ELEG Electric Guitar Plc

This announcement contains inside information as stipulated under the UK version of the Market Abuse Regulation No 596/2014 which is part of UK Law by virtue of the European (Withdrawal) Act 2018, as amended. Upon publication of this announcement this information is considered to be in the public domain.

9 August 2024

Electric Guitar PLC

("Electric Guitar" or the "Company")

Acquisition of Mymyne Limited

Issue of equity and notice of General Meeting

Appointment of Capital Markets Consultant

Change to total voting rights

The Board of Electric Guitar PLC (LSE: ELEG), the digital marketing and advertising company providing first-party data solutions, is pleased to announce that it has today agreed the next step in its buy and build strategy, with the share-for-share acquisition of Mymyne Limited ("Mymyne"), a developer of data-related software solutions, and provider of related sales and marketing services (the "Acquisition"), to add new software capabilities as well as achieving significant synergies and cost savings for Electric Guitar.

The Acquisition is subject to approval by Electric Guitar's shareholders for the purposes of section 190 of the Companies Act 2006 (transactions with directors) at a general meeting of the Company to be held on 27 August 2024 at 10.00 a.m. (the "GM"). A circular containing a notice convening the GM will be posted to shareholders shortly and made available on the Company's website at electricguitarplc.com.

The Company also announces an operational update, the appointment of a capital markets consultant and the issue of new ordinary shares of 0.5p in the Company ("Ordinary Shares") to certain professional advisers and consultants.

Background to Mymyne

Mymyne is a marketing technology business. It has developed data-related software solutions alongside sales and marketing services for the digital marketing sector. While its revenues have to date come from its sales and marketing services, its intellectual property ("IP") includes a website for collecting first-party data in exchange for discount vouchers; Situational Targeting, a segmentation tool that can be used for both customer intent analysis and programmatic digital advertising; and Peprr, a digital traffic and website optimisation tool that offers independent web analytics and channel attribution.

Based on unaudited management accounts for the year ended 29 February 2024, Mymyne recognised revenue of £95,000 (2023: nil), an operating loss of approximately £60,000 (2023: nil) and had net liabilities at 29 February 2024 of approximately £52,000 (2023: net assets of £59,000). Mymyne has one employee as well as a number of consultants and contractors.  

Mymyne was established in 2019 by John Regan (Electric Guitar's CEO) and other digital marketing experts, with particular expertise in developing and commercialising data-related software services.  John Regan was a director of Mymyne until 1 July 2023 and was re-appointed as a director on 14 July 2024 in order to satisfy certain provisions in Mymyne's articles of association in relation to the Acquisition. John Hutchinson (Electric Guitar's Chair) has also invested in Mymyne. Accordingly, as John Regan and his associates currently hold approximately 31.2 per cent. of the issued share capital of Mymyne and John Hutchinson holds approximately 9.2 per cent, they have recused themselves from any dealings between Mymyne and Electric Guitar following the IPO of Electric Guitar in January 2022, a position that has been maintained. All dealings and negotiations by Electric Guitar with Mymyne have been handled exclusively by Electric Guitar's directors that are independent of Mymyne (the "Independent Directors").

Background to and reasons for the Acquisition

Prior to Electric Guitar's reverse takeover of 3radical Ltd ("3radical") on 3 May 2024 (the "RTO"), Mymyne had been engaged by 3radical to provide sales and marketing services as a key component of 3radical's drive for growth following a period of retrenchment and limited resources. That contract (the "3radical Contract") provided 3radical with a dedicated sales and marketing team, with pre-agreed phases of work from March 2024 to September 2024 and services to continue monthly thereafter. The 3radical Contract is terminable on one month's notice, such notice not to take effect earlier than 30 September 2024. For sales and marketing services provided to 3radical up to the RTO, Mymyne agreed to be paid in the form of 4,880,950 Ordinary Shares at 2.1p per share (the price of all the Ordinary Shares issued at the time of the RTO) on completion of the RTO (the "Mymyne Shareholding"), after which Mymyne was contracted to be paid according to fixed monthly payments.

On 6 June 2024, the Company announced the appointment of Jeremy Saul as Managing Director of 3radical. As Jeremy Saul had been a key employee of Mymyne, the management of both companies determined that it would be more efficient for Mymyne to be absorbed into Electric Guitar, bringing in-house sales and marketing functions that had previously been outsourced to Mymyne by 3radical prior to the RTO, and generating substantial cost savings and synergies compared to continuing the outsourced 3radical Contract. 3radical has had the benefit of working with Mymyne and using its resources and network for several months, and the Independent Directors believe that the Company will benefit operationally and financially from the ownership of Mymyne and its team rather than continuing the 3radical Contract.

In addition to the sales and marketing resources, the Acquisition brings potentially valuable IP as outlined above. The Independent Directors have assessed this IP and believe that it has potential value in the context of Electric Guitar's overall business and strategy. However, as this potential has yet to be realised, no value has been placed on it by the Independent Directors in assessing the fairness of the agreed purchase consideration for the Acquisition, even though approximately a fifth of the Consideration Shares (as defined below) are conditional on the potential of this IP being realised in the Company's current financial year to 31 March 2025.

Terms of the Acquisition

The consideration for the Acquisition is payable in two tranches worth up to a maximum of approximately £154,000, based on yesterday's closing mid-market price of Electric Guitar's Ordinary Shares of 0.73p (the "Issue Price"), to be satisfied in full by the issue of up to a maximum of 21,026,186 new Ordinary Shares (the "Consideration Shares"), being 9.4 per cent. of Electric Guitar's current issued share capital.

In addition, Mymyne will seek to place the Mymyne Shareholding with investors shortly after this announcement. This sum would be paid to Electric Guitar on completion of the Acquisition.

The Consideration Shares are to be issued in two tranches as follows:

1)    9,834,521 new Ordinary Shares (the "Initial Consideration Shares") are to be issued on completion of the Acquisition, representing 4.4 per cent. of Electric Guitar's current issued share capital, valued at approximately £72,000 based on the Issue Price; and

2)    the issue of the balance of the Consideration Shares, being 11,191,665 new Ordinary Shares (the "Deferred Consideration Shares"), is deferred for a year and payable as follows:

(i)            6,714,999 new Ordinary Shares, worth approximately £49,000 at the Issue Price, conditional on Jeremy Saul not then having left 3radical; and

(ii)           up to 4,476,666 further Ordinary Shares, worth up to approximately £33,000 at the Issue Price, conditional on, and valued by reference to, Mymyne's IP generating net revenues for 3radical in the year to 31 March 2025 of 2.5 times the value of this tranche of Deferred Consideration Shares at the time of issue.

While the number of Consideration Shares for all tranches is fixed and the two tranches of Deferred Consideration Shares are only payable subject to the conditions set out above, should Electric Guitar's prevailing share price increase to more than 2.4p per share at the time that any Deferred Consideration Shares are due to be issued, the number of Deferred Consideration Shares will be reduced accordingly so that the maximum potential value of the two tranches of Deferred Consideration Shares at the time of issue is no higher than £161,160 and £107,440 respectively, of which the latter sales-related tranche would be self-financing if issued.

The £72,000 value of the Initial Consideration Shares represents approximately £42,000 less than 3radical is in any event contracted to pay Mymyne in cash for its services in the next two months. This saving is irrespective of the significant cost savings and synergies expected to be achieved when compared to continuing with Mymyne's services under the 3radical Contract, as well as the potentially valuable IP.

Application will be made for the admission of the Initial Consideration Shares to trading on AIM on or around 28 August 2024 ("Initial Consideration Shares Admission"). Completion of the Acquisition is subject to approval by shareholders of a resolution at the GM and Initial Consideration Shares Admission. The Initial Consideration Shares will rank pari passu with the Company's existing Ordinary Shares and will be issued utilising the share authority granted to the directors of Electric Guitar at the general meeting of the Company on 1 May 2024.

The vendors of Mymyne Limited, and who will therefore receive Consideration Shares, are Tamsin Hunt, John Regan, Steven Kent, Ross Haworth, David Stephenson, Neil Hathaway, Robert Regan, Jason Batten, Brian Basham, Julian Berry (Marketing Planning Services Ltd), Jeremy Saul and John Hutchinson (together, the "Vendors").

John Regan, Jason Batten and John Hutchinson have agreed not to dispose of any Consideration Shares for a period of 12 months from their issue, and for six months thereafter only to dispose of any Consideration Shares within orderly market principles. The other Vendors have agreed to only sell any Consideration Shares within orderly market principles for six months from their issue.

Related party transaction

Since John Regan and John Hutchinson are directors of the Company and shareholders in Mymyne, the Acquisition constitutes a related party transaction pursuant to Rule 13 of the AIM Rules for Companies. Accordingly, the Independent Directors consider, having consulted with the Company's nominated adviser, Allenby Capital Limited, that the terms of the Acquisition are fair and reasonable insofar as Electric Guitar's shareholders are concerned.

Director shareholdings

Subject to the Acquisition being approved by Electric Guitar's shareholders at the GM and Initial Consideration Shares Admission, as a result of the issue of the Initial Consideration Shares, John Hutchinson and John Regan will have the following interests in the enlarged share capital of the Company (as enlarged by the issue of the Initial Consideration Shares, the Consultant Shares and the Fee Shares):

*Includes 321,031 Initial Consideration Shares to be issued to John Regan's wife, Tamsin Hunt.

General Meeting

Due to the size of the Acquisition and of the shareholdings of John Regan (and his associates) and John Hutchinson in Mymyne, the Acquisition requires shareholder approval pursuant to section 190 of the Companies Act 2006, which pertains to transactions with directors.

A circular including a notice convening the GM (the "Circular"), to be held at the offices of BDB Pitmans LLP, One Bartholomew Close, London, EC1A 7BL at 10.00 a.m. on 27 August 2024, is expected to be sent to shareholders later today. At the GM, shareholders will be asked to consider the resolution referred to above.

Electronic Communications

Pursuant to the Company's Articles of Association and for efficiency and cost savings, the directors of Electric Guitar hereby notify its shareholders that the Board wishes to implement communications with shareholders in electronic form and take advantage of the provisions relating to website communications.

Under the Companies Act 2006, the Company is permitted to make arrangements to communicate electronically with shareholders. The Company proposes to take advantage of these arrangements in order to improve communication with shareholders while reducing its use of paper. The proposed electronic communications regime requires the Company to consult with its shareholders individually as to whether they wish to receive information through the Company's website. A consultation letter will be enclosed with the Circular in this regard (the "Consultation Letter"). If a shareholder agrees, then future communications with that shareholder will be by electronic means. If a shareholder fails to respond to the Consultation Letter within 28 days, then such a shareholder will be deemed to have agreed to receive communications by electronic means. If a shareholder still wishes to receive future communications in paper form, then such shareholder will need to respond to the Consultation Letter within 28 days selecting the appropriate paper form option. Shareholders who notify the Company that they no longer wish to receive alerts by email, will instead receive written notifications.

The Company sees a positive benefit in the increase in electronic communications, in terms of the saving of paper and production expense.

Operational Update

After acquiring 3radical in May and as anticipated in our AIM Admission Document, we immediately set to work boosting 3radical's sales and marketing activities in conjunction with Mymyne. In particular, we recruited a very experienced new Managing Director for 3radical with extensive sales and marketing experience in the sector; added direct sales, marketing and business development resources in the UK; and made multiple business development trips to major customers and prospects in APAC.

We are already seeing positive responses to our new sales approach, focusing more on target markets and shortening sales lead times. A new website was launched a month ago to showcase work, and improve our messaging, sales support and lead generation. This has already resulted in significantly improved visitor engagement rates. In addition, as expected at the time of the 3radical acquisition, we have completed the development of the Voco Solution Portal ("VSP") as a minimum viable product, and are now actively marketing it. VSP allows for much quicker and easier adoption of the Voco SaaS platform by clients.

We have also signed new international collaborations. First with Digital Alchemy (announced on 19 June 2024), a global marketing automation consultancy based in APAC and North America, in particular strengthening our presence in APAC through Digital Alchemy's robust technological partnerships with Salesforce, Adobe, SAS, Braze and HCL. Pairing Voco with Digital Alchemy's ability to implement and support hyper-personalisation strategies at scale, Voco-generated data can inform Digital Alchemy's AI-powered decisioning engine to deliver the right promotion or content to customers for stronger relationships with their audiences and higher marketing ROI.

Our next new collaboration was a reseller agreement with Sophus3 (announced on 15 July 2024), a market leader in consumer engagement for the automotive industry, working with brands including Ford, Hyundai and Volkswagen. Sophus3's solutions analyse online car buyers to understand their habits, influences and behaviours to help car makers engage with them better and increase sales. Sophus3 has its own SaaS platform, Engage, that allows clients to respond to consumer behaviour in real-time, and serve them the right content at the right moment to maximise sales. Our agreement with Sophus3 means we can now not only offer Voco to some of the world's largest car brands for whom first-party data is becoming increasingly important, but also resell Sophus3's Engage platform to our clients and prospects in other industries, to help them respond to their consumers' behaviour in real-time by providing tailored content that boosts sales.

More recently, as announced on 31 July 2024, we entered into our Marcomms.ai 50:50 joint venture with Exelia Technologies, a Cyprus-based software development business with a specialised team of developers proficient in blockchain, machine learning, data processing and AI, to harness the transformative potential of AI in the marketing communications and advertising sector. Combining Exelia's technical capabilities in all forms of AI and data transformation, with our sales and marketing expertise and, critically, 3radical's unique global dataset with over 1 billion data points, is allowing the joint venture to create advanced machine learning algorithms to help Electric Guitar's clients and prospects (and those of the businesses in our acquisition pipeline) increase their consumer engagement, enabling them to understand their audience at a new level. Work on Marcomms.ai's first product has already begun, and we expect to start user acceptance testing with our key clients and prospects in the autumn.

In addition to these trading developments, we are actively pursuing our acquisition strategy following our first acquisition in May of 3radical. The next step was successfully negotiating the proposed all-share acquisition Mymyne, both bringing us additional IP to utilise alongside our other products, and also in-housing much of our sales and marketing activity which we expect will allow for significant synergies and cost-savings. We are continuing to develop our acquisition pipeline and assessing opportunities, and expect to announce further acquisitions in due course.

Appointment of Capital Markets Consultant, Related Party Transaction and issue of shares

The Company also announces the appointment of Tanvier Malik as a Capital Markets Consultant of the Company.

Mr Malik has long been the Company's most active adviser on engaging with the capital markets and potential investors. His new consultancy agreement formalises the basis on which he will continue to advise and assist the Board, including reports on the state of the investor market; introducing potential investors; dealing with the Company's brokers; and advice on public relations. It also creates a contractual obligation for him to use neither this role nor his shareholding in the Company to seek to interfere with the management of the Company by its Board, which is wholly independent of him; and gives the Company the option of reimbursing him for his services through the issue of shares in lieu of fees.

Accordingly, the Company has issued 5,479,452 new Ordinary Shares (the "Consultant Shares") at a price of 0.73 pence per Consultant Share (being yesterday's closing mid-market price of Ordinary Shares) to Mr Malik to satisfy his annual fee of £40,000.

Since Mr Malik controls Sanderson Capital Partners Limited which is a 20.99% shareholder of the Company and personally has a holding of 3.72% of the Company, pursuant to the AIM Rules for Companies, Mr Malik is deemed a related party to the Company and therefore the issue of the Consultant Shares to Mr Malik constitutes a related party transaction pursuant to Rule 13 of the AIM Rules for Companies. Accordingly, the Directors consider, having consulted with the Company's nominated adviser, Allenby Capital Limited, that the terms of the transaction are fair and reasonable insofar as Electric Guitar's shareholders are concerned.

In addition, certain professional advisers and consultants have agreed for their fees to be satisfied by the issue to them of, in aggregate, 4,109,590 new Ordinary Shares (the "Fee Shares") at a price of 0.73 pence per Fee Share (being yesterday's closing mid-market price of Ordinary Shares) to satisfy their fees.

Application will be made for the admission of the Consultant Shares and Fee Shares to trading on AIM, and dealings are expected to become effective on or around 14 August 2024 ("Admission"). The Fee Shares will rank pari passu with the Company's existing Ordinary Shares.

Total voting rights

On Admission, the Company will have 233,422,331 Ordinary Shares in issue with each Ordinary Share carrying the right to one vote. There are no Ordinary Shares currently held in treasury. The total number of voting rights in the Company is therefore 233,422,331 and this figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure Guidance and Transparency Rules.

Recommendation

The Independent Directors believe that the Acquisition is in the best interests of shareholders and the Company as a whole and therefore recommend that all shareholders vote in favour of the resolution at the GM, as they intend to do in respect of their shareholdings in the Company, representing 2.08%. In addition, John Regan and John Hutchinson intend to vote in favour of the resolution at the GM in respect of their interests in Ordinary Shares, which represent 6.53%.

The Company has received irrevocable undertakings from shareholders of the Company (including the Directors mentioned above), representing approximately 36.10 per cent. of the Company's current issued share capital, to vote in favour of the resolution at the GM.

Richard Horwood, COO of Electric Guitar, commented: "Mymyne not only brings Electric Guitar additional intellectual property, but also brings in-house key sales and marketing functions that had previously been outsourced by 3radical, and which we can now fully apply to the other digital marketing businesses we will be acquiring as part of our buy and build strategy. Moreover, the deal achieves cost savings that more than offset the value of the all-share consideration, regardless of the other benefits of the acquisition."

Jason Batten, Managing Director of Mymyne, added: "Working with 3radical and Electric Guitar has been an important part of our business, and this all-share deal is a logical evolution, giving our shareholders the opportunity to benefit directly from the success of the Electric Guitar group as it grows."

For further information:

Notes to Editors

Electric Guitar PLC (AIM: ELEG) is the provider of first-party data solutions for the marketing and advertising industry, empowering businesses to realise the value of their first-party data. In an era of changing consumer attitudes towards the use of their data, tighter privacy legislation, and the demise of third-party cookies, first-party data is now the key to success in digital marketing. Electric Guitar's strategy is to acquire and scale businesses that help marketers maximise the value of first-party data by curating, managing, and deploying it, and in doing so making Electric Guitar the industry standard for first-party data solutions. As the first part of this strategy, Electric Guitar acquired 3radical Limited, a company that utilises its Software as a Service platform, 3radical Voco, to enable organisations to engage individuals and request their data directly using interactive digital experiences. It has since entered into collaborations with several other businesses operating in the field, as well as a joint venture with Exelia Technologies Limited called Marcomms.ai for producing AI-driven products and services for the digital marketing and advertising industry.

For further information please visit www.electricguitarplc.com.

About Mymyne

Run by Jason Batten, a serial entrepreneur and veteran in database-focused marketing solutions, Mymyne Limited was established in 2019 to develop and commercialising data-related software services, and evolved to provide sales and marketing services to digital marketing solutions businesses such as 3radical. Its intellectual property includes, a website which collects first-party data in exchange for discount vouchers; Situational Targeting, a segmentation tool that can be used for both customer intent analysis and programmatic digital advertising; and Peprr, a digital traffic and website optimisation tool that offers independent web analytics and channel attribution. Mymyne has also provided commercial due diligence services, utilising the expertise of its network of specialist data-related marketing experts.