Sale of Business

RNS Number:0433M
SMF Technologies PLC
09 June 2003


Sale of Business and Assets & Capital Reconstruction


Introduction

The Board of SMF Technologies plc ("SMF" or "The Company") announce that the
Company had entered into a contract, conditional upon shareholder approval, to
sell all the issued share capital of all its trading subsidiaries to Gardon
Limited ("Gardon"), a company partially controlled by Mr John McDonnell, the
managing director of the Company.



Background

On March 19th, 2003 the Board announced that the proposed acquisition announced
as part of the Interim Announcement was not going ahead.  The Company, whilst
receiving indications of support from major shareholders and from a bank, was
unable to reach a situation with the financing that satisfied the vendors so as
to enable the acquisition to be put to shareholders.  In that announcement it
also confirmed that trading continued to be at an acceptable level but that the
short term revenues from license fees, expected by exploitation of the Company's
technologies, would be constrained.  Since then, trading conditions for the
Company have continued to be very difficult given the current economic climate.

As a result of the proposed acquisition not going ahead, the major shareholder,
who has supported the company since August 2001 through the provision of a loan
note from a company controlled by him, indicated to the Board that he could not
continue to underwrite the Company's operations into the future. Given the size
of the Company, with a market capitalisation of less than Euro2 million, the fact
that the business of the Company was just break-even and that the returns from
the investment in the new technologies was becoming more and more uncertain, the
Independent Directors authorised the management of the company to consider
making a management buy-out offer.  This has resulted in the contract described
below.

John McDonnell, the Company's Managing Director, has confirmed to the Board that
he is unwilling to continue in this role should the Company continue to own and
operate its existing business.  Mr McDonnell has also confirmed that he is
having discussions with Enterprise Ireland that should the buyout be approved,
Enterprise Ireland would agree to modifications to the terms of its loan to the
business Gardon is acquiring.

Following completion of this transaction the Company would have no liabilities
and its sole asset will be cash.

The Independent Directors have further considered the opportunities that may
exist for the shareholders to recover some value through the Company being
utilised as a shell.  Following the completion of the sale to management,
approved by shareholders, the Company will have only a small amount of cash,
currently estimated at Euro10,000.  The Board has received some approaches from
parties who wish to commence negotiations to use the Company as a shell but at
this stage the Board has no details of the nature of the proposed transaction.
There can be no certainty that such a transaction will take place or, if it
does, that the benefits to shareholders will be other than nominal.

The Board have therefore decided to allow possible negotiations a minimum of
three months and a maximum of six months, in each case from the date of this
circular, to come to fruition and if after three months there are no parties
still in negotiation or if after six months no transaction is close to
conclusion, the Board will convene a further Extraordinary General Meeting to
consider resolutions to place the Company in members' voluntary liquidation.

To facilitate a transaction as a shell a resolution is also being put before the
EGM to reconstruct the capital of the Company to enable New Ordinary Shares to
be issued for less than Euro0.12 per share.  In addition, a resolution is being put
to the EGM for shareholders inter alia to waive their statutory pre-emption
rights and so to enable the Directors to issue up to 100 million ordinary shares
of Euro0.01 each for cash without offering them to existing shareholders.



Contract with Gardon

Gardon is a newly formed company that has not previously traded.  All the issued
share capital of Gardon is owned by John McDonnell and Gary Carroll.  John
McDonnell has been Managing Director of the Company for the last two and a half
years.  Gary Carroll has acted as a consultant to the Company for the last one
and a half years.

The Company and Gardon have entered into a purchase and sale agreement pursuant
to which the Company has agreed, subject to shareholder approval, to transfer
all the issued share capital of Suparule Holdings Limited, SupaRule Systems
Limited, SupaRules Limited and SupaRule SA (Pty) Limited to Gardon.  Gardon has
agreed to have novated to it the Company's liability of Euro186,000 due to Limerick
Tile & Glass Company Limited, a company controlled by Martin O'Donoghue and to
pay Euro50,000 to the Company in consideration for the transfer.

The agreement contains limited warranties with regard to the Company's ownership
of the shares in the subsidiary companies being sold and the ability of the
company to sell those shares.  The maximum liability of the Company under these
warranties is limited to the consideration paid by Gardon.  John McDonnell will
be resigning as a Director upon the passing of the Resolutions although he will
continue to assist the Independent Directors as necessary in any administrative
matters concerning the Company.



Quotation

Following, inter alia, the resignation of the Company's sponsoring broker the
trading of the Company's Ordinary Shares on the DCM was terminated on June 5th,
2003.  The Company's quotation on AIM continued and will continue.


Circular and EGM

A circular to shareholders is being posted to shareholders today, June 9th,
2003, providing information on these matters and convening an Extraordinary
General Meeting of shareholders to consider and if thought fit to approve these
proposals.  Copies of this document are available for the next month from the
offices of the Company at 9 Technological Park, Castletroy, Limerick, Ireland.



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            The company news service from the London Stock Exchange
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