Proposed Placings and Notice of General Meeting

RNS Number : 0846U

Cyan Holdings Plc

15 December 2011

Cyan Holdings plc

("Cyan" or "the Company")

Proposed Placings

Notice of General Meeting

Cyan Holdings Plc (AIM:CYAN.L), the integrated system design company delivering mesh based flexible wireless solutions for lighting control, utility metering and industrial telemetry announces raising, subject to certain conditions and shareholder approval, approximately £1.7 million before expenses, by way of two share placings ("Placings") pursuant to which 420,200,000 New Ordinary Shares will be issued at 0.4 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 and other development work as set out below. In addition, Placees have been granted warrants ("Warrants") to subscribe for up to a further 420,200,000 New Ordinary Shares at 0.6 pence per New Ordinary Share within six months of Admission. A General Meeting ("GM") to approve the necessary resolutions has been convened for 2.00 p.m. on 5 January 2012 and a circular containing the notice of the GM (the "Circular") has been posted to all shareholders in the Company and is available to view on the Company's website at: www.cyantechnology.com.

Definitions in this announcement are the same as those in the Circular, unless otherwise stated.

Background to and reasons for the Placings

As recent announcements demonstrate, Cyan has now established a foothold in the burgeoning Indian smart metering market. The board is delighted with progress in displacing Zigbee as the likely preferred solution in smart metering through repeated practical demonstration of the robust range and functionality of Cyan's mesh networking technology. Interoperability is the next most critical requirement, any one utility must be able to purchase meters from a selection of suppliers. CyLec has interoperability as a core feature and can be integrated into existing meter designs without requiring disclosure of confidential or proprietary information. Current wireless meter installations utilise handheld units permitting meter reading without entering a property. An overnight transition to a remote meter reading methodology is not practical. CyLec has to support both handheld and remote meter reading and CyLec will have to support a rollout to convert installed meters to remote meter reading, ideally 'over the air' so visits are not required. The primary benefit to utilities of smart metering will be reduction of losses through transmission and theft, but demand control is an increasingly important requirement. These benefits must be tightly integrated into the billing and meter management systems currently used by the utilities.

Very few of these features were in place at the beginning of 2011. The exact requirement was not fully understood; the required partners had not been identified; Zigbee appeared poised to be the preferred solution; interoperation using CyLec had not been demonstrated; utilities had not seen or realised the possibility that Live Tamper Alarms, Over The Air Upgrade, Remote Switch Off, Load Balancing, Demand Control and Pre-Pay metering were available for the next phase of installation and did not include these in tender specifications.

All of the above has now been changed such that Cyan, together with its partners, now has the most complete and sophisticated smart metering solution for the Indian market. It is practical, robust, easy to install and was recently demonstrated to a wide audience that expressed surprise, plaudits and who are now enthusiastically embracing Cyan's solution.

Cyan's engineers were already employed developing Lighting Products and supporting Chinese customers. They worked longer hours, but to get to where the Company is now in the Indian metering market, with new tenders reflecting the CyLec features, interoperability demonstrated, a working installation demonstrated in India with MDMS partners has required additional investment, and orders have been delayed while tender specifications have settled.

Without these Placings and the further funds that can be received from the exercise of some of the Warrants, the Directors believe that the Company would run out of funds prior to being able to take advantage of these opportunities. This has been exacerbated by the need to fund the incremental investment in developing metering products plus the cost of 'on the ground' time for members of the Cyan team with prospective customers in India. 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 order to ensure that the Placings give the Company the maximum headroom, the Board is considering the most appropriate Board structure for the Company on an ongoing basis. Additionally, should the Company succeed in completing pending and further orders, the Board expects the Warrants will permit the Company to receive incremental resources for working capital to fund a significant increase in stock of finished modules for these.

The Directors believe that Cyan remains in an outstanding position to secure substantial revenues from a huge market, and to a large extent the Placings represent the cost to the Company of securing that position.

Serious loss of capital

The value of the Company's net assets has reached a level that is less than half of its called-up share capital. In such circumstances, the Directors are required under section 656 of the Companies Act to convene a general meeting of the Company for the purpose of considering whether any, and if so what, steps should be taken to deal with the situation. This matter will be considered at the GM. The steps which are recommended by the Directors are set out in the Circular and in particular in the paragraph below. If the Placings are completed, the Directors do not consider that any additional action needs to be taken.

Capital Reorganisation

In order to partly address the fact that the Company's net assets has reached a level that is less than half of its called-up share capital, in addition to considering what steps should be taken at the GM, it is proposed to sub-divide and convert each unissued and issued existing ordinary share of 0.2 pence into one new ordinary share of 0.01 pence ("New Ordinary Shares") and one deferred share of 0.19 pence (the "Deferred Shares") (together the "Capital Reorganisation"). The rights attaching to the New Ordinary Shares and the Deferred Shares are set out in the New Articles. Essentially, the passing of the resolution in relation to the New Articles would change the par value of the ordinary share capital of the Company to 0.01 pence per Ordinary Share.

The Deferred Shares created will be effectively valueless as they will not carry any rights to vote or dividend rights. In addition, holders of Deferred Shares will only be entitled to a payment on a return of capital or on a winding up of the Company after each of the holders of New Ordinary Shares have received a payment of £10,000,000 on each such share. The Deferred Shares will not be listed or traded on AIM and will not be transferable without the prior written consent of the Board. No share certificates will be issued following the Capital Reorganisation for the Deferred Shares. The Board may further appoint any person to act on behalf of all the holders of the Deferred Shares to procure the transfer all such shares back to the Company (or its nominee) for an aggregate consideration of 1 penny.

It is not intended to issue new share certificates to the holders of the New Ordinary Shares following the Capital Reorganisation. Existing share certificate(s) will remain valid for the same number of shares but with a different par value of 0.01 pence.

In summary, the practical effect of the Capital Reorganisation, if implemented, will be that each Shareholder will receive the same number of New Ordinary Shares as they hold in Existing Ordinary Shares, without diminution in rights (subject to the provisions of the New Articles).

The creation of the Deferred Shares requires amendment to the Existing Articles. As the Existing Articles were adopted prior to October 2009, they contain certain transitional provisions which require updating. It is therefore appropriate for the Company to adopt a complete new set of articles of association. A summary of the New Articles and the repurchase of the Deferred Shares is set out in the Circular.

Details of the Placings

The New Ordinary Shares

The Company intends to raise approximately £1.7 million, before expenses, through the issue of 420,200,000 New Ordinary Shares at the Placing Price pursuant to the Placings.

The Placing Price represents a discount of approximately 45.2 per cent. to the closing mid-market price of 0.73 pence per Ordinary Share as at 14 December 2011, 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 Existing Ordinary Shares, including the right to receive dividends and other distributions declared following Admission.

The Placing Shares will represent approximately 26.1 per cent. of the Enlarged Share Capital.

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 at 8.00 a.m. on 6 January 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 to be held the Stanley Library, Girton College, Cambridge, CB3 0JG at 2.00 p.m. on 5 January 2012;

(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 January 2012 (or such time and date as the Company, Cenkos and XCAP may agree, being not later than 6 February 2012).

Pursuant to the terms of the Placing Agreement, each of Cenkos and XCAP have 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.

The Warrants

In addition, conditional upon Admission, Placees will be issued with one Warrant for each New Ordinary Share they have agreed to acquire through the Placings. Each Warrant will give the Placees the right, but not the obligation, to acquire one New Ordinary Share at an exercise price of 0.6 pence (the "Exercise Price"), conditional on such exercise request being made within the period ending six months from Admission.

The Warrants have been constituted by an instrument of the Company dated 15 December 2011 (the "Warrant Instrument") and their issue is conditional upon Admission occurring. The maximum number of Warrants which may be issued under the Warrant Instrument is 420,200,000.

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:

	Existing		Following the Placings
	Number of Ordinary	Existing Ordinary	Number of New Ordinary	Issued New Ordinary
Director	Shares	Share Capital	Shares	Share Capital
Kenneth Lamb	13,759,579	1.15%	15,634,579	0.97%
Dr. John Read	12,340,760	1.03%	15,090,760	0.94%
Simon Smith	9,896,422	0.83%	12,646,422	0.78%

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: