AN OPPORTUNITY FOR INVESTMENT RECOVERY
Following the disappointing loss of our investments due to the bungled operation involving Spirit on Media (SOM) and the Equi8 Horse racing platform, a group of our corporately more knowledgeable investors met to see if any form of recovery was possible. They concluded that recovery of the old operation was not possible but that a partial recovery by means of a so called phoenix operation might be possible and that this should be put into effect immediately.
Such a venture would have the advantage of having no connection whatever with the previously failed operation. It would require the creation of a new company with new, competent and proven management. The company would be registered in the UK and fully subject to UK Company law. The company should attempt to win an entirely new agreement with the owners of the Intellectual Property (IP) that manifests as Equi8.
This has been done. The new company, SBI Media Ltd, was incorporated and registered in London. Dr. James Pickard was appointed as CEO and Paul Miller was appointed Director of Investor and Media Relations. Both were significant investors in the old operation. Dr. Pickard has a great deal of experience in managing PLCs, rescuing failing companies and raising funds. He also has valuable contacts in the corporate and financial worlds. The CV’s for both Dr Pickard and Paul Miller are attached herewith for reference.
SBI Media Ltd. approached the owners of the IP who, understandably following their earlier experience of unfulfilled promises from SOM and given their story of other happenings, were very cautious, even suspicious. Nevertheless negotiations have proceeded and a more amicable relationship has developed.
The basic agreement is that SBI Media Ltd will acquire full ownership of the IP and the whole operation for €750,000. However, as you would expect, SBI Media does not have that money available. Instead, it has been agreed that for the sum of €150,000 it will buy an option to purchase the IP within a six month time frame. The option agreement will specify the details of the final acquisition agreement but will contain the option clause.
With the option agreement in place, it should be relatively easy to obtain institutional funding within the time frame. This is because:
1. Institutional investors first look at the quality of the management and its achievements. You will see from his CV that Dr. Pickard has the requisite experience and success. He also has many contacts and has raised over £36 million from institutions for successful ventures.
2. A few of our more corporately experienced investors have been approached and have agreed to be part of a corporate team of advisors if required. With their permission their CV’s will also be published when the time comes.
3. The Institutional Investors will also look at the quality of the venture. As you have already determined, the Equi8 project has huge potential and that has not changed.
4. The equi8 project continues to operate on an interim basis under the management of the IP owners and thus represents an investment opportunity that is already generating revenues from an existing, limited customer base.
5. Because of the current financial climate over the last few years, there is a lot of money out there looking for a good return provided points 1 and 3 are positive.
This new company is the brainchild of investors. Because of that and while the company has no obligation to anyone, selected investors will be invited to recover most of the value from their earlier failed investment. To allow this to happen, they will be invited to participate in the seed capital round of funding for a nominal amount based on a percentage of each investor’s earlier investment. This will be the seed investment needed for the option premium of €150,000 plus an amount to cover working capital requirements. The working capital will be used for expenses, lawyers’ fees, accountant fees, due diligence costs, etc. Depending upon the response received from the former shareholders, new external investors may be invited to participate in the seed capital round, if required.
There will be conditions for the seed investment:
1. There is a small chance that the full amount required will not be raised. In that event, all monies invested for this purpose (less any fees and expenses incurred to that point) will be returned to investors, the project will have failed, the company will be dissolved and all hope of recovery will be lost.
2. In the interests of fairness, the investment at the nominal value will be related to the declared percentage of each investor’s previous investment.
3. However, anyone who wishes to participate for a lesser amount than that proposed may do so at their discretion or for a greater amount by agreement.
4. There will be an absolute minimum cut off point for participation.
5. This nominal value will be a one-time only offer purely for the purpose of obtaining seed capital. It will not be offered again.
6. All founding investors will have a pre-emption right, should they wish to participate in subsequent rounds of funding, but this is not an obligation.
A Memorandum of Understanding (MOU) has been signed with the owners of the IP. (By way of explanation, an “MOU” is used to record what has been agreed in principle between parties prior to reaching the stage of entering into formal, contractual documentation. It is subject to contract and satisfactory due diligence.)
We are pressed for time because there are competitors also wanting to make the deal and we have been given four weeks to find the money. I will therefore contact you in the next few days to ascertain your interest. If you wish to take part, the formal investment offer will be prepared and sent to you immediately thereafter together with a copy of the MOU and the mini business plan.
With Kind Regards,
Paul Miller.
SBI Media Ltd
Thornhouse Business Centre
30 Ballot Road
Irvine KA12 0HW
Tel: +44 (0) 2392 470294 (Direct line)
Fax: +44 (0) 1294 275119
Email:
[email protected]