REG - Seed Innovations Ltd - Investee Company Updates: Northern Leaf & OTO

Seed InnovationsAnnouncement

08/09/2023 12:15

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RNS Number : 8954L  Seed Innovations Limited  08 September 2023

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No. 596/2014, as it forms part of UK Domestic
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.

 

 

8 September 2023

 

SEED Innovations Limited

 

("SEED" or the "Company")

 

Investee Company Updates:

Northern Leaf & OTO International

 

SEED Innovations Ltd, the AIM-quoted company investment company providing
shareholders with exposure to early-stage health, wellness and medical
cannabis companies, to which, in normal circumstances, they have limited
access to, today provides updates from two portfolio companies, Northern Leaf
plc ("Northern Leaf") and OTO International Limited ("OTO").

 

Northern Leaf

 

Northern Leaf, a Jersey based medical cannabis producer, has provided a
positive shareholder update in respect of recent progress both operationally
and financially.

 

 

·    Following receipt in May 2023 of Good Manufacturing Practice (GMP)
accreditation by the UK's Medicines and Healthcare Products Regulatory Agency
(MHRA) for its flower product as an active pharmaceutical ingredient(( 1 )) in
June 2023 Northern Leaf was accredited Good Agricultural and Collecting
Practice by Control Union Medical Cannabis Standard (IMC- G.A.P)  for its
cultivation facility in Jersey. Northern Leaf expects this will enable it to
sell into the rapidly growing Israeli medical cannabis market 2 .

 

·    Supply agreements have been received for initial sales into Germany
and Australia, with a number of other supply agreements into various
jurisdictions under discussion.

 

·    Raised a further at least £1 million of pre-IPO money in addition to
the £3 million pre-IPO fundraise earlier in 2023. This latest round is via a
Loan Note with discretionary rights to convert at a percentage discount to a
future IPO price and remains open until mid-September for final subscriptions,
therefore there may be an increase to the overall raise.

 

·    This additional fundraise provides further working capital to the
business as work towards a possible AIM IPO continues.

 

 

The Company owns 1,236,331 ordinary shares in Northern Leaf representing 2.2%
of Northern Leaf's issued share capital before this latest funding.

 

Commenting, Ed McDermott, CEO of SEED said:

"I am pleased to share Northern Leaf's recent developments. As a company
focussed on becoming a key player in the European medical cannabis supply
chain, the addition of GACP accreditation to the Home Office permissions and
GMP accreditation already granted, puts Northern Leaf in a good position to
sell products more widely, already evidenced with an uptick in supply
agreements with a number expected to follow.

"To date, Northern Leaf has delivered on its plans and with additional pre-IPO
funding also secured and work towards an AIM IPO picking up pace, we believe
that Northern Leaf has potential to deliver real growth to our portfolio."

 

 

OTO

SEED updates shareholders on portfolio company OTO, the omni-channel premium
wellness brand known for its use of holistic plant ingredients and CBD,
following their purchase of former portfolio company, South West Brands
Limited ("SWB") (announced via RNS 20 April 2023). OTO's acquisition of SWB
further diversified OTO's business.

OTO has recently undertaken a fundraise to fund working capital through to the
end of 2023 through the issue of a convertible instrument with both floor and
ceiling prices for conversion at a significant discount (70% to 90%) to the
£29.5M indicative enterprise value reported for OTO post the SWB purchase.
Whilst repayments of the SWB Convertible Loan Note held by SEED, totalling
£167,000, have commenced, with full repayment expected in the foreseeable
future, SEED is taking a cautious and prudent valuation approach and impairing
the combined loan and equity position by approximately 75% in light of both
the tough current market conditions and likely needs of OTO to raise further
funding in 2024.  It is the hope of SEED that this valuation will be able to
be increased again in the future once the business and environment at OTO
improves.

As at 31 March 2023, the SWB position was valued (based on the anticipated OTO
transaction) at £590K (equity £423K and loan of £167K).  We currently
expect that this will be reduced to circa. £146K in SEED's interim financial
statements as at 30 September 2023 (represented by £38K in equity and £108K
loans). This revaluation will reflect repayments made on the loan of £12,500
and write-down of the investment value of £431,500, being approximately 3% of
the carrying net asset value of SEED's investments as at 31 March 2023.

Further commenting, Ed McDermott, added:

"We are disappointed to note the dilution resulting from a down round at OTO
so soon after the acquisition of our original investment SWB. We acknowledge
the challenges of raising capital in the current market environment and are
hopeful that OTO has secured the funds it needs at this point. We understand
that OTO is making some good progress operationally and we hope to share
altogether more positive updates soon. SEED has adjusted the valuation of
OTO equity against our NAV at this time but maintain
the expectation for the eventual full repayment of our loan, albeit
within a lengthened timeframe."

 

- Ends -

 

 

 

For further information on the Company please
visit:    www.seedinnovations.co (http://www.seedinnovations.com/)
   or contact:

 

  Ed McDermott        SEED Innovations Ltd             E: info@seedinnovations.co 

 Lance de Jersey                                        
 James Biddle         Beaumont Cornish Limited,        T: (0)20 7628 3396

 Roland Cornish       Nomad                             
 Isabella Pierre      Shard Capital Partners LLP       T: (0)20 7186 9927

 Damon Heath          Broker
 Catherine Leftley    St Brides Partners Ltd,          E: info@stbridespartners.co.uk

 Ana Ribeiro          Financial PR

 Isabelle Morris

 

Notes

 

Seed Innovations Ltd

SEED Innovations is an AIM quoted investment company focused primarily on
disruptive high growth life sciences and technology businesses particularly
within the medical cannabis arena. The Company's strategy is to identify
early-stage opportunities that have an upcoming investment catalyst and grow
its portfolio in terms of value whilst limiting the number of investee
companies to a level where relevant time can be devoted to each.

 

 

 

 

 

 1 
https://tools.eurolandir.com/tools/Pressreleases/GetPressRelease/?ID=4340830&lang=en-GB&companycode=uk-kul&v=r2021
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Ftools.eurolandir.com%2Ftools%2FPressreleases%2FGetPressRelease%2F%3FID%3D4340830%26lang%3Den-GB%26companycode%3Duk-kul%26v%3Dr2021&data=05%7C01%7Ccatherine%40stbridespartners.co.uk%7C0af16931a6814e9c33c508dbaec95462%7C48b7268319d344289c4b73cf144d89ed%7C1%7C0%7C638295951946032005%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=l1umjL7a%2FOC5sMF8iEbtshkg1izQwUOvG5sLQvQxHvI%3D&reserved=0)
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 2  Source: https://knb.is/45QwzWk
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