Baanx

Key Information

Convertible key terms

Key terms

Please note this campaign is intended to replicate the terms of the Company's recent Government backed Future Fund convertible round where £9.95m was raised, including match funding (the "Future Fund CLA"). Please note that funds raised as part of this campaign will not be matched via the Future Fund as this process is now complete, but the business has decided to extend the same CLA terms to Seedrs investors via a separate convertible loan agreement.

More details of the Future Fund initiative can be found here: https://www.seedrs.com/learn/blog/the-future-fu...

You will see a term sheet attached to this Campaign in the Documents section which sets out the key terms of the Future Fund CLA.

A summary of the key terms is set out below, but should be read in conjunction with the term sheet:

• Discount: 20%

• Valuation cap: £75,000,000

• Interest: 8% per annum, non-compounding. On conversion events, the company can choose to repay the interest or convert it to equity (generally without the discount). See the Term Sheet for more details.

• Redemption Premium: An amount equal to 100% of the principal loan amount

• Qualifying Equity Financing. The convertible loan will automatically convert on an equity financing raising at least the total loan amount, at the lowest share price of equity financing less the Discount.

• Maturity Date: 3 September 2023.
o The default position is on the maturity date is that the loan will convert to equity unless the investor majority elect to redeem.
- If redeemed, the company will repay the principal together with the Redemption Premium.
- If converted, the conversion price will be at the most recent funding round share price less the Discount, provided that funding round happened after 20 April 2020 and was at least a quarter of the size of the convertible loan investment. If no such funding round has occurred, conversion will be at the share price of the last funding round prior to 20 April 2020 (no Discount).

• Other events of default or conversion: There are various other scenarios in which the convertible loan may convert or be repaid and investors should reference the term sheet:
o Non Qualifying Funding Round: The convertible loan can convert on an equity financing round which does not meet the size criteria of a ‘Qualifying Equity Financing”, at the election of the majority of investors under the loan. Please see the term sheet for how this conversion is priced.
o Exit: The convertible loan will automatically convert or be redeemed on an Exit, whichever would give investors the higher cash return. Please see the term sheet for how conversion is priced and payments on redemption in this scenario.
o Events of Default: The convertible loan is to be repaid on the events of default, such as liquidation or winding up. See the term sheet for more details.

Conversion to equity

The convertible loan agreement prescribed by the Future Fund is equity focused and favours conversion of the loan to equity as the default position.

Redemption is only available in certain scenarios and is often subject to the vote of majority of the investors. Where a vote of investors is required, Seedrs will vote on behalf of any investors it represents as nominee.

There is a possibility that the convertible loan will convert in some scenarios without the consent of Seedrs (if we do not make up a majority of investors). It is also Seedrs’ position that this is primarily an instrument for investing in the equity of the fundraising business and our default position would be to vote in favour of converting the loans to shares in the company, unless there is a clear or compelling reason not to.

Risks

As always, investors should be aware of and accept the risks involved in investing in early stage and growth focused businesses: https://www.seedrs.com/pages/risk-warnings

In addition to the usual risk warnings included above, investors should be aware of and accept the following with respect to convertible loans:

• The convertible loan agreement is intended as bridge funding to a future funding round, but there is no guarantee that a company will be able to secure further funding.

• There is a risk that the Company may not have sufficient funds to repay the loan on the maturity date, pay interest when it becomes due or pay the redemption premium included in the terms.

• Convertible loans are unsecured obligations and in the event of a winding up or liquidation event will rank behind secured creditors of the Company.

Secondary market

Investors will not be able to sell their interest in the convertible loans on the Seedrs Secondary Market unless and until they have converted to shares in the company (and then only subject to eligibility and the terms and conditions of the Seedrs Secondary Market).

EIS Relief - past, current and future

As noted above, the convertible loan instrument is not compatible with EIS requirements, so no EIS applications will be made with respect to investments in the convertible loan.

The government has confirmed that investing in the convertible loan will not impact EIS relief previously claimed on investments in the fundraising company:

“The government has confirmed that such previous investments will not be affected where the convertible loan converts into shares. Where the convertible loan note redeems, we have been alerted that the government intends to make changes to the rules to clarify that this is compatible with such previous investments.”

However, investing in a convertible loan could impact your ability to claim EIS relief on future investments into the same company. The government has not clarified the position on this and has said it is a matter for HM Treasury and HMRC.

Seedrs is unable to provide tax advice. Tax treatment depends on individual circumstances and is subject to change.

Company structure

- Investee Company - Baanx Group Limited

The investment in this round will be made into Baanx Group Limited (BGL), which owns the IP and technology subsisting in the platform. It is the entity providing managed services to clients as well as managing the operations of the platform and mobile apps. This is broken down as follows:

Managed services include managing mobile applications such as technology and user support, development and release, as well as compliance, operations, KYC, legal elements and providing all staff to run the apps and operations.

Managing the actual full end to end delivery of all services to the users of the platform for both Baanx App and all white-label apps.

- Wholly-owned subsidiary - Baanx.com Ltd

This company owns the B2C app and all services provided by Baanx.com Ltd are managed by BGL.

Related Companies

The founder of BGL separately owns the following companies, which operate in the industry. The intention of the founder is that these companies, along with BGL, will be consolidated under a single holding company in the future. The shareholding in the new holding company will replicate the shareholdings in BGL immediately after this internal restructure, such that shareholders in BGL will own the entire group of companies should the restructure be carried out.

Please note that all payroll and other costs associated with running the below companies are borne by BGL.

- Global Business Holdings (currently 100% owned by Garth Howat)

This company is the issuer of the Currency Life card, owns the partnership with VISA as well as other partner banks, and the “Currency Life” trademark.

- Emoney Cards Ltd (currently 100% owned by Garth Howat)

This company is currently applying for an e-money license with the Central Bank in Lithuania.

- Optimal Search Ltd (currently 80% owned by Garth Howat and 20% by another individual)

This company is a credit-broking company based in the UK and provides lending services elsewhere in the EU and elsewhere. In the future, the company intends to provide services to Baanx Group Limited. Optimal Search Limited has FCA licensed abilities to facilitate lending services between a lender and the end receiver of the loan.

Consumer lending licence

Please note the business is an agent for the regulatory licences held. An affiliate entity holds the FCA consumer lending licence. This is the vehicle for lending utilised by the business.

The business plans to have it's own EMI licences this year, applications for which have already been filed.