IS3 Entitlement Offer to Raise $1,001,460 at $0.001 per Share, Tripling Shares on Issue

Overview of the Offer

I Synergy Group Limited (ASX – IS3) has launched a pro-rata renounceable entitlement offer, inviting existing shareholders to subscribe for two new shares for every one share held as of the record date. Priced at a modest $0.001 per share, the offer aims to raise up to approximately $1 million before costs. This capital raising is fully underwritten by VGI Vmall Limited, providing a safety net that ensures the company will secure the targeted funds regardless of shareholder take-up.

Capital Structure and Use of Funds

Assuming full subscription, the number of shares on issue will triple from around 500.7 million to over 1.5 billion shares. The proceeds, net of estimated expenses of about $82,800, will be allocated across several key areas – operational costs ($220,000), initial licensing and integration fees for new projects ($150,000), local technical setup and cloud hosting ($120,000), sales and marketing for pilot launches ($111,460), cybersecurity training and tools ($75,000), and working capital ($242,157). The company’s board believes these funds will provide sufficient working capital to meet short-term objectives, though acknowledges that further funding may be required for medium to long-term plans.

Risks and Shareholder Impact

While the offer provides a clear path to strengthen the company’s financial position, it carries notable risks. Shareholders who do not participate in the offer face dilution of approximately 50% of their holdings. The company’s largest shareholder, Dato Teo Chee Hong, currently holds about 12.8% and could see his voting power rise to over 30% if other shareholders do not take up their entitlements, although the underwriting arrangement is designed to mitigate control risks.

The company also highlights broader risks including uncertainties around future profitability, reliance on third-party technology providers, market acceptance of its products, regulatory compliance, and the ongoing need for additional capital. The financial report for the year ended December 2024 flagged material uncertainty regarding the company’s ability to continue as a going concern, underscoring the critical nature of this capital raise.

Offer Mechanics and Eligibility

The entitlement offer is open to shareholders registered in Australia, New Zealand, China, Singapore, and Malaysia, with provisions for trading or transferring entitlements on the ASX. Shareholders can fully subscribe, partially subscribe and sell the balance, or sell their entire entitlement on the market. Any entitlements not taken up will form a shortfall offer, which the board may allocate to eligible shareholders or third parties, subject to regulatory limits on voting power.

Governance and Underwriting Details

The offer is governed by an underwriting agreement with VGI Vmall Limited, which includes a 3% underwriting fee and provisions allowing termination under specific adverse conditions such as significant market declines or regulatory issues. The company has appointed RM Corporate Finance Pty Ltd as nominee to manage entitlements of ineligible shareholders. Directors recommend shareholders take up their entitlements to avoid dilution and support the company’s strategic plans.