Cipherpoint Ltd (ASX:CPT) has secured binding commitments to raise $2.9 million in fresh capital via a placement and convertible notes issue.
As a part of the fundraising initiative, the company plans to issue 52.6 million ordinary shares at $0.027 per share, raising $1,420,200 through a placement, while convertible notes will be issued to raise a further $1,500,000.
The company plans to use the proceeds to enhance its security operations centre in North Sydney and support a host of other activities to push growth while pursuing acquisition opportunities.
“Reinforces the confidence”
Cipherpoint non-executive chairman Ted Pretty said: “The successful placement and convertible note raising reinforces the confidence of sophisticated investors in the Cipherpoint group with its recent acquisition of the Brace168 business and the potential of the company for growth.
“Working capital will be used to both add additional resources to the team that will directly support revenue-generating contracts and to focus on business development and new partnerships.
“I am pleased to advise that the joint lead managers have opted to receive their brokerage fees by way of scrip, which we believe is a strong sign of support in the company’s current strategy.”
Raise proceeds
Proceeds from placement and convertible notes will be used to support activities to drive the company's growth, including:
- Enhancements to the security operations centre in North Sydney;
- Acceleration of recruitment activities to deliver on recently awarded contracts and near-term pipeline opportunities;
- Investment into business development and customer acquisition to enable the Brace168 business to achieve a $5 million revenue target by March 31, 2022; and
- Acquisition opportunities to complement Cipherpoint's core business.
Placement terms
The placement shares will be issued without shareholder approval using the company’s existing placement capacity under ASX Listing Rules 7.1 and 7.1A.
The company will issue one free-attaching option with every two placement shares, bearing an 8-cent exercise price and an early 2023 expiration date.
The issue of the placement options is subject to shareholder approval, which will be sought by the company at its annual general meeting (AGM) proposed to be held in September.
Convertible note terms
The company plans to issue convertible notes with an aggregate face value of $1.5 million.
The convertible notes are unsecured, accrue interest at 8% per annum and have an expiry date six months from the date of the company’s forthcoming AGM.
The face-value convertible notes automatically convert to shares and options on the same terms as the placement subject to shareholder approval, which will also be sought at the AGM.
Other terms
Subject to completion of the placement, the company has agreed to issue the joint lead managers an aggregate 30 million in options under the same terms as the placement options.
This is also subject to shareholder approval — if this is not forthcoming, Cipherpoint has agreed to pay the joint lead managers a further joint cash fee of $30,000.
Peak Asset Management and Cumulus Wealth Management together worked as the joint lead managers for the placement.
Buoyant quarter
Today, Cipherpoint also reported on its June quarter financials, announcing its customer receipts grew over seven-fold to $739,000, with $105,000 in cash receipts tabled in the previous quarter.
According to the company, the June quarter result and recent contract wins demonstrate its pipeline strength and confirms that the company is likely to achieve even better returns by investing in organic growth.
During the period under consideration, its operating costs reached $1.64 million, compared to $737,000 in the March quarter, and it accessed a debt facility of $300,000 to meet the short-term capex requirements to support its growth.
The Cipherpoint group held $1.24 million in cash as of June 30, 2021, and during the quarter, the company made $154,000 in payments to related parties, which comprised the usual executive and non-executive director fees, salaries and consultancy payments.