Animoca Brands is a leader in the field of digital entertainment, specializing in blockchain, gamification, and artificial intelligence technologies on the mobile product market.
Animoca Brands Corporation Limited (“Animoca Brands” or “the Company”) wishes to inform shareholders that it has entered into unsecured convertible promissory notes (“Convertible Notes”) with a number of investors including M7 Alternative Investment Strategies Asia Limited (“M7 Asia”), Mind Fund Group Limited (“Mind Fund”), and other investors (collectively, the “Investors”) for net proceeds of US$4.1 million (approximately A$6 million). The Convertible Notes have a coupon rate of 9%, and are repayable at maturity subject to a number of redemption and conversion rights which are summarised below.
“We are incredibly honored and pleased that our vision for the future of digital assets and blockchain gaming has earned the confidence of some of the world’s most successful tech investors M7 and Mind Fund.”
Yat Siu, co-founder and chairman of Animoca Brands
M7 Asia, which focuses on alternative investments in Asia, is a subsidiary of M7 Real Estate Ltd. (“M7”), one of the leading specialists in the pan-European, regional, multi-let real estate market. M7 is a property fund and asset management business owned by its senior managers, with circa 220 employees in 13 countries across Europe. The team manages over 830 retail, office and industrial properties with a value of circa €4.7 billion (approximately A$7.6 billion). M7 typically aggregates numerous individual assets to form large portfolios with income levels and yields well above the real estate market averages.
Mind Fund (www.mindfund.com) is a global venture capital company that has invested in several companies in the United States and Asia. Most notably, Mind Fund is an investor in Bytedance, one of the most valuable startup companies in the world with a reported valuation of over US$100 billion (approximately A$145 billion) as of May 2020 and is an investor in Hedera Hashgraph. Mind Fund also has an institutional partnership with Tokyo and San Francisco-based Digital Garage (TYO:4819) to collaborate and co-invest in a Global Incubation Stream of world-class entrepreneurial companies. Mind Fund is an existing investor in Animoca Brands.
The key terms of the Convertible Notes are summarised below.
M7 Asia Convertible Note
Under the M7 Asia Convertible Note, Animoca Brands has raised the principal sum of US$2 million (approximately A$2.9 million) which carries an interest rate of 9% per annum, with the interest payable every 6 months. The principal and any unpaid interest on the Convertible Notes are due and payable on 24 months from the commencement date of 18 June 2020 (“M7 Maturity Date”), subject to a conversion event or redemption as outlined below. The term of the Convertible Notes may be extended for an additional 6-month period at the written request of either the Company or M7.
The outstanding principal and accrued interest of the M7 Asia Convertible Notes will convert into equity (“M7 Conversion Amount”) upon such time that Animoca Brands, or an entity which holds a mix of assets that may include some combination of the Company’s studios Pixowl SA., TSB Gaming., nWay, Inc., and Quidd, Inc. (“ListCo”), lists on the Euronext exchange (or another exchange that the Company deems appropriate) (“Listing Event”). Upon the Listing Event, M7 Asia will hold 50% of the M7 Conversion Amount in Animoca Brands shares and 50% of the M7 Conversion Amount in ListCo shares.
As outlined above, the Convertible Notes are issued as part of a series of notes to the Investors. If a Listing Event has not occurred by the M7 Maturity Date, the Convertible Notes may convert into equity in Animoca Brands at any time on or after the M7 Maturity Date, at the election of the holders of the Convertible Notes who hold at least 65% of the outstanding principal amount of the Convertible Notes on the issue.
M7 Asia also has the right to redeem the Convertible Note prior to the M7 Maturity Date if Yat Siu ceases to be in a decision-making role at both the Company and ListCo, there is a material change in the nature of the Company’s business, or the Company divests over 25% of its assets to an unrelated third party (“Redemption”). If M7 Asia exercises its rights to Redemption, it will be repaid any unpaid interest and principal, with the timing for such repayment subject to further discussion between the Company and M7 Asia.
Mind Fund and other investors
“We at Mind Fund are excited to continue our partnership with Animoca Brands. We believe deeply in the company’s vision to use blockchain to build economies where true digital ownership in games and virtual worlds will become a reality for hundreds of millions of people.”
Adam Lindemann, partner at Mind Fund
Animoca Brands has also entered into convertible note agreements with Mind Fund and other investors for an additional US$2.1 million (approximately A$3 million) on substantially similar terms as those outlined above for M7 Asia, except without an obligation for payment of interest until the maturity dates of those notes (which would occur within Q2 2022).
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