Advanced Systems Automation Responds to SGX RegCo: Key Insights on Convertible Notes, Financial Health, and Strategic Direction

Major Corporate Actions Addressed as ASA Clarifies Convertible Note Issuance and Going Concern Status

Advanced Systems Automation Limited (“ASA”) has issued an extensive response to queries raised by Singapore Exchange Regulation (SGX RegCo), providing crucial updates on its proposed convertible notes issuance, recent fundraising activities, financial health, and ongoing legal proceedings. These clarifications come at a pivotal time for shareholders, as the Group seeks to navigate a complex financial landscape while executing strategic business initiatives.

Key Points from the SGX RegCo Queries and ASA’s Responses

• No Transfer of Controlling Interest: Under the terms of the Amended & Restated Subscription Agreement for the proposed S\$7.5 million redeemable convertible notes (“RCN 2.0”), conversion rights are capped such that no subscriber or their concert parties can hold 15% or more of the enlarged share capital, or trigger a mandatory general offer. This means there will be no change in controlling interest from the issuance of these notes.
• Convertible Notes Structure:
  • The maximum number of conversion shares is capped at 1,635,103,772, representing the aggregate limit for all tranches and preventing unlimited dilution.
  • Tranche 1 (T1) is earmarked for debt settlement and is not discretionary; Tranche 2 (T2) is the minimum subscriber commitment; Tranche 3 (T3) can be issued at ASA’s discretion, giving the company flexibility to manage capital requirements.
  • The 5% annual interest rate on the notes reflects prevailing market conditions, balancing company risk with investor return.
  • There is no explicit floor price for conversion, but the share cap implies an effective floor of S\$0.0046 per share.
• Summary of Fundraising Activities (Last 2 Years):
  • Raised S\$4.5 million via RCN 1.0, fully utilised for a bridging loan (S\$2.0M for the LSO acquisition), working capital (S\$2.5M, including repayments to ASTI Holdings, admin fees, professional expenses, and payroll).
  • Completed a rights cum warrants issue in December 2024, raising S\$4.605 million, with funds directed to the LSO acquisition, repayment of debt, professional fees, and general working capital. Notably, there were deviations in use of proceeds, with S\$1.662 million originally allocated for acquisition redirected to working capital and debt repayment.
• Outstanding Obligations & Working Capital:
  • As of the latest update, ASA has no outstanding loans but does have S\$2.0 million in outstanding and contingent professional fees.
  • The company plans to deploy S\$2.2 million in working capital over three years, with specifics to be disclosed in future financial reports.
• Strategic Expansion Funds:
  • S\$0.54 million is earmarked for strategic business expansion and acquisitions, but no targets identified yet. The company will consider cash, shares, or a mix as consideration, depending on future opportunities.
• Shareholder Value & Dilution Controls:
  • The convertible notes structure prevents “death spiral” dilution, capped at 50% of enlarged share capital.
  • No immediate plans for further share consolidation or corporate actions, barring potential acquisitions.
• Financial Health & Going Concern:
  • Despite a negative net tangible asset (NTA) of S\$34.5 million (due primarily to goodwill from the LSO acquisition), the Group maintains a positive net asset position (S\$33.0 million as of Dec 2024), with improving profitability in its equipment contract manufacturing segment.
  • Working capital pressures are being managed through deferred vendor repayments and capital raising.
  • Pending litigation (Originating Claim HC/OC 839/2025) is not expected to undermine the going concern status, with the Board confident in its legal defenses.
  • The Sponsor concurs with the Board’s view on going concern, subject to successful capital raising and no adverse legal outcomes.
• Operational Update on LSO Organization Holdings:
  • LSO’s projects in Malaysia and Palau have faced operational delays. The Palau venture is moving forward with a 49-year agreement and pilot studies, but material contributions are only expected from 2026 onward.
  • There are receivables issues, with US\$1.3 million outstanding from customers as of Dec 2024, which may impact near-term results.
• Convertible Notes Subscriber Track Record:
  • The main convertible notes subscriber, AOF, has participated in similar deals with numerous listed companies across Asia-Pacific, including in Malaysia, Thailand, Australia, Indonesia, Singapore, and Hong Kong.
• Disclosure & Trading Continuity:
  • The Board confirms that all material information has been disclosed to ensure orderly share trading.

Price-Sensitive and Shareholder-Relevant Information

• Potential Dilution: The capped maximum dilution of 50% is significant and may impact share valuation.
• Legal Proceedings: Litigation with ASTI Holdings is ongoing; while the Board is confident, any adverse outcome could materially affect ASA’s financials and share price.
• Operational Delays in LSO Projects: Revenue from recent acquisitions may not materialize as quickly as anticipated, impacting short-term financial performance.
• Use of Funds: Deviations from originally stated use of fundraising proceeds may raise concerns about cash management and execution risk.
• Going Concern Status: The company’s ability to continue as a going concern is contingent on successful capital raising and positive legal outcomes.

Timeline for Key Corporate Events

• FY2024 AGM scheduled by 12 December 2025.
• HY2025 Results targeted for release by 15 December 2025.

Conclusion: What Should Investors Watch?

ASA’s response to SGX RegCo provides transparency on its fundraising, convertible note structure, and financial health. Investors should closely monitor:

1. Progress on the Proposed RCN 2.0 issuance and its impact on dilution.
2. Resolution of legal claims and any further disclosures regarding contingent liabilities.
3. Actual performance and revenue contributions from newly acquired LSO Organization Holdings and associated ventures.
4. Updates on working capital management and deviations in fund utilisation.

These factors are likely to influence ASA’s share price and should be closely watched by current and prospective shareholders.

Disclaimer: The above article is based on company disclosures and responses to regulatory queries. Investors are advised to conduct their own due diligence and consult professional advisers before making investment decisions. The article does not constitute investment advice or a recommendation to buy or sell securities.

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