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REG - Capai PLC - Exercise of Warrants, Circular and Notice of GM

capAIAnnouncement

02/05/2025 12:45

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RNS Number : 2843H Capai PLC 02 May 2025

THIS ANNOUNCEMENT ("ANNOUNCEMENT") AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR
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2 May 2025

capAI plc
("capAI" or the "Company")

Exercise of Warrants, Posting of Circular and Notice of General Meeting

capAI plc (LSE: CPAI) announces that it has received conditional notices of
exercise of certain warrants ("Warrants") to subscribe for a total of
400,000,000 new ordinary shares of nominal value £0.00001 each in the capital
of the Company ("Ordinary Shares"; "Warrant Shares"). The total consideration
to be paid to the Company on exercise of such Warrants (the "Warrant
Exercise") is £150,000.

For the Company to facilitate the timely delivery of the Warrant Shares to the
relevant holders of Warrants in connection with the Warrant Exercise, the
Company proposes to enter into an English law governed stock loan agreement
(cast as a deed) with Richard Andrew Edwards, a Director designated as
Executive Chairman (the "Stock Loan Agreement"). The proposed Stock Loan
Agreement constitutes a 'substantial property transaction' under section 190
of the UK Companies Act 2006 (the "Companies Act 2006") which requires
approval by the registered holders of Ordinary Shares (the "Shareholders").

Pursuant to the Stock Loan Agreement:

· Mr. Edwards will, at the request of the Company, make available for
transfer to the Company 400,000,000 Ordinary Shares held by Mr. Edwards which
are required by the Company to settle the Warrant Exercise and deliver the
Warrant Shares to the relevant holders of Warrants;

· following the transfer by Mr. Edwards of Ordinary Shares to the
Company pursuant to the Stock Loan Agreement (the "Borrowed Shares"), the
Company will issue and allot new Ordinary Shares to Mr. Edwards of an
equivalent number to the Borrowed Shares (the "Equivalent Shares"); and

· any loan of Borrowed Shares shall involve no cash consideration
being paid by the Company to Mr. Edwards, and nor will any interest be payable
under the Stock Loan Agreement.

The Company intends to enter into the Stock Loan Agreement with Mr. Edwards on
the date on which the Shareholders approve the Stock Loan Agreement as a
'substantial property transaction' under section 190 of the Companies Act
2006.

Pursuant the Stock Loan Agreement, the Company will irrevocably undertake to
make a request for the transfer of Borrowed Shares following such
Shareholders' approval. It is expected that the Warrant Shares will be
delivered to the holders of the Warrants within two Business Days of the date
of such borrowing request.

The Company will issue and allot 400,000,000 Equivalent Shares to Mr. Edwards
within three business days of the delivery of the Warrant Shares to the
relevant holders of Warrants. It is proposed that the Equivalent Shares will
be issued and allotted to Mr. Edwards under an exemption from the requirement
to issue a prospectus, and that the delivery of the Warrant Shares to the
holders of the Warrants being exercised is being undertaken solely to ensure
the maintenance of market stability in the stock.

For the avoidance of doubt, as the Company will be obliged to redeliver
Equivalent Shares to Mr. Edwards and the loan of the Borrowed Shares cannot be
cash settled and shall not attract and accrued any interest, the Company is
not subject to any economic risk on the Borrowed Shares.

The Equivalent Shares will rank pari passu with the existing Ordinary Shares
and, following the issue of the Equivalent Shares, the Company will make an
application for the Equivalent Shares to be admitted to the equity shares
(transition) category of the Official List of the Financial Conduct Authority
and to trading on the main market for listed securities of London Stock
Exchange plc ("Admission"). It is expected that Admission will become
effective at 8.00 a.m. on 9 June 2025.

In connection with the Warrant Exercise and the Stock Loan Agreement, capAI
further announces that it has today published a circular (containing a notice
of general meeting of the Company (the "General Meeting")) and accompanying
form of proxy to the Shareholders (the "Circular"). The Circular contains,
inter alia, details of capAI's proposed entry into the Stock Loan Agreement,
and the proposed resolution to approve the Stock Loan Agreement as a
'substantial property transaction' under section 190 of the UK Companies Act
2006.

The Circular also contains details of a 'serious loss of capital' within the
Company. Under section 656(1) of the Companies Act 2006, the directors of the
Company are required to call the General Meeting to consider whether any, and
if so what, steps should be taken to deal with the serious loss of capital.

The General Meeting is due to be held at the offices of offices of Orrick,
Herrington & Sutcliffe (UK) LLP, 9th Floor, 107 Cheapside, London EC2V
6DN, United Kingdom at 4.00 p.m. on 28 May 2025.

Extracts from the Circular are appended to this Announcement without
amendment. A copy of the Circular will be available today on the Company's
website at https://capai.group/investors#circulars
(https://capai.group/investors#circulars) .

Capitalised terms in this Announcement have the meaning ascribed to them in
the Definitions section of the Circular, unless otherwise defined in this
Announcement.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Dispatch of the Circular 2 May 2025
Latest time and date for receipt of Form of Proxy 4.00 p.m. on 23 May 2025
General Meeting 4.00 p.m. on 28 May 2025
Proposed entry by the Company into the Stock Loan Agreement Subject to and following the passing of Resolution 1 on 28 May 2025
Warrant Exercise Effective Date and borrowing by the Company of the Borrowed Subject to and following the passing of Resolution 1 on 28 May 2025
Shares
Delivery of the Warrant Shares 30 May 2025
Allotment and issue of the Equivalent Shares 4 June 2025
Admission of the Equivalent Shares On or around 8.00 a.m. on 9 June 2025

Each of the times and dates set out above and mentioned elsewhere in this
document may be subject to change at the absolute discretion of the Company.
All times referred to in this document are, unless otherwise stated,
references to London, UK.

Any changes to the expected timetable of principal events will be notified by
the Company through a RIS.

For further information, please contact:

Company:

capAI plc hello@capaiplc.com

Broker Enquiries:

Peterhouse Capital Limited Tel: +44 (0) 207 469 0930

EXTRACTS FROM THE LETTER FROM THE INDEPENDENT NON-EXECUTIVE DIRECTOR

1. Introduction

Exercise of Warrants and Stock Loan Agreement

The Company has received notices from certain investors in the Company in the
respect of the conditional exercise of 400,000,000 outstanding warrants over
Ordinary Shares (the "Warrants"), requiring the Company to deliver 400,000,000
Ordinary Shares in aggregate (the "Warrant Shares") to the relevant holders of
Warrants (the "Warrant Exercise").

The Warrants have an exercise price of £0.000375 and therefore the Warrant
Exercise will raise gross proceeds of £150,000 in aggregate for the Company.

The Company and the holders of the Warrants have agreed that the Warrant
Exercise will be conditional on and will take effect on the passing of
Resolution 1 at the General Meeting and the Company's entry into the Stock
Loan Agreement (the "Warrant Exercise Effective Date").

Pursuant to the Stock Loan Agreement:

· any loan of Borrowed Shares shall involve no cash consideration
being paid by the Company to Mr. Edwards, and nor will any interest be payable
under the Stock Loan Agreement.

The proposed Stock Loan Agreement constitutes a 'substantial property
transaction' under section 190 of the UK Companies Act 2006 (the "Companies
Act 2006"), which requires approval by the registered holders of Ordinary
Shares (the "Shareholders"), which the Company will seek under Resolution 1 at
the General Meeting.

The Company intends to enter into the Stock Loan Agreement with Mr. Edwards on
the date of the General Meeting provided that the Shareholders approve the
Stock Loan Agreement as a 'substantial property transaction' under section 190
of the Companies Act 2006 by passing Resolution 1.

Pursuant to the Stock Loan Agreement, the Company shall irrevocably undertake
to make a request for the transfer of Borrowed Shares on the Warrant Exercise
Effective Date, provided that Resolution 1 is duly passed at the General
Meeting. It is expected that the Warrant Shares will be delivered to the
holders of the Warrants within two Business Days of the Warrant Exercise
Effective Date.

The Company will issue and allot 400,000,000 Equivalent Shares to Mr. Edwards
within three Business Days of the delivery of the Warrant Shares to the
relevant holders of Warrants. It is proposed that the Equivalent Shares will
be issued and allotted to Mr. Edwards under an exemption from the requirement
to issue a prospectus, and that the delivery of the Warrant Shares to the
holders of the Warrants being exercised is being undertaken solely to ensure
the maintenance of market stability in the stock.

Following the issue and allotment of the Equivalent Shares, the Company will
make an application for 400,000,000 Equivalent Shares to be admitted to a
listing on the equity shares (transition) category of the official list
maintained by the UK Financial Conduct Authority ("FCA") pursuant to Part VI
of FSMA ("Official List") under Chapter 22 of the UK listing rules made by
the FCA under section 73A of FSMA (an "ES(T)C Listing") ("UKLRs") and to
trading on the main market for listed securities of London Stock Exchange plc
(the "Main Market") ("Admission"). The Company expects that Admission will
become effective at 8.00 a.m. on 9 June 2025.

The proposed Stock Loan Agreement is included as an appendix to this document.

Serious loss of capital

Under the Companies Act 2006, a 'serious loss of capital' occurs once the
value of a company's net assets is less than half of its called-up share
capital. In such circumstances, the directors of a company are required,
pursuant to section 656(1) of the Companies Act 2006, to call a general
meeting to consider whether any, and if so what, steps should be taken to deal
with the situation. Accordingly, in addition to the approval of the Stock Loan
Agreement, the Board is also calling the General Meeting to ensure that this
matter is addressed and discussed with the Shareholders as required by the
Companies Act 2006.

Although the Directors are addressing this matter as part of the General
Meeting, Shareholders should note that this is not specifically related to the
Company's current business and is not a new issue which has arisen since the
publication of the annual financial statements for the year ended 30 September
2024.

The Directors have reviewed the historical financial information of the
Company and note that the situation giving rise to a 'serious loss of capital'
primarily manifested from previous business activities undertaken by the
Company before any of the current Directors were appointed.

The current Directors have been unable to ascertain whether a general meeting
was previously held by the Company by the-then directors to address a 'serious
loss of capital' as required by the Companies Act 2006. Therefore, the
Directors are addressing this as part of the General Meeting.

The Directors consider that, as shown in the recent RIS announcement on 14
April 2025 (RNS Number: 8619E), the strategy change to henceforth solely focus
on the Artificial Intelligence space, and the appointment of Professor Ronjon
Nag to the Board to oversee this, should assist in alleviating the loss of
capital. Furthermore, the Directors also consider that the 'serious loss of
capital' does not in itself have any specific bearing on the Company's
financial position or current performance, and therefore they remain positive
about the Company's future.

The Board welcomes dialogue with Shareholders on this matter and the General
Meeting will provide a forum for such discussions to take place. Shareholders
should note that they will not be asked to vote on this agenda item at the
General Meeting, which is for discussion only.

2. General Meeting

In the usual way the Directors ask and encourage Shareholders to vote for the
Resolutions by appointing me, as Independent Non-Executive Director, as chair
of the General Meeting (the "Chair") as a Shareholder's proxy. Accordingly,
Shareholders are encouraged to complete the Form of Proxy accompanying this
document which must be completed and returned, in accordance with the
instructions printed on it, so as to be received by the Registrar,
Computershare Investor Services plc, The Pavilions, Bridgwater Road, Bristol,
BS13 8AE, United Kingdom as soon as possible, but in any event not later than
4.00 p.m. on 23 May 2025.

The General Meeting shall take place at 4.00 p.m. on 28 May 2025.

The Chair will then formally put the Resolutions to the General Meeting and
advise of the proxy votes received in advance.

Following the Chair putting the Resolutions to the General Meeting, the Chair
will invite the General Meeting to discuss the serious loss of capital within
the Company and whether any, and if so what, steps should be taken to address
the serious loss of capital. Following this discussion, the General Meeting
will then formally close.

The results of the General Meeting will be announced via a RIS and posted to
the Company's website https://capai.group/ on the day of the General Meeting.

3. Substantial Property Transaction

The Company's entry into the Stock Loan Agreement with Mr. Edwards constitutes
a 'substantial property transaction' under section 190 of the Companies Act
2006, as the Borrowed Shares which Mr. Edwards will make available to the
Company under the Stock Loan Agreement have a value of approximately
£1,740,000 in aggregate (based on the closing price for the Ordinary Shares
on 29 April 2025).

Accordingly, under section 190 of the Companies Act 2006, the Company's entry
into the Stock Loan Agreement requires the approval of the Shareholders. This
will be achieved by the passing of Resolution 1 in the Notice of General
Meeting, set out at the end of this document and as summarised below.

Mr. Edwards has voluntarily agreed not to vote on Resolution 1 and has
undertaken to take all reasonable steps to ensure that his close family and
associates who hold Ordinary Shares do not vote on Resolution 1.

4. Related Party Transaction

The Board consider that the Company's entry into the Stock Loan Agreement with
Mr. Edwards is a material related party transaction for the purposes of rule
7.3 of the disclosure guidance and transparency rules of the FCA made in
accordance with section 73A of FSMA (the "Disclosure Guidance and Transparency
Rules" or "DTRs").

Mr. Edwards is, and has been since 16 October 2024, a Director designated as
Executive Chairman. As at 1 May 2025 (being the latest practicable date before
the publication of this document ("Latest Practicable Date")), Mr. Edwards
personally holds 454,000,000 Ordinary Shares and his close family and
associates hold 301,793,650 Ordinary Shares, therefore Mr. Edwards and his
close family and associates hold 755,793,650 Ordinary Shares in aggregate,
representing approximately 23.39% of the issued share capital of the Company.
In addition, Mr. Edwards and his close family and associates hold 462,500,000
warrants over Ordinary Shares in aggregate.

Pursuant to the Stock Loan Agreement, Mr. Edwards will make available to the
Company 400,000,000 Borrowed Shares, which have a value of approximately
£1,740,000 in aggregate (based on the closing price for the Ordinary Shares
on 29 April 2025). If Mr. Edwards transfers any Borrowed Shares to the Company
under the Stock Loan Agreement, the Company will issue and allot Equivalent
Shares to Mr. Edwards of an equivalent number to the Borrowed Shares to
facilitate the redelivery of the Equivalent Shares by the Company to Mr.
Edwards.

The Company confirms that Directors other than Mr. Edwards (the "Independent
Directors"), having exercised reasonable care, skill and diligence, considered
the material related party transaction in respect of the Stock Loan Agreement
to be fair and reasonable from the perspective of the Company and the
Shareholders who are not a related party (as such term is defined in
UK-adopted International Financial Reporting Standards ("UK IFRS")).

5. Business of the General Meeting

The notes below explain the proposed business of the General Meeting, being
the Resolutions and the discussion regarding the significant loss of capital
within the Company.

With regards to the Resolutions, Resolution 1 is proposed as an ordinary
resolution. This means that if Resolution 1 is to be passed, more than half of
the votes cast must be in favour of Resolution 1. Resolution 2 is proposed as
a special resolution. This means that for Resolution 2 to be passed, at least
three quarters of the votes cast must be in favour of the Resolution 2.

The Board welcomes dialogue with Shareholders at the General Meeting on the
serious loss of capital within the Company. Shareholders should note that they
will not be asked to vote on this agenda item at the General Meeting, which is
for discussion only.

Explanatory notes to Resolutions

Resolution 1

Ordinary Resolution: Substantial Property Transaction

To facilitate the timely delivery of 400,000,000 Warrant Shares to certain
investors following the Warrant Exercise, the Company proposes to enter into
the Stock Loan Agreement with Richard Andrew Edwards, pursuant to which Mr.
Edwards will, at the request of the Company, make available for transfer to
the Company 400,000,000 Ordinary Shares held by Mr. Edwards which are required
by the Company to settle the Warrant Exercise and deliver the Warrant Shares
to the relevant holders of Warrants. The Company has irrevocably undertaken to
make a request for the transfer of 400,000,000 Borrowed Shares on the Warrant
Exercise Effective Date, provided that Resolution 1 is duly passed at the
General Meeting.

Following Mr. Edwards transferring the Borrowed Shares to the Company pursuant
to the Stock Loan Agreement, the Company will issue and allot Equivalent
Shares to Mr. Edwards of an equivalent number to the Borrowed Shares.

The proposed Stock Loan Agreement is included as an appendix to this document.

The Company's entry into the Stock Loan Agreement constitutes a 'substantial
property transaction' under section 190 of the Companies Act 2006, which
requires the approval of the Shareholders pursuant to Resolution 1.

As the Company's proposed entry into the Stock Loan Agreement constitutes a
material related party transaction for the purposes of DTR 7.3, the Company
confirms that the Independent Directors, having exercised reasonable care,
skill and diligence, have considered the material related party transaction to
be fair and reasonable from the perspective of the Company and its
Shareholders who are not a related party (as such term is defined in UK IFRS).

Resolution 2

Special Resolution: Calling general meetings by not less than 21 clear days'
notice

The Companies Act 2006 requires the notice period for general meetings of the
Company to be at least 21 days. The Company, however, would value the power to
call general meetings (other than an annual general meeting) on at least 14
clear days' notice. In order to be able to do so, Shareholders must approve
the calling of general meetings on at least 14 clear days' notice.

Resolution 2, which will be proposed as a special resolution, seeks such
approval. The approval will be effective until the Company's next annual
general meeting, when it is intended that a similar resolution will be
proposed. The shorter notice period would not be used as a matter of routine
for general meetings, but only where the flexibility is merited by the
business of the meeting and is thought to be to the advantage of Shareholders
as a whole.

Shareholder discussion

Serious loss of capital

The Board believes that a 'serious loss of capital' has occurred within the
Company. In such circumstances, the Directors are required, pursuant to
section 656(1) of the Companies Act 2006, to call a general meeting to
consider whether any, and if so what, steps should be taken to deal with the
situation. In addition to the approval of the Stock Loan Agreement, the Board
is also calling the General Meeting to ensure that this matter is addressed
and discussed with the Shareholders as required by the Companies Act 2006.

6. Basis of voting

In accordance with the articles of association of the Company, all
Shareholders entitled to vote and be present by proxy at the General Meeting
have one vote in respect of every Ordinary Share held.

In this way all proxy votes will count towards the voting on the Resolutions.

7. Action to be taken

Shareholders will find enclosed a Form of Proxy for use in connection with the
General Meeting. Whether or not Shareholders propose to attend the General
Meeting, they are requested to complete, sign and return the Form of Proxy as
soon as possible, in accordance with the instructions printed on it.

To be valid, the enclosed Form of Proxy must be lodged with the Registrar,
Computershare Investor Services plc, The Pavilions, Bridgwater Road, Bristol
BS13 8AE, United Kingdom as soon as possible and, in any event, so as to
arrive by no later than 4.00 p.m. on 23 May 2025.

8. Recommendation

The Independent Directors consider the Stock Loan Agreement and the Company's
entry into the Stock Loan Agreement to be in the best interests of the Company
and the Shareholders as a whole. Accordingly, the Independent Directors
unanimously recommend that Shareholders vote or procure votes in favour of
Resolution 1, as the Independent Directors who hold Ordinary Shares have
irrevocably undertaken to do in respect of their own beneficial holdings (and
the beneficial holdings which are under their control and those of their close
relatives), which amount to 156,250,000 Ordinary Shares (in aggregate),
representing approximately 4.83% of the issued share capital of the Company
(as at 1 May 2025, being the Latest Practicable Date). As a "related party"
Richard Andrew Edwards has not taken part in the Board's consideration of the
Stock Loan Agreement and has voluntarily agreed not to vote on Resolution 1
and has undertaken to take all reasonable steps to ensure that his close
family and associates who hold Ordinary Shares do not vote on Resolution 1.

In addition, the Board considers the passing of Resolution 2 to be in the best
interests of the Company and the Shareholders as a whole. Accordingly, the
Board unanimously recommends that Shareholders vote or procure votes in favour
of Resolution 2, as the Directors who hold Ordinary Shares have irrevocably
undertaken to do in respect of their own beneficial holdings (and the
beneficial holdings which are under their control and those of their close
relatives), which amount to 912,043,650 Ordinary Shares (in aggregate),
representing approximately 28.22% of the issued share capital of the Company
(as at 1 May 2025, being the Latest Practicable Date).

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