Proposed Placings and Notice of GM

RNS Number : 5862H

Cyan Holdings Plc

13 July 2012

Cyan Holdings plc

("Cyan" or "the Company")

Proposed Placings

Notice of General Meeting

Cyan Holdings plc (AIM:CYAN.L), the integrated system and software design company delivering mesh based flexible wireless solutions for utility metering and lighting control announces raising, subject to certain conditions, approximately £2.1 million before expenses, by way of two share placings ("Placings") pursuant to which 602,730,000 Ordinary Shares will be issued at 0.35 pence each. The Placings were managed by Cenkos Securities plc and XCAP Securities plc. as joint brokers to the Company. It is intended that the net proceeds from the Placings will be used for general working capital requirements, business development and other product development work as set out below. In addition Placees have been granted warrants ("Warrants") to subscribe for up to a further 301,365,000 Ordinary Shares at 0.5 pence per Ordinary Shares within twelve months of Admission. A General Meeting ("GM") will be held at 11.00 a.m. on 2 August 2012. A circular containing the notice of the GM (the "Circular") will be posted to all shareholders in the Company on Monday 16 July 2012 and will be available to view on the Company's website at: www.cyantechnology.com.

Background to and reasons for the Placings

In the first quarter of 2012, Cyan continued to strengthen its strategic partnerships in India. In February, Cyan announced that it was entering into a Strategic Partnership Agreement with Larsen & Toubro (L&T) to provide Indian customers with Advanced Metering Infrastructure (AMI) products. L&T is a recognised leader in the Energy and Utilities sector with proven products and a Tier 1 reputation. The alliance with Cyan enabled L&T to offer an 865 MHz interoperable smart metering solution for a number of projects identified in India.

During this time, Cyan also made a significant addition to the management team. In March, John Cronin, a telecoms and smart metering industry expert, was appointed as a Non-Executive Director before taking over the position of Executive Chairman following the Annual General Meeting in May. Consequently John Read, who had been appointed to the role as an interim measure, assumed his previous position as a Non-Executive Director.

Cyan has established a strong position in the Indian smart metering market by working with leading meter manufacturers, system integrators and utility providers. These key partners are promoting CyLec, Cyan's interoperable smart metering solutions that can be easily integrated. In May, Cyan received a substantial order exceeding US$1M from one of its partners to fulfill the initial stages of a number of projects with several Indian electricity utilities. Shareholders will be aware that the Company's position of being poised for significant growth in India has taken several years to reach through deep and wide eco-system contacts (utilities and system integrators through to meter manufacturers).

As recent announcements demonstrate, the Tamil Nadu Electricity Board ("TNEB") Automatic Meter Reading ("AMR") tender process has progressed and is nearing the final stages. With four Cyan partners getting ready and planning to install 500 unit pilots during July and August, Cyan understands that TNEB will make a decision on suppliers within 45 days of the start of the pilots and the Board remains confident of a positive outcome for Cyan. Cyan's technology has been integrated into five leading meter manufacturers in India with two more in progress. This provides the Company with a very strong position as new tenders get released.

Cyan is in the process of migrating its business model away from a supplier of hardware by adding Software as a Service (SaaS) to the revenue stream. For example, in the electricity metering market, this will take the form of a monthly per meter user fee as well as annual maintenance and license revenues. These fees are expected to be borne by the system integrators who will offer a turnkey service to their utility customers. Cyan's SaaS pricing is competitive with the current cost in India of reading meters manually. Several quotes have been provided to customers and this new revenue source is expected to start in 2013. Incremental development work is required to complete this new offering.

Provided that the TNEB tender is awarded to it, Cyan is expected to build out a local operation in India which will be responsible for local customer support as well as developing new sales opportunities for Cyan in the local market. Additionally, Cyan has received requests from its customers in India to start local sub-contract manufacturing in order to avoid import duties.

The Placing Shares will be allotted at a price of 0.35 pence per Ordinary Share. The Directors believe that this price represents the best price achievable to raise additional working capital and development funding. Without these Placings, the Directors believe that the Company would not have sufficient funds to take advantage of these opportunities as an independent company.

Therefore, Shareholders are requested to vote in favour of the Resolutions in order to safeguard their investment and to allow the Company to demonstrate a suitable level of financial strength to its partners. In addition, the Warrants will permit the Company to receive incremental resources for working capital to fund a significant increase in stock of finished modules that will be required for initial shipments to pending orders, which the Company hopes to announce at the appropriate time.

The Directors believe that Cyan remains in an outstanding position to secure substantial revenues from a very large market and, to a large extent, the Placings represent the cost to the Company of securing that position. It is therefore essential to Cyan's growth strategy, that the Company approaches this crucial phase in its life, in the strongest position possible.

Details of the Placings

Ordinary Shares

The Company intends to raise approximately £2.1 million, before expenses, through the issue of 602,730,000 Ordinary Shares at the Placing Price pursuant to the Placings.

The Placing Price represents a discount of approximately 26 per cent. to the closing mid-market price of 0.47 pence per Ordinary Share as at 12 July 2012, the latest practicable date prior to the announcement of the Placings. The Placing Shares will, when issued, rank pari passu in all respects with the Ordinary Shares, including the right to receive dividends and other distributions declared following Admission.

The Placing Shares will represent approximately 26.6 per cent. of the Enlarged Share Capital.

Further to this, the Placing Warrants will represent approximately 11.8% of the Enlarged Share Capital following exercise of the Warrants.

The Placings are being made on a non pre-emptive basis as the time delay and costs associated with a pre-emptive offer are considered by the Directors to be excessive.

Application will be made by the Company for the Placing Shares to be admitted to trading on AIM. Subject to completion of the Placings, it is expected that the Placing Shares will be admitted to trading on AIM and that dealings will commence by 8.00 a.m. on 6 August 2012 in respect of the Placing Shares.

The issue of the Placing Shares, is conditional, inter alia, upon:

(a) the approval of the Resolutions at the GM;

(b) the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and

in each case occurring no later than 8.00 a.m. on 6 August 2012 (or such time and date as the Company, Cenkos and XCAP may agree, being not later than 3 September 2012).

Pursuant to the terms of the Placing Agreement, each of Cenkos and XCAP has conditionally agreed to use its reasonable endeavours, as agent to the Company, to place the Placing Shares at the Placing Price with certain institutional and other investors. The above obligations are subject to certain conditions including those listed above. The Placings are not being underwritten by Cenkos and XCAP.

The Placing Agreement contains customary warranties given by the Company with respect to its business and certain matters connected with the Placings. In addition, the Company has given certain indemnities to Cenkos and XCAP in connection with the Placings and Cenkos' and XCAP's performance of services in relation to the Placings. Each of Cenkos and XCAP is entitled to terminate the Placing Agreement in specified circumstances including where there has been a material breach of the warranties.

XCAP and Cenkos will each be issued with Corporate Finance Warrants in addition to corporate finance fees and commissions charged by them to the Company in connection with their services relating to the Placings. The Corporate Finance Warrants will have similar terms and conditions to the Placing Warrants which are described in more detail below.

The Placing Warrants

In addition, conditional upon Admission, Placees will be issued with one Placing Warrant for every two Ordinary Shares they have agreed to acquire through the Placings. Each Placing Warrant will give the Placees the right, but not the obligation, to acquire one Ordinary Share at an exercise price of 0.5 pence (the "Exercise Price"), conditional on such exercise request being made within the period ending twelve months from Admission.

The Placing Warrants have been constituted by the Placing Warrant Instrument and their issue is conditional upon Admission occurring. The maximum number of Placing Warrants which may be issued under the Placing Warrant Instrument is 301,365,000. The Placing Warrant Instrument contains the terms and conditions upon which the Placing Warrants will be issued and the principal terms and conditions are as follows:

Form of Placing Warrants

Placing Warrant Holders will be recorded as the holders of Placing Warrants in a register of Placing Warrants maintained on behalf of the Company.

Each Placing Warrant Holder shall be entitled to a certificate. Joint holders will be entitled to only one certificate in respect of their joint holding. A form of notice of exercise and the full terms and conditions of the Placing Warrants will be attached to each certificate.

Conditions attaching to exercise

The Directors may require, as a condition of exercise of any Placing Warrant, that the registered holder of the Placing Warrant certifies that such exercise is not being made with a view to a transfer of the Ordinary Shares to which it relates to an overseas person.

Allotment of Shares

On the due exercise of any Placing Warrant, the Company will allot the number of Ordinary Shares for which subscription is made to the registered holder of the Placing Warrant. Following exercise of the Placing Warrants, the Company will apply for those Ordinary Shares to be admitted to dealing on any recognised investment exchange on which the Company's shares are then quoted.

Insolvency

If an Insolvency Event (as defined in the Placing Warrant Instrument) occurs in respect of the Company (except as part of a reconstruction or amalgamation which has been approved by the Placing Warrant Holders by extraordinary resolution) each Placing Warrant Holder shall, in respect of its Placing Warrant(s) be treated as if its Placing Warrant(s) had been exercised on the day immediately preceding the happening of the Insolvency Event and shall receive out of the surplus assets of the Company available in the liquidation such sum as it would have received if it had been registered as the holder of the number of fully paid Ordinary Shares for which it is entitled to subscribe under the Warrant(s) then registered in its name after the deduction from such sum of a sum equal to the Exercise Price in respect of those Ordinary Shares.

Adjustment

If the Company alters its share capital by consolidating or subdividing shares the Company shall within 10 business days after such event give written notice to the Placing Warrant Holders giving full details of the event in question.

Within 10 business days after the service of a notice the Placing Warrant Holders may serve written notice on the Company requiring it to instruct auditors to prepare and deliver to the Placing Warrant Holders and the Company a certificate as to what is in their opinion the amount of the adjustment which ought reasonably to be made to the number of Ordinary Shares subject to the Warrant and/or to the Exercise Price for each of those Ordinary Shares but so that:

(a) the aggregate amount payable on the exercise of the Placing Warrants in full is not increased; and

(b) the Exercise Price for an Ordinary Share is not reduced below its nominal value, and the Company shall give to the auditors all information reasonably requested by the auditors to enable the auditors to produce their certificate.

Meetings of Placing Warrant Holders & Modification of Placing Warrant rights

The Company may (and shall on the written request in writing of Placing Warrant Holders holding at least one-fifth of the Placing Warrants then outstanding) convene a meeting of the Placing Warrant Holders by at least 14 days' clear written notice, and such meeting shall have power by an extraordinary resolution (that is to say a resolution passed by a majority consisting of at least seventy-five per cent. of the Placing Warrant Holders voting on a show of hands or (if a poll is demanded by the chairman of the meeting or by Placing Warrant Holders holding at least three quarters of the Placing Warrants then outstanding and in respect of which notice of conversion has not been given) by a simple majority of the votes given on such poll):

(a) to sanction any modification or compromise or any agreement in respect of the rights of the Placing Warrant Holders;

(b) to assent to any modification of these conditions proposed or agreed to by the Company and to agree to the issue of a supplemental instrument embodying the modification; and

(c) to appoint any persons (whether Placing Warrant Holders or not) as a committee to represent the interest of the Placing Warrant Holders and to confer upon such committee any powers or discretions which the Placing Warrant Holders could themselves exercise by an extraordinary resolution.

A resolution signed by Placing Warrant Holdersholding at least 75% of the Placing Warrants in issue shall be as valid and effectual as if it had been passed at a meeting of the Placing Warrant Holders duly convened and held. Such resolution may be contained in one document or in several documents in like form each signed by one or more of the Placing Warrant Holders.

Law and Jurisdiction

The Placing Warrant Instrument is governed by and construed in accordance with English law and the Company and the Placing Warrant Holders submit to the non-exclusive jurisdiction of the English courts.

Directors' shareholdings

The current beneficial and non-beneficial interests of the Directors in Ordinary Shares (not including Ordinary Shares held by the Cyan Employee Benefit Trust) and the beneficial and non-beneficial interests following the Placings are set out below:

	Date of this document		Following the Placings
	Existing Number of Ordinary Shares	Percentage of Ordinary Share Capital	Number of OrdinaryShares	Issued Ordinary Share Capital
Director
John Cronin Dr. John Read	9,580,096 18,291,293	0.58% 1.10%	24,237,239 24,087,579	1.07% 1.06%
Simon Smith	14,085,389	0.85%	20,447,675	0.90%

The Directors' participation in this placing will be paid for in part by sacrificing their entire salaries for the remainder of 2012. This will take the place of the current directors' share purchase plan whereby the directors purchase shares on a monthly basis out of varying portions of their salaries.

The following Ordinary Shares held by the Cyan Employee Benefit Trust are beneficially owned by the following Directors to the extent the share price of the Company exceeds 2.5 pence per Ordinary Share: