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Convertible Securities, Issue of Equity & Warrants

Released 07:00 23-Aug-2019

RNS Number : 0020K
Quadrise Fuels International PLC
23 August 2019
 

23 August 2019

Quadrise Fuels International plc

("Quadrise", "QFI" or the "Company")

 

Convertible Securities, Issue of Equity and Issue of Warrants

 

Quadrise is pleased to confirm that it has secured funding of £2 million, being the first tranche of an issue of convertible securities, to progress recently announced business development opportunities towards trial projects and commercial contracts. These funds will secure the Company's financial position through to June 2020.

In recognition of the continuing support from long-term shareholders, the Company also announces that it intends to offer existing shareholders the opportunity to participate in an open offer of new ordinary shares in the Company with warrants attached.

Quadrise will be holding an investor conference call during the week beginning 26 August 2019 to provide shareholders with an opportunity to ask questions on recent business development activities and on the funding now secured.

Quadrise has entered into a convertible securities issuance deed (the "Agreement") with Bergen Global Opportunity Fund, LP (the "Investor"), in connection with an issuance by the Company of zero coupon convertible securities in two tranches (each, a "Convertible Security", and collectively, the "Convertible Securities") having an aggregate subscription price of up to £4.0 million, a par value of up to £4.3 million and being convertible into new ordinary shares in the Company (the "Transaction"). The Investor is managed by Bergen Asset Management, LLC, based in New York, which is an institutional investor with a particular focus on direct investments in small-cap companies around the world.

Quadrise also confirms that the Company intends to offer existing shareholders the opportunity to participate in an open offer of new ordinary shares of £0.01 each in the Company ("Ordinary Shares") to raise up to a maximum of £1.5 million (the "Intended Open Offer"). The Intended Open Offer will be priced at 3.96 pence per new Ordinary Share and with warrants,  on the basis of one open offer warrant for every two Ordinary Shares subscribed for under the Intended Open Offer, to subscribe for new Ordinary Shares at a price of 7.48 pence per new Ordinary Share for a period of 36 months from issue attached. The Intended Open Offer will enable existing shareholders to participate in a new issue of Ordinary Shares and warrants as part of the Company's overall funding requirements in order to advance its business development initiatives.

 

The Company looks forward to updating shareholders on the Intended Open Offer in due course.

 

Commenting on the Agreement, Mike Kirk, Quadrise's Executive Chairman, said:

"We are delighted that we have been able to secure the funds to enable Quadrise to build on the considerable momentum generated in 2019 and to progress  the multiple opportunities announced during 2019 towards trial projects and commercial contracts. This includes, for example, the activities in Kuwait, Saudi Arabia, Europe and Morocco, alongside the upstream market initiative with Merlin Energy Resources that we announced on 14 August.

 

The initial tranche of the funding from the Investor is in the amount of £2m, and it will provide the necessary funding to continue the activities noted above through to June 2020, with up to a further £2m of funding available by way of a second Convertible Security after one year.

 

Whilst we understand that this funding is more complex than a straight equity raise, it is, we believe, funding that is highly competitive when compared to an equity placing at the current share price, with the investment carrying no interest and being issued at a 7.5% discount, and the price at which Bergen is able to convert the Convertible Securities determined by reference to Quadrise's future share price performance.  

 

 

I look forward to being able to speak to investors on the conference call next week about the recent material business development activities in the company and the great platform that this funding provides for Quadrise. Details of the call will be announced shortly." 

 

Summary of Transaction Documents

 

The Company has entered into the Agreement with the Investor pursuant to which up to £4.0 million of interest free unsecured funding is to be provided by the Investor in two tranches through the issue by the Company of the Convertible Securities with a nominal value of up to £4.3 million, convertible into Ordinary Shares.

 

An initial tranche of Convertible Securities with a nominal value of £2.15 million (the "Initial Tranche") will be subscribed for by the Investor for £2.0 million. A further announcement will be made once the Initial Tranche has been issued. 

 

A second tranche of Convertible Securities, with a nominal value of up to £2.15 million (the "Second Tranche"), is conditionally available to the Company with a subscription price of up to £2.0 million, subject to the aggregate nominal value of the Second Tranche of Convertible Securities to be issued not exceeding 3.5% of the Company's market capitalisation on issue. The Second Tranche is envisaged to be issued within one week of the first anniversary of the entry into the Agreement, subject to certain conditions having been met. Both the Initial Tranche and the Second Tranche have 24 month maturity dates from the dates of their respective issuance and any Convertible Securities not converted prior to such dates will automatically convert into Ordinary Shares at such time. There is no interest applicable to either the Initial Tranche or the Second Tranche, absent default. 

 

The conversion price of the Convertible Securities is (a) the average of five daily volume weighted average prices of the Ordinary Shares, during a specified period before the conversion date, rounded down to the next 1/10th of a penny, or (b) 140% of the average of the daily VWAPs for the 20 trading days immediately prior to the execution date of the Agreement, being 5.78 pence per Ordinary Share ("Conversion Price B"). The Investor may only utilize Conversion Price B for Convertible Securities with a par value of no more than £800,000.

 

As part of the Transaction, and subject to receiving the Authority (defined below), the Company will also issue 4.9 million 36 month warrants to subscribe for new Ordinary Shares ("Warrants") to the Investor by way of a warrant instrument (the "Warrant Instrument") initially exercisable at 5.78 pence per Ordinary Share, subject to anti-dilution and exercise price reduction provisions included in the Warrant Instrument.

 

The Convertible Securities will only be convertible to the extent that the Company has corporate authority to do so and it is a term of the Agreement that, throughout the term of the Agreement, the Company must retain sufficient authority to issue and allot (on a non-pre-emptive basis) a sufficient number of Ordinary Shares potentially required to be issued under the terms of the Agreement (and the Warrant Instrument). Pursuant to the terms of the Agreement, the Company is required to obtain and maintain sufficient non-pre-emptive share issuance authority from its shareholders in relation to the Ordinary Shares ("Authority") that may be required to be issued pursuant to the Agreement and Warrant Instrument. It is acknowledged between the parties that the Company currently does not have sufficient Authority to enable conversion of the entire Initial Tranche. However, the Investor has agreed that the Agreement can be completed and the Initial Tranche  will be funded to the Company on the basis of the remaining current Authority from the 2018 annual general meeting, and also on the basis that an updated Authority must be obtained at a general meeting of shareholders ("General Meeting") within an agreed time period after the advance of the initial funding. Failure to obtain or maintain these (as required) will give rise to an event of default under the Agreement, which could potentially precipitate a cash demand for all unconverted securities representing the Initial Tranche (as well as a payment of £90,000 in relation to the failure to issue the Warrants). 

 

The Board are unanimously of the view that having commercially negotiated the Agreement, entry into the Agreement at this time, taking into account the risks and the rewards that the funding provides, is in the best interests of all members of the Company. Obtaining the Authority is likely to be critical to the continued trading of the Company and the directors will be recommending that shareholders vote in favour of the resolution seeking the Authority at the General Meeting. The Company will seek to mitigate the potential risk of having to make payments if the Authority is not obtained by continuing to maintain a tight control on costs and minimising discretionary expenditure until the General Meeting is held.

 

Other Terms of the Agreement

 

Failure to obtain the Authority at the General Meeting gives rise to an "Event of Default" under the Agreement, which gives the Investor the right to demand repayment in cash of the aggregate amount of the Initial Tranche that has not been converted at such date. In light of the potentially fluctuating share price, the Investor may have the right to a further cash repayment if the ability to convert any outstanding amount of the Initial Tranche changes. Following this (or any other) Event of Default, default interest of 15% would be applicable to any sums payable under the Agreement until the date of payment. There is a similar requirement to obtain a further Authority prior to the potential issuance of the Second Tranche.

 

The Company will have the right, but not the obligation, to repurchase the Initial Tranche of Convertible Securities in full (but not in part) for cash at nominal value without penalty within 90 days of issue, subject to the Investor's right to elect to not redeem 30% of the Initial Tranche Convertible Securities.

 

The Investor has a general right to delay completion of the Second Tranche until such time that the Investor holds an aggregate of securities under the Agreement of less than £500,000 or in the event that the price per Ordinary Share is not greater than £0.03 per Ordinary Share and, should the price per Ordinary Share remain below £0.03 for the duration of a 60 day period, the Investor will have the right to terminate the Company's ability to request the Second Tranche.

 

The Investor has agreed to certain limitations on its ability to transfer/sell its Ordinary Shares following a conversion of the Convertible Securities, and the Investor may not request conversion of the Initial Tranche within the first 30 calendar days of having subscribed for the Initial Tranche of Convertible Securities.

 

The Investor is also contractually precluded from short selling the Company's Ordinary Shares. The Company is precluded from entering into certain prohibited transactions which would adversely impact the Investor's position under the Agreement for a period of 120 days following such date that the Investor has no further unconverted tranches.

 

In connection with the Agreement, the Company will issue to the Investor:

 

(A)      3,888,889 new Ordinary Shares in settlement of a commencement fee of £140,000 ("Commencement Fee Shares"); and

 

(B)       a further 4,500,000 new Ordinary Shares to collateralize the Agreement (the "Collateral Shares") subscribed for at nominal value by the Investor. Depending on the market value of the Ordinary Shares once the Company's obligations under the Agreement have been met in full and no amount remains outstanding to the Investor, the Investor shall make an additional payment to the Company (to the extent the value exceeds the subscription price, without such payment being capped) (and otherwise, the Company will make an additional payment not exceeding £45,000 to the Investor).

 

Other terms of the Warrant Instrument

 

The Warrant Instrument will be appended to the Agreement and will only be effected if the Company's shareholders approve the Authority at the General Meeting. If the Authority is not approved, the Warrant Instrument will not be issue by the Company and instead a payment of £90,000 shall be payable by the Company to the Investor for failure to issue the Warrants.

 

The Warrant Instrument contains adjustment mechanisms such that the number of Warrants a holder holds, and the exercise price of such Warrants, are adjusted if the Company issues Ordinary Shares to shareholders capitalising profits or reserves (although not simply reflecting dividends / distributions issued by way of Ordinary Shares rather than cash); or consolidates, reclassifies or sub-divides its share capital.

 

Admission of Commencement Fee Shares and Collateral Shares to trading on AIM

 

Application has been made for the Commencement Fee Shares and the Collateral Shares, which rank pari passu with the Company's existing Ordinary Shares, to be admitted to trading on AIM ("Admission"). Dealings in the Commencement Fee Shares and the Collateral Shares are expected to commence at 8.00 a.m. on 30 August 2019.

 

On Admission, the Company will have 931,100,784 Ordinary Shares in issue with each Ordinary Share carrying the right to one vote. No Ordinary Shares are held in treasury. The total number of voting rights in the Company will therefore be 931,100,784 and this figure may be used by shareholders as the denominator for the calculations by which they determine if they are required to notify their interest in, or a change to their interest in, the Company in accordance with the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

 

For further information, please refer to the Company's website at www.quadrisefuels.com or contact:

 

Quadrise Fuels International Plc

 

Mike Kirk, Executive Chairman

+44 (0)20 7031 7321

Jason Miles, Chief Operating Officer

 

 

 

Nominated Adviser

 

Cenkos Securities plc

 

Dr Azhic Basirov

+44 (0)20 7397 8900

Ben Jeynes

Katy Birkin

 

 

 

Joint Brokers

 

Peel Hunt LLP

 

Richard Crichton

+44 (0)20 7418 8900

Ross Allister 

 

 

 

Shore Capital Stockbrokers Limited

 

Daniel Harris

Andy Crossley

+44 (0)20 7601 6108

 

Public & Investor Relations

 

FTI Consulting

 

Ben Brewerton

Ntobeko Chidavaenzi

+44 (0)20 3727 1000

 

 

Notes to Editors

QFI is the supplier of MSAR® emulsion technology and fuels, a low-cost alternative to heavy fuel oil (one of the world's largest fuel markets, comprising over 450 million tons per annum) in the global power generation, shipping, steam and refining industries.

This announcement is inside information for the purposes of Article 7 of EU Regulations.

 

 

 

 

 

 


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Convertible Securities, Issue of Equity & Warrants - RNS