("Gunsynd" or the "Company")
Further Investment in Human Brands and Share Exchange with Rogue Baron
Gunsynd Plc (AIM: GUN, AQUIS: GUN) announces the following update regarding Human Brands International Inc ("Human Brands"), a US-based premium spirits company in which Gunsynd holds a convertible loan note ("Loan Note") of £378,575:
Share Exchange Agreement
As part of the redomiciling process from the US to the UK, pursuing a listing in the UK and raising further funds to develop the business, as notified by the Company on 27 January 2020, Human Brands has entered into a share exchange agreement ("Share Exchange") with Rogue Baron Ltd ("Rogue Baron"), a limited company incorporated in England and Wales, to sell the subsidiaries listed below:-
Shinju Whiskey LLC
Shinju Spirits, Inc
STI Signature Spirits Group, LLC
Legacy Retail Group LLC
These subsidiaries hold the Shinju, Mazeray and Copa Imperial Brands, as well as a 52% interest in the Bin 1301 wine bar in Washington DC.
The consideration for the sale is £2,827,305 which will be satisfied through the issue of 36,247,500 ordinary shares in Rogue Baron at a price of £0.078 per ordinary share.
The decision has been taken that the Armero tequila brand and the conditional agreements with the owners of the Santo Coyote restaurant, as notified in the Company's quarterly update of 21 February 2020, will not be part of the Share Exchange and will remain with Human Brands.
Following the Share Exchange, the 36,247,500 ordinary shares in Rogue Baron will be distributed in specie to existing shareholders of Human Brands, who will hold all bar one of the issued shares in Rogue Baron. Hamish Harris, a director of Gunsynd, has been appointed to the board of Rogue Baron as a representative of the Company.
Deed of Novation and Further Investment
A deed of novation ("Novation") has been entered into which will transfer Gunsynd's Loan Note of £378,575 from Human Brands to Rogue Baron. Simultaneously, Gunsynd will increase the Loan Note by a further £120,000 to £498,575. It will accrue interest at 12% per annum, be unsecured and repayable on 31 March 2021.
As a result of the Novation, Gunsynd has no further conversion rights into new shares in Human Brands. Gunsynd holds no shares in Human Brands.
The Loan Note may be converted (in full or in part) at any time at the election of Gunsynd, into ordinary shares of Rogue Baron at a price per share determined by dividing £1,616,304 (representing the agreed valuation of the ordinary share capital of Rogue Baron) by the total number of ordinary shares in Rogue Baron in issue immediately prior to conversion.
Furthermore, on 27 January 2020, the Company announced that, in recognition of the efforts of Gunsynd to assist with its proposed listing, Human Brands will, within 5 Business Days of each Fundraising Event (as defined below) which occurs in 2020, issue ordinary shares to Gunsynd in order to ensure that:
i. where the total amounts raised pursuant to Fundraising Events occurring in 2020 (Raised Funds) are equal to or less than US$350,000, Human Brands shall issue an aggregate number of Fee Shares equal to 1% of the entire issued share capital of Human Brands to Gunsynd as enlarged by the applicable Fundraising Event;
ii. where the Raised Funds are greater than US$350,000 but equal to or less than US$500,000, Human Brands shall issue an aggregate number of Fee Shares equal to 2% of the entire issued share capital of Human Brands to Gunsynd as enlarged by the applicable Fundraising Event; and
iii. where the Raised Funds are more than US$500,000, Human Brands shall issue an aggregate number of Fee Shares equal to 3% of the entire issued share capital of Human Brands to Gunsynd as enlarged by the applicable Fundraising Event.
A Fundraising Event means either (i) a placing of Ordinary Shares carried out pursuant to an IPO of Human Brands on any recognised investment exchange or (ii) the raising of funds on a crowdfunding platform in the UK by Human Brands. Under the Novation, Rogue Baron has undertaken the obligations set out above previously made by Human Brands.
Hamish Harris, the Company's Executive Chairman, commented:
"The Novation and Share Exchange with a UK company are an important and essential step for Human Brands/Rogue Baron to take with respect to monetising our investment via a proposed listing in London and eliminating any need for future funding by Gunsynd. The Share Exchange will result in Gunsynd keeping exposure to what we regard as the key brands, not least Shinju Whisky which has seen large growth in its distribution channels in the last twelve months including potential overseas orders from a number of countries. It will also cut capital expenditure and working capital requirements associated with the Mexican conditional agreements.
Rogue Baron has applied for and been granted EIS advanced assurance, something which we believe will increase investor appetite, which we believe is strong for premium drinks companies as shown earlier this year by the admission of The British Honey Company to the Aquis Stock Exchange Growth Market (AQSE: BHC) which we understand was strongly supported.
The Board believes that the reduced Loan Note conversion price is at a significant discount to the value of the Shinju Whisky alone. Whilst it has taken longer than we hoped, this step will allow us to move forward. We look forward to further updating shareholders regarding Rogue Baron in the near future."
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
The Directors of Gunsynd accept responsibility for this announcement.
For further information please contact:
+44 20 7440 0640
Cairn Financial Advisers LLP
James Caithie / Liam Murray
+44 20 7213 0880
Peterhouse Capital Limited
+44 20 7469 0930