Shares in embattled Structural Monitoring Systems plc have slumped 60 per cent as the company seeks a shareholder vote to reduce the nominal value of its stock for a planned $4 million raising.
Shares in embattled Structural Monitoring Systems plc have slumped 60 per cent as the company seeks a shareholder vote to reduce the nominal value of its stock for a planned $4 million raising.
The company today said it planned to raise the money through a non-renounceable rights issue of four new shares at a discounted 2 cents each for every five shares held.
Shares in the company closed down six cents to four cents today.
Funds raised will be used for working capital to meet the increasing demand for the company's Comparative Vacuum Monitoring, a technology designed to detect structural flaws in aircraft fuselage.
The company said it was meeting the increasing demand by hiring production staff on a contract basis.
In July the company announced it was terminating the employment of all executives and staff following a decline in cash reserves due in part to the volatile market conditions and the removal of the Federal Government's grant programs.
Structural said it will call for an extraordinary general meeting of shareholders to vote on the restructure of the nominal value of shares.
It explained that under the nominal value policy in the UK, where the company is incorporated, Structural is prohibited from issuing shares for less than 11c each.
At the meeting, shareholders will vote on lowering the nominal value of new shares to 1c each.
"As the Company's shares have been trading below the Nominal Value it has been become a serious impediment to the Company raising capital in the current market conditions," Structural said.
"This has lead to the situation where the Company does not have sufficient working capital to continue the process of commercialising the CVM technology.
"This comes at a time when after years of development and the considerable expense of meeting the strict regulatory requirements for putting equipment onto operating aircraft the Company's CVM technology has been accredited and orders are projected to increase."
A meeting notice will be issued to shareholders this week.
Below is the full announcement:
The Company wishes to announce a non-renounceable rights issue of four (4) New Shares for every five (5) Existing Shares at AU$0.02 per share to raise up to AU$ 4,064,396.
The aim of the Rights Issue is to raise sufficient working capital to meet the increasing demand for the Company's Comparative Vacuum Monitoring (CVM™) structural monitoring products. CVM™ products developed have been accredited by the leading aircraft manufacturers and orders are on the increase. Increasing sales revenue and the reduced cost base should see the business turn cash-flow positive in the coming year.
Since the update announcement on the 26 August 2008, the Company has received increasing orders for CVM™ instrumentation and sensors. The Company is meeting these orders from stock and by engaging production staff on a contract basis. The current stock and working capital will only last a short time and additional working capital is urgently required to enable the Company to meet increasing orders and continue to operate.
Concurrently with the Rights Issue the Company will be calling an Extraordinary General Meeting (EGM) of Share Holders to restructure the capital of the Company by reducing the Nominal Value of the Company's shares.
"Nominal value" is a concept that was removed from Australian corporations law many years ago but still applies under the UK Companies Act 2006. As the Company is incorporated in the UK Nominal Value applies. The affect is that the Company is prohibited from issuing shares for less than the "nominal value" UK £0.05 or around AU$0.11 per share.
As the Company's shares have been trading below the Nominal Value it has been become a serious impediment to the Company raising capital in the current market conditions.
This has lead to the situation where the Company does not have sufficient working capital to continue the process of commercialising the CVM™ technology. This comes at a time when after years of development and the considerable expense of meeting the strict regulatory requirements for putting equipment onto operating aircraft the Company's CVM ™ technology has been accredited and orders are projected to increase.
The Rights Issue will be subject to share holders approving at the EGM a reconstruction of the Nominal Value of the Company's shares from UK£0.05 (approximately AU$0.11) to UK£0.005 (approximately AU$0.01) per share, enabling new securities to be issued with the Nominal Value of UK£0.005 each. A notice of meeting will be dispatched to share holders this week.
It is important to note that the change in Nominal Value will not affect the number of listed or market value of securities held by individual share holders.
Subject to raising sufficient working capital via the Rights Issue and the placement of any short fall via third parties, the Company will continue in its restructured form with research activities suspended, and focus on production, sales and product support to meet the increase in customer demand for CVM™ products.
The Company will also use the funds to maintain patent protection of the Intellectual Property (IP) generated from the years of development and investment in the CVM™ technology.
The Board commends the Rights Issue to share holders.
