KRM22 plc (LON:KRM), the technology and software investment company focused on risk management for capital markets, today announced that, further to its announcement of 7 May 2020, the Company is in discussions with its shareholders and certain other investors regarding an equity fundraising. The Company is pleased to confirm that it has received a firm commitment for an equity investment of approximately £1.0m at 30 pence per share in the Fundraise. This exceeds the Company’s original target for the Fundraise. The Company remains in dialogue with other existing and new potential investors regarding additional investment to add to the total funds raised and a further announcement will be made once the investor road show has concluded and the Fundraise has completed which is expected on 14 May 2020.
The proceeds of the Fundraise will go to strengthen the Company’s working capital facilities and accelerate the Group’s growth.
finnCap Ltd is acting as nominated adviser, broker and sole bookrunner in connection with the Fundraise. The Fundraise is not underwritten.
In addition to the Fundraise the Company has reached agreement with its existing debt provider Harbert, that it may, at its own election draw down a further £500,000 conditional on completion of the Fundraise. However, depending on the final proceeds raised in the Fundraise the Company may choose not to draw down on the facility at this time.
Final Results and Current Trading
The Company expects to report its audited results for the year ended 31 December 2019 (“FY19”) during the course of the week commencing 18 May 2020. In the results, the Company expects to report the following, remaining subject to audit.
| 2019 Unaudited GBP’000 | 2018 Audited GBP’000 | |
| Revenue | 4,143 | 1,288 |
| ARR (contracted) | 4,314 | 3,263 |
| Current ARR (undisputed) | 3,965 | 3,263 |
| Adjusted EBITDA loss | 3,072 | 3,319 |
| Cash position | 1,076 | 3,355 |
| Group debt | 1,994 | 1,193 |
As announced in the trading update of 2 April 2020, the Company has continued to see strong interest in its risk management offerings and continues to be in advanced stages of negotiation with regards to a number of multi-year contracts. One of these contracts is with a UK based global brokerage firm which is expected imminently and two further contracts are with Tier-1 banks and if all are signed, are expected to increase ARR by an aggregate of over £0.6m ARR and account for non-recurring revenue of over £0.2m. However, as previously detailed it has also seen that the sales cycles for contracts has extended as a result of COVID-19. The Company remains encouraged by the fact that existing and new potential customers continue to remain engaged in discussions on new business, however the time to complete the negotiations can be unpredictable. Despite this, pursuant to the actions taken by the Board to reduce costs, the Board still expects to be adjusted EBITDA positive by 31 December 2020.
KRM22 has made a number of acquisitions since inception and these acquisitions have comprised of a purchase price that includes an initial consideration and deferred contingent consideration (satisfied in cash or shares at the Company’s discretion). The Company acquired Prime Analytics in September 2018 and despite the progress made by the Group, the Board does not expect that the milestones attached to the two deferred consideration payments of US$1.5m each in FY19 and FY20 will be met and has therefore written back the discounted value of the deferred consideration in FY19. Similarly, the Company acquired Object+ in May 2019 and it is not expected that the milestones attached to the first deferred consideration payment of US$0.6m will be met and and the Company has therefore excluded this element of consideration from the fair value of the total consideration that could have been for the acquisition of Object+.
Director Participation
Keith Todd, Executive Chairman and CEO of the Company, has informed the Board of his intention to participate in the Fundraise and to make a further equity investment of £100,000 in the Company. Mr Todd will irrevocably commit to subscribe for those new ordinary shares following the publication of the Company’s final results, which is expected in the week commencing 18 May 2020. A further announcement will be made when the subscription is complete.
