Paysme

Key Information

Existing Loans

The company has an outstanding secured convertible loan totalling £161,000 for the purpose of purchasing 1,500 mobile points of sale devices (mPOS devices). The loan entitles the lenders to a portion of the Company’s revenue and may convert into equity or be repaid in accordance with the following key terms:
- Repayment date: 1 December 2023
- Revenue Share: From 1st March 2021 until the Repayment Date, the lenders are entitled to 50% of the total revenue received by Paysme via the 1,500 mPOS devices up to a maximum of £225,400.
The minimum payment in respect of the Revenue Share must be the equivalent of an annual interest of 12% on the principal loan amount (the “Minimum Revenue Share”).
- Conversion trigger(s): the lenders can at any time, on or before the Repayment Date, convert all or a part of the outstanding loan amount plus the Minimum Revenue Share (i.e. 12% interest p.a.) into ordinary shares at the Conversion Price.
- Conversion price: £1.87 per ordinary share of £0.01 (equivalent to a pre-money valuation of £4m)
- Repayment: If not previously converted, the Company will repay the loan, together with all Revenue Share accrued but not paid, on the Repayment Date. The Company may also prepay all or a part of the loan, together with any outstanding Revenue Share at any time.

The company has the following outstanding loans:
1. £50,000 Barclay Bounce Back Loan at an interest rate of 2.5% per annum. The loan is to be repaid on May 2025.
2. £49,000 Barclays Overdraft Facility at an interest rate of 5% per annum.
3. £50,000 shareholder loan at an interest rate of 12% per annum. The loan is to be repaid on June 2021.
4. £21,100 Fleximize Working Capital Facility at an interest rate of 2.9% per month. The loan is to be repaid May 2021.
The funds raised from this investment round will not be used to repay these loans.

Redeemable Shares

The company has a founder’s loan of £460,000 which has been converted into 460,000 Redeemable shares. These shares carry no voting rights or rights to dividends but will entitle the founder to a maximum of £1 per redeemable share on an exit or liquidation.

Future Fund

Seedrs is supporting companies who are intending to apply to the Government backed Future Fund. You can read more about the Future Fund here: https://www.seedrs.com/learn/blog/the-future-fu...

In order for a company to be eligible to seek matched funding from the Future Fund, this investment round must be on the convertible loan terms that have been prescribed by the Future Fund for this purpose. These terms differ to our normal ‘advanced subscription agreements’.

Given this product differs from most campaigns on Seedrs, we urge all investors, including regular Seedrs investors, to read the information below and ensure you understand the terms in full before making your investment.

Key Terms
You will see a term sheet attached to this Campaign in the Documents section which sets out the key terms of the convertible loan and you can see the full document prescribed by the Future Fund here: https://www.british-business-bank.co.uk/ourpart...

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

• Discount: 25%

• Valuation Cap: £5m

• 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: 36 months from signing convertible loan agreement.
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.

Government Matched Funding
The company intends to apply to the Future Fund for matched funding on the total eligible amount invested in this funding round. The Future Fund will “match” the funding raised via Seedrs or other eligible sources, subject to a minimum investment of £125,000 and a maximum investment of £5m. The Future Fund is to be allocated on a ‘first come, first served basis’, so there is no guarantee that a company will receive the Future Fund matched funding.

This campaign is conditional upon receiving matched funding from the Future Fund. Seedrs will not complete the investment and transfer the funds raised until we have confirmation that the Future Fund matched funding application has been approved and that the Future Fund is ready to make the investment. If the application is denied, the campaign will be cancelled and funds will be returned to investors.

Because this campaign is conditional upon the matched funding, you will see that we have reflected the Future Fund investment as part of the round.

Seedrs does not charge any fees in relation to the Future Fund matched funding, application process or for acting as lead investor with respect to applications.

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.

• The Future Fund is to be allocated on a ‘first come, first served basis’ and there is no guarantee that a company will be successful in its application to receive the Future Fund matched 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.