Eqtec Regulatory News (EQT)

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THE ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

28 June 2019

EQTEC plc

("EQTEC", the "Company" or the "Group")

Debt Reduction, Placing, Commercial Leadership Addition

and Planned Reduction of Operating Costs

EQTEC plc (AIM: EQT), the technology solution company for waste gasification to energy projects, today announces it has reached agreement for a comprehensive restructuring of various payment obligations with its lenders, resulting in a reduction in its liabilities of, in aggregate, approximately £2.7 million (the "Debt Restructuring") and that it has raised £750,000 (before expenses) for general working capital by way of a placing of 227,272,727 new ordinary shares of €0.001 each in the capital of the Company ("Ordinary Shares") (the "Placing Shares") at 0.33 pence per share (the "Placing Price") with new and existing investors (the "Placing").

The Company also announces its intention to undertake a cost reduction programme in relation to its operations in the UK and Spain, along with certain senior management appointments (the "Operational Restructuring").

Further information on the Placing

The Company has raised, in aggregate, £750,000 (before expenses), from new and existing investors, including Altair Group Investment Ltd ("Altair"), Riverfort Global Opportunities PCC Ltd (formerly Cuart Investments Fund) and YA II PN, Ltd (collectively, Riverfort Opportunities and YA II being the "Riverfort Lenders"). The net proceeds of the Placing will be used for working capital purposes and for continuing the development of the Company's portfolio of opportunities in the waste elimination and energy recovery sectors. Global Investment Strategy UK Limited is acting as the Company's sole agent in relation to the Placing.

The participants in the Placing (the "Placees") will, for each Placing Share, be granted one warrant to subscribe for one new Ordinary Share (the "Warrants") at an exercise price of 0.495 pence per share (representing a premium of 50 per cent. to the Placing Price). Altair will also be granted a further 60,606,060 Warrants in connection with arrangements under the Debt Restructuring. Accordingly, if exercised in full, the Warrants would result in the issue of, in aggregate, 287,878,787 new Ordinary Shares to the Placees, representing approximately 9.5 per cent. of the Company's issued share capital (as enlarged by the New Ordinary Shares (as defined below)), and proceeds to the Company of approximately £1.45 million. The Warrants will be exercisable for a period of nine months from the date of admission of the Placing Shares (the "Exercise Period"). The Exercise Period may be extended in certain circumstances but will in no event be longer than the second anniversary of Admission (as defined below). No Warrants shall be exercised if such exercise would trigger an obligation under Rule 9 of the Irish Takeover Rules to make a general offer for the balance of issued shares in the capital of the Company.

In addition, pursuant to the Placing, the Company will issue Altair 644,673,909 new Ordinary Shares (the "Altair Redemption Shares") at the Placing Price, with the proceeds of the issue of such shares being set off against the early redemption of the majority of the outstanding Altair Facility (including payment of an early redemption fee) as described below.

Pursuant to Altair's participation in the Placing, it will receive 45,454,545 Placing Shares and 644,673,909 Altair Redemption Shares. Following admission of such shares, Altair will hold 869,432,501 Ordinary Shares, representing approximately 28.25 per cent. of the Company's then enlarged share capital and will be issued with 106,060,605 Warrants.

The Placing is conditional on, inter alia, receipt of the Placing proceeds by the Company (or GIS as its agent) on or before Admission, the admission of the Placing Shares and the Altair Redemption Shares to trading on AIM and completion of the Debt Restructuring. The Placing Shares and the Altair Redemption Shares, when issued, will rank pari passu with the existing Ordinary Shares.

The Placing Price represents a discount of approximately 2.9 per cent. to the closing middle market price of the Company's Ordinary Shares of 0.34 pence per share on 27 June 2019 (being the latest practicable date prior to the date of this announcement).

Further information on the Debt Restructuring

The Company currently has two major lenders, being Altair and the Riverfort Lenders.

Altair

On 14 July 2015, the Company issued £2.0 million of secured convertible loan notes (the "CLNs") to Altair and entered into a secured five year term loan agreement with Ecofinance (GLI) Limited ("Ecofinance") for £1.0 million (the "Ecofinance Loan"). On 19 January 2018, the Company announced that it had made an early repayment of £378,882 along with £2,958 of accrued interest on the Ecofinance Loan, leaving a remaining balance of £621,118, which is repayable in July 2020. On 6 August 2018 the Company entered into arrangements with Altair and Ecofinance to settle interest due under the CLNs and the Ecofinance Loan until 30 June 2019 by way of the issue of an aggregate of 115,528,000 Ordinary Shares. On 21 January 2019, EQTEC, Altair and Ecofinance agreed to consolidate the CLNs and the Ecofinance Loan into one facility with Altair as the lender (the "Altair Facility") and on 24 January 2019, the aggregate amount available for drawdown under the Altair Facility was increased to £3.5 million. On 3 June 2019, the Company announced that it had drawn down an additional £0.2 million under the increased Altair Facility.

Following the drawdown on 3 June 2019, the outstanding principal owed by the Company under the Altair Facility is £2,821,118, which is due to be repaid in full in July 2020. There is currently no accrued and unpaid interest under the Altair Facility.

Riverfort Lenders

On 5 July 2018, the Company announced that it had agreed a secured loan facility of up to US$3.2 million to be provided by the Riverfort Lenders, as amended and announced on 3 October 2018 (increasing the amount available under the facility to up to US$10 million) and 11 January 2019 (amending certain repayment terms) (the "Riverfort Facility"). The Riverfort Facility is being repaid in varying monthly instalments, with the final balance due to be repaid in June 2020.

Following the settlement of the monthly instalment in May 2019 through the issue of 33,767,588 Ordinary Shares, the current outstanding principal and accrued interest owed under the Riverfort Facility is US$2,382,993.

Summary of the Debt Restructuring

· EQTEC will redeem £2,026,118 of the outstanding principal owed by the Company under the Altair Facility and will also pay Altair an early redemption fee of £101,306, being 5 per cent. of the value of the debt redeemed, through the issue of the Altair Redemption Shares (the "Redemption"). The remaining, unredeemed amount of £795,000 under the Altair Facility will be governed by an amended and restated secured loan facility (the "2019 Altair Facility"). Following the Debt Restructuring, £1,083,882 remains available for drawdown under the 2019 Altair Facility.

· Altair has undertaken to the Company not to dispose of 584,067,849 Ordinary Shares for a period of six months from Admission (save with the consent of the Company or in certain limited circumstances) and that for a further six months it will only dispose of an interest in such shares through the Company's broker, in such manner as the Company's broker shall require in order to maintain an orderly market in the Ordinary Shares.

· Altair has been granted a right to nominate a director to the board of directors of the Company ("Board") for such time as Altair holds not less than 20 per cent. of the issued share capital of the Company. The appointment of any individual nominated by Altair will be subject, inter alia, to the approval of the Company's nominated adviser. Altair has also undertaken that while it holds not less than 20 per cent of the issued share capital of the Company, it will refrain from exercising the voting rights attaching to its Ordinary Shares in certain circumstances in order to ensure that the Company can act independently from it.

· The Riverfort Lenders, pursuant to a further amendment to the Riverfort Facility, will convert US$800,000 (approximately £632,000) of its debt into 191,515,152 new Ordinary Shares at the Placing Price and will receive a debt conversion fee of £31,600, being 5 per cent. of the value of the debt converted, to be satisfied by the issue of 9,575,757 new Ordinary Shares (together, the "Riverfort Conversion Shares") (the "Conversion"). Following the Conversion, US$1,582,993 remains outstanding under the Riverfort Facility (together with the 2019 Altair Facility, the "Remaining Facilities").

· The Riverfort Lenders have each undertaken that they will not dispose of any interest in the Riverfort Conversion Shares for a period of six months from Admission (save with the consent of the Company or in certain limited circumstances).

· Pursuant to the amended Riverfort Facility, the Company has agreed certain cost reduction measures with the Riverfort Lenders, including undertaking to keep quarterly operating cash costs at an agreed level. Should the Company's quarterly cash costs exceed the agreed threshold, the Company will have 90 days to cure the breach by way of bringing cash costs during that cure period under the agreed threshold by at least an amount of the excess from the previous quarter. Should the Company fail to remedy the breach, an event of default will occur and the amount outstanding under the Riverfort Facility will become immediately due and payable.

· The Redemption and Conversion are inter-conditional and also conditional on, inter alia, Admission becoming effect and the Company entering into agreements relating to the issue of new Ordinary Shares in respect of certain Directors and Senior Management fees as detailed below, in each case by 12 July 2019.

· Following the Redemption and Conversion, in aggregate, approximately £2 million remains outstanding under the Remaining Facilities. The Remaining Facilities will have a revised annual interest rate of 12.5 per cent and all amounts outstanding are to be repaid as a single payment of principal and accrued interest on 31 July 2020, together with a cash redemption fee of 8 per cent. on the balances outstanding as at that date.

· Altair and the Riverfort Lenders have been given the right, at their sole discretion, to convert the outstanding principal and interest under the 2019 Altair Facility and Riverfort Facility respectively, in part or in full, at any time up to 31 July 2020 into new Ordinary Shares at a 100 per cent. premium to the Placing Price, being 0.66 pence per share. The redemption fee of 8 per cent. will not be payable on any debt converted in this manner. However, Altair can only elect to convert if such exercise would not trigger an obligation under Rule 9 of the Irish Takeover Rules to make a general offer for the balance of issued shares in the capital of the Company.

· The 2019 Altair Facility and the Riverfort Facility will remain secured by mortgage debentures, cross guarantees and share pledges over EQTEC and its subsidiary companies.

Further information on the Operational Restructuring

Alongside the Debt Restructuring, the Company is mindful of its need to preserve cash as it seeks to implement its strategy and has conducted and completed a comprehensive review of its operations. Accordingly, the Board has identified a series of cash cost reduction initiatives, including certain salary reductions outlined below, which it intends to put in place in the near term. Once implemented, such initiatives should lead to cash cost reductions of approximately £1 million across the Group through to July 2020. In addition, the Company is pleased to announce the senior management appointments of Yoel Aleman, an existing employee of the Group, and David Palumbo with immediate effect, as Chief Technical Director and Commercial Director respectively, and a proposal to put in a place a new share option plan.

Proposed cash cost reduction initiatives include:

· It is intended that Thomas Quigley a, Non-Executive Director of the Company, shall receive his remuneration in new Ordinary Shares at the Placing Price until 31 July 2020.

· It is intended that Ian Price and Gerry Madden, Executive Directors of the Company, together with new senior management appointees Yoel Aleman and David Palumbo, shall receive 40 per cent. of their remuneration in new Ordinary Shares at the Placing Price until 31 July 2020.

· It is intended that any new Ordinary Shares issued in lieu of fees and salary will be subject to lock-in arrangements.

· The Company proposes to issue 15,151,515 new Ordinary Shares to Thomas Quigley, trading as Cloudberry Corporate Advisers, in lieu of corporate advisory fees in relation to the Debt Restructuring.

Such cash cost reduction initiatives in relation to Thomas Quigley, Ian Price, and Gerry Madden which will be related party transactions pursuant to the AIM Rules, are still to be formally agreed and further announcement(s) will be made in due course.

New Share Option Plan

The Company also announces the intention to put in place a new unapproved management share option plan to incentivise Directors and senior management personnel across the Group (the "New Share Option Plan"). The terms and conditions of the New Share Option Plan are still to be agreed and ratified by the Board. However, the intention is for options over up to 10 per cent. of the Company's issued share capital from time to time to be granted to certain senior management personnel and/or Directors in accordance with the terms and conditions of the New Share Option Plan, to be determined and announced in due course.

In addition, it is intended that an additional 30,773,543 warrants to subscribe for new Ordinary Shares will be issued to Strand Hanson Limited, exercisable at the Placing Price for a period of five years from the date of grant.

North Fork Community Power LLC

The Company announced on 4 June 2019 that further to an investment agreement being entered into with North Fork Community Power LLC, the Company expected the related sales contract to be completed and signed by the end of June 2019. The Company now believes that the contract will not be signed by the end of June 2019 and we will keep shareholders updated in this regard.

Director changes

The Company also announces that it has received notice from Oscar Leiva, a Non-executive Director of the Company, of his resignation from the Board, with immediate effect, to focus on his commitments to the EBIOSS Energy SE Group.

Admission and total voting rights

Application will be made to the London Stock Exchange for admission of the Placing Shares, the Altair Redemption Shares and the Riverfort Conversion Shares (together, the "New Ordinary Shares") to trading on AIM ("Admission"). It is expected that Admission will become effective and dealings in the New Ordinary Shares will commence on or around 5 July 2019.

Following Admission, the Company will have a total of 3,077,354,292 Ordinary Shares in issue carrying voting rights. The Company does not hold any Ordinary Shares in treasury. Therefore, with effect from Admission, this figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in the Company, under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

Following Admission, the significant shareholders of EQTEC, insofar as the Company is aware, will be as follows.

The Company anticipates that its results for the year ended 31 December 2018, will be announced later today.

Ian Pearson, Chairman of EQTEC plc, commented: "We are pleased to have significantly reduced our payment obligations with both Altair and Riverfort and to have secured an extension of repayment until July 2020 with regard to the remaining balances outstanding under the facilities. This is an important step for the Group in optimising its balance sheet.

"This debt reduction, coupled with the Placing proceeds and the planned cash cost reduction measures we are undertaking, will ensure the Group is better positioned for future growth. We believe the market opportunity for EQTEC remains significant and the Group is now much better placed to be able to deliver on its strategy to create shareholder value.

"I would like to thank our lenders and our shareholders for their continued support during this process and I look forward to EQTEC's future with renewed confidence."

Enquiries

Notes to Editors

About EQTEC plc

EQTEC's business model involves sourcing and providing assistance in developing waste elimination projects to which it will ultimately sell its EQTEC Gasifier Technology ("EGT") and O&M services. EGT enables project developers to construct waste elimination plants and recover electrical and thermal energy from the waste streams.

EQTEC sources projects that have a local supply of waste in need of elimination and conversion. It builds relationships and brings together the developers, the waste owners, the building contractors and funders. It then supplies the energy recovery technology and provides engineering services to the projects. Furthermore, EQTEC will provide O&M services to the operating projects generating recurring revenues over the life of the projects.

The Company is quoted on AIM and trades as EQT. Further information on the Company can be found at www.eqtecplc.com.