Secured Convertible Note Facility & other matters

RNS Number : 5649R

Advanced Oncotherapy PLC

01 March 2023

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF REGULATION 11 OF THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS 2019/310. MARKET SOUNDINGS WERE TAKEN IN RESPECT OF THE MATTERS CONTAINED IN THIS ANNOUNCEMENT, WITH THE RESULT THAT CERTAIN PERSONS PREVIOUSLY BECAME AWARE OF SUCH INSIDE INFORMATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN AND ALL SUCH PERSONS SHALL THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION.

1 March 2023

ADVANCED ONCOTHERAPY PLC

("Advanced Oncotherapy", "AVO" or the "Company")

New Secured Convertible Note Facility and Conversion of Prior Facility with Warrants

Advanced Oncotherapy (AIM:AVO), the developer of LIGHT, the next-generation proton therapy system for cancer treatment, announces that is has entered into secured convertible loan note agreements to raise £4.975 million from new and existing investors, as well as certain Directors (together, the "Lenders") of the Company (the "Secured Convertible Note"). Total funds of £3.828 million have been received from investors under the Secured Convertible Loan Note as at the date of this announcement. The balance of funds are due to be received shortly save for £500,000 from Michael Sinclair (Executive Chairman) due to be received by mid March 2023.

In addition, and further to the announcement made by the Company on 18 January 2023, the Company announces that its short-term loan facility of £2.915 million p rovided to the Company in July 2022 by a French counterparty has been converted to convertible notes and warrants ("Converted Loan"). The notes will have a minimum conversion price of 25 pence. Warrants to subscribe for 1,250,000 new Ordinary Shares will also be issued on or around 3 March 2023 to the French counterparty with an exercise price of 25 pence per share, exercisable until 3 March 2026.

The funds raised will further strengthen the Company's balance sheet and contribute to the funding for progressing the assembly, documentation, verification and validation activities.

Secured Convertible Note

Key terms of the Secured Convertible Note are set out in the table below:

Maturity Date	9 months from the date of the receipt of the funds
Conversion	Option to convert prior to the Maturity Date at 20% discount to the next equity fund raising of the Company
Interest Rate	Fixed interest of 1.25% per month until the earliest of the full redemption or the conversion of the loan
Revenue share entitlement for the Harley Street machine	The Operator of the Harley Street Centre shall pay to the Lenders a pro rata portion of the revenue generated by the Proton Therapy machine which is to be installed in Harley Street. The total revenue amount will be capped at £2.5 million per annum and the portion each Lender will receive will be calculated on a pro rata basis according to each Lender's loan amount of the total Secured Convertible Note. The first payment shall be made at the end of the first full calendar year of operations of the proton centre located on Harley Street (London, UK). An annual payment shall be made for 10 consecutive years. Even if the Secured Convertible Note is redeemed prior to the maturity date or converted into Ordinary Shares, the revenue share entitlement will continue for the full 10 years.

A summary of the other material terms of the Secured Convertible Note and the key terms of the Converted Loan is set out in the Appendix of this announcement.

Together, these initiatives will provide immediate working capital to the Company and support it in the execution of its broader long term financing plans.

The funding received from the Secured Convertible Note provides the Company with a cash runway until end of April 2023. The Company is taking steps to raise additional financing, both dilutive and non-dilutive. These financing options involve further possible equity financings, the quantum and timing of which will also depend, inter alia, on the outcome and the timing regarding the non-dilutive financing options. In the absence of additional funding the Company will need to take steps to extend its cash runway beyond the end of April 2023, including further cost reduction initiatives.  Whilst the terms of the Secured Convertible Note increase the cost to the Company of the overall facility, the directors believe that the Secured Convertible Note is the most attractive available fundraising option to the Company at the current time and is therefore in the best interests of the Company and its shareholders.

Director participation

Certain of the Directors (the "Participating Directors"), detailed below, will be participating in the Secured Convertible Note on the same terms as set out above and in the Appendix, which is deemed to be a Related Party Transaction pursuant to AIM Rule 13.

Director	Committed Participation of the Secured Convertible Note	Revenue share entitlement p.a.**
Michael Sinclair* (Executive Chairman)	£563,000	140,750
Michael Bradfield (Non-Executive Director)	£80,000	20,000
Dr Nick Plowman (Non-Executive Director)	£10,000	2,500
Enrico Vanni (Non-Executive Director)	£30,000	7,500
Nicolas Serandour (CEO)	£10,000	2,500
Prof. Stephen Myers (ADAM Executive Chairman)	£25,000	6,250
Hans Von Celsing (Non-Executive Director)	£10,000	2,500

*£500,000 of Michael Sinclair's participation in the Secured Convertible Note is expected to be settled by mid-March 2023.

**Revenue share entitlement and pro rata calculations are based on £10 million being raised under the Secured Convertible Note. Should additional funds be raised the revenue share entitlements will decrease and be based pro rata on the higher amount raised. If less than £10 million is raised the share entitlements will not increase.

Related party transaction disclosure

The Participating Directors are directors of AVO and therefore related parties of the Company for the purposes of the AIM Rules for Companies ("AIM Rules"). Participation in the Secured Convertible Note by the Participating Directors is a related party transaction under the AIM Rules. The independent Directors (being Lori Cross and Renhua Zhang) of AVO consider, having consulted with the Company's nominated adviser, Allenby Capital Limited, that the terms of the participation in the Secured Convertible Note by the Participating Directors are fair and reasonable insofar as the Company's shareholders are concerned.

Advanced Oncotherapy plc	www.avoplc.com
Dr. Michael Sinclair, Executive Chairman	Tel: [phone]
Nicolas Serandour, CEO
Allenby Capital Limited (Nomad and Joint Broker)
Nick Athanas / Piers Shimwell (Corporate Finance) Amrit Nahal / Matt Butlin (Sales & Corporate Broking)	Tel: [phone]
SI Capital Ltd (Joint Broker)
Nick Emerson	Tel: [phone]
Jon Levinson	Tel: [phone]

About Advanced Oncotherapy Plc www.avoplc.com

Advanced Oncotherapy, a UK headquartered company with offices in London, Geneva, The Netherlands and in the USA, is a provider of particle therapy with protons that harnesses the best in modern technology. Advanced Oncotherapy's team "ADAM," based in Geneva, focuses on the development of a proprietary proton accelerator called, Linac Image Guided Hadron Technology (LIGHT). LIGHT's compact configuration delivers proton beams in a way that facilitates greater precision and electronic control.

Advanced Oncotherapy will offer healthcare providers affordable systems that will enable them to treat cancer with innovative technology as well as expected lower treatment-related side effects.

Advanced Oncotherapy continually monitors the market for any emerging improvements in delivering proton therapy and actively seeks working relationships with providers of these innovative technologies. Through these relationships, the Company will remain the prime provider of an innovative and cost-effective system for particle therapy with protons.

Appendix

Secured Convertible Note

Financing instrument	Secured interest-bearing convertible facility
Principal	Up to £15 million
Maturity Date	9 months from the date of the receipt of the funds
Conversion	Option to convert prior to the Maturity Date at 20% discount to the next equity fund raising of the Company
Interest Rate	Fixed interest of 1.25% per month until the earliest of the full redemption or the conversion of the loan
Revenue share entitlement for the Harley Street machine	The Operator of the Harley Street Centre shall pay to the Lenders a pro rata portion of the revenue the Operator will receive from the Proton Therapy machine which is to be installed in Harley Street. The total revenue amount will be capped at £2.5 million per annum and the portion each Lender will receive will be calculated on a pro rata basis according to each Lender's loan amount of the total Secured Convertible Note. The first payment shall be made at the end of the first full calendar year of operations of the proton centre located on Harley Street (London, UK). An annual payment shall be made for 10 consecutive years. Even if the Secured Convertible Note is redeemed prior to the maturity date or converted into Ordinary Shares, the revenue share entitlement will continue for the full 10 years.
Security	Secured against the same assets as the existing facilities in place with Nerano Pharma Ltd, on a pari passu basis, such as the LIGHT components being built in Daresbury and Geneva, associated intellectual property and the property at Harley St.
Assignment and transfer by the Lender	All transfers and assignments are subject to the Lender receiving the Company's prior consent not to be unreasonably withheld. Such proposed transfer or assignment will not be permitted when the proposed transferee or assignee is a person whose principal business or material activity is investing in distressed debt or the purchase of loans or other debt securities with the intention of (or view to) owning the equity (loan to own) or gaining control of a business or exploiting holdout or blocking positions.
AOB	· In the event other investors wish to subscribe to this instrument, up to a maximum aggregated amount of £15 million, within 60 days of the date of the agreement, those investors would benefit from the same terms as detailed above, notably in relation to the interest rate and (on a pro rata basis) the security package and revenue share entitlement. · Any subscription under the Secured Convertible Note is subject to the consent of the Lenders and Nerano Pharma Ltd ("Nerano") and disclosure to the Lenders and Nerano of the identity of such new subscriber.

Converted Loan

Financing instrument	Convertible Bond program with attached warrants
Conversion Amount	GBP 2,915,000
Convertible Notes	583 notes, each with a value of GBP 5,000, which may be converted into ordinary shares of 25 pence each
Maturity Date	6 February 2025
Conversion Price	Equal to the higher of the nominal value of the Company's shares (£0.25) or 90% of the lowest daily VWAP during the 15 trading days preceding issue of a conversion notice.
Conversion Fee	If the Company's mid-market share price is trading below its nominal share price, the Company shall pay the French counterparty a conversion fee calculated to compensate for the difference, which may be settled in the Company's ordinary shares of 25 pence each ("Ordinary Shares") or cash. If the Conversion Fee is to be paid in cash, it will be calculated as the difference in value between the conversion price and the nominal value multiplied by the closing share price on the conversion date. If the Conversion Fee is to be paid in Ordinary Shares, it will be calculated as the difference in value between the conversion price and the nominal value multiplied by the closing share price on the conversion date and the multiple of the nominal value over the lowest closing share price during the period of the conversion date to the date before the transfer of the Ordinary Shares
Warrants	Warrants to subscribe for 1,250,000 new Ordinary Shares will also be issued on or around 3 March 2023 to the counterparty with an exercise price of 25 pence per share, exercisable until 3 March 2026.

 

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