REG - Microsaic Systems - Publication of Circular and Notice of GM

Microsaic SystemsAnnouncement

04/12/2023 07:00

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RNS Number : 4850V  Microsaic Systems plc  04 December 2023

4 December 2023

 

Microsaic Systems plc

("Microsaic" or the "Company")

 

Publication of Circular and Notice of General Meeting

 

Further to the announcement on 13 November 2023 regarding the Company's
intention to raise funds subject to, inter alia, the restoration of its
Ordinary Shares to trading on AIM (the "Fundraising"), the Company today
announces that it has posted a circular and notice of general meeting to
shareholders convening a General Meeting ("General Meeting"), together with a
form of proxy.

The Company is seeking Shareholder approval to take the necessary steps to
enable the Fundraising to take place, which requires the passing of
resolutions to enable a re-organisation of the Company's share capital, to
provide authority to issue new shares and to wave pre-emption rights, and the
adoption of new articles of association.

Completion of the Fundraising remains conditional upon, inter alia, the
publication of both the FY22 audited annual accounts on a going concern basis
(the "Annual Report") and the interim results for the six months ended 30 June
2023 (the "Interim Results"), the Company will still need to table a
cancellation resolution (the "Cancellation Resolution") in case the
resolutions to enable the Fundraising are not passed, or if for any other
reason the Fundraising does not complete.

If the relevant resolutions are approved by the required majorities, with firm
commitments obtained from investors prior to the General Meeting then being
subject only to Admission of the new ordinary shares to be issued in
connection with the Fundraising (the "Fundraising Shares"), the cancellation
of admission to trading of the Company's ordinary shares on AIM would only be
implemented in the event that the restoration to trading of the ordinary
shares on AIM and admission of the Fundraising Shares did not become effective
on or before 22 December 2022.

The General Meeting will be held at 9:30 a.m. on 19 December 2023 at the
offices of Turner Pope Investments at 8 Frederick's Place, London, EC2R 8AB.

The Chairmans's letter from the Circular is reproduced in full below and
provides further information in relation to the proposed Fundraising and the
business of the General Meeting.

 Enquiries:
 Microsaic Systems plc                  +44 (0)1483 751 577

 Bob Moore

Executive Chairman
 Singer Capital Markets                 +44 (0)20 7496 3000

(Nominated Adviser)
 Aubrey Powell / Angus Campbell

 Turner Pope Investments (TPI) Limited  +44 (0) 20 3657 0050

 (Broker)

 Andy Thacker / James Pope

LETTER FROM THE CHAIRMAN OF MICROSAIC SYSTEMS PLC

 

Dear Shareholders

 

Share consolidation and sub-division of share capital

(to enable issue of the Fundraising Shares at an appropriate price)

Authority to issue and allot Ordinary Shares;

Waiver of Pre-emption Rights

(both in connection with proposed Fundraising)

Adoption of New Articles of Association

Alternate Cancellation of admission to trading on AIM

(only in the event that the Fundraising fails)

Notice of General Meeting

1.           Introduction

The Company announced on 3 November 2023 that it was evaluating alternatives
including discussions with several parties about strengthening the Company's
balance sheet, with the aim of concluding a fundraising within its available
cash runway, which by that date had been extended to mid-November. Despite
several expressions of interest, none of the discussions reached a successful
conclusion with the Company's cost base at that time. The Company therefore
began a very significant, rapid cost reduction exercise, including regrettably
a consultation period with employees which is likely to result in all staff
being made redundant. The cost reduction plans announced also included the
Company's intention to cancel admission to trading of its Ordinary Shares on
AIM ("Cancellation"), subject to Shareholder approval at a general meeting.

The Company has since been engaged in further funding discussions which
involve raising funds subject to restoration of the Ordinary Shares to trading
on AIM, as notified on 13 November 2023. The Company is now therefore seeking
Shareholder approval to take the necessary steps to enable the Fundraising to
take place, which requires the passing of the Fundraising Resolutions (as
described in paragraph 2 below).

Given that Completion of the Fundraising remains conditional upon, inter alia,
the publication of both the FY22 audited annual accounts on a going concern
basis (the "Annual Report") and the interim results for the six months ended
30 June 2023 (the "Interim Results"), the Company will still need to table the
Cancellation Resolution in case the Fundraising Resolutions are not passed, or
if for any other reason the Fundraising does not Complete. If the Fundraising
Resolutions are approved by the required majorities of Shareholders, with firm
commitments obtained from investors prior to the General Meeting then being
subject only to Admission of the Fundraising Shares (i.e. assuming restoration
to trading on AIM will have occurred), the Cancellation Resolution (if it
becomes effective) would only be implemented in the event that the restoration
to trading of the Ordinary Shares on AIM and Admission of the Fundraising
Shares did not become effective on or before 22 December 2023.

The Company is seeking Shareholders' approval for the consolidation and
sub-division of share capital, the adoption of the New Articles (setting out,
in particular, the rights and restrictions of the Deferred Shares), the
authority to allot shares, the disapplication of pre-emption rights and for
Cancellation (if needed) at the general meeting which has been convened for
9:30 a.m. on 19 December 2023 at the offices of Turner Pope Investments at 8
Frederick's Place, London, EC2R 8AB (the "General Meeting"). If the approvals
are given for the Fundraising, Completion is expected to take place on 21
December 2023.

The Resolutions to approve the consolidation and sub-division of share capital
(Resolutions 1 and 2) and to grant the Directors authority to allot shares
(Resolution 4) require the approval of not less than 50 per cent. of the votes
cast by Shareholders (whether present in person or by proxy) at the General
Meeting.

The Resolutions to approve the adoption of the New Articles (Resolution 3) and
the disapplication of pre-emption rights (Resolution 5) require the approval
of not less than 75 per cent. of the votes cast by Shareholders (whether
present in person or by proxy) at the General Meeting.

The Cancellation Resolution (Resolution 6), pursuant to Rule 41 of the AIM
Rules, requires the approval of Shareholders holding not less than 75 per
cent. of the votes cast by Shareholders (whether present in person or by
proxy) at the General Meeting. Cancellation will only take place if Admission
of the Fundraising Shares does not become effective on or before 22 December
2023.

If Admission of the Fundraising Shares does not become effective on or before
22 December 2023 but the Cancellation Resolution is passed at the General
Meeting, it is anticipated that the Cancellation will become effective at 7:00
a.m. on 2 January 2024.  An announcement via a Regulatory Information Service
will be made following the General Meeting to confirm the status of the
Resolutions and to reconfirm the expected timetable of events.

The purpose of this Document is to provide Shareholders with information on
the background to and reasons for the Resolutions; to provide sufficient
information to Shareholders to enable them to understand the consequences of
the Resolutions; to seek Shareholders' approval for the Resolutions; and to
provide reasons why the Directors unanimously consider the proposed
Fundraising or, in the event that Completion does not occur, then the
alternative of Cancellation, to be in the best interests of the Company and
its Shareholders as a whole.

Shareholders should note that, unless all the Fundraising Resolutions are
passed and Admission of the Fundraising Shares becomes effective on or before
22 December 2023, the Directors would need to consider whether it is
appropriate for the Company to cease trading and enter into a liquidation
process. It is the Directors' opinion that any such liquidation, which is
likely to be a Creditors Voluntary Liquidation, would not result in any
material value being returned to Shareholders. Accordingly, in order for the
Company to avoid entering a possible liquidation process, it is essential that
Shareholders vote in favour of the Resolutions.

The Notice of the General Meeting is set out in Part II of this Document.

2          Background to and reasons for the Resolutions

The Company announced on 29 June 2023 that its annual report and accounts for
the year ended 31 December 2022 (the "Annual Report") would not be published
by 30 June 2023, being the deadline for publication under the AIM
Rules. Consequently, the Company's shares were suspended from trading on AIM
with effect from 3 July 2023, pending publication of the Annual Report. The
Company also announced that would likely need to raise further working capital
and that it therefore intended to conclude a fundraising by the end of the
third quarter.

The Company announced on 25 September 2023 that it was evaluating
alternatives, including a fundraise, and that an amount of
approximately £1.5 to 2.0 million would provide sufficient funds to remain
a going concern assuming a broadly unchanged cost base.

The Company announced on 3 November 2023 that it was still evaluating
alternatives including discussions with several parties about strengthening
the Company's balance sheet with the aim of concluding a fundraising within
its extended runway to mid-November. Despite several expressions of interest,
none of the discussions had reached a successful conclusion with the then
current cost base.

The Company therefore began a very significant cost reduction exercise,
including regrettably a consultation period with employees which is likely to
result in all staff being made redundant with effect from 3 December 2023. The
cost reduction plans announced also included the Company's intention to cancel
admission to trading of its shares on AIM and subsequent re-registration as a
private company, in both cases subject to Shareholder approval at a general
meeting. At that time, it was envisaged that a fundraising exercise to secure
the continuation of the business would only be possible as a private company,
having made additional cost savings from the Cancellation.

Subject to the successful conclusion of the Fundraising, which is conditional
upon the restoration of the Company's shares to admission to trading on AIM,
the cost reduction process is, however, expected to result in the Company
remaining as an operating business, with access to sufficient resources
(including external contractors) to maintain production of the current mass
spectrometer machines and the continuation of existing trading relationships.
Ongoing activities for growth potential are expected to include the Company's
recently redesigned novel ProteinID technology and PFAS detection technology,
both of which have undergone further successful internal testing ahead of
commercial field trials, and which the Company now expects to bring to market
through partnership approaches in 2024.

On 13 November 2023, the Company therefore announced that it had been engaged
in further funding discussions which involve raising funds subject, inter
alia, to restoration of the Company's shares to trading on AIM. The Company is
therefore seeking Shareholder approval to consolidate and sub-divide the share
capital, to adopt the New Articles, to allot shares and to disapply
pre-emption rights to enable the issue of new Ordinary Shares for cash on a
non-pre-emptive basis in connection with the Fundraising.

It should be noted that the Fundraising is intended to ensure the continuation
of the Company's business activities and that the Directors consider that the
resumption of more material growth in the business is likely to require access
to additional capital including the potential issue of further dilutive
equity.

Share Consolidation and Sub-division

At the date of this document, there are 6,361,365,146 Existing Ordinary Shares
of 0.01 pence each in the capital of the Company in issue. The Directors
consider that the number of Existing Ordinary Shares is unwieldly in volume.
The Directors consider that the Share Consolidation will: (1) result in a more
appropriate share capital structure for the Company which is expected to
increase the Company's share price proportionately, which may consequently
positively impact the trading activity in the Company shares; and (2) provide
the basis for enhanced perception of the Company, improving its marketability
to a wider investor group over time.

Under the Share Consolidation, it is proposed that every 625 Existing Ordinary
Shares be consolidated into one Consolidated Ordinary Share of 6.25 pence
each. Accordingly, the proportion of Existing Ordinary Shares held by each
Shareholder immediately before the Share Consolidation will, save for
fractional entitlements (which are discussed further below), be the same as
the proportion of Consolidated Ordinary Shares held by each Shareholder
immediately after the Share Consolidation. The Directors believe that the
Share Consolidation will result in a more appropriate number of shares in
issue for the size of the Company.

To effect the Share Consolidation, it will be necessary to issue 479
additional Existing Ordinary Shares so that the Company's issued ordinary
share capital is exactly divisible by 625. It is proposed that these
additional Existing Ordinary Shares will be issued to the Company's share
registrars on the date of the General Meeting (assuming Resolutions 4 and 5
are passed and become unconditional). These additional Existing Ordinary
Shares would only represent an entitlement to a fraction of a Consolidated
Ordinary Share, so this fraction would be sold subsequently pursuant to the
arrangements for fractional entitlements described below. Following the issue
of these additional shares, the issued share capital as at close of business
on the date of the General Meeting would be 6,361,365,625 Existing Ordinary
Shares.

In the event that the number of Existing Ordinary Shares held by a Shareholder
is not exactly divisible by 625, the Share Consolidation will generate an
entitlement to a fraction of a Consolidated Ordinary Share.

The Directors propose that any such fractional entitlements will be aggregated
and sold in the market for the best price reasonably obtainable with the net
proceeds being to the benefit of the Company. Given the small economic value
of such fractional entitlements, the Board is of the view that the
distribution of the sale proceeds to individual Shareholders would result in a
disproportionate cost to the Company.

Any Shareholder holding fewer than 625 Ordinary Shares at the Record Date will
cease to be a Shareholder.

The issued share capital of the Company immediately following the Share
Consolidation is expected to comprise 10,178,185 Consolidated Ordinary Shares.

The nominal value of the Existing Ordinary Shares is currently 0.01 pence per
share, above the price at which the shares last traded prior to suspension,
and above the price at which New Ordinary Shares are expected to be issued
pursuant to the Fundraising. As a matter of English law, the Company is unable
to issue shares at an issue price which is below their nominal value. It is
therefore proposed to sub-divide the entire ordinary share capital immediately
following the Share Consolidation, consisting of 10,178,185 Consolidated
Ordinary Shares of 6.25 pence nominal value each, into 10,178,185 New Ordinary
Shares of 0.001 pence nominal value each and 10,178,185 Deferred Shares of
6.249 pence nominal value each, thus enabling the Company to lawfully
implement the Fundraising at an appropriate price. As a result, the Company's
articles of association will be required to be updated to reflect the proposed
new share structure of the Company following the Share Reorganisation and
Resolution 3 proposes the adoption of the New Articles.

Each New Ordinary Share will have the same rights (including voting and
dividend rights and rights on a return of capital) as each Existing Ordinary
Share except that they will have a nominal value of 0.001 pence each.

The Deferred Shares will, as their name suggests, have very limited rights
(which are deferred to the New Ordinary Shares) and will effectively carry no
value as a result. Accordingly, the holders of the Deferred Shares will not be
entitled (unless they also hold New Ordinary Shares) to receive notice of,
attend or vote at general meetings of the Company, nor be entitled to receive
any dividends or any payment on a return of capital until at least
£10,000,000 has been paid on each New Ordinary Share. No application will be
made for the Deferred Shares to be admitted to trading on AIM.

The Company will also be given power to arrange for all the Deferred Shares to
be transferred to a custodian or to be purchased for nominal consideration
only, without the prior sanction of the holders of the Deferred Shares. No
share certificates for the Deferred Shares will be issued.

A request will be made to the London Stock Exchange to reflect on AIM the
sub-division of the Existing Ordinary Shares into New Ordinary Shares of 0.001
pence each. Each Consolidated Ordinary Share standing to the credit of a CREST
account will be subdivided into one New Ordinary Share of 0.001 pence and one
Deferred Share of 6.249 pence at 6:00 p.m. on 19 December 2023. Only the New
Ordinary Shares will be eligible for restoration to trading on AIM.

The entitlements to New Ordinary Shares of holders of share options or other
instruments convertible into Existing Ordinary Shares will be adjusted in
accordance with their terms to reflect the Share Reorganisation.

Application will be made for the simultaneous cancellation of the Existing
Ordinary Shares from CREST and admission of the New Ordinary Shares to CREST
and their admission, together with the Fundraising Shares if issued, to
trading on AIM.  New Ordinary Shares may thereafter be held in and
transferred via CREST. It is expected that New Ordinary Shares which are held
in uncertificated form will be credited to the relevant CREST accounts on 20
December 2023 and admitted to trading on AIM on the next day.

Definitive share certificates in respect of those New Ordinary Shares which
will be held by Shareholders who currently hold their Existing Ordinary Shares
in certificated form are expected to be dispatched to relevant Shareholders in
the week commencing 1 January 2024. Share certificates in respect of Existing
Ordinary Shares will cease to be valid on 20 December 2023 and, pending
delivery of share certificates in respect of New Ordinary Shares, transfers
will be certified against the register.

No new certificates for the Existing Ordinary Shares will be dispatched if the
Share Reorganisation becomes effective.

Following the Share Capital Reorganisation, a new ISIN code will be required
for the New Ordinary Shares. Details of the new ISIN code will be announced
alongside the results of the General Meeting.

Cancellation Resolution

Given that completion of any Fundraising remains conditional upon, inter alia,
the publication of both the Annual Report on a going concern basis and the
Interim Results, the Company will still need to table an alternate resolution
to approve Cancellation if the Fundraising Resolutions are not voted for by
the requisite majorities at the General Meeting. If the Fundraising
Resolutions were to be approved, with firm commitments obtained from investors
prior to the General Meeting then being subject only to Admission of the
Fundraising Shares (itself dependent on restoration occurring), the
Cancellation Resolution will still need to be included in the business of the
General Meeting, as there remains the possibility that Admission of the
Fundraising Shares does not become effective on or before 22 December 2023.

For these reasons, and following careful consideration, the Directors believe
that it is in the best interests of the Company and Shareholders as a whole to
seek the proposed authority to consolidate and sub-divide the share capital,
to allot shares and to disapply pre-emption rights so as to be able to issue
shares for cash on a non-pre-emptive basis and to adopt the New Articles.

3.            Board composition

The Board has confirmed its intention to use all reasonable endeavours to
recruit at least one further independent non-executive director (INED) in the
near term and at least one executive director in the short term, to ensure
full compliance with principles 5 and 6 of the QCA Corporate Governance Code.
Mr Moore intends to return to his non-executive role as soon as practicable
but remains committed to supporting the business through this near-term period
of stabilisation and to re-establishing growth opportunities for an incoming
new executive.

4.            Additional requirements for restoration

The AIM Rules and the AIM Rules for Nominated Advisers require, inter alia,
that a Company maintains sufficient resources, systems and controls so as to
ensure its ability to comply with the AIM Rules, and that a Company's
nominated adviser is satisfied as to the continuing suitability of an AIM
issuer's shares to be admitted to trading on AIM. Accordingly, the Company's
Nominated Adviser is conducting a further review of relevant matters in
connection with the Company's business and controls, and will make such
further enquiries of the Company and its personnel as it deems appropriate in
this regard. The Nominated Adviser's review will only complete in parallel
with the finalisation of the Fundraising. Should the Nominated Adviser not be
able to deem the Company's shares suitable for continuing admission as a
result of any material aspect of its enquires which cannot be resolved to its
satisfaction, or the Company be unable to meet its obligations under the AIM
Rules, the Fundraising will not proceed and the Cancellation Resolution (if
passed) will be implemented.

5.            Process for, and principal effects of, the Fundraising

To enable the Fundraising to proceed, the Fundraising will be subject to
obtaining fresh Shareholder authorities to allot the new Ordinary Shares on a
non pre-emptive basis. Firm commitments, subject only to Admission of the
Fundraising Shares becoming effective (i.e. assuming restoration will occur),
are intended to be sought from investors prior to the General Meeting.
Admission of the Fundraising Shares will be conditional upon, inter alia, the
publication of both the FY22 audited annual accounts on a going concern basis
and the interim results for the six months ended 30 June 2023.

The Directors recognise that the Fundraising will result in a high level of
dilution for the Company's existing Shareholders, as only limited value will
be ascribed to the Company prior to resolution of the uncertainty relating to
its financial condition. However, it is the Directors' opinion that equity
dilution is materially preferable to Shareholders than Cancellation of
admission to trading on AIM or potential liquidation of the Company. A further
announcement is expected to be made prior to the General Meeting in relation
to the firm commitments made in support of the Fundraisig, which will provide
Shareholders with the issue price for the Fundraising and the amount being
raised.

 

6.                  Process for, and principal effects of,
the Cancellation of admission to trading on AIM

Cancellation will only take place if Admission of the Fundraising Shares does
not become effective on or before 22 December 2023, and subject to the
Cancellation Resolution being passed. Shareholders should note that, unless
all the Fundraising Resolutions are passed, the Directors would need to
consider whether it is appropriate for the Company to cease trading and enter
into a liquidation process. It is the Directors' opinion than any such
liquidation, which is likely to be a Creditors Voluntary Liquidation, would
not result in any material value being returned to Shareholders.

The Directors are aware that certain Shareholders may be unable or unwilling
to hold Ordinary Shares if the Cancellation is approved and subsequently
becomes effective. Such Shareholders should be aware that the Company will
evaluate a matched bargain facility to provide periodic liquidity
opportunities to shareholders should Cancellation take place.

Under the AIM Rules, it is a requirement that the Cancellation must be
approved by Shareholders holding not less than 75 per cent. of votes cast by
Shareholders at the General Meeting. Accordingly, the Notice of General
Meeting set out in Part II of this Document contains a special resolution to
approve the Cancellation.

Furthermore, Rule 41 of the AIM Rules requires any AIM quoted company that
wishes the London Stock Exchange to cancel the admission of its shares to
trading on AIM to notify shareholders and to inform the London Stock Exchange
separately of its preferred cancellation date at least 20 business days prior
to such date. Cancellation will not ordinarily take effect until at least five
clear Business Days have passed following the passing of the Cancellation
Resolution. In accordance with Rule 41 of the AIM Rules, the Directors have
notified the London Stock Exchange of the Company's intention, subject to the
Cancellation Resolution being passed at the General Meeting and Admission of
the Fundraising Shares not becoming effective on or before 22 December 2023.

Accordingly, if the Fundraising Resolutions are not passed or Admission of the
Fundraising Shares does not otherwise become effective on or before 22
December 2023 and the Cancellation Resolution has been passed, the
Cancellation will become effective at 7:00 a.m. on 2 January 2024. If the
Cancellation becomes effective, Singer Capital Markets will cease to be the
Nominated Adviser of the Company and the Company will no longer be required to
comply with the AIM Rules.

The principal effects of the Cancellation would include the following:

•          there would be no formal market mechanism enabling the
Shareholders to trade Ordinary Shares;

•          it is possible that, following the Cancellation, the
liquidity and marketability of the Ordinary Shares of the Company would be
further reduced and their value adversely affected;

•          the Ordinary Shares may be more difficult to sell
compared to shares of companies traded on AIM (or any other recognised market
or trading exchange);

•          in the absence of a formal market and quote, it may be
difficult for Shareholders to determine the value of their investment in the
Company at any given time;

•          the regulatory and financial reporting regime applicable
to companies whose shares are admitted to trading on AIM would no longer
apply;

•          Shareholders would no longer be afforded the protections
given by the AIM Rules, such as the requirement to be notified of price
sensitive information or certain events and the requirement that the Company
seek shareholder approval for certain corporate actions, where applicable,
including substantial transactions, reverse takeovers, related party
transactions and fundamental changes in the Company's business, including
certain acquisitions and disposals;

•          the levels of disclosure and corporate governance within
the Company may not be as stringent as for a company quoted on AIM;

•          the Company would no longer be subject to UK MAR
covering inside information and other matters;

•          the Company would no longer be required to publicly
disclose any change in major shareholdings in the Company under the Disclosure
Guidance and Transparency Rules;

•          Singer Capital Markets will cease to be Nominated
Adviser to the Company;

•          whilst the Company's CREST facility would remain in
place immediately post the Cancellation, the Company's CREST facility may be
cancelled in the future and, although the Ordinary Shares would remain
transferable, they may cease to be transferable through CREST (in which case,
Shareholders who hold Ordinary Shares in CREST will receive share
certificates);

•          stamp duty would be due on transfers of shares and
agreements to transfer shares unless a relevant exemption or relief applies to
a particular transfer; and

•          the Cancellation may have personal taxation consequences
for Shareholders. Shareholders who are in any doubt about their tax position
should consult their own professional independent tax adviser.

The above considerations are not exhaustive, and Shareholders should seek
their own independent advice when assessing the likely impact of the
Cancellation on them.

For the avoidance of doubt, the Company will remain registered with the
Registrar of Companies in England and Wales in accordance with and, subject to
the Companies Act, notwithstanding the Cancellation.

If Cancellation takes place and the Company were able to source alternate
funds, the Company currently intends to continue to provide certain facilities
and services to Shareholders that they currently enjoy as shareholders of an
AIM company. The Company would, subject to continuing as a going concern:

•          continue to communicate information about the Company
(including annual accounts) to its Shareholders, as required by the Companies
Act;

•          continue, for at least 12 months following Cancellation,
to maintain its website, www.microsaic.com (http://www.microsaic.com) and to
post updates on the website from time to time, although Shareholders should be
aware that there will be no obligation on the Company to include all of the
information required under the Disclosure Guidance and Transparency Rules,
Rule 26 of the AIM Rules or to update the website as required by the AIM
Rules; and

•          evaluate whether a matched bargain facility could be
made available to shareholders who wish to buy or sell shares following
Cancellation.

There would be no change to the composition of the Board immediately following
Cancellation. Subject to the availability of sufficient funding following
Cancellation, the Board would seek to recruit at least one further independent
Non-executive Director and to appoint at least one executive director to
ensure appropriate standards of corporate governance.

7.             Transactions in the Ordinary Shares prior to and
post the proposed Cancellation

7.1         Prior to Cancellation

Shareholders should note that the current suspension of the Company's shares
from admission to trading on AIM is not expected to be lifted unless and until
the material uncertainy regarding the Company's financial position is resolved
and it is clear that the Fundraising is likely to be completed. Although the
Company expects to secure binding conditional commitments for the Fundraising
prior to the General Meeting, the publication of the Annual Report and the
Interim Results are only likely to occur shortly before the expected
restoration of the New Ordinary Shares and the admission of the Fundraising
Shares.

In the event that it becomes apparent that one or more conditions or necessary
steps prior to restoration cannot be met or completed respectively, and are
incapable of resolution such that the Fundraising cannot complete by 22
December 2023, the suspension of the Company's shares from trading on AIM
would not be lifted and Shareholders would not have an opportunity to trade in
the Company's Ordinary Shares prior to Cancellation.

7.2         Dealing and settlement arrangements in the event of
Cancellation

The Directors are aware that Shareholders may wish to acquire or dispose of
Ordinary Shares following Cancellation. Should Cancellation be approved by
Shareholders at the General Meeting and the Company not proceed into a
liquidation process, the Company may explore alternative 'matched bargain
facilities' to enable investors to trade in its shares following the possible
Cancellation, although the timing for implementation and details of operation
of such a facility are not yet known, and the facility could, if implemented,
be withdrawn in future at the Company's discretion.

Full details would be made available to Shareholders on the Company's website
at https://www.microsaic.com/investors/ (https://www.microsaic.com/investors/)
and directly by letter or e-mail (where appropriate).

 

As noted above, if Shareholders approve the Cancellation Resolution and the
Fundraising Resolutions are not approved and/or Admission of the Fundraising
Shares does not become effective on or before 22 December 2023, it is
anticipated that the suspension of the Company's shares from admission to
trading on AIM would not be lifted prior to admission being cancelled, and
that the effective date of Cancellation would be 2 January 20234.

 

8.             Recent historical trading, financial performance
and position

The Company's trading performance improved in 2022 against the prior year,
with higher sales and reduced losses.

The unaudited revenues for the year were £1.57m, representing an uplift from
the £906k achieved in 2021. However, of this revenue, sales to the related
party DeepVerge plc ("DeepVerge") or its subsidiaries totalled £1,248,828
(plus VAT), of which they have only settled £118,659 (plus VAT) leaving a
balance of £1,130,169 (plus VAT) outstanding.  On 19 April 2023, DeepVerge
announced that it could not meet its obligation to creditors and that a
payment plan had been tentatively agreed with Microsaic. However, on 26 June
2023, DeepVerge plc announced that it would no longer be in a position to
support its subsidiaries and was anticipating a sale or liquidation of these
assets. The impact of this on the Company has been recognised as an adjusting
event after the reporting date with £1,130,169 charged as an impairment of
related party debt. Excluding revenues from DeepVerge, revenues for 2022 were
only £318,869, significantly below the prior year. Only 5 units were shipped
in 2022 before year end, compared to 19 in 2021. The results for 2022 and the
prospects for 2023 and beyond therefore need to be considered on the basis
that no further payments and no further revenues are expected to be received
from DeepVerge or its subsidiaries.

Gross margin rose to 61%, up from 42% (restated) in the previous year. This is
attributed to the higher margins achieved on new business development which
began in April 2022.

The Adjusted EBITDA loss for the year was £2.04m, an increase from the
£1.77m adjusted EBITDA loss in 2021. This includes the above-mentioned costs
in relation to the impairment of related party debt of £1.13m (2021: £nil).
Adjusted EBITDA as a measure of underlying operating profit or loss is
calculated by adding back professional fees relating to corporate activities
and share based payments to EBITDA.

Unaudited revenues for the first half of 2023 were approximately £390k, with
losses before tax of £1.1m. Further details will be published prior to
readmission of the share to trading on AIM.

 

9.             Current Trading, Strategy and Prospects

The supply chain issues which hindered production in 2022 were resolved,
enabling production to be restarted in May 2023, with 7 units expected to be
shipped by the end of 2023. As of November 2023, there is an equipment sales
pipeline of approximately 19 units in addition to service and spares revenue.
Although it is unlikely that all of these prospective sales will become firm
orders in the short-term, the Board considers that the Company's cost base,
excluding costs attributable to remaining a public company, are a level such
that they can be supported by a similar level of unit sales to 2022 and 2023.
The Fundraising is intended to raise sufficient funds for the Company to
remain public and to continue trading in the short-term, assuming only a low
level of sales. Higher sales of existing products will require careful
management of working capital but the minimum net proceeds of the Fundraising
are expected to provide an element of contingency should this arise. A
downside sensitivity has also been analysed assuming no unit sales and income
arising from contracted service revenue only, which supports the adoption of
the going concern basis of preparation of the Annual Report, assuming the
minimum net proceeds from the Fundraising are attained.

A further modest cash inflow of up to c. £250,000 may be received in 2024 in
the event that the Company is successful in its latest R&D tax credit
claim, although the benefit of this could be offset by other contingencies
(including the possibility of a fine from the London Stock Exchange in
relation to the timing of disclosure of the amount outstanding from DeepVerge
plc). At the date of this document there is no certainty on either matter and
neither is included in the Company's working capital assessment, save for a
general contingencies allowance.

The Board has conducted a thorough assessment of the Company's cash reserves
and has made due and careful enquiry as to the Company's working capital
requirements. As of 31 December 2022, the Company had £1.2 million (31
December 2021: £3.5 million) in cash and bank balances. As at 12 November
2023, the cash and bank balances had fallen to £83k, which is in line with
recent communications on the cash runway. As a result, the Board now
anticipates a significant challenge managing working capital over the next 12
months, and the Board recognises that there will be material uncertainty over
the going concern status of the Company in the very near-term if the proposed
Fundraising does not complete.

Therefore, Shareholders should be aware of the material uncertainty
surrounding the potential need for additional funding to remain a going
concern and the associated risks involved including the uncertain level of
sales to be completed. The Company will actively monitor and assess its
financial position to ensure that it can meet the demands of its plans
effectively.

The very significant cost reduction exercise announced on 3 November 2023 is
expected to result in the Company remaining as an operating business, with
access to sufficient resources (including external contractors) to maintain
production of the current mass spectrometer machines and the continuation of
existing trading relationships, but in a very different position to that
expected at the start of 2023. Following this significant reorganisation, the
Board will focus on stabilising the business whilst commercialising the
Company's ProteinID and PFAS detection technologiesand exploring the potential
for growth including exploring potential business combinations and seeking
additional capital to fund further recovery and growth. The Company's
cost-cutting and working capital plans assume only a very limited number of
unit sales of existing on-market technology, together with some contracted
service revenues from the support of units already operated by end customers.

In addition to the financial risks outlined above, the significant
reorganisation of the business means that the Company faces higher operational
risks including the loss of key employees and consultants and subsequent
difficulty in recruiting suitable replacements, and the risk that sales growth
is too slow. The Company's growth trajectory and the pursuit of a cash flow
positive position are likely to necessitate additional funding from sources
such as debt or equity. These considerations pose risks to the Company's
ability to sustain its operations as a going concern.

As at the date of this document, there are no active discussions with regard
to other corporate developments, save for those with prospective partners for
taking new product applications to market. However, the Company may resume
dialogue with prospective providers of further funding for the business, which
includes financial backers of potentially complementary businesses, it is
likely that additional capital may also be needed in that context. There can
be no certainty of any transaction or associated fundraising ensuing in this
regard.

10.          General Meeting

The General Meeting will be held at the offices of Turner Pope Investments
(TPI) Limited, 8 Frederick's Place, London, EC2R 8AB, at 9:30 a.m. on 19
December 2023, at which the following Resolutions will be proposed:

Resolution 1 is an ordinary resolution that every 625 Existing Ordinary Shares
be consolidated into one Consolidated Ordinary Share of 6.25p each. The effect
of Resolution 1 would be that the 6,361,365,625 then issued Existing Ordinary
Shares of 0.01p as at 7:59 p.m. on the date of the General Meeting would be
consolidated into 10,178,185 Consolidated Ordinary Shares of 6.25p each. The
Directors consider that the Share Consolidation will result in a more
appropriate share capital structure for the Company.

Resolution 2 is an ordinary resolution (conditional upon the passing of
Resolution 1) and in accordance with section 618 of the Companies Act 2006
("Act"), with effect from 8:00 p.m. on the date of the General Meeting every
one Consolidated Ordinary Share of 6.25 pence be sub-divided into one New
Ordinary Share of 0.001 pence, such New Ordinary Share having the same rights
and being subject to the same restrictions as the Existing Ordinary Shares as
set out in the Company's articles of association for the time being, and one
Deferred Share of 6.249 pence, such Deferred Shares having the same rights and
being subject to the same restrictions as the existing deferred shares of 0.24
pence in the capital of the Company as set out in the Company's articles of
association for the time being (but with a different nominal value).

Resolution 3 is a special resolution (conditional upon the passing of
Resolution 1 and 2) to adopt the New Articles to include the Deferred Shares'
rights and restrictions and requires the approval of not less than 75 per
cent. of the votes cast by Shareholders (whether present in person or by
proxy) at the General Meeting.

Resolution 4 is an ordinary resolution to authorise the directors of the
Company to allot shares in the Company (and rights over such shares) up to an
aggregate nominal amount of £2,000 being equal to 200,000,000 New Ordinary
Shares and requires the approval of not less than 50 per cent. of the votes
cast by Shareholders (whether present in person or by proxy) at the General
Meeting.

Resolution 5 is a special resolution (conditional on the passing of Resolution
4), to empower the directors of the Company to issue and allot 200,000,000 New
Ordinary Shares on a non-pre-emptive basis and requires the approval of not
less than 75 per cent. of the votes cast by Shareholders (whether present in
person or by proxy) at the General Meeting.

Resolution 6 (the Cancellation Resolution) is a special resolution to approve
Cancellation if the Fundraising and restoration of Shares to trading on AIM do
not take place. Resolution 6 is conditional, pursuant to Rule 41 of the AIM
Rules, upon the approval of Shareholders holding not less than 75 per cent. of
the votes cast by Shareholders (whether present in person or by proxy) at the
General Meeting. Cancellation will only take place if, for any reason,
Admission of the Fundraising Shares does not become effective on or before 22
December 2023.

11.          Action to be taken in relation to the General Meeting

A Form of Proxy is enclosed with this Document for use in connection with the
General Meeting.

You are strongly encouraged to complete, sign and return your Form of Proxy in
accordance with the instructions printed thereon so as to be received, by post
or, during normal business hours only, by hand to Neville Registrars Limited,
Neville House, Steelpark Road, Halesowen, B62 8HD, as soon as possible but in
any event so as to arrive by not later than 9:30 a.m. on 15 December 2023 (or,
in the case of an adjournment of the General Meeting, not later than 48 hours
before the time fixed for the holding of the adjourned meeting (excluding any
part of a day that is not a Business Day)).

Appointing a proxy in accordance with the instructions set out above will
enable your vote to be counted at the General Meeting in the event of your
absence. The completion and return of a Form of Proxy will not preclude you
from attending and voting in person at the General Meeting, or any adjournment
thereof, should you wish to do so.

12.          Recommendation

The Directors unanimously consider the Fundraising, or in the event that
Completion does not occur then the alternative of Cancellation, to be in the
best interests of the Company and its Shareholders as a whole and, therefore,
unanimously recommend that you vote in favour of the Resolutions at the
General Meeting as Nigel Burton (being the Director who is interested in
Ordinary Shares) intends to vote, or procure the vote in respect of, in
aggregate, 300,500,000 Ordinary Shares to which he is beneficially entitled
(equivalent to 480,800 New Ordinary Shares and representing approximately 4.72
per cent. of the total voting rights in the Company's share capital).

Certain principal Shareholders have also indicated verbally that they are
supportive of the Resolutions.

Yours faithfully,

Bob Moore

Acting Executive Chairman

 

 

 

 

 

 

DEFINITIONS

The following definitions apply throughout this Document, unless the context
requires otherwise:

 

 

 "Admission"                           admission of the relevant shares to trading on AIM becoming effective in
                                       accordance with the AIM Rules;

 "AIM"                                 AIM, the market operated by the London Stock Exchange;

 "AIM Rules"                           the rules and guidance for companies whose shares are admitted to trading on
                                       AIM entitled "AIM Rules for Companies" published by the London Stock Exchange,
                                       as amended from time to time;

 "AIM Rules for Nominated Advisers"    the rules and guidance for nominated advisers published by the London Stock
                                       Exchange, as amended from time to time, under which a nominated adviser has
                                       obligations owed separately and distinctly to the London Stock Exchange;
 "Annual Report"                       the audited annual report and accounts for the year ended 31 December 2022,
                                       previously due to have been published by 30 June 2023;
 "Business Day"                        a day (excluding Saturdays, Sundays and public holidays in England and Wales)
                                       on which banks are generally open for the transaction of normal banking
                                       business in London;
 "Cancellation"                        the cancellation of admission of the Existing Ordinary Shares or New Ordinary
                                       Shares to trading on AIM in accordance with Rule 41 of the AIM Rules, subject
                                       to the Cancellation Resolution becoming effective;

 "Cancellation Resolution"             Resolution 6 set out in the Notice of General Meeting;
 "Company" or "Microsaic Systems plc"  Microsaic Systems plc, a company incorporated in England and Wales with
                                       registered number 03568010 and having its registered office at GMS House,
                                       Boundary Road, Woking, Surrey, GU21 5BX;
 "Companies Act"                       the Companies Act 2006 (as amended from time to time);
 "Completion"                          Admission of the Fundraising Shares becoming effective;
 "Consolidated Ordinary Shares"        the ordinary shares in the capital of the Company of 6.25 pence each (expected
                                       to be 10,178,185 of such shares) immediately following the Share Consolidation
                                       becoming effective;

 "CREST"                               the relevant system (as defined in the CREST Regulations) in respect of which
                                       Euroclear UK & International Limited is the operator (as also defined in
                                       the CREST Regulations);
 "CREST Regulations"                   the Uncertificated Securities Regulations 2001 (SI2001/3755) (as amended from
                                       time to time);
 "Deferred Shares"                     the deferred shares in the capital of the Company of 6.249 pence each
                                       (expected to be 10,178,185 of such shares) immediately following the Share
                                       Capital Reorganisation becoming effective;

 "Directors" or "Board"                the directors of the Company, whose names are set out in Part I of this
                                       Document;
 "Disclosure Guidance and              the disclosure rules and transparency rules made by the UK Financial Conduct

                                     Authority pursuant to section 73A of FSMA;
 Transparency Rules"
 "Existing Ordinary Shares"            the existing ordinary shares in the capital of the Company of 0.01 pence each;
 "Interim Results"                     the unaudited financial results for the six months ended 30 June 2023,
                                       originally due to have been published by 30 September 2023;
 "FSMA"                                the Financial Services and Markets Act 2000 (as amended from time to time);

 "Fundraising"                         the proposed fundraising by the Company to raise at not less than £0.6
                                       million in net proceeds for the Company;

 "Fundraising Resolutions"             Resolutions 1 to 5 set out in the Notice of General Meeting;
 "Fundraising Shares"                  the New Ordinary Shares to be issued in connection with the Fundraising;
 "General Meeting"                     the general meeting of the Company convened for 9:30 a.m. on 19 December 2023
                                       and any adjournment thereof, Notice of which is set out in Part II of this
                                       Document;
 "Group"                               Microsaic Systems plc and its subsidiary undertakings (as such term is defined
                                       in section 1162 of the Companies Act) from time to time;
 "London Stock Exchange"               London Stock Exchange plc;
 "New Articles"                        the amended articles of association of the Company proposed to be adopted
                                       pursuant to Resolution 3 set out in the Notice of General Meeting;

 "New Ordinary Shares"                 the Ordinary Shares in the capital of the Company of 0.001 pence each assuming
                                       completion of the Share Capital Reorganisation;

 
 "Notice of General Meeting" or        the notice of the General Meeting which is set out in Part II of this

                                     Document;
 "Notice"
 "Ordinary Shares"                     the ordinary shares in the capital of the Company from time to time;
 "Registrars"                          Neville Registrars Limited of Neville House, Steelpark Road, Halesowen, B62
                                       8HD;
 "Regulatory Information Service"      has the meaning given to it in the AIM Rules for any of the services approved
                                       by the London Stock Exchange for the notification of AIM announcements and
                                       included within the list maintained on the website of the London Stock
                                       Exchange;
 "Resolutions"                         the resolutions to be proposed at the General Meeting in the form set out in
                                       Part II and "Resolution" means any one of them;
 "Share Capital Reorganisation"        the proposed Share Consolidation and Sub-division;
 "Share Consolidation"                 the proposed consolidation of every 625 Existing Ordinary Shares into one
                                       Consolidated Ordinary Share;
 "Sub-division"                        the proposed sub-division of the Consolidated Ordinary Shares into 10,178,185
                                       New Ordinary Shares of 0.001 pence each and 10,178,185 Deferred Shares of
                                       6.249 pence each;

 "Shareholders"                        holders of Ordinary Shares from time to time and "Shareholder" means any one
                                       of them;
 "Singer Capital Markets"              Singer Capital Markets Advisory LLP, registered in England and Wales with
                                       registered number OC364131 and whose registered office is at One Bartholomew
                                       Lane, London, EC2N 2AX;

 "Turner Pope Investments"             Turner Pope Investments (TPI) Limited, registered in England and Wales with
                                       registered number 09506196, and whose registered office is at 8 Frederick's
                                       Place, London, England, EC2R 8AB;

 "UK MAR"                              Regulation (EU) (No 596/2014) of the European Parliament and of the Council of
                                       16 April 2014 on market abuse to the extent that it forms part of the domestic
                                       law of the United Kingdom including by virtue of the European Union
                                       (Withdrawal) Act 2018 (as amended by virtue of the European Union (Withdrawal
                                       Agreement) Act 2020);
 "United Kingdom" or "UK"              the United Kingdom of Great Britain and Northern Ireland; and
 a reference to "£", "pence" or "p"    pounds sterling, being the lawful currency of the UK.

 

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