RoosterMoney

Key Information

Convertible Loan Note

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

As this campaign forms part of a Future Fund investment round, the terms are based on those prescribed by the Future Fund. 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.

1. 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: 20%

Interest: 10% 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

Valuation Cap: £39m

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 or, if lower, the Valuation Cap share price.

Maturity Date: 36 months from signing convertible loan agreement.
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 2 July 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 2 July 2020 (no Discount). Or, if lower, at the Valuation Cap share price.

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:
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.

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.

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.

2. Government matched funding

The company has had £950k of investment matched by Future Fund.

There is £2.6m headroom amount available as part of this funding round, which will not be matched by the Future Fund.

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.

3. 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.

4. 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.

5. 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).

6. 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.

Existing Convertible Loan Note

Please note, that Rooster Money has an existing convertible loan note (CLN) of £991,353. This may convert in to equity and dilute existing shareholders.

This note was entered into on the 28th of January 2020 and accrues 10% interest (non-compounding), which is payable in kind on conversion to shares. The CLN has a discount rate of 20%.

This CLN has a longstop date of the 1st of November 2021.

Should there be no relevant funding round to trigger conversion of this CLN before the longstop date, it will convert at £6.91 per share, which equates to a fully diluted pre-money valuation of £14.8m based on the current capital structure of the business (this does not include the value of this current Future Fund and crowdfunding round, or the funds raised under the existing CLN).

On conversion of the CLN, £545,797 will convert in to preference shares, with the remaining amount converting in to ordinary shares.

There is no valuation cap for this CLN and the amount which must be raised to trigger conversion is £2m.

Investment in this round will not be used for the repayment of this CLN.

Share Classes

Please note, RoosterMoney has 2 share classes currently outstanding; preferred shares and ordinary shares.

The preferred shares are non-participating and have a 1x preference. This means that, in the event of a liquidation, distribution of proceeds or exit, the preferred shareholders will first be paid an amount per share held equal to the higher of (i) the original investment price, or (ii) an amount equal to that holder’s pro rata entitlement to the assets being distributed as if the preferred shares and the ordinary shares constituted one and the same class. Once this is paid out, the balance of any surplus will be (if any) shall be distributed among the holders of ordinary shares pro rata to the number of Ordinary Shares held.

The share classes rank parri passu in all other respects.

Seedrs investors will be issued with the highest ranking share class at the time of conversion, which currently are the preferred shares.