TIDMRM2
RNS Number : 3376G
RM2 International SA
23 July 2019
23 July 2019
RM2 International S.A.
("RM2" or the "Company")
Proposed Conditional Placing, Notice of EGM and Contract
Update
RM2 today announces a contract update and a conditional Placing
of 300,000,000 new Ordinary Shares at a Placing Price of US$0.02
per Ordinary Share to raise up to US$6,000,000 million before
expenses.
Notice of General Meeting
A circular including a Notice of General Meeting has been posted
to Shareholders (the "Circular") to convene the necessary general
meeting of the Company (the "General Meeting") to approve the
Resolutions to authorise the Placing. The General Meeting is to be
held at 5 Rue de la Chapelle, Luxembourg, L-1325, Luxembourg at
11:00 a.m. BST / 12:00 noon CEST on 31 July 2019.
The Notice of General Meeting also includes alternative
Resolutions, to be proposed in the event that the Resolutions
relating to the Placing are not approved, which seek shareholder
approval for, inter alia, the voluntary liquidation of the Company
and the delisting of the Company's Ordinary Shares from trading on
AIM.
A copy of the Circular and Notice of General Meeting will also
be available to view on the Company's website www.rm2.com.
An extract of selected parts of the Circular is copied out below
along with an indicative timetable of principal events related to
the Restructuring and Placing. The definitions that apply
throughout this announcement can be found at the end of this
announcement.
Contract Update
The Company also announces that, after rigorous testing of
15,000 pallets, it has extended its agreement with a Fortune 500
company in North America for the phased deployment of 150,000
pallets into their network. Expansion of pallet deployment with the
supplier network of the Fortune 500 company continues to develop.
The Company has also signed an agreement for the staged deployment
in Mexico of RM2 ELIoT pallets, which, although total unit volumes
are not yet determined, is expected to lead to the deployment of an
additional 50,000 ELIoT pallets in 2019 and 150,000 ELIoT pallets
in 2020. These developments, together with ongoing commercial
discussions, mark progress towards the business being funded from
operational cashflow.
For further information:
RM2 International S.A. +44 (0)20 7638 9571
Kevin Mazula, Chief Executive Officer
Jean-Francois Blouvac, Chief Financial
Officer
Strand Hanson Limited (Nominated &
Financial Adviser and Broker) +44 (0)20 7409 3494
James Spinney / Ritchie Balmer / James
Bellman
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
Notes to Editors
RM2 International S.A. specialises in smart pallet development,
manufacture, supply and management to establish a leading presence
in global pallet supply and improve the supply chain of
manufacturing and distribution businesses through the effective and
efficient use and management of composite pallets. It is quoted on
the AIM market of the London Stock Exchange under the symbol RM2.L.
For further information, please visit www.rm2.com
Report from the Board of RM2 International S.A.
Dear Shareholder,
Introduction
The purpose of this circular is to notify Shareholders of the
proposed General Meeting to consider and, if thought fit, approve
the Resolutions (as defined herein). The General Meeting is to be
held at 5 Rue de la Chapelle, Luxembourg, L-1325, Luxembourg at 11
a.m. BST/12 noon CEST on 31 July 2019. The formal notice of the
General Meeting is set out at the end of this document.
As you will be aware from the Company's public announcements,
the Company's Board of Directors (the Board) has been seeking
additional funding for the Company. In light of the progress and
results of that process to date, the Board has concluded that such
funding will only be provided if it can be demonstrated that it
raises sufficient equity to cover its Selling, General &
Administrative expenses until it reaches EBITDA break-even, an
amount of equity capital estimated by the Board to be a minimum of
$6.0 million. After extensive discussions, the Board has been able
to come to agreement on the Placing described herein to raise, if
approved by Shareholders, $6.0 million in new equity finance.
The Board will continue to explore all opportunities to maximize
value for shareholders, and, should additional equity capital be
offered or a different transaction which, in the opinion of the
Board, would be likely to provide a greater return to all of its
shareholders crystallize in the limited time available, a circular
setting forth the terms of such a transaction in accordance with
the requirements of the AIM Rules will be distributed to
shareholders along with a convocation to a new General Meeting of
Shareholders and the General Meeting convened herein will not be
held.
The Placing
The Company has entered into a conditional Placing agreement
with an existing substantial shareholder (as defined under the AIM
Rules), Richard Cashin, for the issue of up to 300,000,000 new
Ordinary Shares pursuant to the Placing, which is conditional upon
Shareholder approval and the satisfaction of certain conditions
precedent. The Placing, if approved, will comprise two tranches,
with a price of USD0.02 per Placing Share (the Placing Price). Each
of the First Tranche Placing and the Second Tranche Placing is
composed of monthly instalments of $1 million and the issue of
50,000,000 Placing Shares per instalment (each, an Instalment).
Each Tranche is subject to the conditions precedents described
herein, but once such conditions precedents are satisfied, the
Instalments are not conditional.
If Shareholders approve the Placing, the issuance of the first
Instalment of the First Tranche Placing Shares will take place
immediately following the General Meeting. The first Instalment of
the First Tranche Placing Shares would be issued for USD 1,000,000,
payable on or about 31 July, with the second Instalment occurring
on or about 31 August and the third Instalment on or about 30
September 2019. Therefore, assuming Shareholders approved the
Resolutions relating to the Placing, there are no further
conditions to completion of the First Tranche Placing and the
company will receive minimum gross proceeds of $3,000,000.
Completion of the Second Tranche Placing, assuming the Placing
is approved by Shareholders, would be subject to the Company having
signed a term sheet for debt funding in the amount of at least $10
million, having entered into contracts for in aggregate at least
150,000 pallets with certain counterparties by September 30, 2019
and the shareholders approving (at the General Meeting) an employee
share option scheme allowing for the award of up to 15 per cent. of
the Enlarged Share Capital to beneficiaries (collectively, the
Conditions). Subject to satisfaction of the Conditions, the Second
Tranche Placing Shares would be issued for gross proceeds of, in
aggregate, USD3,000,000, issued in three monthly Instalments on or
about 31 October, on or about 29 November and on or about 30
December 2019. The Placing Shares will, when issued, be subject to
the Articles, will be fully paid and will rank pari passu in all
respects with the Ordinary Shares then in issue, including the
right to receive all dividends and other distributions declared,
made or paid in respect of such Ordinary Shares after the date of
their respective Admission.
Should the Placing be approved, the Company intends to use the
net proceeds of the Placing to fund: (i) the retrofitting of
existing inventory of RM2 Blockpals with ELIoT track and trace
devices; (ii) the production of new RM2 ELIoT Pallets; and (iii)
its sales and general administrative costs pending the conclusion
of a debt facility. The funds available through the debt facility
to be sought pursuant to the Conditions are expected to be
dedicated to the retrofitting and production of pallets, leaving
the proceeds of the Placing thereafter to fund sales and general
administrative costs.
It is noted that, pursuant to the Subscription Agreement in
relation to the Placing, Richard Cashin benefits from the right to
have the Board nominate for election by the Shareholders such
director as he may designate.
For the Placing to proceed, the Company requires Shareholders'
approval to authorise the Directors to disapply existing
Shareholders' pre-emption rights in relation to the issue of the
Placing Shares on a non pre--emptive basis.
The Board notes that Woodford Investment Management Ltd.
currently controls approximately 34.2 per cent. of the Company's
voting rights (based on current effective total voting rights in
the Company of 25,081,086), which is a sufficient proportion of the
Company's voting rights to block the approval of the Placing and
that there is no assurance that Woodford Investment Management Ltd.
will vote in favour of the Placing.
The Board believes that raising equity finance using the
flexibility provided by a non pre-emptive placing is the only
viable option for the Company at this time. The Placing allows the
Company to raise urgent funding for the Company's survival and
avoids the requirement for a prospectus, which is a costly and time
consuming process.
Should the Placing prove successful and subject to shareholder
authorisation, the Board will consider ways of preserving a
sufficient level of its Ordinary Shares in public hands, including
making an open offer to all Shareholders following the Second
Tranche Placing at the Placing Price of new Ordinary Shares up to
the the maximum value permitted without requiring the Company to
publish a prospectus under the EU Prospectus Directive (the Open
Offer). The Open Offer would be made available to all Shareholders
to allow those Shareholders who could not participate in the
Placing to have the opportunity to invest on the same terms.
Potential Liquidation
Should the Resolution relating to the Placing not be approved by
the requisite number of votes at the General Meeting, the
shareholders will be asked to vote on the dissolution of the
Company with immediate effect and the placing of the Company in
voluntary liquidation (the Liquidation), as more thoroughly set
forth in the formal notice of the General Meeting below. If the
Resolution relating to the Liquidation should be submitted and
passed by the requisite majority at the General Meeting, then the
Chairman of the Meeting will ask the Shareholders to vote on the
Resolution relating to the Delisting as the listing of the
Company's shares on the AIM market would serve no further
purpose.
Should the requisite number of votes be cast in favor of the
Resolution relating to Delisting, in accordance with Rule 41 of the
AIM Rules, the Company will notify the London Stock Exchange of
outcome of the vote, giving twenty business days' notice. Under the
AIM Rules, it is a requirement that the Delisting is approved by
not less than 75 per cent of votes cast by Shareholders (in person
or by proxy) at a General Meeting. Subject to the Resolution
relating to the Delisting being passed at the General Meeting, it
is anticipated that Delisting would take effect at 7:00 am UK time
on 20 August 2019.
Following the cancellation of trading in the Company's shares on
AIM, the Ordinary Shares will not be traded on any public market
and the CREST facility (through which the depositary interests
representing Ordinary Shares are currently traded) will be
cancelled. The Ordinary Shares will remain capable of being
transferred on the Company's share register (and therefore not
through CREST) for a limited time.
Upon the Delisting becoming effective, Strand Hanson Limited
will cease to be nominated adviser and broker to the Company and
the Company will no longer be required to comply with the rules and
corporate governance requirements to which companies admitted to
trading on AIM are subject, including the AIM Rules.
Board Recommendation
The Board considers, in light of the Company's circumstances,
that the Placing is in the best interests of the Company and its
Shareholders, and the Directors recommend that Shareholders vote in
favour of the Resolutions pertaining to the Placing to be proposed
at the General Meeting.
The primary reason for the Resolutions for the Placing is for
the Company to be able to raise sufficient funds for the Company to
augment its product offering and to meet its ongoing working
capital obligations and to enable the Company to continue as a
going concern.
If all of the Resolutions relating to the Placing are not
successfully passed at the General Meeting, and no other source of
funds has become available to the Company prior to the General
Meeting, the Chairman of the General Meeting will table for
immediate vote the resolutions authorising the dissolution of the
Company with immediate effect, the appointment of a liquidator, the
determination of the powers of the liquidator and the voluntary
liquidation of the Company (the Resolutions relating to the
Liquidation) and the Resolution relating to the Delisting. In such
circumstances, it is unlikely that trading in the Company's
Ordinary Shares on AIM would be restored. It is expected that the
Company's subsidiaries would also be wound up or disposed of in due
course. The Resolutions relating to the Liquidation propose that
shareholders appoint Charles Duro of Duro & Goebel, a current
director of the Company, as liquidator. Given Charles Duro's
experience and training as a lawyer as well as his extensive
knowledge of the Company and its subsidiaries, the Board believes
that it would be most efficient and cost-effective to have Charles
Duro serve as liquidator. The Resolutions are set forth in the
formal notice of the General Meeting at the end of this
document.
If none of the Resolutions are passed, it is likely that the
Company would be forced into a compulsory liquidation process,
which may not result in the return of any value to Shareholders,
and it is unlikely that trading in the Company's ordinary shares on
AIM would be restored.
Background to the Placing and use of proceeds
1.1 Information on the Company & its strategic progress
RM2 specialises in pallet development, manufacture, supply and
management and is seeking to establish a leading presence in global
pallet supply and improve the supply chain of manufacturing and
distribution businesses through the effective and efficient use and
management of composite pallets.
Whilst, since 2016, the Company has made significant progress in
addressing difficulties it has encountered, it remains in a
difficult financial situation.
Firstly, it closed down its manufacturing facility in Toronto
and outsourced production to experienced, world class partners. One
of these partners, Jabil, Inc., now has a dedicated facility in
Ciudad Juarez in Mexico, which is fully built out, but, in light of
the distressed financial position of the Company is operating below
capacity. Assuming the Placing is successful, it is expected that
Jabil will continue to retrofit existing inventory of RM2
Blockpallets with ELIoT devices (described below), build new RM2
Blockpallets and that such pallets would be deployed to
customers
Secondly, in order to address issues of asset retention,
reduction of theft and mis- or undeclared utilization, the Company
has developed its RM2 ELIoT tracking technology. ELIoT comprises a
cellular device which transmits the whereabouts of each pallet,
providing a previously unachievable level of confidence in asset
security. The underlying technology is believed to be unique to
RM2. The Company has conducted a number of trials of ELIoT-enabled
pallets with customers in North America and has signed or is in
advanced negotiations for deployment. While the Directors believe
that the RM2 ELIoT device is a robust product based on trials and
information from component suppliers, it is a new product, and
therefore its longevity will be demonstrated over its course of
service.
1.2 Current trading and prospects
RM2 has an extensive pipeline of potential deployments in North
America and Europe, a good percentage of which it expects to be
successfully converted over the upcoming 12-18 months. These
include numerous potential deployments of ELIoT pallets, which have
generated significant interest from existing and potential
customers following a number of trials of the product. The Company
has, on July 19, 2019 entered into an agreement with a Fortune 500
company in North America regarding the phased deployment of 150,000
pallets into their network. Expansion of pallet deployment with the
supplier network of the Fortune 500 company continues to develop.
The Company also signed on July 19, 2019 a distributor agreement
for the staged deployment in Mexico of RM2 ELIoT pallets. In light
of the slower than expected conversion of certain opportunities,
and assuming the Placing is completed and debt financing is
available by August 2019 on acceptable terms, the Company believes
that it will be in a position to generate positive EBITDA in early
2020 subject to procurement of the debt financing required as a
Condition to completion of the Second Tranche Placing.
1.3 Reasons for the Placing and use of proceeds
As announced on 26 June 2019, the Company's cash balance at the
end of May 2019 was US$3.3 million. Its cash balance at the end of
June 2019 was US$705,000 and, taking in to account its monthly cash
burn, the Company does not have sufficient financial resources to
fully meet obligations in to be incurred in August. As the Group
and its auditors were unable to finalise the audit of the Company's
annual consolidated financial statements for the year ended 31
December 2018 (2018 AFS) and publish them prior to 30 June 2019, as
required by Rule 19 of the AIM Rules, dealings in the Company's
ordinary shares were temporarily suspended from trading on AIM with
effect from 7.30 a.m. on Monday 1 July 2019 (the Suspension). The
shares will remain suspended from trading until such time as the
Company's 2018 AFS have been published in compliance with AIM Rule
19, which the Company hopes it will be in a position to during Q3
2019 assuming the debt financing is secured.
As a consequence of the constrained financial situation of the
Company, the Board has convened the General Meeting to vote on the
Resolutions.
Should the Placing be approved, the proceeds will be required
for the Company to meet its ongoing working capital obligations and
enable the Company to continue as a going concern pending the
procurement of debt financing of at least $10 million required as
condition precedent to completion of the Second Tranche Placing.
Without the Placing proceeds, the Board recommends that
Shareholders vote in favor of the voluntary liquidation of the
Company and the appointment of a liquidator for the orderly wind-up
of the Company and the Group.
Pursuant to the Placing, the Company has conditionally raised $6
million (before fees and expenses) by way of a conditional, non
pre-emptive placing of up to 300,000,000 new Ordinary Shares in two
tranches at the Placing Price. The Placing Price represents a
discount of approximately 81% per cent. to the closing mid-market
price of 8.5 pence on 28 June 2019, being the latest date of
trading in the Company's shares prior to the Suspension, and a
discount of approximately 96 per cent. from the three month
historical average closing mid-market price of 40.1 pence prior to
the date of Suspension. Assuming Shareholders approve the Placing,
the first Instalment of the First Tranche Placing will take place
immediately following the General Meeting for USD 1,000,000, with
the second Instalment occurring on or about 31 August and the third
Instalment on or about 30 September 2019.
Subject to satisfaction of the Conditions, the Second Tranche
Placing Shares would be issued for gross proceeds of, in aggregate,
USD3,000,000, issued in three monthly Instalments on or about 31
October, on or about 29 November and on or about 30 December
2019.
Following completion of First Tranche Placing, the First Tranche
Placing Shares will represent approximately 78.8 per cent. of the
First Tranche Enlarged Share Capital, and assuming completion of
the Second Tranche Placing, , the Placing Shares will represent
approximately 88.1 per cent. of the Enlarged Share Capital. In
order to raise funds quickly and to minimize the time and
transaction costs of the Placing, the Placing Shares are only being
placed with one existing shareholder. The Placing Shares are not
being made available to the public.
The Placing Shares will, when issued, be subject to the
Articles, be credited as fully paid and will rank pari passu in all
respects with the Ordinary Shares then in issue, including the
right to receive all dividends and other distributions declared,
made or paid in respect of such Ordinary Shares after the date of
Admission.
In connection with the Placing, the Company is entering into
Placing Agreements with the subscriber. No element of the Placing
is underwritten. In accordance with the terms of the Placing
Agreement, the Placing is conditional upon, inter alia, the passing
of the Resolutions, any conditions in the Placing Agreement
relating to the Placing being satisfied or (if applicable) waived,
the Placing Agreement not having been terminated in accordance with
its terms prior to Admission. The Second Tranche Placing is subject
to the satisfaction of the Conditions.
The Board notes that Woodford Investment Management Limited,
currently the Company's largest shareholder, holds sufficient
voting rights to block the Placing. There is no assurance that
Woodford Investment Management Ltd. will vote in favour of the
Placing.
1.4 Delisting and Liquidation
If all of the Resolutions relating to the Placing are not
successfully passed at the General Meeting, and no other source of
funds has become available to the Company prior to the General
Meeting, the Chairman of the General Meeting will table for
immediate vote the resolutions authorizing the dissolution of the
Company with immediate effect, the appointment of a liquidator, the
determination of the powers of the liquidator and the voluntary
liquidation of the Company (the Resolutions relating to the
Liquidation) and the Resolution relating to the Delisting. It is
expected that the Company's subsidiaries will also be wound up or
disposed of in due course.
The Resolutions relating to the Liquidation propose that
shareholders appoint Charles Duro of Duro & Goebel, a current
director of the Company, be appointed as liquidator. Given Charles
Duro's experience and training as a lawyer as well as his extensive
knowledge of the Company and its subsidiaries, the Board believes
that it would be most efficient and cost-effective to have Charles
Duro serve as liquidator. The Resolutions are set forth in the
formal notice of the General Meeting at the end of this
document.
Noting the proposed liquidation process above, if the Delisting
becomes effective following the General Meeting, Shareholders
should be aware of the implications and principal effects of the
Delisting, which include the following:
-- Public market - there will be no public market or trading
facility on any recognised investment exchange for the Ordinary
Shares and, consequently, there can be no guarantee that a
Shareholder will be able to purchase or sell any Ordinary
Shares.
-- AIM Rules - Shareholders will no longer be afforded the
protections given by the AIM Rules, such as the requirement for the
Company to retain a nominated adviser, to be notified of certain
events, including substantial transactions, financing transactions,
related party transactions and fundamental changes in the Company's
business, including certain acquisitions and disposals.
-- Independent advisers - the Company will cease to have an
independent financial and nominated adviser and broker;
-- Regulatory, accounting and reporting requirements - as an
unlisted company, the Company will be subject to fewer regulatory
restrictions than as a listed company.
-- Tax - the Delisting may have either positive or negative
taxation consequences for Shareholders. Shareholders who are in any
doubt about their tax position should consult their own
professional independent adviser immediately;
-- MAR - as an unlisted company there will no longer be a
requirement for the Company to publicly disclose matters which
constitute inside information which, as a listed company, it would
be required to do pursuant to the provisions of the Market Abuse
Regulation. Although the Company may in the future publicly
disclose matters which the Directors consider prudent, the
disclosure of information will not reflect the requirements of
MAR.
The above considerations are not exhaustive and Shareholders
should seek their own independent advice when assessing the likely
impact of the Delisting on them.
Related Party Transaction
The table below sets out the positions of the Company's current
Significant Shareholders (as defined in the AIM Rules) and its
Chairman following the issue of the First Tranche Placing Shares
and the Second Tranche Placing Shares.
Existing holding Holding of % of First Holding of Holding of
of Ordinary Ordinary Shares Tranche Enlarged Ordinary Shares Ordinary Shares
Shares after admission Share Capital* after admission after admission
of First Tranche of Second Tranche of Second Tranche
Placing Shares* Placing Shares* Placing Shares*
Woodford
Investment
Management, LLP,
acting on behalf
of funds under
its management 23,720,250 23,720,250 12.5% 23,720,250 7.0%
------------------ ------------------ ------------------ ------------------ ------------------
Richard Cashin 4,799,233 154,799,233 81.4% 304,799,233 89.6%
------------------ ------------------ ------------------ ------------------ ------------------
Ian Molson 2,448,499 2,448,499 1.3% 2,448,500 0.7%
------------------ ------------------ ------------------ ------------------ ------------------
Jupiter Asset
Management 1,871,842 1,871,842 1.0% 1,871,842 0.5%
------------------ ------------------ ------------------ ------------------ ------------------
Polygon Global
Partners LLP 1,516,891 1,516,891 0.8% 1,516,891 0.4%
------------------ ------------------ ------------------ ------------------ ------------------
* Each of the First Tranche Placing and the Second Tranche
Placing are expected to be in three equal tranches and are subject
to shareholder approval at the General Meeting and, in the case of
the Second Tranche Placing, the satisfaction of certain Conditions.
The figures stated here assume that both the First Tranche Placing
and the Second Tranche Placing are completed and that there are no
other changes to the Company's issued share capital between the
time of this Circular and the completion of the Second Tranche
Placing.
Richard Cashin's participation in the Placing is deemed related
party transaction under Rule 13 of the AIM Rules as he is a
Substantial Shareholder in the Company (as defined within the AIM
Rules for Companies). The Directors consider, having consulted with
the Company's nominated adviser, Strand Hanson, that the terms of
Richard Cashin's participations fair and reasonable insofar as
Shareholders as a whole are concerned.
General Meeting
A notice convening a General Meeting, to be held at 5 Rue de la
Chapelle, Luxembourg, L-1325, Luxembourg at 11 a.m. BST/12 noon
CEST on 31 July 2019, is set out at the end of this document. For
the Resolutions to be validly adopted, at least two thirds of the
votes validly cast by Shareholders present or represented at the
General Meeting must be cast in favour and with a quorum of at
least 50 per cent. of the Shares issued.
Action to be taken
Shareholders will find enclosed a Form of Proxy or Form of
Instruction for use at the General Meeting. Whether you are going
to attend the meeting or not, please complete the Form of Proxy or
Form of Instruction, following the instructions, and return it as
soon as possible to the Company's Registrars, preferably through
the use of their electronic voting system. Electronic votes must be
lodged or forms must arrive at the latest by 10 a.m. BST/11 a.m.
CEST on 29 July 2019 for Forms of Instruction and 11 a.m. BST/12
noon CEST on 29 July 2019 for Forms of Proxy. Returning the form
will not stop you from attending the meeting and voting if you wish
to do so.
Recommendation
The Directors recommend that you vote in favour of the
Resolutions to be proposed at the General Meeting as they intend to
do in respect of their shareholdings in the Company of, in
aggregate, 18.0 per cent. of the currently effective voting
rights.
Risk Factors
Any investment in the Company is subject to a number of risks.
Accordingly, prospective investors should carefully consider the
risks set out below as well as the other information contained in
this document and any other publicly available information about
the Group before making a decision whether to invest in the
Company. The risks described below are not the only risks that the
Group faces. Additional risks and uncertainties that the Directors
are not aware of or that the Directors currently believe are
immaterial may also impair the Group's operations. Any of these
risks may have a material adverse effect on the Group's business,
financial condition, results of operations and prospects. In that
case, the price of the Ordinary Shares could decline and investors
may lose all or part of their investment. Prospective investors
should consider carefully whether an investment in the Company is
suitable for them in light of the information in this document and
their personal circumstances.
Before making an investment, prospective investors are strongly
advised to consult an investment adviser authorised under FSMA who
specialises in investments of this kind. A prospective investor
should consider carefully whether an investment in the Company is
suitable in the light of his or her personal circumstances, the
financial resources available to him or her and his or her ability
to bear any loss which might result from such investment.
The following factors do not purport to be a complete list or
explanation of all the risks involved in investing in the Company.
In particular, the Company's performance may be affected by changes
in the market and/or economic conditions and in legal, regulatory
and tax requirements.
1 RISKS RELATING TO RM2 AND ITS BUSINESS
1.1 Early stage of operations
The commencement of RM2 earning material revenues is difficult
to predict and there is no guarantee that RM2 will generate any
material revenues in the near future. RM2 has a limited operating
history upon which its performance and prospects can be evaluated
and faces the risks frequently encountered by developing companies.
These risks include the uncertainty as to which areas to target for
growth. There can be no assurance that RM2's proposed operations
will be profitable or produce a reasonable return, if any, on
investment.
1.2 Product development
RM2 intends to continue to develop products which are designed
to have a commercial application. There is no guarantee that any
such product will be successful nor that any products will actually
result in any commercial applications.
The success of RM2 is reliant upon there being a demand for its
products. In addition, RM2 relies upon third parties to incorporate
its products into their own processes. A particular third party
having access to RM2's products may fail to use the products in an
effective process or the products or processes may not be or become
commercially viable. There can be no assurance that such products
will achieve commercial success or be an attractive alternative to
conventional products or processes.
It is possible that RM2 focuses its activities on a limited
number of products and technologies and that after such further
development has taken place, RM2 finds that the resulting product
is not successful or has no profitable commercial application, or
that the resulting product has been superseded by other products
which have a more profitable commercial application when compared
with those of RM2.
The development and manufacture of products takes some time to
complete. Depending on the process, RM2 may not be able to develop
its products within the timeframe required by its potential
customers and/or that targeted by its competitors. Further, the
success of RM2 may depend on its continued ability to develop new
products and to meet potential customers' changing
requirements.
1.3 Market acceptance
The development of a market for a new product is affected by
many factors, most of which are beyond the control of RM2,
including the emergence of newer and more competitive products or
processes, the costs of the products, regulatory requirements,
including any future regulatory changes, end-users' perceptions as
to the safety of any product and the propensity of end-users to try
new products or processes.
If a market for any product fails to develop or develops more
slowly than anticipated, RM2 may fail to achieve profitability with
respect to the associated products. In addition, RM2 may not
continue to develop such products if market conditions do not
support the continuation of those products.
1.4 Need for additional financing
In addition to the US$10 million debt financing required, as
described in this circular, RM2 may require additional sources of
capital to be able to meet its future obligations. Such additional
sources of capital, which may take the form of debt financing, may
not be forthcoming or available on acceptable terms. In the future,
it may explore other sources of financing including invoice
discounting and other debt facilities.
1.5 RM2 may experience accelerated demand for its products and services
A need to fulfill large orders rapidly may require RM2 to seek
additional capital which could entail the issuance of new equity,
debt financing or some combination thereof. If RM2 is unable to
raise the necessary additional financing for any expanded working
capital requirement it could adversely affect its ability to
continue its operations or expand its business
1.6 If RM2 is not able to effectively manage its growth, its
operations could be damaged and profitability reduced
Future growth of RM2 could place significant demands on RM2's
operational and financial infrastructure and its ability to expand
to meet such growth will be tested. RM2 may need to expand and
enhance its infrastructure and technology, and improve its
operational and financial systems and procedures and controls from
time to time in order to be able to match that growth. If RM2 is
unable to manage its growth effectively, its operations could be
harmed and profitability reduced. The growth of RM2's sales and
profits in the future will depend, in part, on its ability to
expand its operations through the roll-out of its products and
services to new potential customers and into new markets and
geographies. Furthermore, in order to manage its planned expansion,
it will need continually to evaluate the adequacy of its management
capability, operational procedures, financial controls and
information systems. Accordingly, there can be no assurance that
RM2 will be able to achieve its expansion goals on a timely or
profitable basis.
1.7 RM2 will need to ensure that its financial risk limitation
policies, procedures and practices remain suitable as RM2 grows
The financial risk limitation policies, procedures and practices
RM2 has established to date are suitable for a company of the size
and stage of development of RM2. As RM2 seeks to grow, the design
and implementation of RM2's policies, procedures and practices used
to identify, monitor and control a variety of risks may fail to be
effective. RM2's financial risk limitation methods rely on a
combination of internally developed technical controls, industry
standard practices, observation of historical market behaviour and
human supervision. These methods may not adequately prevent future
losses.
A lack of effective internal controls could have a material
adverse effect on RM2's reputation, business, financial condition
and operating results. Any material weaknesses may materially
adversely affect RM2's ability to report accurately its financial
condition and results of operations in the future in a timely and
reliable manner.
1.8 RM2's expansion may not be successful
RM2's operations are subject to certain risks including changes
in government policies, changes in political and economic
conditions, changes in regulatory environments, exposure to
different legal, regulatory or fiscal standards, difficulties in
staffing and managing operations, and potentially adverse tax
consequences. There are no guarantees that RM2 will be able to
successfully expand its operations in line with its current
expectations.
1.9 RM2 may experience unforeseen delays and cost overruns when
rolling out its products and services
Management effort and financial resources are being employed by
RM2 in rolling out its products and services to potential
customers. Although RM2 has budgeted for expected costings,
additional expenses in the event of unforeseen delays, cost
overruns, unanticipated expenses, regulatory changes and increases
in the price of materials and other manufacturing equipment
utilised in the production of RM2's pallets may negatively affect
RM2's business, financial condition and results of operations.
1.10 RM2 is dependent on developing relationships with existing and potential customers
The success of RM2's business is, and is expected to continue to
be, dependent on the development of commercial relationships with
its existing and potential customers and suppliers. There is no
guarantee that these relationships will be developed sufficiently
to the point of generating significant revenue for RM2, or that
such potential customers will not seek to use alternative providers
of products and services similar to those of RM2.
1.11 RM2 is dependent on continued availability of raw materials and manufacturing equipment
The raw materials and manufacturing equipment utilised by RM2's
manufacturing partners in the delivery of its products and services
are readily available from a number of suppliers and
counterparties. However, any restriction on the availability of
such items may negatively affect RM2's business, financial
condition and results of operations.
1.12 The Company depends on component and product manufacturing
and logistical services provided by outsourcing partners
Substantially all of the Company's manufacturing is performed in
whole or in part by outsourcing partners located in Mexico. The
Company has also outsourced much of its transportation and
logistics management. While these arrangements may lower operating
costs, they also reduce the Company's direct control over
production and distribution. It is uncertain what effect such
diminished control will have on the quality or quantity of products
or services, or the Company's flexibility to respond to changing
conditions. Although arrangements with these partners may contain
provisions for warranty expense reimbursement, the Company may
remain responsible to the consumer for warranty service in the
event of product defects and could experience an unanticipated
product defect or warranty liability.
Any failure of the Company's outsourcing partners to perform may
have a negative impact on the Company's cost or supply of
components or finished goods. In addition, manufacturing or
logistics in these locations or transit to final destinations may
be disrupted for a variety of reasons including, but not limited
to, natural and man-made disasters, information technology system
failures, commercial disputes, military actions or economic,
business, labour, environmental, public health, or political
issues.
The Company has invested in manufacturing process equipment,
much of which is held at certain of its outsourcing partners, and
has made prepayments to certain of its suppliers associated with
long-term supply agreements. While these arrangements help ensure
the supply of components and finished goods, if these outsourcing
partners or suppliers experience severe financial problems or other
disruptions in their business, such continued supply could be
reduced or terminated and the net realisable value of these assets
could be negatively impacted.
1.13 The Company faces substantial inventory and other asset
risk in addition to purchase commitment cancellation risk
The Company orders products and builds inventory in advance of
purchase orders. Because the Company's markets are developing,
competitive and subject to other changes, there is a risk the
Company will forecast incorrectly and order or produce excess or
insufficient amounts of products.
1.14 Future operating results depend upon the Company's ability
to obtain RM2 ELIoT components and products in sufficient
quantities on commercially reasonable terms and on the timely
introduction of LTE-m (Long Term Evolution (4G)) technology
Because the Company currently obtains RM2 ELIoT components and
products from single or limited sources, the Company is subject to
significant supply and pricing risks. There can be no assurance
that the Company will be able to negotiate, extend or renew supply
agreements on similar terms, or at all. Suppliers of components may
suffer from poor financial conditions, which can lead to business
failure for the supplier or consolidation within a particular
industry, further limiting the Company's ability to obtain
sufficient quantities of components on commercially reasonable
terms. The effects of global or regional economic conditions on the
Company's suppliers also could affect the Company's ability to
obtain components and products. Therefore, the Company remains
subject to significant risks of supply shortages and price
increases.
The cellular LTE-m network which is in process of being
introduced throughout much of North America permits the utilization
of a new, simpler and less-expensive chip-set. When a component or
product uses new technologies, initial capacity constraints may
exist until the suppliers' yields have matured or manufacturing
capacity has increased. The supply of components could be delayed
or constrained, or a key manufacturing vendor could delay shipments
of completed products to the Company.
1.15 Exchange rate fluctuations
RM2's principal revenues in the near term are expected to be
earned in US$. Currency fluctuations may affect RM2's operating
cash flow since certain of its costs and revenues are likely to be
denominated in a number of different currencies other than US$ and
any potential income may become subject to exchange control or
similar restrictions. Fluctuations in exchange rates between
currencies in which RM2 operates may cause fluctuations in its
financial results which are not necessarily related to its
underlying operations.
RM2 does not currently have any foreign currency hedges in
place. If and when appropriate, the adoption of a hedging policy
will be considered by the Board.
1.16 Competition
There can be no assurance that potential competitors of RM2,
which may have greater financial, research and development, sales
and marketing and personnel resources than RM2, are not currently
developing, or will not in the future develop, products and
strategies that are equally or more effective and/or economical as
any products or strategies developed by RM2 or which would
otherwise render its products or strategies obsolete.
RM2 operates within competitive markets and the Directors
believe that it has adopted a competitive business strategy.
However, RM2's business, results, operations and financial
condition could be materially adversely affected by the actions of
its competitors (including their marketing and pricing strategies
and product and services development).
RM2 may be forced to change the nature of its business as a
result of competitive factors and there is no assurance that RM2
will be able to compete successfully in the market place in which
it seeks to operate.
1.17 Manufacturing technology
Even if new and advanced manufacturing or production equipment
becomes available for the production of RM2's products, RM2 may not
have funds available or be able to obtain necessary financing on
acceptable terms to acquire it for use by its manufacturing
contractors, or agree for its manufacturing contractors to acquire
or utilise it. Further, any investment RM2 may make in a perceived
technological advance may not be effective, economically successful
or otherwise accepted in the market.
1.18 RM2's expenses include fixed costs
A significant proportion of RM2's costs may be fixed and may not
then be easily reduced in the short-term. Therefore, RM2 may not be
able to reduce certain expenses promptly in response to any future
reduction in revenue. Should such a reduction occur and RM2 be
unable to reduce its fixed expenses accordingly, its business,
financial condition and results of operations may be materially
adversely affected.
1.19 Ability to attract and retain key executives, officers, managers and technical personnel
RM2 is headquartered in Luxembourg. The Chief Executive Officer
is currently based in North America and the Chief Financial Officer
and the principal sales office are located in Switzerland.
Attracting, training, retaining and motivating technical and
managerial personnel, including individuals with significant
technical expertise is a critical component of the future success
of RM2's business. RM2 may encounter difficulties in attracting or
retaining qualified personnel. Managing from disparate locations
can pose challenges in communication and decision-making. Continued
growth may cause a significant strain on existing managerial,
operational, financial and information systems resources.
The performance of RM2 depends, to a significant extent, upon
the abilities and continued efforts of its existing senior
management as well as the recruitment of further senior management
in line with the planned growth in operations. The loss of the
services or failure to recruit key management personnel or the
failure to retain or recruit key employees or the inability to
effectively communicate across international offices could
adversely affect RM2's ability to maintain and/or improve its
operating and financial performance. In common with many
businesses, the success of RM2 will, to a significant extent, be
dependent on the expertise and experience of the Directors and key
senior management, the loss of one or more of whom could have a
material adverse effect on RM2.
1.20 RM2's disaster recovery plans may not be sufficient and if
they are not then there could be a material adverse effect on its
financial position
RM2 depends on the performance, reliability and availability of
its information technology and communications systems. Any damage
to or failure of its systems could result in disruptions to RM2's
operations and websites, which could reduce its revenues and
profits, and damage its brands.
RM2's systems are vulnerable to damage or interruption from
power loss, telecommunications failures, computer viruses, computer
denial of service attacks or other attempts to harm its systems,
natural disasters, including floods and fires, volcanic ash and
vandalism, terrorist attacks or other acts.
RM2's disaster recovery plans may not adequately address every
potential event and its insurance policies may not cover any loss
in full or in part (including losses resulting from business
interruptions) or damage that it suffers fully or at all.
RM2 relies on third parties, including data centres and
bandwidth providers, to host and operate its websites. Any failure
or interruption in the services provided by these third parties
could harm its operations and reputation. In addition, RM2 may have
little or no control over these third parties, which increases its
vulnerability to service problems. Any disruptions in the services
provided by these parties or any failure of these providers to
handle current or higher visitor traffic or transaction volumes
could significantly harm RM2's business. RM2 may in the future
experience disruptions or delays in these services. If these
providers were to suffer financial or other difficulties, their
services could be interrupted or discontinued and replacement
providers may be uneconomical or unavailable. Any of these events
could have a material adverse effect on RM2's business, operating
profit and overall financial condition.
1.21 Political, economic, regulatory and legislative considerations
Adverse developments in the political, legal, economic and
regulatory environment may materially and adversely affect the
financial position and business prospects of RM2. Political and
economic uncertainties include, but are not limited to,
expropriation, nationalisation, changes in interest rates, the
retail prices index, changes in taxation, changes in trade tariffs
and trade treaties and changes in law. Whilst RM2 strives to
continue to take effective measures such as prudent financial
management and efficient operating procedures, there is no
assurance that adverse political, economic, legal and regulatory
factors will not materially and adversely affect RM2.
1.22 Development of technology
Continuing research on and development of RM2's technology may
be required and there can be no assurance that any of its future
technology will be successfully developed or exploited. RM2 may
encounter delays and incur additional research and development
costs and expenses over and above those anticipated or allowed for
by the Directors. For example while the Directors believe that
ELIoT is a robust product based on trials and information from
component suppliers, it is a new product which has not yet been
able to demonstrate its longevity.
1.23 Unforeseen factors and developments
RM2's ability to implement its business strategy may be
adversely affected by factors that it cannot currently foresee,
such as unanticipated costs and expenses, technological change and
severe economic downturn. All of these factors may necessitate
changes to the business strategy described in this document.
1.24 Market acceptance and future funding
Whilst the Directors believe that there are viable markets for
RM2's products and services, there can be no assurance that these
will be generally adopted by RM2's existing and potential client
base.
1.25 Regulatory environment
RM2's operations may be subject to a variety of national,
federal, provincial, state, foreign and local laws and regulations,
including environmental, health and safety laws, regulations,
treaties and conventions (together, "Regulations").
This includes, inter alia, those controlling the discharge of
materials into the environment, requiring removal and clean-up of
environmental contamination, establishing certification, licensing,
health and safety, taxes, labour and training standards, operation
of equipment or otherwise relating to the protection of human
health and the environment, and export control regulations. The
amendment or modification of existing Regulations or the adoption
of new Regulations curtailing or further regulating RM2's business
could have a material adverse effect on RM2's operating results and
financial condition.
Whilst RM2 intends to work to comply with all applicable
Regulations, it cannot predict the extent to which future earnings
or capital expenditures may be affected by compliance with such new
Regulations. In addition, RM2 may be subject to significant fines,
penalties or liability if it does not comply with any such existing
or future Regulations.
There may be a change in the regulatory environment which may
materially adversely affect RM2's ability to implement successfully
the strategy set out in this document.
1.26 Intellectual property and proprietary rights
RM2 relies upon maintaining the confidentiality of the exact
nature of the BLOCKPal manufacturing process and its RM2 ELIoT
technology and does not for example have any patents. The details
of the manufacturing process and its RM2 ELIoT technology are the
Company's most important intellectual property. The Company
protects this intellectual property by ensuring that its relevant
employees and manufacturers have confidentiality provisions in
their employment and manufacturing contracts preventing them from
disclosing the confidential information of the Group to anyone
outside of the Group. RM2 ensures relevant suppliers have entered
into non-disclosure agreements restricting disclosure by such
suppliers of the confidential information of the Group.
However, RM2 cannot be sure that other competitors will not
infringe upon, violate, challenge or reverse engineer its
intellectual property in the future. If RM2 is not able to
adequately protect or enforce its intellectual property rights, its
business, results of operations and financial condition may be
materially adversely affected.
RM2 is also subject to the risk that third parties may allege
that RM2's operations and use of technology infringes upon their
intellectual property rights. RM2 cannot be sure that such
litigation will not be brought against RM2 in the future and, if
brought, whether RM2 would be successful in defending itself
against such claims. Moreover, defending such claims may result in
protracted litigation, which could result in substantial costs and
the diversion of RM2's resources, as a result of which RM2's
business, results of operations and financial condition may be
adversely affected. Furthermore, RM2 customer contracts may contain
indemnities, whereby RM2 may agree to indemnify its customers for
third party intellectual property infringement claims and RM2
cannot be sure that it would have no liability to its customers in
such circumstances.
1.27 Reliance on manufacturing sector for bulk of pallet orders
RM2 is reliant on the manufacturing sector of the economy to
produce goods in sufficient volumes to drive demand for pallets on
which to transport those goods. A reduction in manufacturing output
may lead to a reduction in the size of the pallet market and in
turn RM2 may find it more difficult to obtain orders to produce or
lease pallets.
1.28 Increases in input costs
RM2's operations require raw materials, road transportation and
water and electricity supply. Any increase in these input costs
would affect the profitability of RM2 which may find it difficult
to pass on such increased costs to potential customers.
1.29 Publication of Annual Accounts; suspension from trading
As announced on 1 July 2019, the Company and its auditors were
not able to finalize the Company's fiscal year 2018 audited annual
consolidated financial statements and as a consequence, the
Company's Shares were suspended from trading on 1 July 2019. The
Shares remain suspended from trading to date. There is no assurance
that the Company will be able to finalize its 2018 AFS or that the
suspension in the trading of its shares will be lifted.
RISKS RELATING TO THE COMPANY'S DOMICILE
2.1 Disclosure of interests in shares
Under the Luxembourg Companies Law, shareholders in RM2 are not
obliged to disclose their interests in a company in the same way as
shareholders of certain public companies incorporated in the United
Kingdom. In particular, the Disclosure Guidance and Transparency
Rules do not apply. The Articles have been amended to incorporate
provisions equivalent to those contained in the Disclosure Guidance
and Transparency Rules, but these may be amended by a resolution of
the Shareholders.
2.2 Takeovers
As RM2 is not admitted to trading on a "regulated market", it is
not subject to any takeover laws in Luxembourg or elsewhere.
RISKS RELATING TO THE ORDINARY SHARES
3.1
3.1 Suitability
Investment in the Ordinary Shares may not be suitable for all
readers of this document. All potential investors are accordingly
advised to consult a person authorised under FSMA who specialises
in investments of this nature before making any investment
decisions.
3.2 Investment in AIM-traded securities
Investment in shares traded on AIM involves a higher degree of
risk, and such shares may be less liquid, than shares in companies
which are listed on the Official List. The AIM Rules are less
demanding than those rules that govern companies admitted to the
Official List. It is emphasised that no application is being made
for the admission of RM2's securities to the Official List or to
any other investment exchange other than AIM. An investment in the
Ordinary Shares may be difficult to realise. Prospective investors
should be aware that the value of an investment in RM2 may go down
as well as up and that the market price of the Ordinary Shares may
not reflect the underlying value of RM2. Investors may therefore
realise less than, or lose all of, their investment. In the event
that the Placing Resolutions are not passed, the Company may enter
into a liquidation process and effect the delisting of its Ordinary
Shares from trading on AIM; in such circumstances, it is unlikely
that the Company's Ordinary Shares will be restored to trading on
AIM.
3.3 Share price volatility and liquidity
The share price of quoted companies can be highly volatile and
shareholdings can be illiquid. The price at which the Ordinary
Shares are quoted and the price which investors may realise for
their Ordinary Shares will be influenced by a large number of
factors, some specific to RM2 and its operations and others which
may affect quoted companies generally. These factors could include
the performance of RM2, large purchases or sales of the Ordinary
Shares, currency fluctuations, legislative changes and general
economic, political, regulatory or social conditions.
3.4 Placing Shares Issued in Two Tranches
Issuance of the Second Tranche Placing Shares is conditional on
the satisfaction of the Conditions. In addition, the subscriber(s)
for the Second Tranche Placing Shares may be unable to provide the
funds for the purchase of such Shares at the time scheduled for the
issuance. The occurrence of either of these circumstances would
lead to the Second Tranche Placing Shares not being issued, in
which case the Company will not have the resources to carry out its
business plan.
3.5 Access to further capital
Following completion of the Placing, which is contingent on
securing US$10 million of debt funding, RM2 may require additional
funds to continue as a going concern and to respond to business
challenges, enhancing existing products and services and further
developing its sales and marketing channels and capabilities.
Accordingly, RM2 may need to engage in further equity or debt
financings to secure additional funds. If RM2 raises additional
funds through further issues of equity or convertible debt
securities, existing shareholders could suffer further significant
dilution, and any new equity securities or convertible debt
securities could have rights, preferences and privileges superior
to those of current shareholders. Any debt financing secured by RM2
in the future could involve restrictive covenants relating to its
capital raising activities and other financial and operational
matters, which may make it more difficult for RM2 to obtain
additional capital and to pursue business opportunities, including
potential acquisitions. In addition, RM2 may not be able to obtain
additional financing on terms favourable to it, if at all. If RM2
is unable to obtain adequate financing or financing on terms
satisfactory to it, when required, its ability to continue to
support its business growth and to respond to business challenges
could be significantly limited or could affect its financial
viability.
3.6 Dilution
The Placing Shares will give rise to highly significant dilution
for Shareholders and, if available, future financings to provide
required capital may dilute shareholders' proportionate ownership
in RM2. Following completion of the Placing, RM2 may raise capital
in the future through public or private equity financings or by
issuing debt securities convertible into Ordinary Shares, or rights
to acquire these securities (which, in any such case, may not be
made available to existing holders of Ordinary Shares). If RM2
raises significant amounts of capital by these or other means, that
could cause further dilution for RM2's existing shareholders.
Moreover, the Placing and/or the further issue of Ordinary Shares
could have a negative impact on the trading price and increase the
volatility of the market price of the Ordinary Shares. RM2 may also
issue further Ordinary Shares, or create further options over
Ordinary Shares, as part of its employee remuneration policy, which
could in aggregate create a substantial dilution in the value of
the Ordinary Shares and the proportion of RM2's share capital in
which investors are interested.
3.7 Future sale of Ordinary Shares
RM2 is unable to predict when and if substantial numbers of
Ordinary Shares will be sold in the open market following the
Placing. Any such sales, or the perception that such sales might
occur, could result in a material adverse effect on the market
price of the Ordinary Shares. RM2 may require additional capital in
the future which may not be available to it.
3.8 Exchange rate risk to investors
RM2's functional currency is US$. Fluctuations in currency could
have an adverse effect on the value of an investor's holdings in
RM2 where the principal accounting currency of the investor is not
US$ or where there are inverse fluctuations between Sterling, the
currency in which the Ordinary Shares are quoted, and US$, the
currency in which the Company's results are reported.
3.9 Dividends
There can be no assurance as to whether dividends will be paid
in future or in what amount. Subject to compliance with the
Luxembourg Companies Law and the Articles, the declaration, payment
and amount of any future dividends are subject to the discretion of
the Directors, and will depend on, inter alia, the Company's
earnings, financial position, cash requirements and availability of
profits. A dividend may never be paid and, at present, there is no
intention to pay a dividend in the short to medium term.
3.10 If the Resolutions relating to the Placing are not passed,
the Company will not be able to proceed with the Placing and will
likely enter into a liquidation process and its Ordinary Shares
will likely be delisted from trading on AIM
The Placing is conditional, inter alia, on the passing of the
Resolutions. In the event that the Resolutions relating to the
Placing are not passed, the Company will not be able to proceed
with the Placing and the Group is unlikely to be able to continue
as a going concern as a result. If the Resolutions relating to the
Liquidation are passed, the Company would enter into a voluntary
liquidation process and it is unlikely that its Ordinary Shares
would be restored to trading on AIM. If the Resolution relating to
the delisting of the Company's Ordinary Shares is passed, admission
of the Company's shares to trading on AIM would be cancelled. If
none of the Resolutions are passed, it is likely that the Company
would be forced into a compulsory liquidation process, which may
not result in the return of any value to Shareholders, and it is
unlikely that trading in the Company's ordinary shares on AIM would
be restored.
3.11 Major shareholders are able to exercise significant
influence over matters requiring Shareholder approval
Certain investment funds discretionary managed by Woodford
currently own a total of 23,720,250 Ordinary Shares, representing
58.8 per cent. of the Company's issued share capital and 34.2% of
the voting rights. Consequently, Woodford has the ability to block
any measures requiring the vote of 66 2/3 or more of the Company's
shareholders, including the Placing. Following completion of the
First Tranche Placing, Woodford's holding in the First Tranche
Enlarged Share Capital will be reduced to 12.5% and the holding in
the First Tranche Enlarged Share Capital of Richard Cashin will be
increased to 81.4%, and following completion of the Second Tranche
Placing, Woodford's holding in the Enlarged Share Capital will be
reduced to 7.0% and the holding in the Enlarged Share Capital of
Richard Cashin will be increased to 89.6%.
In addition, pursuant to the Subscription Agreement, Richard
Cashin benefits from the right to have the Board nominate for
election by the Shareholders such director as he may designate.
As a result, as of the completion of the First Tranche Placing
Richard Cashin will be able to exercise a significant degree of
influence over matters requiring Shareholder approval, including
the election of Directors and significant corporate
transactions.
The risks noted above do not necessarily comprise all of the
risks potentially faced by RM2 and are not intended to be presented
in any assumed order of priority.
Although RM2 will seek to minimise the impact of the Risk
Factors, investment in RM2 should only be made by investors able to
sustain a total loss of their investment. Potential investors are
strongly recommended to consult an investment adviser authorised
under FSMA, who specialises in investments of this nature before
making any decision to invest.
Placing Statistics
Number of Ordinary Shares in issue at
the date of this document (of which 193,500
Ordinary Shares are held in Treasury) 40,347,671
Placing Price USD 0.02
Placing Price discount to the price at
which the Company's shares were suspended
from trading on AIM on 1 July 2019 81%
Number of First Tranche Placing Shares
to be issued pursuant to the First Tranche
Placing* 150,000,000
Total number of Placing Shares to be issued
pursuant to the Placing* 300,000,000
Number of Ordinary Shares in issue following
completion of the First Tranche Placing* 190,347,671
First Tranche Placing Shares as a percentage
of the First Tranche Enlarged Share Capital* 78.8%
Gross proceeds of the Placing following
the First Tranche Placing $3,000,000
Expected percentage of shares in public
hands (as defined by the AIM Rules) following
Admission of the First Tranche Placing
Shares* 3.7%
Number of Ordinary Shares in issue immediately
following Admission of the Second Tranche
Placing Shares (including 193,500 Ordinary
Shares held in Treasury)* 340,347,671
Placing Shares as a percentage of the
Enlarged Share Capital* 88.1%
Gross proceeds of the Placing from the
Second Tranche Placing $3,000,000
Total gross proceeds from the Placing* $6,000,000
Expected percentage of shares in public
hands (as defined by the AIM Rules) following
Admission of the Second Tranche Placing
Shares* 9.0%
Assumed GBP:USD exchange rate 1.24
* Each of the First Tranche Placing and the Second Tranche
Placing are expected to be in three equal tranches and are subject
to shareholder approval at the General Meeting and, in the case of
the Second Tranche Placing, the satisfaction of certain Conditions.
The figures stated here assume that both the First Tranche Placing
and the Second Tranche Placing are completed and that there are no
other changes to the Company's issued share capital between the
time of this Circular and the completion of the Second Tranche
Placing.
Expected Timetable of Key Events
Issue of Circular to Shareholders 22 July 2019
Deadline for receipt of Forms 10:00 a.m. BST/11:00 a.m. CEST
of Instruction on 29 July 2019
Deadline for receipt of Forms 11:00 a.m. BST/12:00 noon CEST
of Proxy on 29 July 2019
General Meeting 12:00 noon CEST on 31 July 2019
Admission of each equal tranche 1 August 2019, 31 August 2019,
of First Tranche Placing Shares, 30 September 2019
if applicable
Admission of each equal tranche 30 October 2019, 29 November 2019,
of Second Tranche Placing 30 December 2019
Shares, if applicable
Each of the times and dates in the above timetable is subject to
change. If any of the above times and/or dates change, the revised
times and/or dates will be notified by announcement by the Company
on a regulatory information service.
Definitions
The following definitions apply throughout this document, unless
the context requires otherwise:
2018 AFS Company's annual consolidated financial
statements for the year ended 31 December
2018
Admission admission of Ordinary Shares in the
Company to trading on AIM becoming effective
(pursuant to Rule 6 of the AIM Rules
for Companies), as the context requires;
AIM the AIM market of the London Stock Exchange;
AIM Rules the rules for AIM companies and their
nominated advisers issued by the London
Stock Exchange;
Articles articles of association of the Company;
Board the board of Directors of RM2;
CEST central European summer time;
Conditions the Company having signed a term sheet
for debt funding on acceptable terms
in the amount of at least $10 million
and having entered into contracts with
a certain customer for at least 150,000
pallets by September 30, 2019 (the latter
condition now having been fulfilled);
CREST the relevant system (as defined in the
CREST Regulations) of which Euroclear
UK & Ireland is the Operator (as defined
in the CREST Regulations);
CREST Regulations the Uncertificated Securities Regulations
2001 (as amended);
Delisting cancellation of the admission to trading
on AIM of the Ordinary Shares;
Directors the directors of RM2;
Disclosure Guidance and the disclosure guidance and transparency
Transparency Rules rules issued by the Financial Conduct
Authority acting in its capacity as
the competent authority for the purposes
of Part V of FSMA;
ELIoT RM2 ELIoT tracking technology, comprising
a cellular device which transmits the
whereabouts of each pallet;
Enlarged Share Capital the number of Ordinary Shares in issue
following completion of the Second Tranche
Placing (excluding any shares issued
pursuant to an Open Offer);
Euroclear UK & Ireland The Euroclear UK & Ireland Limited,
a company incorporated in England and
Wales, being the Operator of CREST;
First Admission the admission of the First Tranche Placing
Shares to trading on AIM becoming effective
(pursuant to Rule 6 of the AIM Rules
for Companies);
First Tranche Enlarged the number of Ordinary Shares in issue
Share Capital following the issue of the First Tranche
Placing Shares;
First Tranche Placing 150,000,000 Ordinary Shares to be issued
Shares by RM2 pursuant to the First Tranche
Placing at the First Tranche Placing
Price;
First Tranche Placing the first tranche of the Placing to
raise $ 3,000,000;
Form of Instruction the form of instruction for use in connection
with the General Meeting accompanying
this document;
Form of Proxy the form of proxy for use in connection
with the General Meeting accompanying
this document;
FSMA the Financial Services and Markets Act
2000, as amended;
General Meeting the extraordinary general meeting of
RM2 to be held at 5 Rue de la Chapelle,
Luxembourg, L-1325, Luxembourg at 11
a.m. BST/12 noon CEST on July 31, 2019
at which the Resolutions will be proposed;
Group the Company and its subsidiary undertakings;
Instalment monthly instalments of each of the First
Tranche Placing Shares and the Second
Tranche Placing Shares equal to $1 million
and 50,000,000 Placing Shares per instalment
Liquidation The filing for voluntary liquidation
of the Company and the wind-up of the
Group
London Stock Exchange the London Stock Exchange plc;
Luxembourg Companies Loi du 10 août 1915 concernant
Law les sociétés commerciales
(telle que modifiée) - Law dated
August 10, 1915 concerning commercial
companies (as amended);
Notice of General Meeting the notice of the General Meeting set
out at the end of this document;
Official List the official list of the UK Listing
Authority;
Operator the meaning given to it in the CREST
Regulations;
Ordinary Shares ordinary shares of $0.01 each in the
capital of RM2;
Placing the conditional placing of the Placing
Shares pursuant to the terms of the
Placing Agreement;
Placing Price USD 0.02 per Placing Share;
Placing Shares The First Tranche Placing Shares and
the Second Tranche Placing Shares;
Resolutions the Resolutions relating to the Placing,
the Resolutions relating to the Liquidation
and/or the Resolutions relating to the
Delisting;
Resolution relating to the resolutions to authorize the cancellation
the Delisting of the admission to trading on AIM of
the Ordinary Shares to be proposed at
the General Meeting following the approval
of the Resolutions relating to the Liquidation,
if applicable;
Resolutions relating the resolutions authorizing the dissolution
to the Liquidation of the Company with immediate effect,
the appointment of a liquidator, the
determination of the powers of the liquidator
and the voluntary liquidation of the
Company;
Resolutions relating the resolutions to authorise the Directors
to the Placing to disapply existing Shareholders' pre-emption
rights in relation to the issue of the
Placing Shares, and to amend the Articles,
to be proposed at the General Meeting;
RM2 or the Company RM2 International S.A.;
Second Admission the admission of the Second Tranche
Placing Shares to trading on AIM becoming
effective (pursuant to Rule 6 of the
AIM Rules for Companies);
Second Tranche Placing 150,000,000 Ordinary Shares to be issued
Shares by RM2 pursuant to the Second Tranche
Placing at the Placing Price;
Second Tranche Placing the second tranche of the Placing to
raise an additional $ 3,000,000 million,
subject to the satisfaction of the Conditions;
Securities Act the US Securities Act 1993, as amended;
Shareholders holders of Shares;
Shares Ordinary Shares;
Strand Hanson Strand Hanson Limited, the Company's
nominated adviser under the AIM Rules
and broker;
Subscription Agreement the agreement dated 21 July 2019 entered
into between Richard Cashin and RM2
in connection with the Placing;
UK the United Kingdom;
US or United States the United States of America; and
Woodford Woodford Investment Management Ltd.
All references in this document to "GBP", "pence" or "p" are to
the lawful currency of the United Kingdom, all references to "US$"
or "$" are to the lawful currency of the United States.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IOERTMFTMBITBRL
(END) Dow Jones Newswires
July 23, 2019 02:00 ET (06:00 GMT)
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