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GeoOp to bolster balance sheet with $7M placement, rights issue, debt conversion

Friday 11th May 2018

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GeoOp plans to raise up to $4 million in a share placement and rights issue followed by a redemption or conversion of $3 million in outstanding convertible notes and loans to strengthen its balance sheet.


The workforce management app developer this week released an investor update repeating its intentions to raise further capital to reach breakeven, then invest to speed up its growth, which it first announced at its annual meeting last year. Today, the company said it has been talking to investors since Tuesday to explain its five growth initiatives - a new GeoService application, average revenue per user increases over legacy pricing, improved digital marketing, GeoPay payments rollout, and new channels to market - and how they could impact the full year performance.


In that presentation, GeoOp said it believes five growth initiatives will generate revenue growth exceeding 30 percent in the 2019 financial year, leading to positive earnings before interest, tax, depreciation and amortisation by mid-2019 and needed about $1.5 million to fund the plan. In the short term, its 2019 growth will be driven by the new GeoService launch, ARPU increases and increased marketing, while in 2020 and beyond gains will come from organic search, new partner channels, and a refocus on GeoSales. It says the GeoPay trial is "blue sky" as a promising opportunity for new revenue, with results to be known by June.


Today, the company said it has had "strong in-principle support" for a capital raise and the redemption or conversion of its $3 million in outstanding convertibles notes. The company intends to run an immediate placement at 15 cents per share to raise between $1.5 million to $2 million and a subsequent pro-rata rights issue at the same price to raise a further $1.5 million to $2 million.


"Directors consider that the proposed transaction structure and pricing will provide certainty of funding while allowing for existing shareholders to participate on a pro rata basis," the company said. "They note further that the combination of these three initiatives (likely to be in the vicinity of $6 million-$7 million) will nearly double the company’s equity capitalisation, leaving it debt-free and with a strong cash balance to pursue revenue growth and profitability."


The 15 cent share price is a 40 percent discount to the current 25 cents the stock is trading at, although it has gained since the market update on Tuesday, and the company said that the 30 day volume weighted average price (VWAP) of its ordinary shares is 19.3 cents per share, meaning the transaction pricing represents a 22 percent discount to one month VWAP. The shares dropped this morning following the news, down 7.4 percent or 2 cents.



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