Trading update, Capital Plan and Notice of GM

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 £1.375 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 £5,000,000 with a commitment by the Company to draw down on at least £2,000,000 of funding, with the decision of the Company as to whether to take more that £2,000,000 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 £250,000 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 £0.0025 to £0.00001 by subdividing each ordinary share into one new ordinary share of £0.00001 ("New Ordinary Share") and one C deferred share of £0.0249 ("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 £1,000 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: