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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Bioseek | LSE:ATD | London | Ordinary Share | GB0009231639 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMATD
RNS Number : 6437H
Asterand PLC
13 July 2012
13 July 2012
Asterand plc
("Asterand" or the "Company")
POSTING OF SHAREHOLDER CIRCULAR
Proposed disposal of the Human Tissue Business
Proposed cancellation of the listing of the Ordinary Shares on the Official List and the admission to trading of the Ordinary Shares on the Main Market of the London Stock Exchange
Proposed change of name to BioSeek plc
and
Notice of General Meeting
The Board of Asterand announces that a circular relating to the proposed Disposal of the Human Tissue Business (the "Circular") has been approved by the UK Listing Authority and is being posted today to Shareholders.
The Circular contains a notice convening a General Meeting of Shareholders at the offices of Daniel Stewart & Company Plc, Becket House, 36 Old Jewry, London EC2R 8DD at 11.00 a.m. on 30 July 2012, at which, amongst other things, approval for the Disposal, Cancellation and Change of Name Resolutions will be sought.
The Circular will be made available for inspection during normal working hours on any weekday (Saturdays, Sundays and public holidays excepted) at the offices of Bird & Bird LLP, 15 Fetter Lane, London EC4A 1JP and at the registered office of Asterand plc, 2 Orchard Road, Royston, Hertfordshire SG8 5HD. The Circular will also shortly be made available for viewing on the Company's website at www.asterand.co.uk and has been submitted to the National Storage Mechanism, where it will be available for inspection at www.hemscott.com/nsm.do.
The terms of the Disposal Agreement, in all material respects, remain as notified by the Company on 11 June 2012.
Subject to the Cancellation Resolution (which is being proposed as a special resolution) being passed by the Shareholders at the General Meeting, the Company intends to seek the Cancellation of the listing of the Ordinary Shares and the admission to trading of the Ordinary Shares on the Main Market of the London Stock Exchange. Under the Listing Rules, a cancellation can be effected by a company after securing a special resolution (requiring at least 75 per cent. approval of those shareholders who vote) in general meeting and the expiration of a period of not less than 20 business days from the date of such shareholder approval. The Board proposes to make application as soon as possible for the Cancellation to be effected. Accordingly, subject to the passing of the Cancellation Resolution, it is anticipated that the date of the Cancellation will be at 8.00 a.m. on 29 August 2012.
Appendices I to IV below have been extracted with out material adjustment from the Circular. Shareholders should read these appendices in conjunction with the Circular. The Circular should be read carefully and in its entirety before making a decision with respect to the Proposals.
The Directors would like to draw Shareholders attention to the qualified working capital statement contained in paragraph 17 of Appendix I below and of the Circular which shows a material difference in the maximum working capital requirement to that which was announced by the Company on 11 June 2012.
For further information, please contact:
Asterand plc Jack Davis, Chairman and Interim Tel: + 44 (0) 1763 211 600 / + Chief Executive Officer 1 (313) 263-0960 Alan Fishman, Interim Chief As above Financial Officer Daniel Stewart & Company Plc Antony Legge Tel: +44 (0) 20 7776 6550 Matt Wilson Beaumont Cornish Limited - Sponsor Roland Cornish Tel: +44 (0) 20 7628 3396 Emily Staples Covington Associates LLC Steven Mermelstein Tel: +1 (914) 420-4510 David Wood
A copy of this announcement will be available at www.asterand.co.uk. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.
Daniel Stewart & Company Plc, which is authorised and regulated in the United Kingdom by the FSA, is acting exclusively for the Company and no-one else in connection with the Disposal and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Daniel Stewart & Company Plc nor for giving advice in relation to the Disposal or any other matters referred to in this announcement.
Beaumont Cornish Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company as sponsor under the requirements of the Listing Rules, in relation to the Disposal and is neither taking responsibility for the commercial assessment of the Disposal, which remains the sole responsibility of the Board, nor for any matters outside the duties of a sponsor, as prescribed by the Listing Rules, nor is it advising any other person and accordingly will not be responsible to any person other than the Company for providing the protections afforded to the clients of Beaumont Cornish Limited or for providing advice in relation to the Disposal or any other matters referred to in this announcement.
Important notice
The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, any applicable restrictions or requirements. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction. This announcement has been prepared for the purposes of complying with English law and the Listing Rules and the applicable rules and the information disclosed may not be the same as that which would have been disclosed if this Circular had been prepared in accordance with the laws and regulations of any jurisdiction outside of England and Wales. The statements contained in this announcement are made as at the date of this announcement, unless some other time is specified in relation to them, and publication of this announcement shall not give rise to any implication that there has been no change in the facts set forth herein since such date. Nothing contained in this announcement shall be deemed to be a forecast, projection or estimate of the future financial performance of the Company, the Group, the Continuing Group or the Human Tissue Business except where otherwise stated.
Forward looking statements
This announcement contains certain "forward-looking statements" with respect to the financial condition, results of operations and business of the Company, the Group and the Continuing Group and certain plans and objectives of the members of the Group. In some cases, these forward-looking statements can be identified by the fact that they do not relate to historical or current facts and by the use of forward-looking terminology, including the terms "anticipates", "believes", "estimates", "expects", "intends", "plans", "prepares", "goal", "target", "will", "may", "should", "could" or "would" or, in each case, their negative or other variations or comparable terminology. These statements are based on assumptions and assessments made by the Directors in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe appropriate. Investors should specifically consider the factors identified in this announcement that could cause actual results to differ before making an investment decision. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, the Group or the Continuing Group, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. They are also based on numerous assumptions regarding the Company's, the Group's and/or the Continuing Group's present and future business strategies and the environment in which it is believed that the Continuing Group will operate in the future. These forward-looking statements speak only as at the date of this announcement. Except as required by the FSA, the Listing Rules, the Disclosure and Transparency Rules, the London Stock Exchange or applicable law, the Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this announcement.
APPENDIX I
LETTER FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF ASTERAND PLC
1. Introduction
On 11 June 2012, the Company announced an agreement for the disposal of the Human Tissue Business, to the Buyers, subject to, amongst other matters, Shareholder approval, for an aggregate cash consideration of USD9,000,000. The Disposal is necessary to raise funds to repay the Secured Debt, in respect of which the Company received notices of default on 4 October 2011 and 17 October 2011 on the BioSeek Loan Notes and the SVB Debt respectively.
Further information relating to the principal terms and conditions of the Disposal is outlined in more detail in Part VI of the Circular.
The purpose of the Circular is to provide you with information on, and to outline the reasons for, the Proposals and to explain why the Board considers them to be in the best interests of the Company and the Shareholders as a whole and why it unanimously recommends that Shareholders vote in favour of the Resolutions.
In view of its size, the Disposal constitutes a Class 1 transaction for the purpose of the Listing Rules and is, therefore, subject to the approval of Shareholders. Following Completion, the Continuing Group will be significantly reduced in size and, having considered the costs and regulatory requirements of remaining a publicly quoted company and the likelihood of raising further funds as an unlisted entity as opposed to a listed entity, the Board believes that the best course of action is to cancel the listing of the Ordinary Shares on the Official List and the admission to trading of the Ordinary Shares on the Main Market of the London Stock Exchange. Accordingly, in addition to seeking Shareholder approval for the proposed Disposal, the Board is also unanimously recommending that Shareholders approve the proposed Cancellation. This process is outlined in more detail in paragraphs 10 and 11 of this Appendix I.
The Directors have convened the General Meeting for 11 a.m. on 30 July 2012 (or as soon thereafter as the Annual General Meeting concludes or is adjourned), at which Shareholders will be asked to consider, and if thought fit, approve the Resolutions in order to implement the Proposals. Details of the General Meeting and the Resolutions are contained in the notice of General Meeting set out at the end of the Circular.
Shareholders should note that if the Disposal Resolutions are not passed, it is likely that the Company will be placed immediately into administration.
Shareholders should read the whole of the Circular and not just rely on the summarised information or summarised financial information contained in this letter. In particular your attention is drawn to paragraph 17 of this Appendix I (Working Capital Statement) and also to the Risk Factors set out in Part II of the Circular.
2. Background to and reasons for the Disposal
In December 2010, the Company announced that it had secured a USD3,000,000 term loan and revolving credit line from Silicon Valley Bank which could be used to satisfy the Deferred Consideration due on the BioSeek Acquisition. Subsequently, in April 2011, the Company, having agreed with the BioSeek Shareholders that the Deferred Consideration was to be satisfied solely with cash, announced that, as a consequence of poor trading conditions in March 2011 resulting in an inability to draw down on the revolving credit line, it had entered into new financing arrangements as a replacement for such revolving credit line and in order to satisfy the Deferred Consideration, leaving only the term loan in place. Under these new financing terms USD2,500,000 was paid to the BioSeek Shareholders in July 2011 and the remaining USD6,000,000 was satisfied by the issue of the BioSeek Loan Notes.
The Company continued to experience challenging and volatile trading conditions and in its interim results announcement on 31 August 2011, it announced a reduced outlook for the year as a whole and the need to raise additional working capital.
On 24 October 2011 the Company announced that it had received notices of default from SVB and from the BioSeek Loan Note Holders. It was announced that the loans repayable to SVB were payable on demand and that, in respect of the BioSeek Loan Notes, the Company had 120 days to remedy the situation. Accordingly, the Company commenced a formal sale process for the entire issued and to be issued ordinary share capital of the Company.
It was announced on 7 November 2011 that the Company had received further notice from the BioSeek Loan Note Holders to the effect that the conditions for the Company to avail itself of the 120 day cure period had not been met and as such the BioSeek Loan Notes were also payable on demand.
After several months of talks with potential buyers, the Board was unable to secure an offer for the Group. Instead, letters of interest were received from two separate buyers for the assets of each of its two businesses: the BioSeek Business and the Human Tissue Business. As announced on 30 April 2012, the Company entered into negotiations with such potential buyers and ended the formal sale process for the entire issued and to be issued ordinary share capital of the Company.
On 2 May 2012, the Company announced that the potential bidder of the BioSeek Business had informed the Company that it no longer wished to pursue the acquisition and had released the Company from an agreed exclusivity provision.
On 10 June 2012, the Company entered into the Disposal Agreement, pursuant to which the Selling Group will, subject to the terms and conditions of the Disposal Agreement, dispose of the Human Tissue Business. The proceeds of the Disposal of USD9,000,000 in conjunction with some of the Existing Cash Resources will, if the Disposal is approved by Shareholders, satisfy in full the Company's repayment obligations to the Secured Lenders.
The receipt of the notices of default on the Secured Debt necessitated action by the Board to avoid the immediate potential loss of all Shareholder value. The Board considered alternatives to the Disposal, including an equity fundraising, but encountered limited opportunities in light of, inter alia, the Company's lack of profitability, the capital requirement for inventory and the reluctance of finance providers to invest in equity to repay debt. The Board believes that the prospects for the Continuing Group after the Disposal and repayment of the Secured Debt are much greater than with any other option currently available.
The Board's ability to negotiate with potential purchasers of either the Group, the BioSeek Business or the Human Tissue Business or with potential funders was hampered by the Group's decreasing cash position and the need to reach an agreement before its financial resources were exhausted. Despite this the Board was able to negotiate a competitive price for the Human Tissue Business. In deciding to proceed with the Disposal to the Buyers the Board concluded that the aggregate purchase price of USD9,000,000 offered by the Buyers was an acceptable outcome in the circumstances as the business has been loss-making in recent years and requires significant capital for its human tissue inventory. Since commencing the formal sale process in October 2011, the Board has evaluated a number of proposals for the sale of the Human Tissue Business and has taken into account a number of factors when assessing these proposals, including the price offered. In view of the level of working capital shortfall facing the Company, the Board has placed significant weight on the level of certainty that could be attributed to an offer, which allowed settlement of the Secured Debt, within an acceptable timeframe and that would avoid the Company being placed into administration. Accordingly, the Board resolved to enter into the Disposal Agreement with the Buying Group and to unanimously recommend that Shareholders vote in favour of the Proposals.
Following the conclusion of the formal sale process, the signing of the Disposal Agreement and the receipt of irrevocable undertakings representing over 50 per cent. of the existing issued ordinary share capital to vote in favour of the Disposal, the Company received a materially higher non-binding offer for the Human Tissue Business from a third party. The net proceeds of the late offer could potentially fund the aggregate further funding requirement of the Continuing Group of approximately USD618,000 (as set out in more detail in paragraph 17 of this Appendix I), and accordingly the Board has been obliged to give due consideration to the merits of this offer and to its decision to unanimously recommend that Shareholders vote in favour of the Disposal Resolutions. Against the benefits to Shareholders and creditors of realising a materially higher amount for the Human Tissue Business, the Board has had regards to, amongst other things: (i) the certainty of completing the Disposal by having entered into a Disposal Agreement which is a binding contract with the Buying Group; (ii) the exclusivity provisions in the Disposal Agreement which prevent any alternative proposal for the sale of the Human Tissue Business being pursued until the Disposal Agreement has lapsed without the risk of exposing the Company to significant liabilities to the Buying Group; (iii) that the holders of over 50 per cent. of the existing issued ordinary share capital have given irrevocable undertakings to vote in favour of the Disposal; (iv) that the Company may not have the necessary cash resources to cover the time period within which an alternative proposal could be negotiated following the lapsing of the Disposal Agreement and that failure to proceed with the Disposal within the envisaged timeframe could result in the Company being placed into administration; and (v) that despite the higher value of the late offer, there is no certainty that a deal could ultimately be concluded at this price or at all. Notwithstanding the alternative proposal, which the Board does not consider to be a viable alternative given points (i) to (v) above, it therefore remains the Board's intention to vote in favour of the Disposal Resolutions and unanimously recommend that Shareholders also vote in favour. The recommendation of the Board is set out in paragraph 18 below.
Whilst the proceeds of the Disposal, together with some of the Existing Cash Resources, will enable the Continuing Group to settle in full the Secured Debt, the Continuing Group continues to experience financing problems and the Board continues to explore a number of alternatives for BioSeek or the BioSeek Business including, inter alia, its disposal, or the securing of additional and/or interim funding from Shareholders and/or third parties. Whilst the Board cannot be certain that it will be able to raise sufficient funds to avoid the Company being placed into administration, it believes that it is more likely to be able to do so if the Cancellation Resolution is approved by Shareholders. The Board believes that there are limited funding options available to the Continuing Group in the UK, and that potential US funders would have a preference for unlisted investments which do not have the costs associated with maintaining a listing.
Your attention is drawn to Part II (Risk Factors) of the Circular.
3. Principal terms of the Disposal
The Company, Asterand UK and Asterand US entered into the Disposal Agreement on 10 June 2012 with Stemgent, the UK Buyer and the US Buyer. The Human Tissue Business will be sold to the Buyers for an aggregate cash consideration of USD9,000,000 subject to certain adjustments (including a working capital adjustment). The Disposal will be effected by way of a sale of the assets of the Human Tissue Business by the Sellers (both being wholly owned subsidiaries of the Company). Completion of the Disposal Agreement is subject to the following conditions being satisfied:
(a) the representations and warranties given by the Selling Group and the Buying Group remaining true and correct in all material respects;
(b) the Sellers and the Buyers having performed and complied in all material respects with their obligations under the Disposal Agreement;
(c) the Company obtaining the consent of Shareholders to the Disposal at the General Meeting;
(d) there being no event, transaction, condition or change since 31 December 2011 which has had or could be reasonably expected to have a material adverse effect on the Human Tissue Business, the assets and/or liabilities to be acquired and assumed by the Buyers pursuant to the Disposal Agreement;
(e) all necessary third party consents having been obtained. These consents are required from certain contractual counterparties of the Human Tissue Business and are expected to be received prior to the date of the General Meeting;
(f) there being no restraining order or injunction entered to materially prevent the Disposal and no action, suit or proceeding pending or threatened before any court or administrative agency of any federal, state, provincial, local, or foreign jurisdiction in which it is sought to restrain or prohibit or obtain damages or other relief in connection with the transactions contemplated by the Disposal Agreement or the operation of all or a material portion of the Human Tissue Business by the Sellers or the Buyers;
(g) the Sellers delivering to the Buyers releases of any and all liens (other than liens permitted by the Disposal Agreement) held by third parties with respect to any of the assets of the Human Tissue Business;
(h) BioSeek executing and delivering the Guarantee;
(i) each of the Company, BioSeek, the Sellers and the Buyers executing and delivering the Security and Contingent Escrow Agreement; and
(j) the delivery by the Sellers and the Buyers of certain documents.
As at the date of the Circular, all conditions remain to be satisfied.
The Disposal Agreement contains warranties from the Selling Group in favour of the Buyers of the kind customarily given in connection with asset purchase agreements. The total liability of the Selling Group for claims under the warranties shall not exceed 8 per cent. of the consideration paid by the Buyers, subject to certain limitations as more fully described in Part VI of the Circular.
BioSeek is to guarantee all of the Selling Group's indemnification obligations to the Buying Group pursuant to the terms of the Disposal Agreement. As additional security for such obligations, BioSeek will grant in favour of the Buyers a security interest in all of its assets and Asterand US will pledge all of the outstanding membership interests of BioSeek. Pursuant to the terms of such security arrangements, the Continuing Group may raise up to USD3,000,000 of secured senior debt without requiring the consent of the Buyers.
In the event that, after Completion, either or both Sellers fail to:
(a) make, when due, any indemnification payments that they are required to make under the Disposal Agreement; and/or
(b) fully satisfy any payments due under the working capital adjustment when due,
the Selling Group and BioSeek are required to issue a convertible promissory note in favour of the Buyers (a Promissory Note). The full amount owing under any Promissory Note shall bear interest at a rate of the lesser of: (i) 18 per cent. per annum, compounding monthly; or (ii) the maximum rate of interest permitted under applicable law. Any Promissory Note shall be due and payable upon demand and, in any event, upon a Change of Control or Qualified Financing. In addition, upon the closing of any equity financing by the Company, Asterand UK, Asterand US or BioSeek pursuant to which stock capital or other equity of the Company, Asterand UK, Asterand US or BioSeek is issued, the amounts outstanding under each Promissory Note shall be convertible, at the election of the Buyers, into shares or stock in the capital of the Company, Asterand UK, Asterand US or BioSeek (as appropriate).
In connection with the Disposal, which includes the right of the Buyers to the "Asterand" name, it is proposed to change the name of the Company to BioSeek plc. The Change of Name Resolution will, accordingly, be proposed at the General Meeting.
On 21 June 2012 the Company and Stemgent entered into a side letter to the Disposal Agreement (the Disposal Side Letter). In accordance with the terms of the Disposal Side Letter, if at any time on or prior to 31 December 2012, Stemgent or any of its affiliates disposes of all or any part of the Human Tissue Business by way of: (a) a sale of all or substantially all of the assets of the Human Tissue Business or the assets of any of the Buyers; (b) a sale of 50 per cent. or more of the securities of any of the Buyers; or (c) any business combination in which any entity who holds the assets of the Human Tissue Business does not survive, and the consideration received in connection therewith (net of any transaction costs) exceeds the purchase price under the Disposal Agreement, Stemgent shall pay to the Company an amount equal to 50 per cent. of such excess.
The principal terms and conditions of the Disposal Agreement are described in more detail in Part VI of the Circular.
4. Use of proceeds and financial effects of the Disposal
The net proceeds arising from the Disposal are expected to be approximately USD6,900,000 after deducting total transaction costs of approximately USD2,100,000 (of which approximately USD1,128,000 remain unpaid as at the date of the Circular).
At Completion, the proceeds of the Disposal of USD9,000,000 in conjunction with some of the Existing Cash Resources will be applied by the Continuing Group to pay down its liabilities as follows:
(a) repayment in full of the SVB Debt of approximately USD2,050,000; and (b) repayment in full of the BioSeek Loan Notes of approximately USD7,017,000.
The unaudited pro forma statement of net assets set out in Part IV of the Circular and Appendix III below illustrates the effects of the Disposal on the consolidated net assets of the Continuing Group had the Disposal occurred on 31 December 2011. In these circumstances total liabilities of the Continuing Group would be approximately USD7,316,000 and net assets would be approximately USD8,103,000.
The proceeds from the Disposal will strengthen the Continuing Group's financial position in that it will be in a position to repay the Secured Lenders in full which, given the working capital position of the Company explained in paragraph 17 of this Appendix I, may effectively buy the Company time to either find a buyer for BioSeek or the BioSeek Business or raise funds for the BioSeek Business. The Disposal is expected to be immediately earnings accretive as set out in the unaudited pro forma statement of earnings in Part IV of the Circular and Appendix III below.
Your attention is drawn to Part IV of the Circular and Appendix III below, which contain the unaudited pro forma statements of the net assets and earnings of the Continuing Group as at 31 December 2011 as if the Disposal had been undertaken at this date.
Financial information set out in this paragraph has been extracted without material adjustment from the unaudited pro forma statement of net assets set out in Part IV of the Circular and Appendix III below. Investors should read the whole Circular and not rely solely on this summarised financial information.
5. Information relating to the Human Tissue Business
The Human Tissue Business provides solutions that are directed at reducing the failure rate of compounds in clinical trials. Pharmaceutical researchers know that animal models do not provide a complete guide to drug response in humans, and so the incorporation of human tissue based models at all stages of the discovery process is gaining acceptance as scientists seek methods to improve decision making during the development of medicines.
The Human Tissue Business currently offers two primary products and services:
1. XpressBANK(TM); and 2. PhaseZERO(TM).
The XpressBANK(TM) biobank contains several thousand specimens from a broad range of therapeutics areas, offering delivery of specimens that meet the research requirements of its clients. Each specimen is accompanied by disease characterisation and clinical information, making the samples suited for drug discovery research. In addition to the bio repository, the business unit offers: custom isolations of specific cell lines and primary cells; custom designed tissue microarrays; and, bio fluids, including blood, serum and plasma.
The PhaseZERO(TM) platform offer human tissue-based drug discovery research services on a fee-for-service basis. The services platform leverages the Human Tissue Business' experience and proven track record in human tissue-based research. PhaseZERO(TM) includes:
1. XpressWay(R) - human gene expression in non-diseased and diseased tissue; 2. XpressArray(TM) - human protein expression profiling; 3. Human tissue-based and primary cell assays for metabolism and toxicity analysis; and
4. 'Good Laboratory Practice' compliant preclinical safety study services to pharmaceutical and biotech clients.
A summary of the unaudited trading results for the Human Tissue Business for the three years ended 31 December 2011 (on an IFRS basis) is set out below.
Hot Features
Premium
For and as For and as For and as
at at at
31 December 31 December 31 December
USD'000 2011 2010 2009
Revenue 15,463 15,025 18,706
Operating loss (5,082) (2,812) (1,553)
Loss before tax (5,106) (2,753) (1,927)
Loss for the financial year
attributable to owners of the
parent (5,801) (2,785) (1,631)
A summary of the unaudited gross and net assets of the Human Tissue Business as at 31 December 2011 (on an IFRS basis) is set out below:
For and as
at
31 December
USD'000 2011
Gross assets 14,934
Net assets 10,984
Unless otherwise stated, the unaudited financial information in this paragraph 5 has been extracted without material adjustment from the unaudited financial information contained in Part III (Unaudited Financial information of the Human Tissue Business) of the Circular and Appendix II below.
Investors should read the whole Circular and not rely solely on this summarised financial information. Please refer to Part III (Unaudited Financial information of the Human Tissue Business) of the Circular and Appendix II below for further information.
6. Information relating to the Continuing Group
After Completion, the Continuing Group will consist of the BioSeek Business only. BioSeek's BioMAP(R) System is a cell based disease model used to generate a profile of human biological response for specific drug candidates. The platform helps to reduce risk at the earliest stages of research and at multiple decision points within the research and development process. Most human cell lines used in preclinical testing are unable to provide truly predictive information since they lack the natural regulatory activity inherent in humans. By using primary cells directly isolated from the human body, the BioMAP(R) System replicates the cellular interactions present in specific human diseases.
A summary of the unaudited trading results for the Continuing Group for the year ended 31 December 2011 (on an IFRS basis), as if the Disposal had occurred on 31 December 2011, is set out below.
For and as
at
31 December
USD'000 2011
Revenue 8,628
Operating profit 544
Loss before tax (1,495)
A summary of the unaudited gross and net assets of the Continuing Group as at 31 December 2011 (on an IFRS basis), as if the Disposal had occurred on 31 December 2011, is set out below.
For and as
at
31 December
USD'000 2011
Gross assets 14,818
Net assets 7,502
Unless otherwise stated, the unaudited financial information in this paragraph 6 has been extracted without material adjustment from the unaudited financial information contained in Part IV (Unaudited Pro Forma Statements of Net Assets and Earnings) of the Circular and Appendix III below.
Investors should read the whole Circular and not rely solely on this summarised financial information. Please refer to Part IV (Unaudited Pro Forma Statements of Net Assets and Earnings) of the Circular and Appendix III below for further information.
7. Information relating to Stemgent
Stemgent is engaged in working alongside some of the world's leading stem cell scientists in developing innovative technology and application solutions for the advancement of stem cell research. The company's goal is to help simplify and support cellular reprogramming by producing products designed by leading stem cell researchers worldwide. The company has scientific development sites located in both Cambridge, Massachusetts and San Diego, California.
Further information on Stemgent is provided at www.stemgent.com.
8. Details of key individuals for the Human Tissue Business
Dr. Victoria Blanc, Vice President Strategic Planning and Government Affairs - joined Asterand in 2002 as Application Scientist and was appointed General Manager of Asterand, Inc. in 2007. Since 2010, Dr. Blanc has been responsible for planning and managing strategic initiatives in the Human Tissue Business and the management of contracts with the US government.
Dr. Tony Brown, General Manager US Operations - joined Asterand in 1998 as Head of Pharmacology and was appointed General Manager of Asterand UK Limited in 2006. Since 2010, Dr. Brown has been responsible for overseeing the laboratory operations in Detroit and tissue donor site development and operations.
Dr. Thomas Mander, Vice President Sales and Marketing - joined Asterand in 2007. Since 2011, Dr. Mander has been responsible for managing the Human Tissue Business' sales and marketing operations and for developing the international sales strategy and client relationships.
Dr. Amanda J. Woodrooffe, General Manager UK Operations - joined Asterand in 2001 as Head of Biochemical Pharmacology and was appointed Director of Scientific Development in 2006. Since 2010, Dr. Woodrooffe has been responsible for managing the UK services operation in Royston, overseeing all staff in the UK and customer services projects.
None or the above mentioned individuals have or have had any material involvement in the BioSeek Business.
It is intended that the above mentioned individuals will not have a role in the Continuing Group following Completion.
9. Current trading of the Company and prospects for the Continuing Group
Current trading of the Company
On 18 May 2012, the Company updated the market on its current trading in an interim management statement:
"Since 1 January 2012, the Board has been focused on resolving the funding crisis that arose in the fourth quarter of last year. As previously announced on 30 April 2012, it has not been possible to find a single buyer for the whole Group and, instead, the Board has focused on securing buyers for the constituent parts of the Group. Negotiations regarding the sale of the non BioSeek Tissue based Solutions (Tissue) business are continuing and the Board expects that a circular, seeking shareholder approval for the sale, will be sent to shareholders in the next few weeks. The Board also continues to explore a number of alternatives in respect of the BioSeek business including the continuation of the business on a stand alone basis or the sale of the business after the potential disposal of the Tissue business. In an effort to reduce costs, the Board is also considering whether or not it is appropriate for the Group to continue as a listed company following a disposal of the Tissue business.
"Despite these distractions and volatile trading conditions, revenue for the period ended 31 March 2012 is flat over the previous year, although the mix has changed with Tissue revenues improving and BioSeek revenues declining. Cash remains tight and the Group continues to manage its cash flow carefully in order that it may have sufficient funds to complete a transaction for the Tissue business. The Group maintains a constructive dialogue with its major creditors regarding the settlement of its secured loans, in which regard Asterand remains in default, and believes that it continues to receive the support of its lenders during his process.
"Shareholders should note that the proceeds from a successful disposal of the Tissue Business should enable the Group to repay its secured creditors but that its cash resources will not be sufficient to cover transaction costs and retained liabilities. Further funding will be required after the disposal of the Tissue business to sustain the BioSeek business on an ongoing basis or until a sales agreement for the business can be reached.
"Shareholders should be aware that the completion of any disposal or the securing of additional funding for the Group is not guaranteed."
Save as disclosed in paragraph 9 of Part VII of the Circular, the Director's expectations for the financial and trading prospects of the Company in the short term remain unchanged from the date of the interim management statement. As at 12 July 2012, being the latest practicable date prior to publication of the Circular, the Company had approximately USD2,700,000 in cash.
Prospects and trend information for the Continuing Group
The financial performance of the Continuing Group has declined over the current financial year. Whilst its markets have remained favourable, the Continuing Group has been hampered by the delay of projects by clients as a result of uncertainty created by the formal sale process and potential disposals. Additionally the Continuing Group has experienced funding restrictions and, as a result, has not been able to hire the sales staff required to increase trading volumes.
The Continuing Group's revenue is wholly generated from the drug discovery services provided by BioSeek. Due to its exposure to a high-growth sector, the Continuing Group has historically experienced strong growth and high profitability. Recent projects have generated less revenue than in previous years as BioSeek has initiated a number of smaller projects with new customers that should lead to increased revenue in future trading years. Over the current financial year the Continuing Group has experienced steady demand from customers for future projects but the signing of a number of agreements and the commencement of projects have been deferred by clients until the future of the Continuing Group is more secure.
Whilst there remains significant uncertainty both in the global economy and in the drug discovery and services sector, if the Continuing Group is able to secure funds it aims to take advantage of future opportunities to work with large pharmaceutical customers and invest in new services, capital equipment, related technologies and staff.
10. Cancellation of listing, transfers and trading of the Ordinary Shares
Following Completion, the Continuing Group will be significantly reduced in size and the Board has concluded that the costs and regulatory requirements associated with maintaining the Company's listing (estimated to be USD1,043,000 per annum) are a drain on the Company's financial and management resources and outweigh the benefits of the listing. Such quantifiable cash costs include fees paid to the Company's financial advisers, lawyers, accountants and registrars, annual fees paid to the London Stock Exchange and costs relating to the release of regulatory announcements. In addition, there is a cost of management time which is used in meeting the ongoing obligations of being a listed company. The Board therefore believes that the best course of action is to cancel the listing of the Ordinary Shares on the Official List and the admission to trading of the Ordinary Shares on the Main Market of the London Stock Exchange.
Under the Listing Rules, a de-listing can be effected by a company after securing a special resolution (requiring at least 75 per cent. approval of those shareholders who vote) in general meeting and the expiration of a period of not less than 20 business days from the date of the shareholder approval. The Board proposes to make application as soon as possible for the Cancellation to be effected. Accordingly, subject to the passing of the Cancellation Resolution, it is anticipated that the date of the Cancellation will be at 8 a.m. on 29 August 2012.
11. Strategy of the Company following, and principal effects of, the Cancellation
Should the Disposal Resolutions and the Cancellation Resolution be passed, the Directors will continue to focus on preserving Shareholder value by exploring a number of alternatives including, amongst other things, a disposal of BioSeek or the BioSeek Business or the securing of additional funding from Shareholders and/or third parties in order to develop and run the business. As the future funding of the Company will continue to be uncertain, the value of the Ordinary Shares will also be uncertain. Should funding not become available and/or a buyer for BioSeek or the BioSeek Business not found, there may be little or no value to the Ordinary Shares in the Company.
Following the Cancellation, although the Ordinary Shares will remain transferable they will no longer be tradable on the Official List and no other trading facility will be available to enable the trading of the Ordinary Shares. Consequently, there can be no guarantee that following the Cancellation a Shareholder will be able to purchase or sell any Ordinary Shares. Shareholders should also note that following the Cancellation:
(a) the Company may not remain subject to the Takeover Code as the Company's place of central management and control is outside of the UK and its shares will no longer be traded on a regulated market in the United Kingdom. The Company's minority Shareholders will therefore no longer benefit from the protections afforded to them by the Takeover Code. However, if in the future the Takeover Panel determines that the Company's place of central management and control is in the UK, the Takeover Code would again apply to the Company;
(b) the Company will not be bound to announce material events, administrative changes or material transactions or to announce interim or final results;
(c) the Company will no longer be required to comply with any of the regulatory requirements applicable to companies admitted to the Official List and to trading on the Main Market of the London Stock Exchange. For example, transactions with related parties or which are of a certain size will no longer require prior Shareholder approval (as is required under the Listing Rules);
(d) the Company will no longer be subject to the Disclosure and Transparency Rules and Shareholders will no longer be required to disclose major shareholdings in the Company and the announcement by the Company of those disclosures will no longer be required; and
(e) the Company will no longer be subject to the Model Code or the UK Corporate Governance Code.
The Cancellation might also have either positive or negative taxation consequences for Shareholders (for example, once the Cancellation has become effective, the Ordinary Shares would no longer be a qualifying investment for an ISA). If Shareholders are, however, in any doubt about their own tax position, they should consult a professional adviser immediately.
12. Change of Name
Included within the assets of the Human Tissue Business sold to the Buyers under the Disposal Agreement is the right to the "Asterand" name. It is therefore necessary for the Company to adopt a new corporate name from Completion. Accordingly, the Change of Name Resolution, which is conditional on the Resolution approving the Disposal being passed, proposes to change the name of the Company to "BioSeek plc". This also reflects the fact that the Continuing Group will consist of the BioSeek Business only.
13. General Meeting
The implementation of the Proposals will require Shareholders to vote in favour of the Resolutions at the General Meeting, which has been convened for 11 a.m. on 30 July 2012 (or as soon thereafter as the annual general meeting concludes or is adjourned). Set out at the end of the Circular is a notice convening the General Meeting. The General Meeting will be held at the offices of Daniel Stewart & Company Plc, Becket House, 36 Old Jewry, London EC2R 8DD.
Resolution no.1 which will be proposed as an ordinary resolution, provides for the approval of the Disposal on the terms set out in the Circular and for the Board or a committee of the Board to be authorised to make non-material amendments, waivers or variations and do all such other things as in each case they consider necessary, desirable or expedient in connection with the Disposal. This Resolution is not conditional on any other Resolution being passed.
The Change of Name Resolution, which will be proposed as a special resolution, provides for the name of the Company to be changed to BioSeek plc. The Change of Name Resolution is conditional on Resolution no.1 being passed.
The Cancellation Resolution, which will be proposed as a special resolution, provides for approval of the Cancellation. The Cancellation Resolution is not conditional on any other Resolution being passed.
Shareholders should note that if the Disposal Resolutions are not passed, it is likely that the Company will be placed immediately into administration.
As explained in more detail in paragraph 3 of this Appendix I, the amounts outstanding under any Promissory Note may be converted into shares of the Company. Accordingly, resolutions will also be proposed at the General Meeting to:
(a) authorise the Directors under section 551 of the Act to allot shares up to a maximum of GBP537,300 in connection with the Promissory Note. This will give the Directors authority to allot up to 10,746,000 Ordinary Shares (representing approximately 9.05 per cent. of the existing issued ordinary share capital of the Company as at 12 July 2012, being the latest practicable date prior to the publication of the Circular). This Resolution will expire 60 months after the date it is passed. This Resolution will be proposed as an ordinary resolution and is not conditional on any other Resolution being passed; and
(b) disapply the pre-emption rights provisions of section 561 of the Act in respect of any allotments made pursuant to the above Resolution. This authority will expire at the same time as the authority conferred by the above Resolution. This Resolution will be proposed as a special resolution and is conditional on the above Resolution being passed.
If, following the Cancellation, the Company raises additional funds through further issuances of equity or convertible debt securities, existing Shareholders could suffer significant dilution. Your attention is drawn to Part II (Risk Factors) of the Circular.
A further Resolution will be proposed at the General Meeting to permit the Company to communicate with Shareholders electronically in accordance with the provisions of the Act. All Company notices, documents and other information (Shareholder Information) can be provided to Shareholders electronically, provided that they agree to this in general meeting and then provide an appropriate (e.g. email) address. If Shareholders are invited to agree that the Company may send or supply Shareholder Information by means of a website, those who do not respond with 28 days are deemed to have agreed to the Company communicating Shareholder Information to them by means of a website. Where Shareholders agree (or are deemed to have agreed) to communication of Shareholder Information by means of a website, Shareholders must be notified of the availability of the relevant document or information on the website, the address of the website, the place on the website where it may be accessed and how to access the document or information. This information will be provided to Shareholders by post or by email (if an email address has been provided for this purpose). This Resolution will be proposed as an ordinary resolution and is not conditional on any other Resolution being passed.
The full text of the Resolutions is set out in the notice convening the General Meeting at the end of the Circular.
The annual general meeting of the Company, which was convened on 26 June 2012, was adjourned and will now take place at 10.30 a.m. on 30 July 2012 at the offices of Daniel Stewart & Company Plc, Becket House, 36 Old Jewry, London EC2R 8DD. Notice of the adjournment of the Annual General Meeting is set out at the end of the Circular.
Shareholders should note that all the Resolutions (save for the Resolution permitting electronic communications and the Cancellation Resolution) are required to be passed in order for the Disposal to proceed in accordance with the terms and conditions of the Disposal Agreement.
14. Irrevocable undertakings
14.1. The Company has received irrevocable undertakings from the following Director Shareholders, to vote in favour of all of the Resolutions:
Number of Percentage of
Ordinary Shares issued
Director Shareholder Ordinary Shares
Jack Davis 1,556,216 1.31
Jill Force 110,000 0.09
Robert Salisbury 50,000 0.04
Total 1,716,216 1.44
14.2. The Company has received irrevocable undertakings from the following Shareholders to vote in favour of all of the Resolutions except for Resolutions no.3 and no.6 (being the Resolution which if approved would allow the Company to communicate with Shareholders electronically and the Change of Name Resolution) set out in the notice of General Meeting:
Number of Percentage of
Ordinary Shares issued
Shareholder Ordinary Shares
Oxford Bioscience Partners 26,570,325 22.38
Chrysalis Ventures II LP 15,735,457 13.25
Hale Fund I LLC 6,343,089 5.34
Arboretum Ventures LLC 4,903,676 4.13
Fort Washington Private Equity
Investors II LP 4,846,346 4.08
Amherst Fund LLC 525,000 0.44
Total 58,923,893 49.65
15. Action to be taken
You will find enclosed with the Circular a Form of Proxy for use at the General Meeting or at any adjournment thereof. Whether or not you propose to attend the General Meeting in person, it is important that you complete and sign the enclosed Form of Proxy in accordance with the instructions printed thereon and return it to the Company's Registrars, Capita Registrars at PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible and, in any event, so as to be received not later than 11 a.m. on 26 July 2012. The completion and return of a Form of Proxy will not preclude you from attending the General Meeting in person and voting in person, if you so wish.
If you hold Ordinary Shares in CREST, you may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Capita Registrars (CREST participant ID RA10), so that it is received by no later than 11 a.m. on 26 July 2012. The completion and return of a CREST Proxy Instruction will not preclude you from attending and voting in person at the General Meeting or any adjournment thereof, if you so wish and are so entitled.
Alternatively you can vote online by visiting www.capitashareportal.com as soon as possible but in any event not later than 11 a.m. on 26 July 2012. Voting electronically will not preclude you from attending and voting in person at the General Meeting or any adjournment thereof, if you so wish and are so entitled.
16. Further information
Your attention is drawn to the further information contained in Parts II to VII of the Circular and in particular, to the Risk Factors in Part II of the Circular. You are advised to read the whole of the Circular and not to rely solely on the information contained in this letter.
17. Working Capital Statement
In the opinion of the Company, the Continuing Group does not have sufficient working capital for its present requirements, being the next 12 months from the date of the Circular.
Immediately on Completion, the Continuing Group will have a cash balance of approximately USD11,024,000, including the proceeds from the Disposal of USD9,000,000. Against this are immediate liabilities of approximately USD11,156,000, being the Secured Debt of approximately USD9,067,000 (which will be paid on Completion), outstanding professional fees relating to the Disposal of approximately USD1,128,000 and other creditors of approximately USD961,000. Thus there is an immediate funding requirement of approximately USD132,000.
In the next 12 months from the date of the Circular the Continuing Group has a maximum funding shortfall of approximately USD618,000 which falls in September 2012.
If the Cancellation Resolution is not passed, the Continuing Group will have an additional annual working capital requirement of approximately USD1,043,000 which represents the annual costs of maintaining the listing (further details of which are set out in paragraph 10 of this Appendix I), the effect of which in the current year would be to increase this maximum working capital requirement by approximately USD175,000 to an estimated USD793,000 in September 2012.
The Continuing Group will not be in a position, following Completion, to settle all its liabilities as they fall due and is dependent on the forbearance of some its major creditors to continue trading. The Board is in advanced discussions with certain of the professional advisers to defer USD770,000 of professional fees until either the Continuing Group receives a tax refund of approximately USD1,100,000, which is due to be received in April 2013, or until BioSeek is either refinanced or sold. Whilst the Board is confident that it can reach the necessary agreement with its professional advisers, there can be no guarantee that this will be the case and as at the date of the Circular there are no legally binding agreements in place. In the event that the Company cannot reach an agreement to defer a minimum of approximately USD618,000 of professional fees, it is likely that the Company will be placed into administration.
It should be noted that there can be no certainty that the expected tax refund will be received in April 2013 or that any of the existing liabilities can be deferred and your attention is therefore drawn to Part II (Risk Factors) of the Circular.
The Board is also considering the possibility of a fundraising, through either debt or equity, or a disposal of BioSeek or the BioSeek Business. However, without a deferment of certain creditors, the Board believes that it is unlikely that there will be sufficient time for these options to be successfully concluded. Furthermore, the Board believes that there are limited funding options available to the Continuing Group in the UK, and that potential US funders would have a preference for investing in an unlisted group which does not have the costs associated with maintaining a listing. Therefore, whilst the Board cannot be certain that it will be able to raise funds even if the USD770,000 is deferred, it believes that it is more likely to be able to do so if the Cancellation Resolution is approved by Shareholders. In the event that a buyer is found for BioSeek or the BioSeek Business, it is the Board's intention to wind up the remaining group and distribute any surplus funds to Shareholders.
In summary, if the Disposal Resolutions are not passed, it is likely that the Company will be placed immediately into administration. If the Disposal Resolutions are passed, in order to avoid being placed into administration the Continuing Group will need to defer certain liabilities on Completion to provide time either to:
1. trade through until the earlier of the tax refund is received, which is expected in April 2013, or until such time as the Continuing Group is generating sufficient cash to repay such liabilities;
2. raise funds; or 3. dispose of BioSeek or the BioSeek Business.
In the event that a minimum of approximately USD618,000 of liabilities and the estimated USD175,000 of pro rata listing costs (in the event of the Cancellation Resolution not being passed) can be deferred until April 2013, the Continuing Group expects to be able to settle its liabilities from its operational cash flows.
Your attention is drawn to paragraph 18 of the Circular and this Appendix I which contains the recommendation from the Board and the importance of the vote.
For further implications of the Disposal and/or the Cancellation not being approved by Shareholders or the action plan outlined above being unsuccessful you are referred to Part II (Risk Factors) of the Circular.
18. Recommendation
The Board considers the Proposals set out in the Circular to be in the best interests of the Company and Shareholders as a whole.
Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions set out in the notice of General Meeting, as the Directors have irrevocably committed to do in respect of their own beneficial holdings of Ordinary Shares which amount to 1,716,216 Ordinary Shares, representing approximately 1.44 per cent. of the existing issued ordinary share capital of the Company as at 12 July 2012, being the latest practicable date prior to the publication of the Circular.
In addition the Company has received irrevocable undertakings to vote in favour of all of the Resolutions except for Resolutions no.3 and no.6 (being the Resolution which if approved would allow the Company to communicate with Shareholders electronically and the Change of Name Resolution) set out in the notice of General Meeting, which amount to 58,923,893 Ordinary Shares, representing approximately 49.65 per cent. of the existing issued ordinary share capital of the Company as at 12 July 2012, being the latest practicable date prior to the publication of the Circular.
Shareholders should note that if the Disposal Resolutions are not passed, it is likely that the Company will be placed immediately into administration.
APPENDIX II
UNAUDITED FINANCIAL INFORMATION OF THE HUMAN TISSUE BUSINESS
The following unaudited financial information relating to the Company's Human Tissue Business, which has been prepared under IFRS, has been extracted without material adjustment from the consolidation schedules used in preparing the audited consolidated financial statements of the Group for the years ended 31 December 2011, 31 December 2010 and 31 December 2009.
The extracted financial information relating to the Company's Human Tissue Business has not been audited and has not been reported on by an accountant. The unaudited financial information contained in Part III (Unaudited Financial Information of the Human Tissue Business) of the Circular and this Appendix II does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The consolidated statutory accounts for the Company in respect of the financial year ended 31 December 2011 will be, and in respect of the financial years ended 31 December 2010 and 31 December 2009 have been, delivered to the Registrar of Companies. The auditors' reports in respect of the consolidated statutory accounts for the Company for each of these three financial periods were unqualified and did not contain statements under section 498(2) or (3) of the Companies Act 2006.
Shareholders should read the whole of the Circular and not rely solely on the summarised unaudited financial information contained in Part III (Unaudited Financial Information of the Human Tissue Business) of the Circular and this Appendix II.
Income statement for each of the years ended 31 December 2011, 31 December 2010 and 31 December 2009:
Year ended 31 December
-------------------------------
2011 2010 2009
--------- --------- ---------
USD'000 USD'000 USD'000
--------- --------- ---------
Revenue 15,463 15,025 18,706
Cost of sales (8,154) (7,128) (7,894)
--------- --------- ---------
Gross profit 7,309 7,897 10,812
--------- --------- ---------
Research and development costs (1,120) (1,118) (478)
Selling and distribution costs (2,780) (3,524) (3,661)
* Normal operations (5,091) (5,617) (6,735)
* Exceptional items (3,400) (450) (1,491)
--------- --------- ---------
Total general and administrative
expenses (8,491) (6,067) (8,226)
--------- --------- ---------
Total operating expenses (12,391) (10,709) (12,365)
Operating loss (5,082) (2,812) (1,553)
Interest income 78 3 49
Interest expense (267) (53) (49)
Foreign exchange income / (expense) 165 109 (374)
--------- --------- ---------
Total finance income / (expense) (24) 59 (374)
Loss before tax (5,106) (2,753) (1,927)
--------- --------- ---------
Taxation (695) (32) 296
--------- --------- ---------
Loss for the financial year attributable
to owners of the parent (5,801) (2,785) (1,631)
--------- --------- ---------
Net asset statement as at 31 December 2011:
Year ended
31 December
Note 2011
USD'000
Assets
Non-current assets
Intangible assets 1 1,293
Property, plant and equipment 470
Trade and other receivables 90
------------
1,853
Current assets
Inventory 2 8,656
Trade and other receivables 4,425
Cash and cash equivalents -
------------
13,081
Total assets 14,934
Liabilities
Current liabilities
Trade and other payables (3,950)
Total liabilities (3,950)
Net assets 10,984
============
Notes:
1. Intangible assets of USD1,293,000 are recorded at historic cost less accumulated amortisation in the financial information of the Human Tissue Business. In preparing the Group's consolidated financial information for the year ended 31 December 2011, the Directors applied an impairment charge of USD1,293,000 to the intangible assets of the Human Tissue Business in order to reduce their carrying value in the Group's consolidated financial information to their net recoverable amount on a disposal of the Human Tissue Business by the Group, being USDNil.
2. Inventory of USD8,656,000 is recorded at the lower of cost and net realisable value in the financial information of the Human Tissue Business as at 31 December 2011. In preparing the Group's consolidated financial information at the same date, the Directors applied an impairment charge of USD2,107,000 to inventory held in the Human Tissue Business in order to reduce its carrying value in the Group's consolidated financial information to its net realisable value on a disposal of the Human Tissue Business by the Group, being USD6,549,000.
APPENDIX III
UNAUDITED PRO FORMA STATEMENTS OF NET ASSETS AND EARNINGS
Set out below is an unaudited pro forma statement of net assets of the Continuing Group as at 31 December 2011 and an unaudited pro forma statement of earnings for the year ended 31 December 2011 (together the "Pro Forma Financial Information"). The Pro Forma Financial Information has been prepared on the basis set out in the notes below to illustrate the effect of the Disposal on the consolidated net assets and earnings of the Continuing Group had the Disposal occurred on 31 December 2011. It has been prepared for illustrative purposes only. Because of its nature, the Pro Forma Financial Information addresses a hypothetical situation and, therefore, does not represent the Continuing Group's actual financial position or results. It is based on the consolidation schedules used in preparing the audited consolidated balance sheet and income statement of the Company and the unaudited financial information of the Human Tissue Business as at 31 December 2011 and the year ended 31 December 2011, which in the case of the Human Tissue Business is reproduced in Part III (Unaudited Financial Information of the Human Tissue Business) of the Circular and Appendix II above.
Shareholders should read the whole of the Circular and not rely solely on the summarised financial information contained in Part IV (Unaudited Pro Forma Statements of Net Assets and Earnings) of the Circular and this Appendix III.
The report on the unaudited pro forma statements of net assets and earnings is set out in Part V (Report on the Unaudited Pro Forma Statements of Net Assets and Earnings) of the Circular.
Unaudited pro forma statement of net assets
Adjustments
Pro forma
Group net net assets
assets as for the
at 31 December Human Tissue Disposal Continuing
2011 Business adjustments Group
(Note 1) (Note 2) (Note 3) (Note 4)
---------------- ------------- ------------- ------------
USD'000 USD'000 USD'000 USD'000
Assets
Non-current assets
Intangible assets 3,305 (1,293) 1,293 3,305
Property, plant and equipment 2,959 (470) - 2,489
Deferred tax assets 4,360 - - 4,360
Trade and other receivables 90 (90) - -
---------------- ------------- ------------- ------------
10,714 (1,853) 1,293 10,154
Current assets
Biobank inventory 6,549 (8,656) 2,107 -
Trade and other receivables 6,130 (4,425) - 1,705
Cash and cash equivalents 2,978 - (19) 2,959
---------------- ------------- ------------- ------------
15,657 (13,081) 2,088 4,664
Total assets 26,371 (14,934) 3,381 14,818
Liabilities
Current liabilities
Trade and other payables (6,857) 3,950 (1,128) (4,035)
Income tax payable (1,307) - - (1,307)
Other financial liabilities
-
Finance leases (5) - - (5)
Current debt (2,428) - 2,428 -
Amounts due to former shareholders
of BioSeek (6,591) - 6,591 -
Warrants (12) - - (12)
---------------- ------------- ------------- ------------
(17,200) 3,950 7,891 (5,359)
Non-current liabilities
Deferred tax liabilities (179) - - (179)
Other payables (1,778) - - (1,778)
---------------- ------------- ------------- ------------
(1,957) - - (1,957)
Total liabilities (19,157) 3,950 7,891 (7,316)
Net assets 7,214 (10,984) 11,272 7,502
================ ============= ============= ============
Unaudited pro forma statement of earnings
Adjustments
---------------------------------------------
Group earnings Pro forma
for the year earnings
ended for the
31 December Human Tissue Continuing
2011 Business Group
(Note 1) (Note 2) (Note 4)
--------------- -------------- ------------
USD'000 USD'000 USD'000
Revenue 24,091 (15,463) 8,628
Cost of sales (11,233) 8,154 (3,079)
--------------- -------------- ------------
Gross profit 12,858 (7,309) 5,549
Research and development costs (1,432) 1,120 (312)
Selling and distribution costs (3,412) 2,780 (632)
* Normal operations (7,819) 5,091 (2,728)
* Exceptional items (4,733) 3,400 (1,333)
--------------- -------------- ------------
Total general and administrative
expenses (12,552) 8,491 (4,061)
--------------- -------------- ------------
Total operating expenses (17,396) 12,391 (5,005)
Operating (loss)/profit (4,538) 5,082 544
Interest income - normal operations 78 (78) -
Interest expense - normal operations (716) 267 (449)
Interest expense - exceptional
items (1,591) - (1,591)
Foreign exchange income / (expense) 166 (165) 1
--------------- -------------- ------------
Total finance expenses (2,063) 24 (2,039)
Loss before tax (6,601) 5,106 (1,495)
Taxation (1,627) 695 (932)
--------------- -------------- ------------
Loss for the financial year attributable
to owners of the parent (8,228) 5,801 (2,427)
=============== ============== ============
Notes:
1. The financial information relating to the Group has been extracted without material adjustment from the audited financial statements of the Group as at 31 December 2011.
2. The unaudited financial information relating to the Company's Human Tissue Business has been extracted without material adjustment from the unaudited financial information of the Company's Human Tissue Business as set out in Part III (Unaudited Financial Information of the Human Tissue Business) of the Circular and Appendix II above. To the extent that the adjustments to the Group earnings relate to the sale of the Human Tissue Business, these adjustments will have a continuing impact on the consolidated profit and loss of the Continuing Group.
3. The Company has agreed to sell the Human Tissue Business for a consideration of USD9,000,000. The Disposal adjustments consist of the following items:
a. recognition of the proceeds of USD9,000,000 cash;
b. estimated outstanding transaction expenses relating to the Disposal of USD1,128,000 recorded against cash;
c. the repayment in full of the debt owed to SVB as at 31 December 2011 being USD2,428,000;
d. the repayment in full of the BioSeek Loan Notes which amounted to USD6,591,000 as at 31 December 2011;
e. the reversal of the impairment charge of USD1,293,000 recorded in the Group's consolidated financial statements for the year ended 31 December 2011. The impairment was initially allocated against goodwill (USD974,000) and other intangible assets (USD319,000) associated with the relevant cash generating units in the Human Tissue Business effectively reducing their carrying value to USDNil. The adjustment of USD1,293,000 is required to offset the carrying value of intangible assets included in Part III of the Circular and Appendix II above. Following the adjustments, the unaudited pro forma balance of USD3,305,000 relates to intangible assets of the Continuing Group only;
f. the reversal of the impairment charge of USD2,107,000 recorded in the Group's consolidated financial statements for the year ended 31 December 2011. Included in Part III of the Circular and Appendix II above, inventory is stated at USD8,656,000. This balance is gross of the USD2,107,000 impairment charge applied to the inventory on consolidation of the Group's financial information. The reversal of the impairment charge, together with the carrying value of the inventory as stated in Part III of the Circular and Appendix II above, cancels out the impaired carrying value of the inventory in the Group's consolidated financial statements, resulting in an unaudited pro forma balance of USDNil. The Continuing Group had no inventory as at 31 December 2011;
g. the net cash outflow of USD19,000 consists of the USD9,000,000 (Note 3.a.) consideration, less the payments of USD2,428,000 of SVB Debt and USD6,591,000 of BioSeek Loan Notes.
4. The unaudited pro forma statements of net assets and earnings does not reflect any changes in the trading position of the Group or any other changes arising from other transactions, or payment of other creditors of USD961,000 other than those outlined in the above notes, since 31 December 2011.
5. The debt balances removed as adjustments (Note 3.c. and Note 3.d.) were balances as at 31 December 2011. The projected debt balances as at 20 July 2012 are as stated in paragraph 4 of Part I of the Circular and Appendix I above.
APPENDIX IV
DEFINITIONS
The following definitions apply throughout this announcement unless the context requires otherwise.
$ or USD US dollars
Act the Companies Act 2006
Annual General Meeting the adjourned annual general meeting
of the Company to be held at the offices
of Daniel Stewart & Company Plc, Becket
House, 36 Old Jewry, London EC2R 8DD
at 10.30 a.m. on 30 July 2012
Asterand UK Asterand UK Limited, a private limited
company, incorporated and registered
in England (registered number 3113041)
Asterand US Asterand, Inc., a Delaware corporation
(organisational number 3223748)
BioSeek BioSeek, LLC, a California limited
liability company(organisational number
200931710007)
BioSeek Acquisition the acquisition of the BioSeek Business
by the Company and certain of its
affiliates pursuant to an agreement
and plan of merger dated 17 November
2009
BioSeek Business the business of applying predictive
human biology to drug discovery utilising
the products and services of BioMAP(R)
BioSeek Loan Notes the subordinated secured promissory
notes issued by the Company to the
BioSeek Loan Note Holders dated 22
July 2011 amounting to approximately
USD7,017,000 as at 20 July 2012
BioSeek Loan Note Holders the holders of the BioSeek Loan Notes
BioSeek Shareholders the shareholders of BioSeek immediately
prior to the completion of the BioSeek
Acquisition
Board the board of Directors of the Company
from time to time
Buyers the UK Buyer and the US Buyer
Buying Group Stemgent and the Buyers
Cancellation the proposed cancellation of the listing
of the Ordinary Shares on the Official
List and the admission to trading
of the Ordinary Shares on the Main
Market of the London Stock Exchange
Cancellation Resolution resolution no. 4 set out in the notice
of General Meeting set out at the
end of the Circular
Change of Control (a) one or more transfers of or transactions
(including, without limitation, a
merger or consolidation) involving
BioSeek in which the members of BioSeek,
immediately prior to the first such
transfer or transaction do not own
more than fifty per cent. of the outstanding
voting power (assuming conversion
of all convertible securities and
the exercise of all outstanding options)
of the surviving or successor entity
participating in such transfer or
transaction; or (b) the sale or exclusive
licensing of all or substantially
all the assets or intellectual property
of BioSeek.
Change of Name Resolution resolution no. 6 set out in the notice
of General Meeting set out at the
end of the Circular
Company Asterand plc, a public limited company,
incorporated and registered in England
(registered number 3355618)
Completion the completion of the Disposal in
accordance with the terms of the Disposal
Agreement
Continuing Group the Group following the Disposal and
repayment of the Secured Debt
CREST the relevant system (as defined in
the Regulations) in respect of which
Euroclear is the operator (as defined
in the Regulations)
CREST Proxy Instruction the form of appointment of proxy to
vote through the Euroclear system
Deferred Consideration the contingent payment of USD8,523,980
required to have been made by the
Company to the BioSeek Shareholders
pursuant to the BioSeek Acquisition
Directors the existing Directors of the Company
whose names are set out on page 6
of the Circular
Disclosure and Transparency the disclosure rules and transparency
Rules rules made by the FSA pursuant to
Part VI of the Financial Services
and Markets Act 2000, as revised from
time to time
Disposal the proposed disposal of the assets
of the Human Tissue Business pursuant
to the Disposal Agreement
Disposal Agreement means the conditional asset purchase
agreement dated 10 June 2012 and made
between the Selling Group and the
Buying Group
Disposal Resolutions resolution no.1, resolution no.2,
resolution no.5 and resolution no.6
set out in the notice of General Meeting
set out at the end of the Circular
Disposal Side Letter as defined in paragraph 3 of Part
I of the Circular and of Appendix
I of this announcement
Euroclear Euroclear UK & Ireland Limited, a
company incorporated in England and
Wales and the operator of CREST
Existing Cash Resources the estimated existing cash resources
of the Continuing Group as at 20 July
2012 being approximately USD2,024,000
Form of Proxy the form of proxy for use at the General
Meeting which accompanies the Circular
FSA the UK Financial Services Authority
General Meeting the general meeting of the Company
convened for the purpose of considering
the Resolutions to be held on 30 July
2012 (or any adjournment of it), notice
of which is set out at the end of
the Circular
Group the Company and each of its subsidiary
undertakings (within the meaning of
the Act) at the date of the Circular
Guarantee as defined in paragraph 7 of Part
VI of the Circular
Human Tissue Business the Human Tissue Products Business
Unit and the Human Tissue Services
Business Unit
Human Tissue Products Business the human tissue products business
Unit unit of the Sellers, including, without
limitation, the products XpressBANK(TM)
and ProCURE(TM)
Human Tissue Services Business the human tissue services business
Unit unit of the Sellers, including, without
limitation, the services offered under
the service mark PhaseZERO(TM)
Listing Rules the listing rules of the UKLA under
section 73A of the Financial Services
and Markets Act 2000
London Stock Exchange London Stock Exchange Plc
Main Market the London Stock Exchange's market
for listed securities
Model Code the model code on directors' dealings
in securities, as set out in the Appendix
to Chapter 9 of the Listing Rules
Official List the list maintained by the Financial
Services Authority in accordance with
section 74(1) of the Financial Services
and Markets Act 2000
Ordinary Shares ordinary shares of 5 pence each in
the capital of the Company
Promissory Note as defined in paragraph 3 of Part
I of the Circular and Appendix I of
this announcement
Proposals the proposals as described in the
Circular
Qualified Financing the sale by any of the Company, Asterand
US or BioSeek of their equity securities
in a single transaction or a series
of related transactions for an aggregate
gross purchase price paid to such
party of at least USD5,000,000
Regulations the Uncertificated Securities Regulations
2001 (SI 2001 No. 01/3755), as amended
Resolutions the resolutions to be proposed at
the General Meeting, which are set
out in the notice of General Meeting
set out at the end of the Circular
Secured Debt the sum, in aggregate, owed to SVB
and the BioSeek Loan Note Holders,
amounting to approximately USD9,067,000
as at 20 July 2012, in respect of
which notices of default were received
by the Company in October 2011
Secured Lenders SVB and the BioSeek Loan Note Holders
Security and Contingent as defined in paragraph 8 of Part
Escrow Agreement VI of the Circular
Sellers Asterand UK and Asterand US
Selling Group the Company and the Sellers
Shareholders holders of Ordinary Shares
Silicon Valley Bank or SVB Silicon Valley Bank, a California
corporation, being a member of the
SVB Financial Group
Stemgent Stemgent, Inc., a Delaware corporation
(organisational number 4438247)
SVB Debt all debts owed to SVB amounting to
approximately USD2,050,000 as at 20
July 2012
Takeover Code the City Code on Takeovers and Mergers
Takeover Panel the Panel on Takeovers and Mergers
UK or United Kingdom the United Kingdom of Great Britain
and Northern Ireland
UK Buyer Asterand UK Acquisition Limited, a
private limited company, incorporated
and registered in England (registered
number 8092729) and a wholly owned
subsidiary of Stemgent
UK Corporate Governance the UK Corporate Governance Code issued
Code by the Financial Reporting Council
UKLA the Financial Services Authority acting
in its capacity as the competent authority
for the purposes of Part VI of the
Financial Services and Markets Act
2000
US or United States the United States of America
US Buyer Asterand US Acquisition Corporation,
a Delaware corporation (organisational
number 5163312) and a wholly owned
subsidiary of Stemgent
This information is provided by RNS
The company news service from the London Stock Exchange
END
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