UK smart card systems vendor ID Data is to raise £4 million in a share placing and loan note conversion in an attempt to secure the future of the company.
AIM-listed ID Data said in April that it needed to raise an additional £6m in working capital, including £1.2m for the restructuring of its UK operations, although the company says this has been partially alleviated.
Unaudited results for the year ending March 30th 2005 show an increase in turnover to £19.3m, an improvement on last year's £11.4m, but estimated losses were only marginally reduced to £4.6m, from £5.1m last year.
In a statement, the vendor says without the placing and loan conversion "there can be no assurance that ID Data's providers of finance would maintain their support of the group", adding that the group's directors would have to consider disposing of company assets or declare insolvency.
The placing of 400 million new shares at one pence apiece will raise £3.7m net of expenses. In addition, investors have agreed to convert £3.6m of long-term debt into equity at one pence per share.
Peter Cox, CEO of ID Data, says: "We see our new funds and conversion of debt as a major vote of confidence in our strategy. Our objective now is to place our focus on our marketing and sales activities and to gain the appropriate business to ensure our company is a leader in its chosen fields."
Following the placing and loan note conversion the company will have net cash balances of £1m, which it says may or may not be enough for future working capital requirements. In order to supplement its working capital, ID Data may issue up to a further 109m shares over the next 15 months.
The vendor says current trading is ahead of internal forecasts and estimates Q1 sales to be in the region of £3.3m, compared to £4.0m in Q1 2004.
ID Data says recent years in the card industry have been challenging, but with the roll out of EMV Chip and pin, the rise of the GSM market, the gift card concept and the government push with ID and other cards, the market is buoyant.