Update on EHGOF,OTT Holdings,ABO and Board Changes

RNS Number : 4577N

Iconic Labs PLC

01 February 2021

 

Iconic Labs Plc ("Iconic Labs" or the "Company")

Update on EHGOF, OTT Holdings and ABO and Changes to the Board

Iconic Labs Plc (LSE:ICON), a multidivisional new media and technology business announces that following the failure of European High Growth Opportunities Securitization Fund ("EHGOF") to accept a revised settlement offer that the Company made to EHGOF to settle all matters outstanding with EHGOF as well as the outstanding issues with OTT Holdings Limited ("OTT Holdings") and Alpha Blue Ocean ("ABO"), and which the Company considered to be commercially acceptable and fair to all parties, John Quinlan, Liam Harrington and Sam Asante (together, the "Former Directors") have considered their position in light of EHGOF, OTT Holdings and ABO's failure to engage in meaningful dialogue in order to reach a settlement, and consider their roles to be untenable.

The board of directors of the Company (the "Board") consider the situation has now reached a stalemate. The Former Directors believe that they have been placed in an impossible position to resolve these issues and they believe that is for the good of the Company, its shareholders and the stakeholders as a whole that they resign and that the current non-executive director, Katharine Lewis, is best placed to assess the Company's options going forward.

It is noted that the Former Directors were originally appointed as part of a process to clean up the old WideCells business that had failed to make any commercial progress or generate any meaningful revenues.  The Company at that stage had significant liabilities from the WideCells operations, which the Former Directors resolved in order to avoid an insolvency event.  The Company also had an existing convertible loan note ("CLN") financing facility with EHGOF.  It should be noted that to enable the restructuring and generate growth in the new media and technology business, the Board and several employees and advisers agreed to defer a significant part of their salaries, fees, bonuses and expenses which are now due and payable.

In order to provide context to recent events, the Board notes that during the last 22 months it has had two principal aims:

· To create a successful, profitable business; and

· To transition the Company from being financed through a CLN facility towards more conventional equity and debt financing.

Following a number of consultations with a number of shareholders, it was made clear to the Board that all shareholders with whom they spoke agreed with these aims, and in particular, the Board was lobbied to move away from the CLN structure.

With respect to the first aim, the Former Directors built a new media business from zero revenues to one now running at an annual revenue rate of over £1m a year. This involved both owned brands, such as GSN, and management service agreements ("MSAs") in respect of TheLondonEconomic, the JOE Media group and Lovin' Media. Iconic was only able to obtain these MSAs because of the skills and experience of the Board in managing digital media businesses. 

Their work on these underlying businesses has borne fruit:

· JOE Media's programmatic revenues have already increased by over 250% since the summer and both Irish and UK businesses have continued to secure significant branded content contracts. The increased revenues together with lower costs from a restructuring carried out by the Former Directors, has resulted in the JOE and Her, and Lovin Media businesses now expecting to run at a profit from next month with expectations high for the rest of the year;

· monthly revenues at TheLondonEconomic are now up 400% year on year and the business is now on course to be profitable this year;

· GSN has been revamped and relaunched and is gaining market traction by being marketed to brands in conjunction with the other published brances.

The Former Directors consider the above achievements and progress represent clear commercial success achieved, despite adverse global conditions, and that therefore their first aim, of creating a successful, profitable business was at or near to being achieved.  The Board had high and justifiable expectations of a successful year during 2021, not least through beginning to share in the profits of these businesses.

With respect to the second aim, that of moving towards more conventional financing, this was discussed with ABO over a period of several months, even prior to the termination of the financing facility in place with EHGOF.  Discussions continued following termination, and the Company was assured by ABO that there was a deal agreed in principle for settlement of all outstanding issues.  However, ABO, acting on behalf of EHGOF, subsequently communicated to the Company that it no longer wished to proceed on the basis of the settlement that the Company believed had been agreed in principle.

In parallel, the Board was contacted by OTT Holdings who asserted that they were the largest shareholder and intended to seek a change in the composition of the Board at a general meeting by removing Liam Harrington, Sam Asante and Katharine Lewis.  OTT Holdings has attempted to serve requisition notices, but as it is not a registered holder of any shares none of these purported notices had any legal validity or force. As far as the Company is aware, OTT Holdings still intends to seek removal of those directors and appointment of its own nominees. OTT Holdings have failed to put forward any commercial plan for the Company.

In considering their obligations and duties to all shareholders and stakeholders, the Former Directors are aware that the current situation with OTT Holdings, EHGOF and ABO is not conducive to stable operations of the Company.  In essence, the Former Directors have become increasingly concerned that the situation they are in has become impossible to resolve in a manner that is commercially acceptable to the Board and which would be fair to all shareholders and stakeholders. The situation also causes considerable time and attention of the Board to be spent on dealing with the dispute, at the expense of spending that time developing the underlying business. Further, in satisfying their duties and obligations each member of the Board believe they could not enter into proposals that they considered commercially unacceptable and in a situation whereby OTT Holdings, EHGOF and ABO would not engage in any meaningful dialogue to find a solution.

It is also noted that Liam Harrington and Sam Asante indicated to the other Board members that they did not wish to remain as directors should that involve either having to continue dealing with disputes with OTT Holdings, EHGOF and ABO or having to work to try and meet settlement terms that would be either factually impossible to fulfil, or would result in EHGOF, ABO and OTT Holdings perpetually being in a position through variable priced conversion rights to take full control of the Company and the value being created.  They indicated that they would prefer to resign immediately and spend their time more productively elsewhere and do not wish to be associated with EHGOF, OTT Holdings or ABO.

John Quinlan, interim Executive Chairman, and Katharine Lewis, the non-executive director, proposed instead that one last attempt should be made to settle all matters through a final proposal by the Company, and that if ABO, EHGOF and OTT Holdings did not agree to the terms proposed then the executive directors could all resign with Katharine Lewis agreeing to remain in place for a short period of time in order to effect an appointment of replacement directors and ensure that such a transition was orderly. 

The Board unanimously agreed with this approach and therefore on Monday 25 January 2021 provided a revised offer to settle, which included fully drafted settlement documentation, to EHGOF.  The Board also considered that the terms of the offer were in all respects commercially reasonable and sensible and fair to all shareholders and stakeholders and that they would only move forward if the offer was accepted by EHGOF, ABO and OTT Holdings in all respects.

No response was received by the deadline for acceptance of 5pm on Thursday 28 January 2021. The Company instead received a revised proposal from EHGOF after the deadline and which  unfortunately, was expressed in general terms only and was sent without definitive documentation necessary to enable the Board fully to analyse the offer.  The revised proposal was set out in general terms, and was both factually impossible for the Company to meet, and similar to previous proposals by EHGOF which had already been the subject of protracted and ultimately fruitless negotiations between the Company and EHGOF.  The revised proposal also rejected the inclusion of ABO and OTT Holdings into the settlement framework, which was considered essential by the Company in light of recent events.

The Former Directors considered the situation over the weekend and on Sunday 31 January 2021, and consistent with their previously stated position, resigned with immediate effect.

Katharine Lewis remains as a director for a period to enable an assessment of all options for the Company going forward, and  ensure as needed an orderly transition of the corporate books and records to newly appointed directors. Following this she intends to resign from the Board.

The Former Directors are very disappointed in the actions of OTT Holdings, EHGOF and ABO, and that as a result they have been placed in a situation which they believe is unsatisfactory to all concerned and which they believe has arisen principally as a result of EHGOF reneging on a plan to move away from the CLN funding structure as discussed with them during 2020, and on a settlement the Company believed was agreed in principle last year, which has led to a complete and irrevocable breakdown in trust between the parties.  Consequently, in order to fully discharge their duties as directors and acting in the best interests of the shareholders and stakeholders of the Company as a whole they have resigned from the Company as they strongly believe OTT Holdings, EHGOF and ABO have no interest in reaching a commercially acceptable settlement, and that without their resignations the current unacceptable stalemate would continue, further damaging the share value of the Company.

Market Abuse Regulation (MAR) Disclosure

The information contained within this announcement is deemed by the Company to constitute inside information for the purposes of the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

**ENDS**

For further information, please visit the Company's website www.iconiclabs.co.uk.

Iconic Labs [e-mail]

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