Interims, Notice of General Meeting and Update (7241M)

TIDMMDST

RNS Number : 7241M

Medicsight Plc

22 August 2011

 
 Press release   22 August 2011

Medicsight PLC

("Medicsight" or "the Group")

Preliminary Findings of the Special Committee

Results of a Comprehensive Strategic Review

General Meeting on 14 September 2011 for Stockholder Vote to Cancel Trading on AIM

Interim Results for the Six Months Ended 30 June 2011

Medicsight PLC (AIM: MDST), an industry leader in the development of Computer-Aided Detection (CAD) and image analysis software, announces the preliminary findings of the Special Committee, results of a comprehensive strategic review including actions taken by the Board of Directors, and Interim Results.

Preliminary findings of the Special Committee

On 8 July, Medicsight announced that it had initiated an internal investigation through a Special Committee of the Board of Directors regarding the potential misappropriation and/or misdirection of Company funds. Based upon the substantially complete results of the investigation, the Company has concluded that no adjustments or restatement of prior issued financial statements is required. Although the investigation remains on-going, the Board is confident that the Company's financial statements will not require a material restatement as a result of any additional irregularities discovered in the future. Furthermore, the Company intends to seek all possible methods of recovery or restitution where appropriate and where the cost of doing so will not be greater than the expected outcome.

Following the results of the investigation, the Board has requested the recommencement of trading in the Company's ordinary shares to trading on AIM with immediate effect.

Comprehensive Strategic Review

Staff reductions and office relocation in London to conserve remaining cash in order to focus on existing products within approved markets

In order to maximize the opportunity for the Company's ColonCAD software to succeed, particularly in the U.S. market, the decision was made to streamline operations with regard to headcount and overhead. Medicsight utilised its lease termination option at its headquarters and will be moving shortly to more appropriate space. Robert Ladd, Interim Chief Executive, commented: "As difficult as this decision is, the only means of ensuring survival is to increase our runway until profitability; with a finite amount of cash, the only option is to reduce expenses. Many people worked very hard to create and support our CAD medical software. These cost cuts give hope for their vision to flourish. The Board will continue to examine all opportunities to maximise value from the Company's assets and generate value for shareholders."

Closing of Tokyo office

In late July 2011, Medicsight was informed by the Japanese Ministry of Health, Labour and Welfare "MHLW" that several statistical data errors were encountered in their review of the Company's application for approval of its MedicRead software for use in CT Colonography procedures. Following informal guidance from MHLW, the Company has decided to withdraw the current submission and is assessing the next course of action. In the meantime, the Board of Directors has decided to close the Tokyo office as part of the overall streamlining of operations and expense reductions.

Corporate organisational restructuring

In addition to Tokyo, the Board of Directors has decided to close several other Company subsidiaries in Australia, China and the UAE. The legal, regulatory and accounting costs of maintaining so many legal entities cannot be justified at this point. However, in order to better exploit the recent U.S. Food and Drug Administration approval of ColonCAD, the Company will reopen Medicsight, Inc. in New York.

Stockholder vote to delist from AIM

Medicsight's Board of Directors will call a General Meeting of stockholders on Wednesday 14th September 2011 to vote on whether to cancel its Ordinary Shares from trading on the AIM Exchange and to re-register as a private company.

Whilst the Directors were pleased to announce on 19 May 2011 that they had received clearance from the US Food and Drug Administration for its ColonCAD(TM) API, this also led the Board to conduct a full review of its operations and future strategy. The Board is very mindful that the Company has had minimal revenues since inception and is equally aware of the risks inherent in the commercialisation of emerging and new technologies in the US markets at the current time. Full commercialisation of the ColonCAD API without a committed, US based, commercialisation partner, would involve the Company in significant incremental costs in terms of a sales, marketing and training platform in the US.

The Board is very aware that the ability to raise money in the equity markets at the current time is very limited, particularly for smaller companies. The Directors have accordingly concluded that conservation of existing cash resources must be the Board's first priority at the current time. The Board considers that the costs associated with the Company's quotation on AIM are large and, in the opinion of the Board, are not economically justified given the very low volumes of trading in the Company's Ordinary Shares. The Directors have decided to put a resolution to Shareholders for the termination of the AIM trading facility as part of the current austerity measures.

The Company has applied to the London Stock Exchange for the Cancellation and it is expected that, subject to the approval of Shareholders at the GM by Special Resolution, the Cancellation will become effective on 22 September 2011. If the resolution is passed and the Cancellation becomes effective there will no longer be any public market in the Company's Ordinary Shares. It is not the intention of the Company to support any off-market or matched bargain facilities in the Ordinary Shares although certain stockbrokers or market intermediaries may be able to offer such services to Shareholders.

Should the delisting be approved, it is the intention of the Board to keep shareholders updated via its website.

It is expected that a full copy of the circular will be sent to shareholders on 23 August 2012 and will be available on the Company's website at www.medicsight.com.

On 16 August 2011, Peter Venton resigned from the Board of MGT Investments Inc. ("MGT"), the Company's majority shareholder. This action has been taken to ensure that one Board member is independent of MGT. In light of the announcement of the proposals to cancel the AIM quotation it was considered impracticable to recruit any further independent directors for the Company at the current time, however, should shareholders resolve not to pass the resolutions to effect the cancellation of the AIM quotation the Board will take steps to supplement its current constitution with an additional independent non-executive director.

Interim results for the six months ended 30 June 2011

Highlights

 
            --   Received U.S. Food and Drug Administration ("FDA") 
                  510(k) clearance to market ColonCAD in the U.S. 
                  on 19 May 
            --   Received EU (CE) approval and launched ColonCAD 
                  4.1 on 25 March 
            --   Revenue decreased to GBP162,000 (2010: GBP215,000) 
            --   Operating costs increased to GBP2,703,000 (2010: 
                  GBP2,622,000) 
            --   Group cash balance at 30 June 2011 of GBP3,399,000 
                  (2010: GBP8,282,000)

Medicsight has received its FDA clearance to market ColonCAD in the United States and is working with its partners to establish reference centres and to begin generating initial sales. In the six months ended 30 June 2011, ColonCAD sales decreased compared to the previous year and sales of the MedicCO(2) LON insufflator system decreased marginally.

Operating expenses were slightly higher than the previous year due to the costs of professional fees relating to the response to FDA, third party work on product development and severance costs relating to previous reductions in employment.

As at 30 June Medicsight's cash balance was GBP3,399,000. In order to preserve cash and maximise the potential U.S. market, we have begun implementing a company-wide expense reduction program as stated above. We expect to see a reduction in total expenses in the second half of this year.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME