THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN ADMISSION DOCUMENT AND DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO SELL OR ISSUE, OR ANY SOLICITATION OF ANY OFFER TO PURCHASE OR SUBSCRIBE FOR, ANY ORDINARY SHARES IN THE CAPITAL OF THE COMPANY, NOR SHALL IT (OR ANY PART OF IT), OR THE FACT OF ITS DISTRIBUTION, FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH OR ACT AS ANY INDUCEMENT TO ENTER INTO, ANY CONTRACT OR COMMITMENT WHATSOEVER.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE RETAINED VERSION OF EU REGULATION 596/2014 AS APPLIED IN THE UK ("MAR"). IN ADDITION, MARKET SOUNDINGS (AS DEFINED IN MAR) WERE TAKEN IN RESPECT OF THE PLACING WITH THE RESULT THAT CERTAIN PERSONS BECAME AWARE OF INSIDE INFORMATION (AS DEFINED IN MAR), AS PERMITTED BY MAR. THIS INSIDE INFORMATION IS SET OUT IN THIS ANNOUNCEMENT. THEREFORE, THOSE PERSONS THAT RECEIVED INSIDE INFORMATION IN A MARKET SOUNDING ARE NO LONGER IN POSSESSION OF SUCH INSIDE INFORMATION RELATING TO THE COMPANY AND ITS SECURITIES.

26 January 2022

Cornerstone FS plc

("Cornerstone" or the "Company" or the "Group")

Proposed acquisition of Capital Currencies Limited and Proposed Fundraising of a minimum of £0.85m

Cornerstone FS plc (AIM: CSFS), the cloud-based provider of international payment, currency risk management and electronic account services to SMEs, is pleased to announce that it has entered into a conditional sale and purchase agreement to acquire Capital Currencies Limited ("Capital Currencies")(the "Acquisition") and its intention to raise a minimum sum of £0.85 million (before expenses) by way of a placing (the "Placing") and a subscription (the "Subscription") of new ordinary shares at a price of 26.5 pence per share (the "Fundraising").

The total consideration payable for the Acquisition is up to £3 million, which is to be satisfied through a mixture of cash, new ordinary shares and convertible loan notes.

Information on Capital Currencies Limited and Rationale for the Acquisition

Capital Currencies Limited ("Capital Currencies") is a well-established foreign exchange broker specialising in the provision of currency exchange and international payments, with high levels of service delivered by experienced personnel. The Directors believe that Capital Currencies is a strong strategic fit for Cornerstone as its client base is primarily UK corporates, with a particular focus on larger SMEs, and over 90% of its revenue is generated by clients that it services directly. Founded in 2004 by Craig Strong, whose career in foreign exchange services spans over 30 years, Capital Currencies is authorised and regulated by the FCA as an authorised payment institution permitted to provide payment services.

The Acquisition is anticipated to be earnings accretive from the current financial year. It is also expected to expand Cornerstone's presence in its core target market and, in line with the Group's stated strategy, increase revenue generated by direct clients. By bringing Capital Currencies' clients onto Cornerstone's technology platform, the Group expects to benefit from the rationalisation of payments to banking partners across the combined organisation as well as recognise other synergistic savings, such as in compliance costs and overheads.   

Craig Strong, along with the rest of the Capital Currencies team, will remain with the business post the Acquisition. Capital Currencies will initially continue to trade under the Capital Currencies brand and the Group will maintain Capital Currencies' office, which is located in Tunbridge Wells, UK.

According to its unaudited results, in the year ended 31 January 2021 Capital Currencies had a turnover of approximately £0.598 million and generated a profit before tax of approximately £0.34 million. Capital Currencies' net asset value at 31 January 2021 was approximately £0.12 million.

Terms of the Sale and Purchase Agreement

The consideration payable for the Acquisition consists of £0.586 million in cash on completion subject to customary working capital adjustments with further earn-out consideration payable over the next two years, in a mixture of new ordinary shares and convertible loan notes; the value of which will be dependent on performance and is capped at a maximum total consideration of £3 million.

The earn-out consideration is payable in two tranches:

·    on the first anniversary of completion, two times Capital Currencies' revenue for the 12-month period leading up to 31 January 2023, less the amount already paid to the sellers in respect of the Acquisition. One half of the earn-out will be satisfied in the issue of convertible loan notes to the sellers with a 6% coupon interest and the remaining half shall be satisfied by the issue of consideration shares to the sellers.

·    on the second anniversary of completion, three times Capital Currencies' revenue for the 12-month period leading up to 31 January 2024, less the amounts already paid (or deemed paid) to the sellers in respect of the Acquisition. The final earn-out payment shall be satisfied by the issue of consideration shares to the sellers.

Any convertible loan notes issued to the sellers under the earn-out payment is for a term of 2 years from the date of issue and the sellers may elect to convert at any time prior to termination date. Any interest is payable quarterly in arrears with the principal repayable at the end of the two-year term. The conversion price per share is at the mid-market price of the Company's share in the 20 dealing days preceding the issue of the convertible loan notes.

Any consideration shares issued to the sellers under the earn-out payment is priced per share as the sum equal to the average mid-market price of the Company's share in the 20 dealing days preceding the issue of the consideration shares.

Any shares received by the sellers under the Acquisition (save for any shares issued under the convertible loan notes) are subject to a 12-month lock-in from the date of issue (subject to certain limited exceptions) and, for a further period of 12 months thereafter, the sellers will only dispose of any interests in the shares on an orderly market basis through the Company's brokers. The sellers have also agreed that any shares issued under the convertible loan notes will only be disposed, for a period of 12 months from the date of issue, through the Company's brokers.

Proposed Fundraising

The Company also announces its intention to raise a minimum £0.85 million (before expenses) by way of the Placing of new ordinary shares (the "Placing Shares") and a subscription for new ordinary shares (the "Subscription Shares"), both at a price of 26.5 pence per share. The Company's brokers have already commenced the Fundraising and it is anticipated to close on 27 January 2022. Certain Directors of the Company have indicated a willingness to subscribe for new ordinary shares by way of the Subscription.

The net proceeds of the Fundraising will be used to:

·    fund the initial cash consideration and integration costs for Capital Currencies, pay the expenses of the Acquisition and Fundraising; and

·    provide additional working capital for the Group.

The Placing Shares and the Subscription Shares, which will rank pari passu with the existing ordinary shares, will be issued under the Company's share allotment authority and shareholders pre-emption disapplication granted at its Annual General Meeting held on 30 June 2021. The Fundraising is not underwritten.

Application will be made to the London Stock Exchange for the Placing and Subscription Shares to be admitted to trading on AIM ("Admission").

Expected timetable for the Fundraising

Further announcements will be made as appropriate.

Julian Wheatland, Chief Executive Officer, Cornerstone commented:

"This acquisition marks a significant milestone in Cornerstone's history as we deliver on our aim, as stated when we joined the market last year, to grow via acquisition as well as organically. Capital Currencies is an excellent strategic fit thanks to its focus on providing high-level currency exchange and international payments services directly to larger UK-based SMEs. As a result, this acquisition is expected to accelerate our growth, being earnings accretive from the current year, and expand our presence in our core target market. We welcome the Capital Currencies team to the Cornerstone group and we look forward to working together to continue to progress our business."

Enquiries

About Cornerstone FS plc

Cornerstone FS plc is a payments focused fintech business that makes managing currency simple for SMEs. It provides international payment, currency risk management and electronic account services using a proprietary cloud-based multi-currency payments platform. These services are delivered directly and via white label partners on a SaaS basis to SMEs that engage in international trade. Cornerstone also serves some high-net worth individual clients.

Headquartered in the City of London, UK and with an office in Dubai, Cornerstone is listed on AIM under the trading symbol 'CSFS'. For more information, please visit www.cornerstonefs.com.