TIDMICON
RNS Number : 3938C
Iconic Labs PLC
07 February 2020
7 February 2020
Iconic Labs Plc ("Iconic Labs" or the "Company")
Trading update, Capital Plan (including Financing update and
Settlement of Previous Debt Facilities), Share Capital
Reorganisation and Notice of GM
Iconic Labs Plc (LSE:ICON) (the "Company"), a multi-divisional
new media and technology business, is pleased to provide the
following updates.
Trading Update
The Company's business is now generating revenues and starting
to achieve real growth and traction. As evidenced by recent
announcements the management team has signed several contracts and
further has a strong pipeline of potential transactions. It has
also successfully launched its first platform with the acquisition
and revamp of GSN, the leading LGBT website. Building a business
based on growing revenues in the short and medium term while
developing and building the long-term value of brand assets is
something the management team did successfully at UNILAD and they
believe a similar model will be even more successful at the
Company.
The launch of the new GSN website is particularly significant
because it not only provides revenues and access to the LGBTI
market, estimated to be in the region of $3.6 trillion of annual
spend globally, but also secures for the Company a platform and
brand with credibility in such a valuable sector.
Since the launch of the new GSN website, it is attracting over a
million monthly users and in just one month since the launch the
Company has secured initial revenues and has a sales pipeline which
is ahead of management's expectations. GSN represents a blueprint
of the overall plan for the Company, building or acquiring assets
that have great value potential and can, when combined with the
expertise of the management team, potentially become world leading
brands in valuable sectors.
The management team considers that value has already been
created in the Company's business, and that this is not fully
recognised in the current share price. Management recognises that
the share price is currently being held back because of the
dilutive effects of, and uncertainty relating to, the historic debt
position inherited from the old WideCells business, and which
continues to have an impact on the current financing position of
the Company.
In light of the above, the board wishes to provide clarity on
the existing arrangements and set out a clear plan to achieve its
stated ambition to move to a clean balance sheet, whereby near-term
growth is conventionally funded through net free cashflow and the
issuance of ordinary shares in an open offer or placing, rather
than through facilities which include variable conversion
rights.
Financing update
On 6 August 2019, the Company announced that it had secured
further financing from European High Growth Opportunities
Securitization Fund (represented by its management company European
High Growth Opportunities Manco SA, a company registered in
Luxembourg whose registered office is at 18, Rue de Robert Stumper,
2557 Luxembourg, registered with the Luxembourg trade and companies
register under number B 124207) (the "Investor") for a gross amount
of up to GBP1.375 million, which would provide the Company with
capital to continue to resolve the outstanding legacy issues
associated with the previous operating stem cell business, fund the
cash consideration elements for the acquisition of Social Alchemist
and for general working capital purposes. This involved the Company
entering into a deed of issuance with the Investor ("Deed of
Issuance").
The Company also announced on 6 August 2019, that it had agreed
to settle with the Investor the remaining amounts due that were
outstanding under a previous financing agreement entered into with
the Investor. This involved the Company entering into a deed of
settlement on 5 August 2019 ("Deed of Settlement") pursuant to
which the Company issued 237,827,207 ordinary shares to the
Investor, with further ordinary shares to be issued once a number
of conditions had been satisfied.
Over the last three months, the Company has engaged with the
Investor, as provider of the historic and current facilities, in an
attempt to try and settle the historic and current debts of the
Company and develop a comprehensive plan to deal with the Deed of
Issuance and Deed of Settlement as well as the near term funding
requirements of the Company.
As background, the Deed of Issuance and Deed of Settlement were
negotiated and secured in a situation whereby the Company had no
other viable options for financing and urgently needed to resolve
the liabilities from historic financing facilities, including
penalties and debts incurred under agreements entered into by the
old WideCells management team before the launch of the Company.
In parallel, the board consulted with its advisers and has also
certain institutional shareholders to canvass views on the best
steps towards the stated capital aim while enabling the Company to
continue to grow. While the institutional shareholders consulted
indicated that they would consider participating in an equity
offering once the balance sheet was more conventional, they held a
consistent view that there was not appetite to successfully place
equity before this has been achieved. This confirmed the view of
the board that the move towards a clean balance sheet is the
correct aim, but that it cannot be achieved in one step.
Specifically, a placing or open offer to enable the Company to
settle all existing amounts owed to the Investor and provide growth
and working capital to the business is not possible at this time.
However, on the basis of the consultations with the institutional
shareholders, the board is confident that there will be interest in
providing equity funding once the situation with the Investor has
been resolved. The Company has therefore entered into a new
financing and settlement agreement ("Financing and Settlement
Agreement") to secure additional financing from the Investor for a
gross amount of up to GBP5,000,000 with a commitment by the Company
to draw down on at least GBP2,000,000 of funding, with the decision
of the Company as to whether to take more that GBP2,000,000 being
in the sole discretion of the Company. This provides the Company
with sufficient capital to pursue its near-term growth strategy of
organic expansion and by making opportune, well-priced smaller
acquisitions. It would also be used for general working capital
purposes. As a result of the new financing arrangements, the
Company hopes to achieve a clean balance sheet as early as the
second half of this year.
The Financing and Settlement Agreement entered into with the
Investor, involves, amongst other matters, the Investor agreeing to
a 30 per cent. reduction of the total amounts it was owed under the
Deed of Settlement. Consequently, the Deed of Settlement is no
longer applicable and all amounts due under that agreement,
including the Make Whole Amount, have now been reduced by 30 per
cent. and are fully dealt with in the Financing and Settlement
Agreement. The Investor has agreed to settle these amounts through
the issue of new notes to the Investor, with such notes to be
issued on the first draw down under the Financing and Settlement
Agreement.
The principal terms of the new funding under the Financing and
Settlement Agreement are that the Company will be entitled to draw
down a base amount of GBP250,000 per month (subject to upwards and
downwards adjustments primarily based on trading volumes), and each
month convertible loan notes will be issued to the Investor which
it will then be able to convert and sell prior to the next tranche.
Each note issued has a duration of 12 months from the date of its
issue. The notes can be freely transferred, will not be listed on
any financial market and are capable of being converted into
ordinary shares. Once issued, the notes can be converted at the
higher of 90 per cent. of the lowest closing volume weighted
average price (VWAP) of the ordinary shares during the applicable
period preceding the date they are to be converted and the nominal
value of the ordinary shares.
On entering into the Financing and Settlement Agreement, the
Company agreed to certain covenants and undertakings which it gave
to the Investor. These include the Company passing certain
resolutions proposed at the GM and issuing a prospectus which will
allow the Company to draw down under the Financing and Settlement
Agreement and issue the notes together with the attached warrants.
The prospectus is substantially complete and subject to final
approval by the relevant authorities will, provided the resolutions
are passed, be issued shortly after the GM.
The funds available under the Financing and Settlement Agreement
are intended to cover working capital and growth needs, also
includes funds to cover legal costs that were incurred dealing with
the old WideCells business as well as the associated costs of
issuing a new prospectus. However, the majority is explicitly
allocated for growth capital. In the view of the board this
represents the best available option to fund the Company business
while transitioning to raising conventional capital can be
secured.
Share Capital Reorganisation
A condition of the Financing and Settlement Agreement is that
the Company reduces the nominal value of its existing ordinary
shares. To achieve this, a resolution will be proposed at the GM
which will, if passed, have the effect of reducing the nominal
value of each ordinary share from GBP0.0025 to GBP0.00001 by
subdividing each ordinary share into one new ordinary share of
GBP0.00001 ("New Ordinary Share") and one C deferred share of
GBP0.0249 ("Deferred Share"). A further resolution is required to
adopt new articles of association of the Company as the rights
attaching to the Deferred Shares will be contained in the Company's
articles of association ("New Articles").
The New Ordinary Shares will have attached to them all the
rights of the existing ordinary shares and will therefore have the
same value as the existing ordinary shares.
As will be set out in the New Articles, the Deferred Shares will
have no right to receive any dividend out of the profits of the
Company available for distribution and resolved to be distributed
in respect of any financial year or any other income or right to
participate therein. On a distribution of assets on a winding-up or
other return of capital the holders of the Deferred Shares shall be
entitled to receive the amount paid up on their shares after
holders of the New Ordinary Shares have received the amount of
GBP1,000 in respect of each New Ordinary Share held by them
respectively. For all practical purposes, the Deferred Shares will
have no value, and the Company will not issue any certificates or
other documents of title in respect of them.
Notice of General Meeting
In order to implement the Share Capital Reorganisation, and
thereby enable the financing arrangements, the Company hereby
provides notice of that a General Meeting ("GM") will be held on
27th February 2020 at 11.00 am at the offices of DLA Piper UK LLP,
160 Aldersgate Street, London, EC1A 4HT. A Notice of GM is being
posted to shareholders and will be available to view on the
company's website www.iconiclabs.co.uk.
**ENDS**
For further information, please visit the Company's website
www.iconiclabs.co.uk or contact:
John Quinlan Iconic Labs Plc c/o SBP Tel: +44 (0) 20
7236 1177
Damon Heath Shard Capital Partners Tel: +44 (0) 20 7186 9950
LLP
Simon Leathers Shard Capital Partners Tel: +44 (0) 20 7186 9007
LLP
Isabel de Salis St Brides Partners Tel: +44 (0) 20 7236 1177
Limited
David Penson St Brides Partners Tel: +44 (0) 20 7236 1177
Limited
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END
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(END) Dow Jones Newswires
February 07, 2020 11:08 ET (16:08 GMT)
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