Sondrel Plc Regulatory News (SND)

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) 596 / 2014 which forms part of United Kingdom law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

6 March 2024

Sondrel (Holdings) plc

("Sondrel", the "Company" and together with its subsidiaries the "Group")

Convertible Loan Note and Exclusivity Agreement

Further to the announcement on 1 March 2024, Sondrel is pleased to announce that it has entered into a £874,600 ("Principal Amount") secured 15% convertible loan agreement (the "Loan") with ROX Equity Partners Limited ("ROX"), a UK-based private equity firm and long term investor specialising in emerging technology companies. The Loan has been entered into to enable the Group to meet immediate working capital requirements (the "Loan Agreement"). The proceeds of the Loan are expected to be received by the Company on 6 March 2024 and will be utilised to meet the Group's February 2024 payroll and certain overdue supplier obligations.

The Principal Amount of the Loan (excluding any interest accrued or compounded) is convertible into ordinary shares of £0.001 in the Company ("Ordinary Shares") at the discretion of ROX or, if earlier, automatically on completion of a proposed future equity fundraise by the Company to raise gross proceeds of a minimum of £6.5 million at a price of 10 pence per new Ordinary Share (the "Fundraise"). In each instance, the conversion price will be 10 pence per Ordinary Share ("Conversion Shares").

Under the Loan Agreement and prior to any Conversion, the Company must pay daily accrued interest at a rate of 15% per annum quarterly on the last day of March, June, September and December (each an "Interest Payment Date") with the Loan and any unpaid interest being repayable in full on the third anniversary of the drawdown date. If the Company is unable to pay such interest (by reason of actual or anticipated financial difficulties), then the Company may, with the prior consent of ROX (acting reasonably), elect that on each such Interest Payment Date, all interest that has accrued during the relevant period will compound (on the basis that such compounded interest together with the principal will bear interest) and will be payable to ROX upon repayment of the Loan.

The Loan Agreement provides for certain events of default including, but not limited to, the Company failing to satisfy the conditions to the Fundraise referenced in the Exclusivity Agreement or to complete the Fundraise within 6 months of the drawdown date or the Company (or any other relevant member of the Group) failing to agree with its largest supplier new payment terms (which are acceptable to the ROX) within 90 days of the date of the Loan Agreement.

The Company's UK subsidiaries, Sondrel Limited and Sondrel (SOC Solutions) Ltd (the "Subsidiaries"), have each entered into a debenture and deed of guarantee with ROX on an all monies basis which therefore covers monies owing under the Loan Agreement and any other amounts owing to ROX by the Company and/or those Subsidiaries.

Exclusivity Agreement

As previously announced, and notwithstanding the entry of the Loan Agreement, the Company requires additional funding to meet the Group's working capital requirements. Sondrel has also entered into an exclusivity agreement with ROX, granting ROX the right to participate, alongside existing shareholders, in the Fundraise ("Potential Investment").

The Company's retail shareholders will be provided with access to the Fundraise through a retail offer to raise gross proceeds of not less than £0.5m at the same price as the Potential Investment. ROX's participation in the Fundraise is conditional upon, inter alia, obtaining shareholder and regulatory approvals (as detailed below) and also the completion of satisfactory due diligence.

Should ROX proceed with the Potential Investment, the Company has agreed that ROX will have the right to subscribe for new Ordinary Shares representing (initially, and pending the necessary waiver of rule 9 of the City Code on Takeovers and Mergers (the "Code") and approval of the Company's shareholders to exceed this level ("Rule 9 Waiver") 29.9 per cent. ("Placing Shares") of the Company's issued ordinary share capital as enlarged by the Fundraise ("Enlarged Issued Share Capital") and will, depending on the level of existing shareholders' participation in the Fundraise and subject to receipt of the Rule 9 Waiver, subscribe for up to a total of 65,000,000 new Ordinary Shares at a price of 10 pence per share. Therefore, subject to the relevant conditions being fulfilled and the terms of the Fundraise being agreed, the Fundraise is guaranteed to be fully subscribed. ROX's maximum commitment to acquire up to 65,000,000 new Ordinary Shares includes the Conversion Shares and is subject to the regulatory and other approvals described below.

Under the terms of the Exclusivity Agreement, ROX will have the exclusive right to participate in the Potential Investment until 30 September 2024 or, if earlier, the date of termination of the agreement or the conclusion of definitive agreements in respect of the Fundraise. This period of exclusivity has been agreed in order to give the parties sufficient time to obtain the necessary regulatory approvals described below.

Director / board observer appointment right and relationship agreement

Under the terms of the Loan Agreement and the Exclusivity Agreement, ROX has been provided with the right, but not the obligation, to nominate one director or an observer to the board of directors of the Company.

In addition, should ROX proceed with the Potential Investment, ROX will enter into a relationship agreement with the Company to regulate the relationship between the Company pursuant to which ROX shall give undertakings for the purpose of ensuring that the business of the Company can be carried on independently and for the benefit of all shareholders and accordingly is suitable for AIM.

Regulatory and other approvals

The Potential Investment is subject to approval of the Secretary of State pursuant to the National Security and Investments Act 2021 ("NSIA") ("NSIA Approval"). In the event that NSIA Approval is not obtained by ROX, it will only be able to subscribe for up to 25% of the Enlarged Issued Share Capital.

The Code applies to the Company. Under Rule 9 of the Code, any person who acquires an interest in shares which, taken together with shares in which that person or any person acting in concert with that person is interested, carry 30% or more of the voting rights of a company which is subject to the Code is normally required to make an offer to all the remaining shareholders to acquire their shares. Accordingly, the Company have undertaken, if necessary (depending on the extent to which existing shareholders elect to participate in the Fundraise and accordingly what percentage of the Enlarged Issued Share Capital ROX stands to acquire), to seek the Rule 9 Waiver.

Further funding

Due to the need to obtain regulatory approvals, it is not anticipated that the conditions to the Potential Investment will be satisfied prior to the end of March 2024. In order to assist in meeting further working capital requirements of the Company, ROX has agreed (subject to a number of conditions) to enter into further convertible loan(s) with the Company (on similar terms to the Loan) which will require shareholder approval to provide authority to allot the requisite number of new Ordinary Shares that may be issued pursuant to the conversion of such further loans. A circular, containing a notice of general meeting, to obtain such shareholder approvals will be despatched in due course to provide the requisite authorities and further announcements will be made, as appropriate, in due course.

There can be no certainty that the conditions to the Potential Investment will be satisfied or that ROX will participate in the Potential Investment or that ROX will provide any further funding to the Company. Following entry of the Exclusivity Agreement, the Company has undertaken (subject to ROX not withdrawing from negotiations with the Company) not to solicit other forms of investment from third parties prior to 30 September 2024 save for engaging with the Company's existing shareholders in connection with their participation in the Fundraise. Should ROX not proceed with the Potential Investment and/or provide interim additional funding prior to completion of the Fundraise, the Company will not have sufficient working capital resources to meet its immediate requirements.

Statement from Graham Curren (CEO of Sondrel)

"This agreement and convertible loan note with ROX provides the Group with immediately available funds with which to meet the balance of the Group's February 2023 payroll and certain overdue supplier obligations. We look forward to working with ROX and the Company's shareholders in advancing the wider fundraise which would give the Group sufficient funds to support it through to a positive trading cash flow position by the end of the year to 31 December 2024. We remain committed to delivering on our growth strategy, are confident that our robust pipeline and potential for material production revenues in the future and I would like to thank the Group's stakeholders for their continued support."

Further announcements, will be made as appropriate, in due course.

For further information:

About Sondrel

Sondrel is a UK-based fabless semiconductor company specialising in high end, complex digital Application Specific Integrated Circuits (ASICs) and System on Chips (SOCs). It provides a full turnkey service in the design, prototyping, testing, packaging and production of ASICs and SoCs.

The Company is one of only a few companies capable of designing and supplying the higher-spec chips built on the most advanced semiconductor technologies, selling into a range of hyper growth end markets such as high-performance computing, automotive, artificial intelligence, VR/AR, video analytics, image processing, mobile networking and data centres. Sondrel designs have enabled products by leading technology brands including Apple (iPhone), Sony (PlayStation), Meta's (Oculus), Samsung, Google and Sony smartphones, JVC (prosumer camcorders), Tesla and Mercedes-Benz cars.

Sondrel is well-established, with a 20-year track record of successful delivery, supported by long standing ecosystem partnerships including Arm, TSMC and Samsung. Headquartered in the UK, Sondrel has a global presence with offices in UK, USA, China, India and Morocco.

For more information please visit: ir.sondrel.com .