
employees which is appropriate for a company whose shares are
traded on AIM. This constitutes the Company's share dealing policy
for the purposes of compliance with United Kingdom legislation
including the Market Abuse Regulation and the relevant part of the
AIM Rules for Companies.
It should be noted that the insider dealing legislation set out
in the United Kingdom Criminal Justice Act 1993, as well as
provisions relating to market abuse, will apply to the Company and
dealings in the Ordinary Shares.
Compliance with the Corporate Governance Code
The Directors and the Proposed Directors recognise the
importance of sound corporate governance and intend that the
Company will comply with the provisions of the QCA Corporate
Governance Code, as published by the Quoted Companies Alliance,
insofar as they are appropriate given the Company's size, nature
and stage of development. The QCA Corporate Governance Code sets
out a standard of minimum best practice for small and mid-size
quoted companies, particularly AIM companies. Further details on
compliance with the QCA corporate governance code will be set out
in the corporate governance statement on the Enlarged Group's
website; www.entertainmentai.co.uk.
The Directors and the Proposed Directors have established an
Audit Committee, a Remuneration Committee, a Nominations Committee
and a Strategy Committee with formally delegated duties and
responsibilities as described below:
Audit committee
The Audit Committee has the primary responsibility for
monitoring the quality of internal control, ensuring that the
financial performance of the Company is properly measured and
reported on and for reviewing reports from the Company's auditors.
The Audit Committee will meet at least twice a year at appropriate
times in the reporting and audit cycle and otherwise when required.
The Audit Committee will also meet with the Company's auditors at
least once a year.
From Admission the Audit Committee will comprise Michael J.
Kelly, David Anton, Akiko Mikumo and will be chaired by Patrick
DeSouza.
Remuneration committee
The Remuneration Committee is responsible for the review and
recommendation of the scale and structure of remuneration for
executive directors and other designated senior management, taking
into account all factors which it deems necessary. The Remuneration
Committee considers all aspects of the executive directors'
remuneration including pensions, benefits and share option awards.
The remuneration of the non-executive directors will be a matter
for the chairman and the executive members of the New Board. No
director will be involved in any decision as to his or her own
remuneration. The Remuneration Committee will meet at least twice a
year and otherwise when required.
In exercising this role, the Directors shall have regard to the
recommendations put forward in the QCA Corporate Governance Code
and, where appropriate, the QCA Remuneration Committee Guide and
associated guidance.
From Admission the Remuneration Committee will comprise Michael
J. Kelly, David Anton and will be chaired by Akiko Mikumo.
As the Remuneration Committee will comprise all of the
Independent Non-Executive Directors, this committee will also
consider related party matters as they arise.
Nominations Committee
The Nominations Committee will be responsible for consideration
of future succession plans for Board members as well as to whether
the New Board has the skills required effectively to manage the
Enlarged Group. The Nominations Committee will also be responsible
for, amongst other things, identifying and nominating members of
the Board, recommending Directors to be appointed to each committee
of the Board and the chair of each such committee. The Nominations
Committee will also arrange for evaluation of the Board. The
Nominations Committee will meet on an ad-hoc basis and from
Admission will comprise Patrick DeSouza, Akiko Mikumo and will be
chaired by Michael J. Kelly.
Strategy Committee
The strategy committee will be responsible for reviewing and
considering the following matters: (i) control over the strategy
development and its implementation; (ii) acquisitions and business
sale transactions; (iii) major investment projects, investment
budget allocation and key financial targets.
From Admission the Strategy Committee will comprise Patrick
DeSouza, Akiko Mikumo, Michael J. Kelly and will be chaired by
David Anton.
Advisory Panel
The Company has established an Advisory Panel, comprised of
Charlie Collier, Thomas Glocer and Chris Welty. The purpose of the
Advisory Panel is to enable the Proposed Directors to draw upon the
skills of these industry experts as well as supporting the Enlarged
Group in accessing growth opportunities via the network of contacts
of each member of the Advisory Panel. The Advisory Panel will meet
on an ad-hoc basis and be available for consultations with various
Proposed Directors as required.
18. IRREVOCABLE UNDERTAKINGS
Jon Hale and Rodger Sargent have given irrevocable undertakings
to the Company to vote in favour of the Resolutions to be proposed
at the General Meeting (and, where relevant, to procure that such
action is taken by the relevant registered holders if that is not
one of them) in respect of their beneficial holdings totalling, in
aggregate, 2,325,000 Ordinary Shares, representing approximately
6.37 per cent. of the Existing Issued Share Capital.
Further details of the irrevocable undertakings received by the
Company are set out in the Admission Document.
19. LOCK-IN AND ORDERLY MARKET ARRANGEMENTS
Each of the Locked-In Persons and the Strategic Investors has
undertaken to the Company and the joint brokers, WH Ireland and
Dowgate, that they will retain their entire interest in and not
dispose of any interest in Ordinary Shares during the period of
twelve months from the date of Admission.
Furthermore each of the Locked-In Persons and Water Intelligence
plc has also undertaken to the Company and to the joint brokers
that they will retain their entire interest in and not dispose of
any interest in Ordinary Shares at any time from 12 to 24 months
from Admission, except with the prior written consent of WH Ireland
(as nominated adviser) and Dowgate or their successors (whose
consent will not be unreasonably withheld or delayed, provided such
disposal is in accordance with orderly market principles) and then
only through either the joint brokers to facilitate the execution
of the trades. Sumitomo Corporation has agreed to notify the joint
brokers if it intends to dispose of any interest in Ordinary Shares
at any time from 12 to 24 months from Admission.
These restrictions are subject to certain limited exceptions, as
described below and in the Admission Document.
20. AUTHORITY FOR OFF-MARKET REPURCHASES
The Acquisition involves the acquisition of three separate
entities: GTChannel, Tagasauris and Entertainment AI and the
shareholder re-organisation of two of those companies. The
Acquisition involves the merging of these three entities into
Blockchain subsidiaries. The entities have received advice that the
structure constitutes a tax-free reorganisation. It is possible
that the tax advice may be challenged and may produce an unexpected
tax. In addition, pursuant to the Acquisition Agreement, any
liability for the Locked-In Vendors is limited to 17.5 per cent. of
the value of their Consideration Shares and the Company's recourse
is limited to the Consideration Shares. Should such a claim be
made, the Company might require the ability to repurchase
Consideration Shares.
Given the lock-in arrangement described in paragraph 19 of this
Part 1, pursuant to which the Locked-In Vendors have agreed to
lock-in all of their Consideration Shares, should there be a
contingency such as an unexpected tax bill or a warranty claim
pursuant to the Acquisition Agreement, such lock-in limits the
ability of a Locked-In Vendor to satisfy such a contingency with
cash.
Under these limited circumstances described above, the Company
and the Joint Brokers will permit some of the Consideration Shares
to be released from the lock-in arrangements in order to satisfy
relevant liabilities. The maximum amount of Consideration Shares to
be released from the lock-in arrangements is expected to be less
than one-third of the Consideration Shares for the Locked-In
Vendors in aggregate. The Locked-In Vendors have agreed that 100
per cent. of their Ordinary Shares shall remain under lock-in
arrangements should no relevant liabilities arise.
In circumstances where the lock-in arrangements are waived, the
Company and Locked-In Vendors have agreed, in the first instance,
to request that WH Ireland and Dowgate or their successors permit
the disposal of the required number of Consideration Shares to
generate sufficient net funds to pay the relevant liability as it
falls due through a market transaction. Such permission is not to
be unreasonably withheld, however, should such permission not be
granted or it is not possible to meet the tax bill or warranty
claim in a market transaction, the Company has agreed to buyback
such number of Ordinary Shares from the Locked-In Vendors that will
generate sufficient net funds to pay the relevant liability as it
falls due.
For the Company to be able to undertake an off-market repurchase
of the relevant Consideration Shares:
-- Shareholders would need to authorise the Board, at the
General Meeting, to undertake an off-market repurchase and would
need to approve the form of off-market SPA set out in Part VII of
the Admission Document. The agreement provides for the price of the
acquired shares to be the Issue Price or (if lower), a price that
reflects standard market practice with a price payable within 5 per
cent. of the volume weighted average closing mid-market price of
the Company's shares for the 20 business days prior to the day the
purchase is agreed.
-- Shareholders will also need to approve, at the General
Meeting, a reduction of the Company's share premium account in
order to create a distributable reserve to finance the buyback;
-- Subsequently the Company will need the sanction of the Court
to the reduction of the share premium account; and
-- before entering into an off-market SPA with a related party,
the independent directors on the Board may need to consult with the
Company's nominated adviser prior to concluding whether the terms
of the buyback are fair and reasonable insofar as shareholders are
concerned.
Alternatively and subject to the requirements of the Act, the
Company or a member of the Enlarged Group may extend a loan to the
Locked-In Vendors to generate sufficient funds to meet relevant
liabilities as they fall due. Any such loan is likely to require
the Board to consult with the Company's nominated adviser prior to
concluding whether the proposed terms are fair and reasonable
insofar as shareholders are concerned.
21. RELATIONSHIP AGREEMENT
The Company, WH Ireland, Patrick DeSouza and Water Intelligence
Plc (a Strategic Investor) (as significant shareholders) have
entered into a relationship agreement, which is conditional upon
Admission and will be in effect at all times from time to time when
such significant shareholders and/or their connected persons
together hold the legal and/or beneficial title to, or the voting
rights attaching to Ordinary Shares which constitute, in aggregate,
not less than 15 per cent. of the number of Ordinary Shares in
issue.
Pursuant to the agreement Patrick DeSouza and Water Intelligence
Plc, in their capacity as substantial shareholders, have given
various undertakings to the Company regarding the relationship
between each of them, their connected persons and the Company.
In particular, Patrick DeSouza and Water Intelligence Plc have
each agreed not to take any action that would result in the Company
not being able to carry on its business independently of Patrick
DeSouza and Water Intelligence Plc or their connected persons. The
agreement will automatically terminate upon the earlier of: the
execution of an agreement between all the parties to terminate the
agreement; and the Ordinary Shares ceasing to be traded on AIM or
some other recognised stock exchange. If the interest of Water
Intelligence and Pat DeSouza in Ordinary Shares fall below 15 per
cent., the agreement will cease but if within one year of the
agreement ceasing to apply, those interests reach or exceed 15 per
cent., then the provisions of the agreement will automatically
re-apply.
22. ADMISSION AND CREST SETTLEMENT
It is intended that if the Acquisition and Fundraising are
completed the admission of the Company's Existing Ordinary Shares
to the standard segment of the Official List and to trading on the
Main Market will be cancelled (immediately prior to Admission) and
the Enlarged Issued Share Capital will be admitted to trading on
AIM. Consequently, application will be made to London Stock
Exchange for the Enlarged Issued Share Capital to be admitted to
trading on AIM.
Admission is expected to take place at 8.00 a.m. on 30 September
2019.
The Existing Ordinary Shares and (following the Share Capital
Consolidation) the Ordinary Shares (including the Consideration
Shares and the Fundraising Shares) are and will be eligible for
CREST settlement. CREST is a paperless settlement procedure
enabling securities to be evidenced otherwise than by a certificate
and transferred otherwise than by a written instrument in
accordance with the requirements of CREST. The Articles permit the
holding and transfer of Ordinary Shares to be evidenced in
uncertificated form in accordance with the requirement of CREST.
Accordingly, following Admission, settlement of transactions in
Ordinary Shares may take place within the CREST system if the
relevant Shareholder so wishes. CREST is a voluntary system and
Shareholders who wish to receive and retain share certificates will
be able to do so
The Ordinary Shares will have the ISIN number GB00BK6SHS41. The
Ordinary Shares will not be dealt on any other recognised
investment exchange and no application has been or is being made
for the Ordinary Shares to be admitted to any other such
exchange.
23. SHARE CAPITAL CONSOLIDATION
Under the Share Capital Consolidation it is proposed that every
12 Existing Ordinary Shares be consolidated as one Ordinary Share.
Accordingly, the proportion of Existing Ordinary Shares held by
each Shareholder immediately before the Share Capital Consolidation
will, save for fractional entitlements (which are discussed further
below), be the same as the proportion of Ordinary Shares held by
each Shareholder immediately after the Share Capital Consolidation.
In the event that the number of Existing Ordinary Shares held by a
Shareholder is not exactly divisible by 12, the Share Capital
Consolidation will generate an entitlement to a fraction of an
Ordinary Share. Any Ordinary Shares in respect of which there are
such fractional entitlements will be aggregated and sold in the
market for the best price reasonably obtainable and the net
proceeds of such sale distributed in due proportion among those
Shareholders entitled to a fraction of an Ordinary Share except
that any amount otherwise due to a member of less than GBP3 will be
retained for the benefit of the Company. The Consolidated Ordinary
Shares will have ISIN number GB00BK6SHS41. Any Shareholder holding
fewer than 12 Existing Ordinary Shares on 30 September 2019, being
the record date for the Share Capital Consolidation, will cease to
be a Shareholder. The Directors and Proposed Directors believe that
the Share Capital Consolidation will result in a more appropriate
number of shares in issue given the Company's size.
24. CHANGE OF NAME
Pursuant to the power given to the Board in the Articles, it is
proposed to change the name of the Company to Entertainment AI Plc
with effect from Admission. Upon the change of name being
registered at Companies House, the Company's website address will
be changed to www.entertainmentai.co.uk.
25. GENERAL MEETING
The Admission Document contains a notice convening a General
Meeting to be held on 27 September 2019 at 10.15 a.m. at the
offices of Fladgate LLP at 16 Great Queen Street, London, WC2B 5DG
at which the Resolutions as stated in the Admission Document will
be proposed.
ADMISSION AND ACQUISITION STATISTICS
Existing Issued Share Capital (prior to the Share Capital Consolidation) 36,500,000
Existing Issued Share Capital (post Share Capital Consolidation) 3,041,666
Number of Consideration Shares 27,092,886
Number of Placing Shares at the Issue Price 16,351,102
Issue Price 45 pence
Number of Cross-Over Shares at the Cross-Over Price 3,472,222
Cross-Over Price 36 pence
Total number of Consideration Shares and Fundraising Shares 46,736,102
Enlarged Issued Share Capital on Admission (post Share Capital Consolidation) 49,916,210
Consideration Shares expressed as a percentage of the Enlarged Issued Share Capital 54.23 per cent.
Fundraising Shares expressed as a percentage of the Enlarged Issued Share Capital 38.68 per cent.
Total Consideration Shares and Fundraising Shares expressed as a percentage of the Enlarged 93.91 per cent.
Issued Share Capital
Gross proceeds receivable by the Company pursuant to the Fundraising GBP8.61 million
Estimated net proceeds of the Fundraising GBP7.31 million
Market capitalisation of the Company at Admission at the Issue Price GBP22.48 million
AIM symbol from Admission EAI
ISIN for the Ordinary Shares on Admission GB00BK6SHS41
SEDOL for the Ordinary Shares on Admission BK6SHS4
TIDM on Admission EAI
LEI for the Company 213800RQVRMW2KRORN22
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Suspension of admission to the standard segment of the Official List and to trading 23 May 2019
on the
Main Market
Publication date of this document 11 September 2019
Record date for Share Capital Consolidation 6.00 p.m. on 27 September 2019
Latest time and date for receipt of Forms of Proxy 10.15 a.m on 25 September 2019
Time and date of General Meeting 10.15 a.m on 27 September 2019
Acquisition Agreement unconditional and Completion of the Acquisition 8.00 a.m. on 30 September 2019
Cancellation of admission to the standard segment of the Official List and to 8.00 a.m. on 30 September 2019
trading on the
Main Market
Admission effective and dealings in the Enlarged Issued Share Capital expected to 8.00 a.m. on 30 September 2019
commence
on AIM
CREST accounts (for uncertified holders (where applicable)) expected to be credited 8.00 a.m. on 30 September 2019
with the
Fundraising Shares and Consideration Shares
Definitive share certificates (for certified holders (where applicable)) for the By 14 October 2019
Fundraising
Shares and Consideration Shares to be dispatched by
Change of name effective 8.00 a.m. on 30 September 2019
Notes:
1. All of the above timings refer to London time unless otherwise stated.
2. Each of the times and dates above is subject to change. Any
such change will be notified by an announcement on a Regulatory
Information Service (as defined in the AIM Rules for
Companies).
3. The times and dates above assume the passing at the General
Meeting of the Resolutions, Completion of the Acquisition and
completion of the Fundraising and Admission.
4. Events listed in the above timetable following the General
Meeting are conditional on the passing at the General Meeting of
certain of the Resolutions.
defintiions and glossary
"Act" the United Kingdom Companies Act 2006, as amended
"Acquisition" the Company's proposed acquisition of the entire issue and to be issued
share capital of Entertainment
AI, GTChannel and Tagasauris pursuant to the terms of the Acquisition
Agreement
"Acquisition Agreement" the conditional agreement and plan of merger dated 11 September 2019 made
between (i) the
Company, (ii) MergerCo, (iii) Entertainment AI, (iv) GTChannel, (v) GTC
MergerCo, (vi) Tagasauris,
(vii) TAG MergerCo, (viii) Patrick DeSouza as shareholder representative
and (ix) certain
Vendors relating to the Acquisition, details of which are set out in the
Admission Document
"Admission" the admission of the Enlarged Issued Share Capital to trading on AIM
becoming effective in
accordance with the AIM Rules for Companies
"Admission Document" the document being published and sent to Shareholders later today in
connection with Admission,
containing a circular to Shareholders and a notice of General Meeting
"Advisory Panel" the advisory panel of the Company as constituted from time to time
"AI" artificial intelligence
"AIM" the market of that name operated by the London Stock Exchange
"AIM Rules" together, the AIM Rules for Companies and, where the context requires, the
AIM Rules for Nominated
Advisers
"AIM Rules for Companies" the rules for companies whose securities are admitted to trading on AIM
published by the London
Stock Exchange
"AIM Rules for Nominated Advisers" the rules for nominated advisers setting out the eligibility, ongoing
obligations and certain
disciplinary matters in relation to nominated advisers published by the
London Stock Exchange
"applicable employee" as defined in the AIM Rules for Companies
"Articles" the articles of association of the Company in force as at the date hereof
"Audit Committee" the audit committee of the Company as constituted from time to time
"certificated" or "in certificated form" a share or other security which is not in uncertificated form (i.e. not in
CREST)
"Company" or "Blockchain" Blockchain Worldwide Plc, a company registered in England and Wales with
company number 10621059
"Completion" completion of the Acquisition in accordance with the terms of the
Acquisition Agreement
"Concert Party" the concert party for the purposes of the Takeover Code which comprises
each of the GTC Concert
Party Members and each of the Tag Concert Party Members, as more fully
described in the Admission
Document
"Consideration Shares" the 27,375,000 Ordinary Shares to be issued to the Vendors pursuant to the
Acquisition Agreement
"Corporate Governance Code" the United Kingdom Corporate Governance Code issued from time to time by
the Financial Reporting
Council
"CREST" the electronic system for the holding and transferring of shares and other
securities in paperless
form operated by Euroclear United Kingdom & Ireland Limited
"Cross-Over Round" or "Subscription" the GBP1.25 million investment to be made by the Strategic Investors at
Admission, details
of which are set out in the Admission Document
"Cross-Over Subscription Letters" the conditional letters entered into between each of the Strategic
Investors and Entertainment
AI with respect to the Strategic Investors' participation in the
Cross-Over Round, details
of which are set out in the Admission Document
"Directors" or "Board" the directors of the Company at the date of this document, whose names are
set out on page
13 of this document (each being a "Director")
"Dowgate" Dowgate Capital Limited, a company registered in England and Wales with
registered number
02474423
"EAI Group" Entertainment AI, GTChannel and Tagasauris
"EGR" EGR Corporate Broking Limited, a company registered in England and Wales
with registered number
11155066
"Enlarged Group" the Company and its subsidiaries on Admission following Completion of the
Acquisition
"Enlarged Issued Share Capital" the issued ordinary share capital of the Company immediately following
Admission, being the
Existing Issued Share Capital as consolidated pursuant to the Share
Capital Consolidation
and together with the Consideration Shares and the Fundraising Shares
"Entertainment AI" Entertainment AI Inc, a company organised and existing under the laws of
the United States
of America whose registered office is at 2711 Centerville Road, Suite 400,
Wilmington, Delaware
19808 USA
"EU" European Union
"Existing Issued Share Capital" the existing 36,500,000 Existing Ordinary Shares in issue
"Existing Ordinary Shares" ordinary shares of one pence nominal value each in the capital of the
Company
"Form of Proxy" the form of proxy accompanying this document for use in connection with
the General Meeting
"FCA" the Financial Conduct Authority
"FSMA" the Financial Services and Markets Act 2000, as amended
"Fundraising" together the Cross-Over Round and the Placing
"Fundraising Shares" together the Cross-Over Shares and the Placing Shares
"GTChannel" GTChannel, Inc, a company registered in Delaware, United
States of America
"GTC MergerCo" the Company's wholly owned subsidiary, GTChannel Acquisition Inc.,
incorporated in the United
States of America for the purpose of the acquisition of GTChannel
"GTC Vendors" the stockholders of GTChannel prior to its acquisition by the
Company
"General Meeting" the general meeting of the Company to be held at the offices of Fladgate
LLP at 16 Great Queen
Street, London, WC2B 5DG at 10.15 a.m. on 27 September 2019, or any
adjournment thereof, notice
of which is set out at the end of this document
"Google" Google, LLC, a wholly owned subsidiary of Alphabet, Inc.
"GTC Concert Party Members" each of Scott Schlichter, Taro Koki, Adam Shea Family, Lunzer
Trust and Yuko Koki (being GTC Vendors)
"HMRC" HM Revenue & Customs
"IFRS" International Financial Reporting Standards as adopted by the EU
"IP" intellectual property including patents, utility models, trade and service
marks, design rights,
trade names, copyrights, moral rights, database rights, domain names and
know-how
"ISIN" International Securities Identification Number
"Issue Price" 45 pence per Ordinary Share
"Locked-In Persons" The Locked-In Vendors together with Akiko Mikumo, Mike Kelly and David
Anton
"Locked-In Vendors" Patrick DeSouza, Todd Carter, Scott Schlichter, and Taro Koki
"London Stock Exchange" London Stock Exchange Plc
"Market Abuse Regulation" the EU Market Abuse Regulation (No. 596/2014)
"MergerCo" the Company's wholly-owned subsidiary, EAI Acquisition, Inc., incorporated
in the United States
of America for the purposes of the Acquisition
"Nomination Committee" the nomination committee of the Company as constituted from time to time
"Notice" the notice convening the General Meeting, which is set out at the end of
this document
"Official List" the Official List of the United Kingdom Listing Authority
"Options" options over Ordinary Shares to be granted by the Company as set out in
the Admission Document
"Ordinary Shares" the proposed new ordinary shares of 12 pence nominal value each in the
capital of the Company
to be created pursuant to the Share Capital Consolidation
"Panel" the Panel on Takeovers and Mergers
"Placing" the proposed conditional placing by WH Ireland and Dowgate of the Placing
Shares at the Issue
Price pursuant to the Placing Agreement, details of which are set outin
the Admission Document
"Placing Agreement" the conditional agreement dated 11 September 2019 between the Company, the
Directors, the
Proposed Directors, WH Ireland and Dowgate, relating to inter alia, the
Placing, details of
which are set out at in the Admission Document
"Placing Shares" the 16,351,102 new Ordinary Shares to be issued by the Company pursuant to
the Placing
"Proposals" together, the Share Capital Consolidation, the Acquisition, the
Fundraising, the Waiver and
the change of name of the Company to Entertainment AI Plc
"Proposed Directors" or "New Board" the directors of the Enlarged Group to be appointed to the board of
directors of the Company
at Completion, being Patrick DeSouza, David Anton, Michael Kelly, Akiko
Mikumo, Todd Carter
and Scott Schlichter.
"Prospectus Rules" the rules published by the FCA under section 73A FSMA
"QCA Guidelines" the Quoted Companies Alliance's Corporate Governance Guidelines for
Smaller Quoted Companies
"Registrar" Share Registrars Limited
"Remuneration Committee" the remuneration committee of the Company as constituted from time to time
"Resolutions" the resolutions to be proposed at the General Meeting (and each a
"Resolution")
"Shareholders" holders of Existing Ordinary Shares (and, Post Share Capital
Consolidation, Ordinary Shares)
from time to time, each individually being a "Shareholder"
"Share Capital Consolidation" the consolidation of every 12 Existing Ordinary Shares into one Ordinary
Share as further
discussed in the Admission Document
"Strategic Investors" investors who will subscribe for Ordinary Shares pursuant to the
Cross-Over Round, further
details of which are set out in the Admission Document
"Strategy Committee" the strategy committee of the Company as constituted from time to time
"subsidiary" a subsidiary undertaking (as defined by section 1162 of the Act) of the
Company and "Subsidiaries"
shall be construed Accordingly
"TAG Concert Party Members" each of Todd Carter, Patrick DeSouza, Water Intelligence Plc and Michael
Solomon
"TAG MergerCo" the Company's wholly-owned subsidiary, TAG Acquisition, Inc., incorporated
in the United States
of America for the purposes of the acquisition of Tagasauris
"TAG Vendors" the stockholders of Tagasauris prior to its acquisition by the Company
"Takeover Code" the City Code on Takeovers and Mergers
"Tagasauris" Tagasauris, Inc, a company registered in Delaware, United States of
America
"uncertificated" an Existing Ordinary Share or post Share Capital Consolidation, or
Ordinary Share recorded
on the Company's register as being held in uncertificated form in CREST,
and title to which,
by virtue of the CREST Regulations, may be transferred by means of CREST
"United Kingdom" United Kingdom of Great Britain and Northern Ireland
"United States of America" the United States of America, its territories and possessions, any state
of the United States
of America and the District of Columbia and all areas subject to its
jurisdiction
"Vendors" the stockholders of Entertainment AI, the GTC Vendors and the TAG Vendors
"Waiver" the approval by the Shareholders of the waiver granted by the Panel of the
obligation that
would otherwise arise on any member of the Concert Party to make a general
offer for the Company
pursuant to Rule 9 of the Takeover Code, further details of which are set
out in the Admission
Document
"Waiver Resolution" the ordinary resolution to approve the Panel's waiver of the Concert Party
Obligation to make
an offer under Rule 9 of the Takeover Code on the allotment and issue to
them of the Consideration
Shares and certain of the Fundraising Shares which is set out in
Resolution 1 of the Notice
of General Meeting to be voted on by the Shareholders by way of poll at
the General Meeting
"Warrants" the warrants referred to in the Admission Document
"Warrant Instrument" the warrant instrument referred to in the Admission Document
"WH Ireland" WH Ireland Limited, a company registered in England and Wales with
registered number 02002044
"YouTube" YouTube, LLC, a wholly owned subsidiary of Google
"GBP" or "sterling" or "pounds" United Kingdom pounds sterling
GLOSSARY
"AI" artificial intelligence
"CPM" the Cost Per Mille is the amount advertisers pay to display one advert to a thousand impressions
(viewers)
"MCN" a multi-channel network, a YouTube approved entity that affiliates with multiple YouTube
channels
"MPN" Multi-platform network
"MVPD" a multichannel video programming distributor is a service that provides multiple television
channels, also known as cable or satellite television
"O&O" Owned and Operated channel/platform refers to the channel/platform that is owned by the
Company/network
with which it is associated
"SEO" Search engine optimisation
"SVOD" Subscription Video on Demand
"Third Wave of TV" content that is streamed direct to a mobile and other devices in such a way that the consumer
may interact with the content in real time, and which, with the use of machine learning
techniques
can be increasingly personalised to each consumer over time
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
MSCMMGMLDMDGLZM
(END) Dow Jones Newswires
September 11, 2019 10:16 ET (14:16 GMT)
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