Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information for the purposes of Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement, this information is now considered to be in the public domain.

ADVANCED ONCOTHERAPY PLC

("Advanced Oncotherapy", "AVO" or the "Company")

Prospective recapitalisation and funding plan

Update on Formal Sale Process

Introduction

Advanced Oncotherapy (AIM: AVO), the developer of next-generation proton therapy systems for cancer treatment, announces a prospective recapitalisation and funding plan to raise up to c.£110 million. The prospective plan comprises three elements: (i) a debt to equity conversion (the "Debt to Equity Swap"); (ii) the Company receiving a new interest-bearing secured loan; and (iii) an equity fundraising (the "Equity Fundraising") (together the "Prospective Recapitalisation Plan").

As at the date of this announcement the Prospective Recapitalisation Plan, which is still at an early stage, is subject to, amongst other things, a number of conditions being satisfied and various documentation being negotiated, agreed and entered into. Whilst the board of Advanced Oncotherapy is hopeful of a satisfactory outcome, certain elements of the Prospective Recapitalisation Plan, in particular the Equity Fundraising, remain at an early stage and there can be no certainty that it will proceed nor to the terms or timing thereof.

On 30 June 2023, the Company announced, inter alia, that additional funding of c.£8 million, which the Company had been working to secure, was no longer a viable financing option in the short term and that the Company was in a highly constrained financial position and required additional financing urgently. Following this the Company's shares were suspended from trading on AIM on 30 June 2023 pending clarification of its financial position.

Since this announcement, the Company has entered into discussions with a number of investors to provide bridge financing to alleviate these immediate financing needs. In the absence of any additional financing being available in the immediate term, the Company would need to take steps to preserve and maximise value for its creditors, including the possible appointment of an administrator.

In light of the financial position of the Company, the Company's annual report and accounts for the year ended 31 December 2022 (the "2022 Annual Report") are not capable of being published at the current time and the Company's shares remain suspended from trading on AIM.

The Prospective Recapitalisation Plan

The Prospective Recapitalisation Plan is an important step for the Company to outline how it plans to address its financial challenges. The Company is hopeful it will unlock the Company's prospects and ensure that Advanced Oncotherapy has strong foundations to progress its strategy of democratising proton therapy. The Prospective Recapitalisation Plan is subject to the Company finalising terms with a number of counterparties, entering into documentation and obtaining various shareholder approvals at a general meeting to be convened in due course. including authorities to issue new shares and a proposed capital reorganisation (as set out in more detail below).

If the Company remains in receipt of an approach from or in discussions with a potential offeror, various elements of the Prospective Recapitalisation Plan will also require shareholder approval under Rule 21 of the City Code on Takeovers and Mergers (the "Takeover Code"), as set out below.

The Prospective Recapitalisation Plan can be summarised as follows:

(1) Debt range reflects whether the £10m Nerano Pharma Ltd/Credit Suisse loan is converted, refinanced, or repaid, as well as the proportion of the £6.4m secured convertible note facility being converted; (2) Equity range determined by the amount of debt converted, per Note 1.

A) The Debt to Equity Swap and debt repayment

As at 30 June 2023, the Company had £33.1 million of financial borrowings plus accrued interest, comprising of the following:

(1) As per announcement dated 29 June 2020; based on a $/£ exchange rate of 1.2; maturity assumed rolling; (2) As per announcement dated 7 August 2019; (3) As per announcement dated 10 May 2019; (4) As per announcement dated 25 March 2022; maturity assumed rolling; (5) As per announcement dated 1 March 2023; (6) Maturity assumed rolling; (7) As per announcements dated 1 March 2023 and 5 May 2023.

Nerano Pharma Limited ("Nerano") and Barrymore Investments Limited ("Barrymore") are companies controlled by Mr Seamus Mulligan and respectively own 4.1% and 1.5% of the Company's current issued share capital. Nerano, Barrymore and Mr Seamus Mulligan are presumed to be acting in concert (the "Concert Party") for the purpose of the Takeover Code.

·     Subject to negotiating terms and conditions and finalising documentation, Nerano  has agreed in principle to convert all or part of its debt holdings (i.e. up to £23.8 million or £27.8m when including accrued interests) into new ordinary shares in the Company of 25p each ("Ordinary Shares" and, in the case of the Ordinary Shares that may be issued to Nerano, the "Conversion Shares") at a price equivalent to the issue price of the Equity Fundraising (the "Issue Price"). In the event that this would result in the Concert Party's interest in the Company exceeding 30%, the conversion of Nerano's debt will be subject to the Panel on Takeovers and Mergers (the "Panel") granting a waiver (a "Waiver") of Nerano's obligations under Rule 9 of the Takeover Code and the approval of independent shareholders of the Company at a general meeting of such a Waiver (a "Waiver Resolution").

·     As per the Company's announcement of 1 March 2023, various lenders who hold £6.4 million of secured convertible loan notes will have the option to convert their secured convertible loan notes into Ordinary Shares at a price that is equivalent to a 20% discount to the Issue Price. It is anticipated that once the Company publishes the 2022 Annual Report and the Directors are not being restricted by virtue of the Company being in a closed period, all Directors who subscribed for secured convertible loan notes, amounting to £1.1 million, will agree to convert their secured convertible loan notes into Ordinary Shares. The Company is hopeful that a total of £4.8-£6.4 million (or £5.3-£7.1 million when including accrued interest over a nine-month period) of the secured convertible loan notes will be settled by the issue of new Ordinary Shares.

Should the Prospective Recapitalisation Plan become effective and the proposed refinancing be completed, the Board intend that the £2.7 million loan to the French lender, as set out above, would be repaid in cash.

Shares in lieu of fees

In addition, subject to obtaining the necessary shareholder approvals and reaching agreement with the various counterparties summarised below, the Company intends to satisfy amounts owed to various parties as follows through the issue of new Ordinary Shares at the Issue Price:

·    the Company is hopeful that £0.5-£2.0 million of payables to certain suppliers will be settled in new Ordinary Shares at the Issue Price (the "Supplier Fee Shares"). Negotiations with selected suppliers are ongoing;

·   certain employees, including Executive Directors, have agreed in principle to receive part of their compensation for an amount of up to £0.5 million through the issue of new Ordinary Shares at the Issue Price (the "Employee Compensation Fee Shares");

·     certain directors have agreed in principle to receive their fees for an amount of £0.6 million in new Ordinary Shares at the Issue Price (the "Director Fee Shares"); and

·     the Company is hopeful that fees due to a number of counterparties, including certain financial advisers, for an amount of approximately £0.2 million will be settled through the issue of new Ordinary Shares at the Issue Price (the "Advisor Fee Shares").

The issue of Employee Compensation Fee Shares and/or Director Fee Shares to certain parties, including directors and other persons discharging managerial responsibility ("PDMRs"), will be subject to the Company publishing its 2022 Annual Report and the directors/PDMRs not being restricted by virtue of the Company being in a closed period.

The above initiatives are currently at a preliminary stage and, as noted, are subject to agreement with the counterparties and various conditions being met. There can be no certainty that any or all of the above initiatives will be implemented. If the above initiatives are fully implemented £25.7-37.4 million of the Company's current debt and payables would be converted into new Ordinary Shares.  If fully implemented, the Prospective Recapitalisation Plan is estimated to reduce the Company's indebtedness by up to a total of £28.4-£40.1 million. This range reflects whether the £10m Nerano Pharma Ltd/Credit Suisse loan is converted, refinanced, or repaid, as well as the proportion of the £6.4m secured convertible note facility being converted.

B) £10 million secured loan

Further to the Company's announcement on 30 June 2023 regarding discussions with a new lender to provide c.£8 million of additional financing for the Company, the Company remains in discussions with the same lender for a secured debt facility of an increased amount of £10 million (the "Loan"). Based on discussions to date, it is anticipated that the interest rate payable on the Loan would be 12 per cent. per annum and the Loan would be repayable in full in cash at the end of a 24-month period. The Loan would be conditional on the Prospective Recapitalisation Plan being approved by shareholders and implemented.

There can be no guarantee that the Loan will be put in place nor as to the timing or the terms and conditions of the Loan. Based on discussions to date and subject to finalisation of the terms of the Loan, the Directors anticipate that the Loan will be made available once the relevant shareholder approvals have been obtained in relation to the Prospective Recapitalisation Plan at a general meeting of the Company's shareholders to be convened in due course.

C) Equity Fundraising

The Prospective Recapitalisation Plan will require the Equity Fundraising to be implemented in conjunction with, inter alia, the proposed Debt to Equity Swap and the proposed Loan. The Prospective Recapitalisation Plan assumes a minimum fundraising of c.£61.7 million pursuant to the Equity Fundraising. The Company intends to implement the Equity Fundraising through: (i) a subscription of new Ordinary Shares; (ii) a placing of new Ordinary Shares through SI Capital, the Company's joint broker; (iii) the issue of a broker option to SI Capital; (iv) a retail offer and/or open offer to the Company's existing shareholders; and (v) equity facility financing arrangements.

At this stage discussions on the Equity Fundraising remain at an early stage and there can be no certainty that these discussions will be successfully concluded. The Equity Fundraising would be subject, inter alia, to the Company obtaining the necessary shareholder authorities at a general meeting and the Company publishing its 2022 Annual Report.

The Company is mindful of the support of existing shareholders and is committed to providing them with the ability to participate in the Equity Fundraising through a retail offer and/or open offer at the Issue Price. Up to a maximum of £5 million (being below the €8 million threshold which would require the publication by the Company of a prospectus under the Prospectus Rules) would be sought to be raised by the Company pursuant to a retail offer and/or open offer.

Financing agreement

Subject to the approval of shareholders, the Company intends to enter into a flexible and staged equity financing agreement (the "Equity Financing Agreement") with a financing institution pursuant to which the financing institution will agree, subject to various conditions being satisfied, to subscribe for tranches of new Ordinary Shares in the Company up to a maximum investment of £30 million. At this stage, the Company is currently in receipt of non-binding term sheets regarding the Equity Financing Agreement. The Equity Financing Agreement will give the Company the ability to drawdown pursuant to the facility at various dates, the full details being subject to final documentation.

There can be no certainty that the Equity Financing Agreement will be entered into with a financing institution.

Warrants

The Company expects that warrants to subscribe for new Ordinary Shares will also be issued as part of the Prospective Recapitalisation Plan.  Further details of the terms of the Warrants will be provided in due course, but are anticipated to include:

·      the issue of Warrants to participants in the Prospective Recapitalisation Plan, including members of the Concert Party, on the basis of one warrant for every two new Ordinary Shares which they subscribe for in the Prospective Recapitalisation Plan (the "Warrants" and, in the case of the Concert Party, the "Concert Party Warrants");

·      the Warrant exercise price is expected to be set at a 25% discount to the market price of an Ordinary Share immediately prior to the first patient being treated with the LIGHT system; and

·      the option to exercise the Warrants within a two-month period after the first patient has been treated with the LIGHT system.

Conditions to the Equity Fundraising

Any Equity Fundraising will be conditional, inter alia, on the approval by the Company's shareholders of resolutions to provide authority to the Directors to issue and allot further Ordinary Shares on a non-pre-emptive basis and the capital reorganisation outlined below. If the Company remains in receipt of an approach from or in discussions with a potential offeror, various elements of the Equity Fundraising will also require shareholder approval under Rule 21 of the Takeover Code, as set out below.

Capital reorganisation

In addition to obtaining the shareholder approvals noted above, in order to implement the Prospective Recapitalisation Plan, it will be necessary to first implement a capital reorganisation of the Company. At the date of this announcement there are 542,573,869 existing Ordinary Shares of 25 pence each in the capital of the Company in issue. The middle market share price of each Ordinary Share as at close on the date prior to suspension of trading in the Company's shares on 30 June 2023 was 1.925 pence, giving the Company a market capitalisation of £10.4 million. The Directors consider that the number of existing Ordinary Shares is not only unwieldly in volume for a company of Advanced Oncotherapy's market capitalisation, but when combined with the prevailing share price, is not conducive to an orderly market.  Accordingly, the Directors believe that a consolidation of share capital will result in a more appropriate number of shares in issue for a company of Advanced Oncotherapy's size in the UK market.

In addition, the Company proposes to further undertake a sub-division as, under the Companies Act 2006, a company is prohibited from issuing new shares at a price less than the nominal value of its shares. Accordingly, in order to implement the Prospective Recapitalisation Plan, it will be necessary to reduce the nominal value of the Ordinary Shares to below the proposed Issue Price.  Further details of the proposed consolidation and sub-division, which will be subject to shareholder approval, will be sent to shareholders in due course.

Conditions to the Prospective Recapitalisation Plan

In addition to the conditions set out elsewhere in this announcement, in the event that the final terms agreed in relation to the Debt to Equity Swap result in the Concert Party's interest in the Company exceeding 30%, the Debt to Equity Swap and issue of the Concert Party Warrants to members of the Concert Party will be conditional on:

·      the grant by the Panel of a Waiver subject to the approval of a Waiver Resolution; and

·      approval by independent shareholders of a Waiver Resolution.

Further, various elements of the Prospective Recapitalisation Plan will also be subject to shareholder approval for the purpose of Rule 21 of the Takeover Code if the Company remains in receipt of an approach from or in discussions with a potential offeror pursuant to the Formal Sale Process (see below) or otherwise.

The Company will update shareholders further as it progresses its Prospective Recapitalisation Plan.

Update on Formal Sale Process

The Company announced on 18 April 2023 the commencement of a strategic review and formal sale process under the Takeover Code (the "Formal Sale Process").

Whilst the Prospective Recapitalisation Plan has been the Company's primary focus, the Company remains in discussions under the Formal Sale Process with strategic players in the radiotherapy sector.

There can be no certainty that any offer will be made for the Company, or even proposed, or as to the terms of any proposal or offer that may be made.

Takeover Code

Under Rule 9 of the Takeover Code, any person who acquires an interest (as such term is defined in the Takeover Code) in shares which, taken together with the shares in which he and persons acting in concert with him are interested, carry 30% or more of the voting rights in a company which is subject to the Takeover Code, is normally required to make a general offer to all of the remaining shareholders to acquire their shares. Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30% of the voting rights but does not hold shares carrying more than 50% of the voting rights of such a company, a general offer will normally be required if any further interests in shares are acquired by any such person. Such an offer would have to be made in cash at a price not less than the highest price paid by him, or by any member of the group of persons acting in concert with him, for any interest in shares in the Company during the 12 months prior to the announcement of the offer.

The Concert Party currently owns in aggregate 5.6% of the Company's issued share capital. The final terms to be agreed in relation to the Debt to Equity Swap may result in the Concert Party's interest in the Company exceeding 30% of the issued share capital as a consequence of the issue of the Conversion Shares to Nerano and the conversion of associated Concert Party Warrants.

In these circumstances, the issue of the Conversion Shares and the conversion of any Concert Party Warrants would ordinarily give rise to an obligation on the Concert Party to make a mandatory offer for the Ordinary Shares they do not already own under Rule 9 of the Takeover Code. Accordingly, prior to completion of the Prospective Recapitalisation Plan and subject to finalisation of the terms of the Prospective Recapitalisation Plan, the Company may need to seek a Waiver of the obligations under Rule 9 of the Takeover Code.

A Waiver will require the passing of a Waiver Resolution on a poll by the independent shareholders of the Company at a general meeting.

Frustrating Action under Rule 21 of the Takeover Code

Under Rule 21 of the Takeover Code, whilst the Company remains in receipt of an approach from or in discussions with potential offerors, as defined in the Takeover Code, certain elements of the Prospective Recapitalisation Plan would constitute frustrating action under Rule 21 of the Takeover Code.

Accordingly, should this still be relevant, the Company will seek either consent from any potential offeror or will seek the approval of shareholders at a General Meeting to implement such elements of the Prospective Recapitalisation Plan.

Further announcements on the Prospective Recapitalisation Plan will be made at the appropriate time.

About Advanced Oncotherapy Plc www.avoplc.com

Advanced Oncotherapy Plc, a UK headquartered company with offices in London, Geneva, The Netherlands and in the USA, is a provider of particle therapy with protons that harnesses the best in modern technology. Advanced Oncotherapy's team "ADAM," based in Geneva, focuses on the development of a proprietary proton accelerator called, Linac Image Guided Hadron Technology (LIGHT). LIGHT's compact configuration delivers proton beams in a way that facilitates greater precision and electronic control.

Advanced Oncotherapy Plc will offer healthcare providers affordable systems that will enable them to treat cancer with innovative technology as well as expected lower treatment-related side effects.

Advanced Oncotherapy Plc continually monitors the market for any emerging improvements in delivering proton therapy and actively seeks working relationships with providers of these innovative technologies. Through these relationships, the Company will remain the prime provider of an innovative and cost-effective system for particle therapy with protons.