Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement, this information is now considered to be in the public domain.

20 August 2019

Cellcast plc

("Cellcast" or the "Company")

Proposed disposal of Cellcast UK

Further to the announcement on 3 July 2019, Cellcast plc (AIM: CLTV) announces that it has entered into a conditional share sale agreement for the disposal of the Company's wholly owned operating subsidiary, Cellcast UK Limited ("Cellcast UK") to Com & Tel Media Limited (the "Purchaser"), for a total cash consideration of £375,000, plus the contingent right to certain additional consideration (the "Disposal"). Com & Tel Media Limited is 100% owned by Craig Gardiner, CEO of Cellcast. Further, Emmanuelle Guicharnaud, CFO, and Craig Gardiner are the two directors of Com & Tel Media Limited. Finance for the purchase is being provided to the Purchaser by SMS Media Limited, further details of which are provided below.

The Disposal constitutes a fundamental change of business under the AIM Rules and is therefore contingent on shareholder approval at a general meeting of the Company. The Company has today posted to shareholders a circular (the "Circular") containing details of the proposed Disposal and a notice of General Meeting containing resolutions to approve the Disposal and a change of the Company's name (the "Resolutions"). Extracts from the Circular are included at the end of this announcement without material amendment or adjustment.

AIM Rule 15

As the Disposal would result in the Company divesting of all of its trading business, activities or assets, the Company would, following the completion of the Disposal, be deemed to become an AIM Rule 15 Cash Shell under the AIM Rules. As such, the Company will be required to make an acquisition or acquisitions which constitutes a reverse takeover under AIM Rule 14 (including seeking re-admission as an investing company (as defined under the AIM Rules)) on or before the date falling six months from completion of the Disposal, or be re-admitted to trading on AIM as an investing company under AIM Rule 8 (which requires the raising of at least £6 million in cash via an equity fundraising on, or immediately before, re-admission). Failing which, the Company's ordinary shares would then be suspended from trading on AIM pursuant to AIM Rule 40. Admission to trading on AIM would be cancelled six months from the date of suspension should the reason for the suspension not have been rectified pursuant to AIM Rule 41.

As an AIM Rule 15 a cash shell, the Company would also have no operating cash flow and would be dependent on its retained cash balances for its working capital requirements.

Proposed change of name

Subject to Shareholder approval at the General Meeting, the Board proposes to change the name of the Company to Vintana plc.

Board changes

Conditional on the passing of the Resolutions, on completion of the Disposal, Craig Gardiner, Emmanuelle Guicharnaud and Bertrand Folliet will resign as directors of the Company.

General Meeting

The notice of General Meeting, to be held at 11:00 a.m. on 06 September 2019, at the offices of Michelmores LLP, 6 New Street Square, London EC4A 3BF is being posted to Shareholders today.

Irrevocable undertakings

The Company has received irrevocable undertakings to vote in favour of the Resolutions, from Shareholders (including Directors) who hold in aggregate, 48,893,697 Ordinary Shares representing approximately 63.08% of the Issued Share Capital. When combined with a non-binding statement of intent provided by Mr Guy Thomas, the Company has received notifications of intention to vote in favour of the Resolutions, from Shareholders (including Directors) who hold in aggregate, 53,507,109 Ordinary Shares representing approximately 69.03% of the Issued Share Capital.

Recommendation

The Directors that are independent of the Purchaser, namely Mike Neville, Chairman and Samuel Malin, Non-Executive Director, unanimously recommend that Shareholders vote in favour of the resolution to approve the Disposal at the General Meeting and all of the Directors unanimously recommend that Shareholders vote in favour of the resolution to approve the change of the Company's name.

The Board intend to vote in favour of each of the resolutions in respect of their direct and indirect shareholdings which in aggregate amount to 14,905,562 Ordinary Shares representing 19.23% of the Issued Share Capital.

For further information:

The following information is extracted without material adjustment from the Circular being sent to Shareholders today. The information below should be read in conjunction with the Circular. Capitalised terms used in the summary below are defined at the end of this announcement.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

CHAIRMAN'S LETTER

1.   Introduction

This Circular sets out the proposals for: (i) the proposed disposal of Cellcast UK Limited for a cash consideration of £375,000 plus the contingent right to certain Additional Consideration; and (ii) the proposed change of the name of the Company to Vintana plc. Subject to the passing of the Resolutions at the General Meeting being convened for 06 September 2019 and on completion of the Disposal, the Company will become an AIM Rule 15 cash shell.

The purpose of this Circular is to provide you with the background to the Proposals and to explain why the Independent Directors consider the Proposals are in the best interests of the Company and its Shareholders as a whole and why they recommend that Shareholders should vote in favour of the Resolutions to be proposed at the General Meeting, as they intend to do in respect of their own shareholdings.

A notice convening a General Meeting, to be held at 11:00 a.m. on 06 September 2019, at the offices of Michelmores LLP, 6 New Street Square, London EC4A 3BF to consider the Resolutions, is set out at the end of this Circular.

2.   Background to the Proposals

As highlighted in the announcement on 14 May 2019 of the Company's final results for the year ended 31 December 2018, during the latter half of 2018 the Company experienced difficult trading conditions. This has continued during 2019 and is expected by the Board to continue to do so. The Directors consider that these difficult trading conditions stem from a combination of factors, including: (i) increasing competition from the internet; (ii) uncertainty related to the UK's negotiations in relation to its exit from the European Union; and (iii) adverse regulatory and tax issues in Kenya.

As a result, the Latest Accounts include the recognition of an impairment loss of £461,000 (2017: £nil) to reduce the carrying value of the Company's investment in Cellcast UK to its expected recoverable amount of £750,000 and an impairment loss of £2,949,000 against intra-group debts due to the Company from Cellcast UK. The recoverable amounts were assessed based on the market capitalisation of the Group as at 31 December 2018.

The regulatory and tax issues in Kenya have cast doubt not only on the ongoing sustainability of the Cellcast UK operations in that region but also on the ability of its key Kenyan creditor, to which it offers services, to pay an outstanding amount due to the Company of £493,000. The Directors have concluded that there is a high risk of all or part of this debtor not being collected.

Additionally, in 2018, the Directors concluded that it was prudent to make a provision in its full year accounts for the year ended 31 December 2017 against the whole of the value of the Company's interest in the Lexinta fund. To date, the Company has not recovered any of these funds, the carrying value of which stood at £754,358 in the Company's accounts prior to the impairment.

The Directors have explored the options for the Company in the interests of Shareholders as they believe that, given the relatively small size and the nature of its business and the relatively high percentage of overheads incurred by the Company to maintain a quotation for its shares on AIM, the Company is no longer benefitting in its current form from its Ordinary Shares being admitted to trading on AIM. One option the Board has considered is to propose to cancel its admission to trading on AIM, but this would result in there being no ready market in its Ordinary Shares. The Board also considered a solvent liquidation but has concluded that the obligations of the Company and the winding up costs would not result in any significant return of value to Shareholders. Alternatively, and as proposed in this Document, the Board could dispose of Cellcast UK, the Company's wholly owned trading subsidiary, with a view to seeking to acquire a new business, raise new funds and appoint a new executive Board.

Having considered these alternatives at length in consultation with its advisers, the Board has concluded that the best available option is to dispose of the entire issued share capital of Cellcast UK to the Purchaser (a newly formed company controlled by the Resigning Directors).

Following the passing of the Resolutions and Completion, the Company will become an AIM Rule 15 cash shell (as defined in the AIM Rules) net assets of approximately £250,000, primarily comprising cash resources of approximately £250,000 and no borrowings.

In view of the Company's net requirement for working capital, should the Resolutions not be approved at the General Meeting, the Board believe that it would be appropriate to consider presenting shareholders with a resolution to cancel its admission to AIM.

Conditional on the passing of the Resolutions, the Resigning Directors will resign as Directors on Completion.

By disposing of the Company's operating subsidiary, the Independent Directors consider that there is an opportunity for Shareholders to realise value through the Company completing a reverse takeover of another business. The Independent Directors, who will remain as Directors following Completion, will use their knowledge and experience to seek to identify a suitable reverse takeover target. There can be no guarantee that the Independent Directors will identify or successfully acquire a suitable reverse takeover target during the period that the Company is an AIM Rule 15 cash shell or thereafter.

3.   Further Information on the Company

Over the past ten years (and increasingly over the past four years), the Group has witnessed a decline in the demand for Cellcast UK's core interactive broadcasting activities. The Company has over this time period attempted a number of expansion strategies in order to leverage the core competencies of the Group's business and provide additions revenue streams to support the UK business. This has included:

·      creating joint ventures in other jurisdictions with what the Board considered at the time to be suitable partners with localised knowledge;

·      pursuing direct investments in opportunities which were deemed to have high growth prospects and provide potentially accretive value for the Company; and

·      diversification into areas which were tangential to the core business.

In particular, the Board focused significant amounts of time in both Brazil and India, where despite best efforts, the ventures failed to yield the results that were expected by the Board. In the face of these continuing failed expansion strategies, the Directors decided to focus the Group's business on the UK market by seeking ways to increase the revenue streams whilst at the same time ensuring that the cost base was managed appropriately and by striving to augment the business through interests in Kenya that the Cellcast UK board had developed. Despite these best efforts, the Cellcast UK business has continued to suffer gradual declines and losses.

The Latest Accounts show that, for the year ended 31 December 2018, the Group's consolidated total revenue and loss before tax amounted to £11.3 million and £0.3 million respectively. The Company will announce its half year results for the six months ended 30 June 2019 before the end of September 2019. The interim results are expected to show a revenue for the period of £5.54 million (H1 2018: £5.77 million) and an operating loss of £148,000 (H1 2018: operating profit of £8,000). The Group's cash and cash and cash equivalents at 30 June 2019 stood at £419,000 (30 June 2018: £978,000). It should be noted that the Company's cash balances are at their highest at the month end and, as a result of operational cash flow requirements, they fluctuate by approximately £350,000 on a month by month basis.

4.   Transaction details

The Company and the Purchaser has on 19 August 2019 entered into the conditional SSA.

The Disposal will take place in the form of the sale by the Company to the Purchaser of the entire issued share capital of Cellcast UK for an aggregate Initial Consideration of £375,000, to be paid in cash at Completion together with the right to receive Additional Consideration.

The SSA contains basic warranties as to capacity, authority and title from the Company and no other warranties.

5.   Related party transaction

The Purchaser, Com & Tel Media Limited, is 100% owned by Mr Craig Gardiner, the Company's current Chief Executive. Further, Emmanuelle Guicharnaud, the Company's current Chief Financial Officer, and Craig Gardiner are the two directors of Com & Tel Media Limited. Accordingly, as Cellcast UK Limited comprises the Company's sole trading subsidiary, the Disposal constitutes a disposal resulting in a fundamental change of business in accordance with Rule 15 of the AIM Rules and, since the Purchaser is controlled by the Resigning Directors, the Disposal also constitutes a related party transaction for the purposes of AIM Rule 13. None of the Resigning Directors have taken any part in any board assessment of the Disposal.

Financing for the purchase is being provided to the Purchaser by SMS Media Limited ("SMS"), which is a 15.71% shareholder in the Company. Bertrand Folliet, Director of Strategy and Business Development, and Andrew Wilson, who is a former Director of the Company and husband of Emmanuelle Guicharnaud, are both directors of SMS. The Company has been informed that Emmanuelle Guicharnaud is a shareholder holding 3.4% of SMS. Bertrand Folliet holds a 34.9% beneficial interest in SMS and Andrew Wilson holds a 34.9% beneficial interest in SMS.

As a result of the treatment of the Disposal under the AIM Rules and the requirements of Section 190 of the Companies Act (requiring any substantial property transaction with a director to be approved by shareholders in general meeting), Completion is conditional on the passing of Resolution 1, which seeks Shareholders' approval for the Disposal, and is to be proposed at the General Meeting.

The Independent Directors consider, having consulted with the Company's Nominated Adviser, that the terms of the Disposal are fair and reasonable insofar as the Company's Shareholders are concerned. The Independent Directors have taken into account the following:

1.   the lack of working capital for the Cellcast UK Business;

2.   the fact that a solvent liquidation of the Company would likely result in no significant value being returned to Shareholders;

3.   the steady decline in the Company's sales and concomitant mounting regulatory risks in the UK and Kenya and, in Kenya, taxation risks, as well as strong and increasing competition from internet-borne services; and

4.   Shareholders representing 69.03% of the issued share capital have given irrevocable undertakings to support the Resolutions or provided a non-binding comfort letter supporting the Proposals.

6.   AIM Rule 15

In accordance with AIM Rule 15, the Disposal constitutes a fundamental change of business of the Company. On Completion, the Company would cease to own, control or conduct all or substantially all, of its existing trading business, activities or assets.

Therefore, following Completion, the Company will become an AIM Rule 15 cash shell and as such will be required to make an acquisition or acquisitions which constitutes a reverse takeover under AIM Rule 14 on or before the date falling six months from Completion or be re-admitted to trading on AIM as an investing company under the AIM Rules (which requires the raising of at least £6 million) failing which, the Company's Ordinary Shares would then be suspended from trading on AIM pursuant to AIM Rule 40. Admission to trading on AIM would be cancelled six months from the date of suspension should the suspension not have been lifted.

As a cash shell, the Company would also have no operating cash flow and would be dependent on the net proceeds of the Disposal for its working capital requirements.

7.   Use of proceeds

The proceeds of the Disposal will be used to cover the costs of the Disposal, expected to total approximately £125,000 and to provide the Company with working capital whilst it seeks a suitable reverse takeover candidate.

8.   Change of name

Subject to shareholders' approval, it is proposed that the name of the Company be changed to Vintana plc. The TIDM will be VITA.

9.   Proposed Board changes

Subject to the Resolutions being passed, at Completion the Resigning Directors will resign from their office as directors and as employees of the Company with no compensation for loss of office or any claims as employees and will waive all claims against the Company. As a result, immediately following Completion, the Board will comprise Michael Neville as Chairman and Sam Malin as a Director.

It is the policy of the Board to manage the affairs of the Company having regard to the QCA Code. Principle 5 of the QCA Code ("Maintain the board as a well-functioning, balanced team led by the Chair") states that the board of a company "should have at least two independent non-executive directors. Independence is a board judgment".

In line with the QCA Code, the Board have carefully considered the composition of the post completion board and determined that the Independent Directors will continue to be Independent and further that the independent board will have the up-to-date experience, skills and capabilities necessary to manage the Company effectively, during the period of the Company being a cash shell (the "Cash Shell Period"), as the Company will have a simple balance sheet and no revenue generating operations during that period. Notwithstanding this, it is the intention of the Independent Directors to seek to appoint at least one additional director to the board as soon as practicable following completion of the Disposal to support the Company's search for a suitable reverse takeover candidate.

During the Cash Shell Period, the Board will continue to manage the affairs of the Company having regard to the QCA Code. However, given the simple nature of the Company as a cash shell and the simplicity of its corporate systems during the Cash Shell Period there will be no internal audit function. This will be kept under review.

10. Strategy for the Company following Completion

The Company's proposed strategy, following completion of the Disposal, will be to acquire one or more companies and/or projects which are either cash flow generative or show significant potential for growth and a profitable exit.

Leveraging their knowledge and contacts, the Independent Directors will seek to identify suitable investment and/or acquisition opportunities. At this stage, the Independent Directors would not seek to exclude any particular sector or jurisdiction.

In selecting suitable investment and/or acquisition opportunities, The Independent Directors will consider various factors relevant to an opportunity, including the:

·      ease with which capital can be raised to meet the working capital requirements both initially and in the future;

·      growth potential and outlook for future cash generation;

·      likely resulting liquidity in the Company's shares following acquisition(s);

·      short, medium and longer term exit strategies for Shareholders;

·      possible synergies with knowledge and contacts of the Independent Directors; and

·      suitability for a public listing, either on AIM or another recognised market in the UK.

11. Risk factors

Shareholders' attention is drawn to the Risk Factors set out in Part II of the Circular.

12. General Meeting

The Notice convening the General Meeting to be held at the offices of Michelmores LLP, at 6 New St Square, London EC4A 3BF, at 11:00 a.m. on 06 September 2019, at which the Resolutions will be proposed is set out at the back of this Circular. A summary of the Resolutions is set out below.

Ordinary resolution:

Resolution 1, which seeks to approve the sale by the Company to Com & Tel Media Limited of Cellcast UK Limited in accordance with the SSA.

Special resolution:

Resolution 2, which seeks to approve the change of the Company's name to Vintana plc.

13. Action to be taken

Please check that you have received the following with this document:

·      a Form of Proxy for use in respect of the General Meeting.

Whether or not you propose to attend the General Meeting in person, you are strongly encouraged to complete, sign and return your Form of Proxy in accordance with the instructions printed thereon as soon as possible, but in any event so as to be received, by post or, during normal business hours only, by hand, at Link Asset Services, The Registry, 34 Beckenham Road, Beckenham Kent, BR3 4TU, not later than 11:00 a.m. on 04 September 2019 (or, in the case of an adjournment of the General Meeting, no later than 11:00 a.m. on the date which is two days before the time of the adjourned meeting excluding non-working days).

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

14. Irrevocable undertakings and non-binding comfort letters

In relation to the Resolutions:

1.   Each of the Directors who is also a Shareholder has irrevocably undertaken to vote in favour of the Resolutions in respect of, in aggregate, 1,082,500 Ordinary Shares held directly by them, representing approximately 1.40% of the Issued Share Capital;

2.   SMS Media Limited, a company registered in the Hong Kong Special Administrative Region of the People's Republic of China, with registration number 0762101, being a Shareholder, has irrevocably undertaken to vote in favour of the Resolutions in respect of, in aggregate, 12,180,062 Ordinary Shares, representing approximately 15.71% of the Issued Share Capital;

3.   Andrew Wilson has irrevocably undertaken to vote in favour of the Resolutions in respect of, in aggregate, 1,643,000 Ordinary Shares, representing approximately 2.12% of the Issued Share Capital;

4.   Mr Gary Lyons has irrevocably undertaken to vote in favour of the Resolutions in respect of, in aggregate, 19,265,000 Ordinary Shares, representing approximately 24.85% of the Issued Share Capital;

5.   The Atlas Group of Companies Ltd, a company registered in Bermuda with registered number 31654, being a Shareholder, has irrevocably undertaken to vote in favour of the Resolutions in respect of 14,723,135 Ordinary Shares, representing approximately 18.99% of the Issued Share Capital; and

6.   Mr Guy Thomas has provided a non-binding statement of intent to vote in favour of the Resolutions in respect of, in aggregate, 4,613,412 Ordinary Shares, representing approximately 5.95% of the Issued Share Capital.

The Company has therefore received irrevocable undertakings to vote in favour of all the Resolutions, from Shareholders (including Directors) who hold in aggregate, 48,893,697 Ordinary Shares representing approximately 63.08% of the Issued Share Capital. When combined with the non-binding statement of intent provided by Mr Guy Thomas, the Company has received notifications of intention to vote in favour of all the Resolutions, from Shareholders (including Directors) who hold in aggregate, 53,507,109 Ordinary Shares representing approximately 69.03% of the Issued Share Capital.

15. Recommendation

The Independent Directors unanimously recommend that Shareholders vote in favour of Resolution number 1 to approve the Disposal.

The Board unanimously recommend that Shareholders vote in favour of Resolution number 2 to change the Company's name.

The Board intend to vote in favour of each of the Resolutions in respect of their direct and indirect shareholdings which in aggregate amount to 14,905,562 Ordinary Shares representing 19.23% of the Issued Share Capital.

DEFINITIONS

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