Wednesday 17 January 2018 ShareProphets: The one stop source for breaking news, expert analysis, and podcasts on fast-moving AIM and LSE listed shares

CloudTag – drawdown of final tranche L1 funding, and yet another clarification needed by Nomad Cairn?

By Nigel Somerville, the Deputy Sheriff of AIM | Tuesday 3 January 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Two RNS announcements this morning from AIM-listed CloudTag (CTAG) this morning tell us that the company has drawn down the final amount of cash under its death spiral funding deal with L1. The problem is that the dates don’t quite work. Perhaps Nomad Cairn would care to clarify (yet again)?

Firstly, CloudTag announced at 7am that:

… after business hours on 30 December 2016 it issued to L1 a Notice of Drawdown for the remainder of the second part of the Tranche 2 Notes being £1 million of nominal value of which the Company expects to receive £850,000 net of expenses. Under the terms of the Notes, 2 business days' notice is required prior to the funds being due to the Company following which the Notes will be issued to L1. A further announcement will be made when the funds are received and the Notes issued.

OK, so “after business hours on 30 December” it issued a notice to L1 to draw the final £850,000 (net of expenses).

That’s all well and good, but then at 10.13am we were told that:

 further to the announcement of 3 January 2017….

(ie earlier today)

….stating that it had issued a drawdown notice in respect of £1 million nominal of Tranche 2 Notes, it has now received net proceeds of £0.85 million taking into account costs of £0.05 million). Accordingly, £1,000,000 (at nominal value) of the Tranche 2 Notes have today been issued to L1 Capital Global Opportunities Master Fund.

Now call me a pedant, but if the company issued the draw down notice “after business hours” on 30 Dec 2016 and today is the first business day after that, how can the company have managed 2 business days’ notice?

Meanwhile, investors will note that another £50,000 of expenses were racked up (to add to the £50,000 already coughed up in the drawdown of the first part of Tranche 2) in this latest draw down, contrary to the RNS of 7 November 2016 which indicated there would be no expenses associated with draw down of Tranche 2, and the RNS of 28 November 2016 which gave no indication of a change to the terms in that respect.

Oh, and we still have not had an explanation as to how, when and why the exercise terms of previously issued warrants were altered so as to round down the exercise price to the nearest half penny, not to mention the introduction of this previously unannounced condition.

Oh, and while we are at it, we’ve still not been told how, when and why the loan conversion terms suddenly included a rounding down of the conversion price to the nearest half penny.

Were those alterations, as well as the £100,000 of previously (by implication) denied “expenses” in relation to the drawdown of Tranche 2 already written into the contract with L1 in some way but not disclosed to the market, or were they part of a renegotiation of terms?

Answers on a postcard to CloudTag’s hapless Nomad, Cairn Financial.

Needless to say, the shares remain a stand-out sell, with a target price of 0p (unless they are booted off the Casino first).

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