Tomizone restructures debt but is yet to complete crucial capital raise

Tomizone [ASX:TOM], the loss-making wi-fi company, said it has refinanced term debt after some company directors and executives made personal loans, but the moves are conditional on attracting a further A$2.3 million in new investment.

Late last year the Auckland-based company said it needed to raise A$4 million under an offer of convertible notes following a back-door listing on the ASX in June.

The offer was approved by shareholders at the annual meeting in November but has taken a lot longer to complete than expected and the share price has dropped to just 7 Australian cents.

In a statement to the ASX today, Tomizone said its existing term debt of A$1.7 million is held by finance company FE Investments (FEI).

Under the refinancing deal, A$1.25 million of that will be rolled over into convertible notes which FEI will hold directly. Some unnamed company directors have agreed to personally borrow the remaining A$425,000 from FEI which will be used to subscribe for that amount of loan notes. The loan notes will issued on the same terms as convertible notes except they don't have a conversion right.

The company said the loan and convertible notes will be issued on much the same terms as those approved at the AGM apart from the conversion price being adjusted down by 5 Australian cents to 15 Australian cents and a 2.5 percentage points rise in the interest rate to 12.5 percent.

The moves lower the company's capital raising target from A$4 million to A$2.3 million and reduces the annual interest rate payable by 2.5 percentage points compared to under the FEI previous loan.

However, the term debt refinancing is conditional on the company completing its drawn-out capital raising and Tomizone said it was in talks with a number of "strategic and financial investors" for the balance required.

Tomizone reported a $2.3 million loss for the half-year ended December, wider than the year earlier loss of $1.8 million while revenue dropped to $1.63 million from $1.9 million in 2014.

Board chairman Tarun Kanji said in the February interim report that closure of the convertible note offering, along with continued sales traction, was "critical to the continued operation of the business".

Chief executive Geoff Wanless who replaced co-founder Steven Simms in September, said he was confident of securing new investors from Australia and Asia in the near future and that he had "confidence in the future of this company".

He's put his own money on the line after he and other executive management members and non-executive directors agreed in February to significantly reduce or forego salaries or director fees for an estimated $400,000 annual cost saving. The group also made a $200,000 contribution to working capital.

Then last month the company's co-founder and largest shareholder Phillip Joe gifted and sold a portion of his stake to help with the capital raising. He entered into a call option agreement with Wanless to acquire 3 million shares for an exercise price of A$53,400 and gifted a further 1.5 million shares.

Wanless has also entered into a call option agreement with Simms and the company for 12 million fully paid ordinary shares and holds call options over 18.5 million shares.

The agreement states the majority of the Joe and Simms shares will be used to incentivise a new cornerstone or strategic investor in the capital raise and some will be used for key management personnel as a long-term incentive.

Tomizone sells technology for managing a wi-fi network, operates in 80 countries, and its customers include airports, cafes, retailers, hotels and motels.

(BusinessDesk)

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