VERS.L Regulatory News (VERS)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (596/2014/EU) ("MAR"). WITH THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

October 23, 2019

Verseon Corporation

("Verseon" or the "Company")

Sale-Leaseback of Verseon's Research, Development, and Operations Facility in Fremont, CA

FREMONT, Calif.-Further to the announcement of October 18, 2019 and pursuant to AIM Rule 15, Verseon Corporation (AIM:VERS), the clinical-stage pharmaceutical company developing products and technologies to advance global health, today announces that it is negotiating a sale-leaseback agreement (the "Sale-Leaseback") with Catalus Capital Management LLC (the "Purchaser") for the Company's research, development, and operations facility located at 47071 Bayside Parkway, Fremont, CA (the "Facility"). The final Sale-Leaseback agreement is expected to consist of substantially the same terms as laid out below or better.

Upon successful completion of the Sale-Leaseback, Catalus Capital Management LLC will purchase the Facility from the Company's wholly owned subsidiary VRH1 for a total cash consideration of $34.7 million. Net proceeds of the Sale-Leaseback after real estate broker and closing costs, holdbacks, and repayment of the $21.7 million mortgage on the Facility (see announcement dated June 13, 2018) are expected to be approximately $9.5 million. The Sale-Leaseback is expected to complete on October 29, 2019 local time and will provide working capital for Verseon.

The Sale-Leaseback will involve a disposal of Company assets, which, under AIM Rule 15, requires shareholder approval at the 2019 Annual General Meeting ("AGM"), notice of which was given to shareholders on October 18, 2019. Verseon encourages all shareholders to vote at the AGM, in person or by proxy. The Proxy Information Statement and Proxy Form can be downloaded from the Company's website at http://www.verseon.com/investor-notices/agm2019.

Details of the Sale-Leaseback are set out in a circular that is being sent to Shareholders today and will also be made available for download from the Company's website at www.verseon.com.

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The following summary is extracted without material adjustment from the circular being sent to shareholders. It should be read by shareholders in conjunction with the circular.

1. Introduction

The Company announced today that, contingent on final negotiations, it intends to sign a sale-leaseback transaction (the "Sale-Leaseback") for its research, development, and operations facility in Fremont, CA (the "Facility") with Catalus Capital Management LLC (the "Purchaser"). Pursuant to the Sale-Leaseback Agreement, the Purchaser will acquire the Facility for a total cash consideration of $34.7 million from the Company's wholly owned subsidiary VRH1. Simultaneously, the Purchaser and the Company intend to sign a 10-year lease agreement for the Facility with an initial monthly rent of $277,000 with 3% annual increases for the first three years. The final Sale-Leaseback Agreement is expected to consist of substantially the same terms as laid out in the Circular or better.

The Sale-Leaseback is intended to provide for working capital and other business needs of the Company. To expedite the transaction, the agreed sales price has been set at an approximately 30% discount to the approximately $51 million balance sheet value of the Facility as at June 30, 2019. Net proceeds of the Sale-Leaseback after real estate broker and closing costs, holdbacks, and repayment of the $21.7 million mortgage on the Facility (see announcement dated June 13, 2018) are expected to be approximately $9.5 million.

The Sale-Leaseback is expected to complete on October 29, 2019 local time and will involve a disposal of Company assets, which, under AIM Rule 15, requires shareholder approval at the 2019 Annual General Meeting ("AGM"), notice of which was given to shareholders on October 18, 2019. Verseon encourages all shareholders to vote at the AGM, in person or by proxy.

The purpose of the Circular is to explain the background to the Sale-Leaseback and the reasons why the Directors believe the Sale-Leaseback to be in the best interest of the Company and its Shareholders.

The AGM, at which the resolution pertaining to the Sale-Leaseback will be proposed to Shareholders, has been convened for 9:00 a.m. Pacific Time on October 28, 2019. It is important that Shareholders complete, sign, and return the Form of Proxy for use at the AGM. The Directors consider that it is in the best interest of the Company and its Shareholders to proceed with the Sale-Leaseback and recommend that Shareholders vote in favor of the resolutions to be proposed at the AGM for the reasons stated in paragraph 7 below.

2. Background and reasons for the Sale-Leaseback

Verseon is a clinical-stage technology-driven pharmaceutical company developing products and technology to advance global health. The Company is using its proprietary, computational drug discovery platform paired with a comprehensive in-house chemistry and biology workflow to build a growing drug development pipeline. The Company currently has active drug programs in anticoagulation, diabetic macular edema, hereditary angioedema, metabolic disorders, and oncology.

During the recent months, market events outside of the Company's control impacting various external shareholders have put Verseon's Common Share price under extreme pressure and have negatively impacted the Company's attempts to raise new capital. In its interim results announced on September 30, 2019, the Company stated that it is currently pursuing alternate efforts to raise working capital, including a refinancing or sale-leaseback of its headquarters, a bridge debt facility, as well as the previously announced preferred share offering. As at June 30, 2019, the date of the Company's most recent interim results, the Company had total assets of $57.6 million, of which approximately $51 million reflected the value of the Facility, and cash, cash equivalents, and short-term investments of $2.3 million.

After careful consideration of all available options and an evaluation of the Company's working capital requirements, the Board has decided that an expedited sale-leaseback transaction at a discount to the balance sheet value of the Facility is in the Company's best interest to ensure its continued operation as a going concern.

3. Principal terms of the Sale-Leaseback

The Company and Catalus Capital Management LLC (the "Purchaser") expect to enter into a Sale-Leaseback Agreement pursuant to which the Purchaser is expected to acquire the Facility from the Company's wholly owned subsidiary VRH1, subject to the approval of the Sale-Leaseback by Shareholders at the AGM.

The principal terms of the Sale-Leaseback Agreement, subject to changes based on further negotiations, are as follows:

·; The consideration payable by the Purchaser on completion of the Sale-Leaseback Agreement is a cash sum of $34.7 million, less holdbacks of $2.23 million for security deposit, various facilities improvements, and tax assessments.

·; The lease agreement between the Company and the Purchaser is for a 10-year term with an initial monthly rent of $277,000 with 3% annual increases for the first three years.

·; The Sale-Leaseback is subject to a PACE financing prepayment requirement. As disclosed on September 22, 2017, the Company has closed a PACE financing for the Facility, for which the current full payout amount of approximately $6.3 million is set to be paid off by the Company within the next five years. As a security, the Purchaser will place a priority lien of approximately $9.3 million on the Company, which will be enforced if: (1) the Company misses its 2020 PACE repayment tranche of $1.3 million (due by September 30, 2020) or (2) the Company defaults on its rent or real estate taxes. These lien rights will end when the following occurs: (a) the Company increases its security deposit to $3.5 million and (b) the Company can verify at least $20 million of liquid assets.

·; The Sale-Leaseback is expected to close on October 29, 2019 with funds expected to flow to the Company the same day.

The final Sale-Leaseback Agreement would be expected to consist of substantially the same terms as laid out above or better.

4. Information on the Purchaser

Catalus Capital is a multi-strategy private equity firm founded in early 2011. It is composed of two strategies: Catalus Growth Partners, a buyout fund focused on acquiring majority stakes in growing technology companies, and Catalus Special Opportunities, focused on finding deep value in corporate, real estate, and esoteric assets. The flexibility of the firm's mandates sets it apart from its peers.

Catalus is an experienced middle market investor employing an entrepreneurial and collaborative approach. The firm has significant structural flexibility that it utilizes to help its partners realize their goals.

Catalus was built on a foundation of discipline, attention to detail, and holding itself to the highest standards of integrity. It seeks partners that exemplify the same values.

5. 2019 Annual General Meeting

As explained above, the Sale-Leaseback transaction is conditional upon the approval of Shareholders at the 2019 Annual General Meeting.

A notice of convening the AGM to be held at 9:00 a.m. Pacific Time on October 28, 2019 at the Critosphere Cowork Space, 7100 Stevenson Blvd. Fremont, CA 94538, USA, was given to Shareholders on October 18, 2019. A Form of Proxy to be used in connection with the AGM is available for download from the Company's website at http://www.verseon.com/investor-notices/agm2019. For holders of depository interests in the Company, a Form of Instruction to be used in connection with the AGM is also available for download from the Company's website at the above URL. The Record Date for the AGM is September 30, 2019.

In addition to seeking Shareholder approval for the Sale-Leaseback, the Shareholders will also be asked to vote on the re-election of two non-executive Class I Directors (Dr. Thomas Hecht and Dr. Sangtae Kim) as well as on such other business as may properly come before shareholders present, in person or by proxy.

The attention of Shareholders is drawn to the voting recommendation of the Directors set out in the paragraph entitled "Recommendation" below.

6. Recommendation

The Board considers the Sale-Leaseback and the passing of the resolutions to be proposed at the AGM to be in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that Shareholders vote in favor of the resolutions to be proposed at the AGM.

7. Consequences of voting against the Sale-Leaseback

The Board believes that the recent performance of the Company's Common Shares, triggered by events outside the Company's control, is severely restricting the Company's fundraising options. At present, the Board considers the Sale-Leaseback the only viable option for the Company to continue to operate as a going concern.

8. Working capital requirements and strategy

The net proceeds of the Sale-Leaseback will address the Company's working capital requirements and other business needs into early 2020 while it completes the next stage of its fundraising strategy.

9. Action to be taken

A Form of Proxy for use at the AGM is available for download from the Company's website at http://www.verseon.com/investor-notices/agm2019. To be valid, a Form of Proxy must be completed, signed, and returned in accordance with the instructions thereon as soon as possible.

For holders of depository interests in the Company's shares, a Form of Instruction for use at the AGM is available for download from the Company's website at http://www.verseon.com/investor-notices/agm2019. To be valid, the Form of Instruction must be completed, signed, and returned in accordance with the instructions thereon as soon as possible.

The completion and return of a Form of Proxy or Form of Instruction will not prevent Shareholders who are entitled to vote from attending and voting in person at the AGM if they so wish. Further details relating to voting by proxy are set out in the Proxy Information Statement and in the Form of Proxy.

10. Documents available

Copies of this document will be available to the public, free of charge, at the Company's registered office during usual business hours on any business day from the date of this document until the date of the AGM. This document is also available on the Company's website, www.verseon.com. Except to the extent expressly stated in this document, information on that website, any website mentioned in this document, or any website directly or indirectly linked to those websites has not been verified and does not form part of this document and Shareholders should not rely on it.

Definitions

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

Act the Companies Act 2006, as amended

AGM the 2019 annual general meeting of the Company convened for 9:00 a.m. Pacific Time on October 28, 2019 (4:00 p.m. GMT) to approve resolutions, including the Sale-Leaseback, or any adjournment of it

AIM the market of that name operated by the London Stock Exchange

AIM Rules the AIM Rules for Companies published by the London Stock Exchange, as amended from time to time

Arden Arden Partners plc, the Company's nominated adviser and broker

Board or Directors the directors of the Company, whose names are set out on page 5 of the circular

Purchaser or Catalus Capital Catalus Capital Management LLC, the purchaser of the Facility pursuant to the Sale-Leaseback

Circular or the Document the circular dated October 23, 2019

Common Shares the AIM-listed common shares in the share capital of the Company

Company Verseon Corporation, incorporated and registered in the State of Delaware, USA, with registration number 3549267

Computershare the Company's registrar, Computershare Investor Services (Jersey) Limited, whose address is set out on page 5 of this document

Facility the Company's research, development, and operations facility located at 47071 Bayside Parkway, Fremont, CA, 94538, USA

FCA the Financial Conduct Authority

Form of Instruction the form of instruction for use at the AGM by holders of depository interests in the Company's shares that is available for download from the Company's website at http://www.verseon.com/investor-notices/agm2019

Form of Proxy the form of proxy for use by Shareholders at the AGM that is available for download from the Company's website at http://www.verseon.com/investor-notices/agm2019

FSMA the Financial Services and Markets Act 2000, as amended

LSE London Stock Exchange plc

Notice of Meeting or the notice of the 2019 AGM issued by the Company on October 18,

Notice of AGM 2019

Sale-Leaseback the sale-leaseback transaction for the Facility, to be effected pursuant to the Sale-Leaseback Agreement

Record Date the record date for the 2019 AGM, September 30, 2019

Sale-Leaseback Agreement the expected agreement between the Company and the Purchaser

or Agreement relating to the Sale-Leaseback of the Facility

Shareholders the holders of the Company's Common Shares

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