31st Jan 2005 07:00
FOR IMMEDIATE RELEASE 28 January 2005 INTERNET MUSIC & MEDIA PLC PROPOSED ACQUISITION OF TIMESTRIP, PLACING, CHANGE OF NAME, EXTRAORDINARY GENERAL MEETING AND ADMISSION TO TRADING ON AIM Timestrip to join AIM through reversal into Internet Music & Media plc * Internet Music & Media to acquire entire issued share capital of Timestrip for ‚£6.4 million and will be renamed Timestrip plc to reflect the new business * Purchase price is to be satisfied by the issue of 160,000,000 new Ordinary Shares at 4p per share to the Vendors on the sale of their Timestrip shares * A placing has been agreed to raise a maximum of ‚£3m for working capital and development purposes * Timestrip, founded in 2000, has developed an inexpensive and versatile technology for accurately measuring lapsed time. Timestrip‚® smart labels contain a liquid which migrates across the label, enabling users of perishable food and other products to monitor for how long an item has been open or in use. The technology can be implemented as an external label or can be fully integrated into products and product packaging. * The Timestrip‚® technology is relevant to a wide range of food and non-food products which, once opened, should be used or replaced within a recommended time. In 1997, in the UK alone, over 100 billion food items were packaged. * Expiry dates feature prominently in five international mass markets: Food Retailing; Catering and Food Services; Consumables; Pharmaceuticals;Medical Devices * The Board envisages that Timestrip's main route to market will be through supply and license agreements with manufacturers and packaging companies who will integrate Timestrips‚® in their product or packaging. * Timestrip has already supplied customers both in the US and UK in the Food Service markets and is progressing with its existing development contracts for integration of the technology into devices and packaging. * Nominated Adviser is Beaumont Cornish limited and Broker is Falcon Securities limited Leo Knifton, Chairman commented:-"The Board is very excited by this deal as we believe that the Timestrip‚®technology will become a household name through its integration with a hugerange of perishable products. It is testimony to the quality of the technologythat serious interest is being shown by a number of multinational companies andI have no doubt that the business is poised for an exciting period ofsignificant growth." INTERNET MUSIC & MEDIA PLC PROPOSED ACQUISITION OF TIMESTRIP, PLACING, PROPOSED WAIVER OF THE REQUIREMENTS OF RULE 9 OF THE CITY CODE, CHANGE OF NAME, EXTRAORDINARY GENERAL MEETING AND ADMISSION TO TRADING ON AIM INTRODUCTIONThe Company is pleased to advise you that today the Company announced that ithad conditionally agreed to acquire the entire issued share capital ofTimestrip. The purchase price of ‚£6.4 million is to be satisfied by way of theissue of 160,000,000 new Ordinary Shares at 4p per share to the Vendors on thesale of their shares in Timestrip.The scale of the Acquisition in relation to your Company, which will result ina change of control of the Company and a fundamental change in the business,means that the Acquisition will constitute a reverse takeover of the Companyunder the AIM Rules. Further, the size of the collective shareholding of theConcert Party in the Company following implementation of the Proposals willconstitute a change of control under the City Code. Accordingly, the Circularto be published in relation to the Acquisition requires the prior approval ofthe Panel on Takeovers and Mergers and the Acquisition requires the priorapproval of Shareholders at an Extraordinary General Meeting to be confirmed.Further details of the Acquisition are set out below. On completion of theAcquisition, all the present Directors of the Company, with the exception of MrStephen Oakes, will resign and the Proposed Directors will be appointed to theBoard.Up to 75,000,000 new Ordinary Shares are to be placed, conditional onAdmission, with investors at 4p per Ordinary Share to raise up to ‚£3m, whichwill be principally used for working capital purposes of the Enlarged Group.Further details of the Placing are set out below.BACKGROUND TO AND REASONS FOR THE ACQUISITIONAt the meetings of Shareholders and creditors held on 3 November 2004, theproposal to effect a Company Voluntary Arrangement of the Company pursuant tothe Insolvency Act 1986 was approved, and the ordinary share capital wasre-structured. Leo Knifton, Nigel Weller and Stephen Oakes were then appointedto the Board to review suitable businesses. Trading in the Ordinary Shares ofthe Company re-commenced on 9 November 2004 at the time of publication of theCompany's interim results for the six month period ended 30 June 2004.Arrangements for the proposed acquisition of Timestrip have now been concluded.The Directors believe that the Acquisition presents an opportunity to acquire abusiness with significant upside potential that would, if this potential couldbe realised, well justify the price being paid and therefore the dilution toexisting shareholders, as is more fully explained below.INFORMATION ON TIMESTRIPTimestrip, based in Hitchin, Hertfordshire, has developed a smart label, the`Timestrip'‚®, which enables users of perishable food and other products tomonitor for how long an item has been open or in use. The Timestrip‚® is adisposable multi-layer laminated label which contains a timing deviceconsisting of a specialised porous material and a non-toxic liquid. Uponsqueezing the label to activate, the liquid starts to move through the porousmaterial by micro capillary action. A printed calibration on the top layer ofthe label allows the user to tell at any point in time how long the label hasbeen active. The label is currently manufactured with adhesive backing enablingit to be attached to perishable goods as a reminder to use or replace theproduct. The label is designed to be easily customised and is capable of beingembedded into the product packaging or the product itself. It can be activatedautomatically either upon first opening the package or upon first use of theproduct. The Timestrip‚® technology has created a product which the Boardbelieves can be manufactured at a sufficiently low cost to be sold economicallyto product and packaging manufacturers for integration into their products.The solution provided by Timestrip‚® relates to the difficulty in monitoringrelative expiry dates, such as "Use within two weeks of opening". The Timestrip‚® addresses this problem by reliably monitoring the lapse of time, providing avisual indication that the relative expiry date is approaching, thereby givingthe user the opportunity to manage perishable items in a way that waspreviously problematic.Relative expiry dates feature prominently in five international mass markets:1. Food Retailing - where it can be integrated into the packaging by themanufacturer or applied to the product by the consumer, who can purchasemultipacks of Timestrip‚®.2. Catering and Food Services - where it can supplement the current practice ofwriting the replacement date on a label or chart and will assist in thecompliance with regulatory requirements in respect of food storage.3. Consumables - where it can be integrated into product, packaging orreplacement parts such as filters in vacuum cleaners or water jugs.4. Pharmaceuticals - where, again, it can be integrated into the product orpackaging by the manufacturer or applied by the consumer.5. Medical Devices - where it can supplement the practice of writing reminderdates on labels or charts to assist staff and practitioners in monitoringlapsed time in processes such as wound management and non-critical procedures.These applications afford benefits to consumers, retailers and manufacturersalike. The common time frames for relative expiry dates are from 10 minutes upto 6 months at temperatures ranging from 70‚°C down to -17‚°C. The simplicity ofthis technology is important to the success of the product. It does not dependon a chemical reaction and can be customised to function in a wide range oftemperature environments, yet within each environment can be relativelyinsensitive to temperature change.There is no need for moving parts, thereby enhancing reliability andconsistency while enabling the product to be manufactured at low cost.The Timestrips‚® are currently manufactured in Even Yehuda, Israel. Theproduction machinery, owned by Timestrip, is designed, built and operated inIsrael. However, it is the intention of Timestrip to license the rights tomanufacture and distribute Timestrips‚® to third parties in local markets. It isenvisaged that a licensee will purchase machines, raw materials and supportfrom Timestrip, paying a royalty based on units sold in the market for whichthe license is granted.The Board believes that Israel is a suitable location for research anddevelopment and for manufacturing. Israel has relevant customs concessions onimports and exports to and from Europe and North America, and the Boardbelieves Israel has a competitive labour market with a competent technicalskill base.The "know-how" for Timestrip‚® was born out of technology developed by Profilewith whom Timestrip entered into a global exclusive license agreement in May2001. Profile has agreed to transfer to Timestrip its rights and interests inthe technology in return for the issue of 20,626 `B' Ordinary Shares of 0.1peach in Timestrip, to be issued prior to and included in the Acquisition, and apayment of ‚£100,000 which is to be funded from the proceeds of the Placing.An international patent application covers a feature of the Timestrip‚® that isconsidered by the Proposed Directors to enable low cost production. TheEuropean Patent Office in January 2004 concluded that all claims in respect ofthe patent application are deemed to be novel, inventive and industriallyapplicable, and the application is now pending in major territories includingNorth America, Europe, Japan, China, Australia and South Africa.Timestrip‚® is a trademark registered in the UK, the US, Canada and Europe.Timestrip was founded in December 2000 by Paul Freedman and in May 2001, ReubenIsbitsky, who was involved in the project from inception, formally joinedTimestrip as a director.At the outset, the shareholding in Timestrip was split equally between itsfounders, Paul Freedman and Reuben Isbitsky. Subsequently, in four rounds ofequity funding, Timestrip raised a total of ‚£2,163,450 (before expenses) fromsome 58 private investors.STRATEGYTimestrip does not itself intend to develop significant manufacturingcapability. Instead the new market potential for Timestrip‚® lends itself to alicensing strategy under which Timestrip will licence the rights to manufactureand distribute in local markets to customers, joint venture partners anddistributors. The Board believes that the present manufacturing facilities inIsrael have sufficient capacity to satisfy initial contracts and will seek todevelop this capacity to support existing contracts and development in newmarkets. Timestrip would receive a licence fee for each Timestrip‚® manufacturedby licensees and will seek to enhance revenue through the supply of key rawmaterials and support.The Board intends that Timestrip‚® is to be established as an internationalbrand. The prospects for the proliferation of Timestrip‚® on a global basis areenhanced because target customers are predominantly multinational companies,several of whom have already entered into formal development contracts andworking relationships with Timestrip.The Board envisages that the main channel to market will be through supplyagreements with manufacturers and packaging companies who will integrateTimestrips‚® in their product or packaging. Timestrip has already launchedTimestrip‚® in the food service sector in the UK where it has identified demandin the restaurant sector for a label that shows lapsed time by way of colourrather than written date information. It is expected that Timestrip‚® will belaunched in the North American food services sector in 2005. The ProposedDirectors have also identified the opportunity to sell Timestrip‚® as a valueadded promotional product to magazines and a variety of food and consumerproduct manufacturers.COMPETITIONIt is anticipated that the commercialisation of Timestrip‚® will stimulatecompetition at some point in the future, given the size of the market to whichit has relevance. Nevertheless, the Board is not aware of any directcompetition showing lapsed time in colour progression in the expiry datesector.There are, however, products whose purpose is to signal when product qualityshould be checked due to temperature exposure beyond a recommended threshold.There is also a consortium of business and universities working on RFID chiptechnology. Such chips will be able to contain far more information than barcodes and may even be able to show lapsed time with the use of additionalhardware such as a scanner.CURRENT TRADING AND FUTURE PROSPECTSThe Timestrip‚® technology is relevant to a wide range of applications in massmarkets. In 1997, in the UK alone, over 100 billion food items were packaged.This figure demonstrates the sheer scale of the potential markets in whichTimestrip‚® could be used.The current manufacturing process gives Timestrip the capability to generatesignificant gross margins. Furthermore the Board considers that the unit costof manufacture can be reduced over time, enabling the Enlarged Group to targeta unit sale price which the Board believes will prove a pricing point thatcould trigger the broadest mass market application.The existing development contracts and arrangements with manufacturersestablish a pipeline of product development potential. The increased financialresources will provide the opportunity for the Board to bring these prospectsto fruition. Furthermore new capital will enable the Enlarged Group to identifyfurther potential for product integration with other multi-national brand-ledbusinesses.As regards current trading, Timestrip started production in December 2004 onits initial order from Daymark for the Food Service market in North America andhas made its first delivery to Dovemart for the UK market. In December 2004,Timestrip received an additional order from Daymark for delivery in February2005. Even though the product is not set to be launched officially in the UKuntil later in the first quarter of 2005, Dovemart has already secured alisting for the product in one of the largest food service catalogues in theUK, and Timestrip has received several approaches from major food manufacturersspecialising in supplying the catering sector.Timestrip is actively negotiating supply contracts with several consumer goodscompanies looking for a reminder label to add value to their existing productrange and with potential distributors to the retail sector in North America andAsia.Timestrip is progressing with its existing development contracts forintegration of the technology into devices and packaging. For example, inDecember 2004 an order for ¢â€š¬19,000 was received from one customer to pay foradditional tooling as the next stage in the project. Timestrip expects to startworking on new projects in early 2005 as a result of discussions that havetaken place in recent weeks. Timestrip is not yet generating sufficient levelof sales to trade profitably or generate positive cash flow but is makingprogress towards these milestones by way of the launch in Food Services inNorth America and the UK as well as a number of other potential contracts inother sectors.ACQUISITION OF TIMESTRIPIMM will acquire all of the issued shares of Timestrip comprising 80,000 `A'Ordinary Shares of 0.1 pence each, and 85,304 `B' Ordinary Shares of 0.1 penceeach (together "the Sale Shares"). The Sale Shares will be acquired for a totalconsideration valued at ‚£6.4 million to be satisfied by the issue to theVendors of 160,000,000 Ordinary Shares at an issue price of 4p per share.IMM will, in addition, issue `B' Warrants to subscribe for a total of 7,500,000Ordinary Shares at an exercise price of 4p per share exercisable within twoyears after Completion. These warrants will be issued to the Vendors (otherthan the Proposed Directors) pro rata to their holdings of the Sale Shares.On completion of the Acquisition, IMM will also issue `C' Warrants whichentitle the holders to subscribe for a total of 8,500,000 Ordinary Shares at anissue price of 0.02p per share exercisable after two years but not later thanseven years after the date of issue. These warrants are to be issued to thoseindividuals, namely Jeff Woyda, Frank O'Connor, Ilan Schragenheim and AviRabinovitz, who have been promised an entitlement to comparable options inrespect of the shares of Timestrip in return for their contribution toTimestrip and that have agreed to accept these `C'Warrants of IMM insubstitution for their entitlement in relation to Timestrip.Further, on completion of the Acquisition, IMM will issue `D'Warrants whichentitle the holders to subscribe for a total of 4,000,000 Ordinary Shares at anissue price of 4p per share exercisable within two years after the date ofissue. These warrants will be issued to Mr Spencer Leslie, one of the Vendorsand Proposed Directors, in recognition for his contribution to Timestrip.Under a Deed of Warranties and Indemnity, the Proposed Directors have enteredinto warranties and indemnities in respect of Timestrip subject to limitationson their liability. The Proposed Directors have also entered into restrictivecovenants.PROPOSED NAME CHANGEThe Directors have decided to change the name of the Company to `Timestrip plc'to reflect more closely the Enlarged Group's operations. The change of name issubject to shareholder approval, which will be sought at the EGM. Timestripwill change its name to "Timestrip UK Limited" at the same time.DIRECTORS OF THE COMPANY ON COMPLETIONOn Completion of the Acquisition, Leo Knifton and Nigel Weller will resign fromoffice as directors of IMM and the Proposed Directors, being Paul Freedman,Reuben Isbitsky and Spencer Leslie, will be appointed to the Board.DirectorsStephen Oakes, (aged 49) ChairmanStephen Oakes has over 30 years experience in financial markets and is a Fellowof the Securities Institute. He began his career with stockbrokers Vickers daCosta Ltd, becoming a Member of the Stock Exchange in 1984. In 1985 he joinedJames Capel & Co (now HSBC Investment Bank plc) as a portfolio manager.Increasing management responsibility culminated in the position of ChiefExecutive Officer, HSBC Investment Management, firstly in respect of theinternational business and subsequently as acting CEO of the combined UK andinternational operations. He left HSBC in December 2002 and in October 2003joined Alfred Henry Corporate Finance Limited to work with an established teamspecialising in advisory services to small listed businesses. He is a directorof SBS Group Plc, Alltrue Investments plc, Beaufort International Group plc andPountney PLC.Paul Freedman (aged 37) Co-Founder and Joint Chief ExecutivePaul Freedman graduated from Manchester University in 1990 with a BA (jointHons) in Accounting and Law. Paul joined Citibank on their Graduate TrainingScheme where he worked in Corporate Finance before leaving in late 1991 to joinhis family's textile business, Carfax Gowns Limited. Paul was responsible forsales to leading clothing retailers in the UK as well as general management.Having participated in a large scale reorganisation of Carfax's manufacturingsites and assisted in the broadening of its base, Paul left Carfax in 2000 inorder to establish Timestrip, a new venture with the aim of creating a low costexpiry date label. Since inception Paul has shared responsibility for generalmanagement, commercial strategy and in particular Timestrip's valuation andfunding requirements.Reuben Isbitsky (aged 36) Co-Founder and Joint Chief ExecutiveReuben Isbitsky studied at York University, Toronto, Canada. In 1991, beforegraduating he joined Brita Canada, a high growth consumer products company asProduct Manager where he was responsible for the implementation of new productdevelopment. In 1996, he was appointed International Product Manager for Britaand relocated to Germany, being responsible for product marketing anddevelopment. And subsequently, for two years from the end of 1997, he worked asProject Manager for Sodaclub International BV (United Kingdom), a company whichdeveloped a high-tech. product where he worked on business and technicaldevelopment, and co-ordinated a project team of 20 co-workers in a worldwidenetwork of offices. Reuben left Sodaclub in 2000 in order to establishTimestrip with Paul Freedman, where his major responsibilities are marketingand sales, product development and general management.Spencer Leslie (aged 38) Non-Executive DirectorSpencer Leslie qualified as a Chartered Accountant before joining LehmanBrothers Investment Bank as a Private Client Investment Manager. In 1991Spencer took the position of Finance Director at Supercuts Holdings Limited, astart-up business modelled on a niche market US concept. In his role asManaging Director from 1994, Spencer grew the business into a chain of 70 hairsalons in shopping centres across the UK, before selling the business to its USnamesake in 1999. Spencer is now actively involved in a number of businesses inthe field of property investment and development and has made privateinvestments and holds non-executive directorships in Timestrip, Topsy TurvyWorld Holdings Limited (children's play centres) and Mykindaplace Limited(online publishing). Spencer became a non-executive director of Timestrip on 23February 2004 and Spencer has not previously been remunerated for his role asnonexecutive director of Timestrip.THE PLACINGThe Company has agreed with Falcon conditionally to place a minimum of37,500,000, and a maximum of 75,000,000 new Ordinary Shares representingapproximately 16.1 per cent. and 27.8 per cent. respectively of the EnlargedOrdinary Share Capital before the exercise of any Warrants.Placees who subscribe for New Ordinary Shares will be issued with one PlacingWarrant for every three new Ordinary Shares issued to them under the Placing.Each Warrant will entitle the holder to subscribe for one Ordinary Share at theprice of 6p during the period of 18 months commencing on Admission subject to aexpiry notice provision.The New Ordinary Shares and Ordinary Shares issued on the exercise of thePlacing Warrants will, following allotment, rank pari passu in all respectswith the Existing Ordinary Shares and will have the right to receive alldividends and other distributions thereafter declared, made or paid in respectof the issued ordinary share capital of the Company.The net proceeds of the Placing will be used for the working capitalrequirements of the Group, including the repayment of any funding in additionto the balance due to Profile for the purchase of the intellectual propertyrights as referred to above.ADMISSION TO AIM AND DEALINGSThe proposed Acquisition will constitute a "reverse take-over" under the AIMRules and is therefore dependent upon the approval of shareholders being givenat the Extraordinary General Meeting to be confirmed.Application has been made for the Existing Ordinary Shares and the New OrdinaryShares to be admitted to trading on AIM and it is anticipated that Admissionwill become effective and that trading in the Ordinary Shares on AIM willcommence on the trading day following the EGM.The circular comprising an Admission Document in respect of the Acquisitionwill be posted as soon as practicable and will be subject to prior approval bythe Panel on Takeovers and Mergers. Pending the publication of the circular,trading in the Company's Existing Shares will be suspended on AIM in accordancewith the AIM Rules.For further information:Paul Freedman, Joint CEO and founding Director, Timestrip 07786 391868Stephen Oakes, Falcon Securities 07867 528108Shane Dolan, Biddicks 07947 118383Roland Cornish, Beaumont Cornish Limited 020 7628 3396ENDRelated Shares:
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