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Vycon Inc (VYCO)

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Monday 10 November, 2008

Vycon Inc

Convertible loan notes to rai

RNS Number : 7657H
Vycon Inc
10 November 2008
 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN THE UNITED STATES, CANADA, AUSTRALIA, SOUTH AFRICA OR JAPAN


Vycon, Inc.


Proposed subscription for Convertible Loan Notes

to raise up to US$6.4 million



Vycon, Inc. ('Vycon' or the 'Company'), the designer and manufacturer of high-speed flywheel based, environmentally friendly energy storage systems, today announces a fundraising to raise up to US$6.4 million.


Highlights

  • Fundraising by way of an offer of Convertible Loan Notes to raise net proceeds (after expenses) of up to US$6.0 million. The Offer is not being underwritten
  • Undertakings to subscribe US$2.5 million have already been received by the Company from major stockholders, directors and senior management
  • The Company is providing Qualifying Stockholders the opportunity to participate in the fundraising by subscribing for Convertible Loan Notes on equivalent terms

  • Principal terms of the Convertible Loan Notes:

    • the Convertible Loan Notes will be repaid on 31 October 2011 ('the Maturity Date'), unless they are converted earlier at the discretion of the holder or they are voluntarily prepaid by the Company

    • each holder of Convertible Loan Notes at the Maturity Date may elect to receive repayment in the form of (i) the then outstanding principal and accrued but unpaid interest in cash, (ii) new Common Shares, or (iii) a combination of cash and new Common Shares as elected by the holder. New Common Shares will be issued at a conversion price of US$0.39 (equivalent to 25 pence at the Exchange Rate)

    • the Convertible Loan Notes will carry a simple gross coupon of 10 per cent. per annum payable on the outstanding principal balance until the earlier of conversion or repayment

    • each subscriber will be issued Warrants to subscribe for new Common Shares within two years at a price of 50 pence. Subscribers will be issued one Warrant for each US$0.78 invested in Convertible Loan Notes

  • The proceeds of the Offer will provide the Company with additional working capital to continue gaining sales traction in its targeted markets and exploit the relationships developed with its strategic partners


Stockholders should be aware that the Offer does not take the form of a rights issue. Subscriptions under the Offer will be dealt with on a 'first come, first served' basis. In the event that the Company does not receive subscriptions from Qualifying Stockholders for the full amount of Convertible Loan Notes under the Offer within 21 days of the Offer being made, the Company may seek subscriptions from persons other than Qualifying Stockholders.


David Potter, Non Executive Chairman of Vycon, commented:


'Although achieving sales traction has taken longer than originally envisaged I am greatly encouraged by the momentum we are now developingThe support shown by substantial shareholders, directors and members of the senior management team by undertaking to participate in the Offer demonstrates a shared belief that our strategy is one that will deliver shareholder value.


Enquiries:

Vycon, Inc.


Vatche Artinian

 001 310 741 1444

Craig Glynn

 001 714 386 3800



Smith & Williamson Corporate Finance Limited


Barrie Newton

+44 (0)117 376 2117

Nick Reeve

+44 (0)117 376 2100

Martyn Fraser

+44 (0)117 376 2062



Cardew Group


Rupert Pittman

+44 (0)20 7930 0777

Shan Shan Willenbrock



Notes to editors


About Vycon


VYCON is an innovator in the design and manufacturing of technologically advanced, flywheel based, energy storage systems that enable a highly reliable, cost effective and 'Green' energy storage solution for a variety of applications. VYCON's products are applied in the power quality markets to provide back-up power in mission critical applications and in the energy re-cycling markets for capturing and regenerating energy in crane, electric rail and distributed generation applications. VYCON is a publically listed company on the AIM market of the London Stock Exchange and is headquartered in Orange CountyCA. Further background on the Company can be found at www.vyconenergy.com


This summary should be read in conjunction with the detailed announcement which follows. The full announcement contains the definitions of certain terms used in this summary and the full announcement. This announcement does not constitute, or form part of, an offer to sell, or the solicitation of an offer to subscribe for or buy any of the Convertible Loan Notes to be issued in connection with the Offer.


The Directors of Vycon have taken all reasonable care to ensure that the information contained in this announcement is, to the best of their knowledge, in accordance with the facts and contains no omission likely to affect the import of such information.


The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.


Smith & Williamson Corporate Finance Limited which is authorised and regulated in the United Kingdom by the Financial Services Authority, are acting exclusively for the Company and for no one else in relation to the Offer and will not be responsible to anyone other than the Company for providing the protections afforded to their clients or for providing advice in relation to the Offer any other matter referred to in this announcement.


THIS ANNOUNCEMENT DOES NOT CONSTITUTE, OR FORM PART OF, AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO SUBSCRIBE FOR OR BUY ANY SECURITIES NOR SHALL THERE BE ANY SALE, ISSUE OR TRANSFER OF THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW. ANY DECISION TO INVEST IN THE CONVERTIBLE LOAN NOTES SHOULD ONLY BE MADE ON THE BASIS OF INFORMATION CONTAINED IN THE CIRCULAR BEING POSTED TO STOCKHOLDERS TODAY.




Proposed Subscription for Convertible Loan Notes to Raise up to US$6,400,000


The Board of Vycon announced today that, in order to provide the Company with additional working capital to support its growth plans, it proposes to raise up to US$6.4 million before expenses by means of an offer of Convertible Loan Notes to Qualifying Stockholders. Undertakings to subscribe for approximately US$2.5 million under the Offer have already been received by the Company.


The Convertible Loan Notes will be repaid on 31 October 2011, unless they are converted earlier at the discretion of the holder or they are voluntarily prepaid by the Company. Each holder of Convertible Loan Notes at that date may elect to receive repayment in the form of (i) the then outstanding principal and accrued but unpaid interest in cash, (ii) new Common Shares, or (iii) a combination of cash and new Common Shares as elected by the holder. New Common Shares will be issued at a conversion price of US$0.39 (equivalent to 25 pence at the Exchange Rate).


In addition each subscriber for Convertible Loan Notes will be issued Warrants to subscribe for new Common Shares within two years at a price of 50 penceSubscribers will be issued one Warrant for each US$0.78 invested in Convertible Loan Notes.


Further details of the Convertible Loan Notes are set out in the circular being posted to Stockholders today.

Reason for the Offer


After Admission to AIM in March 2007, Vycon pursued a strategy of developing sales traction through aligning with selected industry channel partners. However, it was not until 2008 that these efforts resulted in channel partner relationships with global UPS manufacturers Chloride and Eaton (Powerware), and leading port crane manufacturer Noell. During this time the Company also continued to develop its new VDC/VDC XE product for the UPS market in response to feedback from customers. At the same time significant investment has been made to develop the Company's infrastructure to support the anticipated growth in orders.


Although later than initially planned this strategy began to deliver tangible results in the six months to 30 June 2008 where the Company shipped orders valued at US$2.0 million, of which US$1.0 million was recognised as revenue during the period. This compares favourably to shipments and revenue of US$0.7 million during all of 2007. The Company also launched the VDC/VDC XE products for commercial sale in September 2008.


Whilst the developments that have taken place during 2008 have begun to generate satisfactory sales growth for the Company overall sales traction has taken longer to establish than planned at the time of admission to AIM. This has given rise to an additional funding requirement to support the continued growth of the business, which is being addressed through the Offer announced today.


After careful consideration the Board has decided not to make the Offer available on a pre-emptive basis, as permitted by DGCL, in order to provide greater certainty over the availability of funding to the Company. On 28 October 2008 the Company announced that a US$1.0 million bridge loan had been made available to the Company by three of its substantial Stockholders, including BankInvest and Cooper Capital who have board representation through Jens Christian Mathiesen and Peter Cooper respectively.


The Company has received undertakings to subscribe for US$2.5 million under the Offer, which includes conversion of the US$1.0 million bridge loan. The undertakings include US$140,000 from directors and other senior management and demonstrate their strong support for our strategy.


In the circumstances the Board considers it is appropriate to provide all Qualifying Stockholders with an opportunity to participate in the Offer on the same terms.



Use of the proceeds


The proceeds of the Offer will be used to provide additional working capital for the Company. The Board believe that full subscription under the Offer, in conjunction with existing cash resources and anticipated debt facilities, will provide funding in an amount sufficient to enable the Company to continue gaining sales traction in its targeted markets and exploit the relationships developed with its strategic partners. However, Stockholders should be aware that in the event the Offer is not fully subscribed it will be necessary for the Company to secure additional sources of funding in due course in order to pursue its stated strategy.



Current trading


On 29 September 2008 the Company announced its interim results for the six months ended 30 June 2008. This reported a growth in revenue to US$1.0 million, compared to US$0.3 million in the corresponding period during 2007. Sales growth has continued into the second half of 2008 and on 16 October 2008 the Company announced that International Container Terminal Services, Inc. had ordered from Noell China twelve rubber tyred gantry cranes fitted with Vycon's fuel and emission saving REGEN energy storage systems. This order, which represents revenues in excess of US$1.0 million, is the Company's largest single order to date. The Company also recently completed development of its VDC/VDC XE products and is currently receiving orders for them. One of these orders is for four units configured in parallel to provide up to 1 megawatt of back-up power. The Company remains confident of achieving the market forecast for revenue in the year ending 31 December 2008 in the range US$4.6 - US$5.3 million. The Company also expect the operating loss for the same period will be in line with market expectations.



Principal terms of the Convertible Loan Notes


A summary of the principal terms of the Convertible Loan Notes is set out in the circular being posted to Stockholders today, but the key terms include:


  • the Convertible Loan Notes will be repaid on 31 October 2011 ('the Maturity Date') unless they are converted earlier at the discretion of the holder or they are voluntarily prepaid by the Company;

  • the Convertible Loan Notes are unsecured and will yield a simple gross coupon of 10 per cent. per annum payable on the earlier of conversion or prepayment;

  • at the Maturity Date each holder of Convertible Loan Notes may elect to receive repayment in the form of (i) the then outstanding principal and accrued but unpaid interest in cash, (ii) new Common Shares, or (iii) a combination of cash and new Common Shares as elected by the holder. New Common Shares will be issued at a conversion price of US$0.39 (equivalent to 25 pence at the Exchange Rate);

  • each holder of Convertible Loan Notes may at any time after the first anniversary of issue convert the outstanding principal and accrued interest in whole or in part, into Common Shares at a conversion price of US$0.39 per Common Share; and

  • prepayment of the Convertible Loan Notes by the Company is not permitted before 1 November 2010. The Company may voluntarily prepay the Convertible Loan Notes in part or in full without penalty at any time thereafter provided it does so pro rata in respect of the outstanding principal amounts of the Convertible Loan Notes and it provides the holders no less than 20 days' notice. Any such prepayment will be made at 105% of par.

Principal terms of the Offer


Subscriptions under the Offer will be dealt with on a 'first come, first served' basis. In the event that the Company does not receive subscriptions from Qualifying Stockholders for the full amount of Convertible Loan Notes under the Offer within 21 days of the Offer being made, the Company may seek subscriptions from persons other than Qualifying Stockholders. It should be noted that the Offer does not take the form of a rights issue.


There is no minimum level of subscriptions and the Company will begin using funds received from the Offer immediately on their receipt. The Offer is not being underwritten.


The Directors have not applied, and do not intend to apply to the London Stock Exchange for the Convertible Loan Notes or Warrants to be admitted to trading on AIM. The Convertible Loan Notes and Warrants will however be transferable subject to the restrictions set out in the circular being posted to Stockholders today. The Company will use its reasonable endeavours to seek admission to trading of the new Common Shares, issued on conversion of the Convertible Loan Notes, or on exercise of the Warrants, on AIM or other recognised investment exchange or market on which the Common Shares are then traded.


The detailed terms and conditions of the Offer are set out in the circular being posted to Stockholders today.



Undertakings to participate in the Offer


The following undertakings to subscribe in the Offer have been received by the Company:


Name
Value of subscription
P/S BI New Energy Solutions (BankInvest)
US$1,000,000
Cabayan Family Trust
US$778,333
Cooper Capital
US$333,333
David Potter (Chairman)
US$40,000
Vatche Artinian (Chief Executive Officer)
US$50,000
Craig Glynn (Chief Financial Officer
US$25,000
Other Stockholders
US$275,000
 
 


The Offer is a related party transaction as defined in the AIM Rules.
 The directors, with the exception of Jens Christian Mathiesen and Peter Cooper (who are not deemed to be independent of the transaction by virtue of their relationship with BankInvest and Cooper Capital respectively) consider, having consulted the Company's Nominated Adviser, Smith & Williamson Corporate Finance Limited, that the terms of the transaction, as set out in this Circular being posted to Stockholders today, are fair and reasonable insofar as the Company's Stockholders are concerned.



Taxation


If Qualifying Stockholders are in any doubt as to their tax position in respect of the Convertible Loan Notes or the Offer they should consult their professional advisers without delay.



Share option schemes


Holders of the options under the Share Option Schemes will be entitled to make an application for subscription for Convertible Loan Notes.



Action to be taken


Qualifying Stockholders who wish to take up the Offer should complete the Application Form, which is being posted to Stockholders today, in accordance with the instructions set out on the Application Form and return it and the appropriate remittance, by post, to the Company Secretary, Vycon, Inc., 23695 Via Del Rio, Yorba Linda, CA 92887, United States of America with payment in full, so as to be received no later than 10.00 a.m. on 2 December 2008.



Further information


Further information on the Offer is contained in the circular being posted to Stockholders today.




Expected Timetable of Principal Events


Record Date

6.00 p.m. on 7 November 2008

Date of the circular to Stockholders and posting of the Application Forms

10 November 2008

Latest time and date for receipt of completed Application Form and payment in full under the Offer

2 December 2008

Definitive loan note certificates for Convertible Loan Notes despatched by no later than

12 December 2008


Each of the times and dates in the above timetable is subject to change. If any of the above times and/or dates change, the revised times and/or dates will be notified to Stockholders by announcement on a Regulatory Information Service. References to time in this announcement are to London time.



Offer Statistics


Number of Common Shares in issue at the date of this announcement

30,306,053

Gross proceeds of the Offer

US$6,400,000

Conversion Price

US$0.39*

Enlarged Issued Share Capital

46,716,309**

Percentage of Enlarged Issued Share Capital represented by the Convertible Loan Notes 

35.1%**

Estimated net proceeds of the Offer

US$6,000,000**


* Equivalent to 25 pence at the Exchange Rate 


** Assuming full subscription of the Convertible Loan Notes and, where the context requires, full conversion of the Convertible Loan Notes into Common Shares on issuance (but taking no account of interest or Warrants)


References to 'dollars', 'US$' and 'US Dollars' are to United States dollars and all references to '£' are to British pounds sterling. Unless otherwise stated, this announcement translates figures in US dollars into pounds sterling, or vice versa, at the exchange rate of £1 being equal to US$1.56 (referred to as the Exchange Rate in this announcement).



Definitions


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


'1985 Act'

the Companies Act 1985, as amended from time to time;

'2006 Act'

the Companies Act 2006, as amended from time to time;

'Accredited Investor'

as defined by Rule 501(a) of the Securities Act; 

'AIM Rules' 

the 'AIM Rules for Companies' as published by the London Stock Exchange from time to time;

'AIM' 

the market known as AIM operated by the London Stock Exchange;

'Application Form'

the application form in respect of the Offer accompanying thcircular being posted to Stockholders today;

'BankInvest'

P/S BI New Energy Solutions;

'Board' or 'Directors'

the directors of Vycon;

'Business Day'

any day other than a Saturday or a Sunday or public holiday when banks generally are open in London for general banking business;

'certificated' or 'in certificated form'

the description of a share or other security which is not in uncertificated form (that is, not in CREST);

'Code' or 'City Code'

the City Code on Takeovers and Mergers;

'Common Shares'

the common shares of par value of US$0.0001 each of the Company;

'Company' or 'Vycon'

Vycon, Inc.;

'Convertible Loan Notes'

the US$6,400,000 nominal of unsecured subordinated convertible loan notes of the Company to be created by a loan note instrument to be dated on or about 7 November 2008;

'Cooper Capital'

collectively Cooper Capital Partners, L.P. and Cooper Capital Partners II, L.P.;

'CREST Regulations' 


the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), including (i) any enactment or subordinate legislation which amends or supersedes those regulations and (ii) any applicable rules made under those regulations or any such enactment or subordinate legislation for the time being in force;

'CREST' 


the computerised settlement system (as defined in the CREST Regulations) operated by Euroclear which facilitates the transfer of title to shares in uncertificated form;

'DGCL'

Delaware General Corporation Law;

'Enlarged Issued Share Capital' 

the Common Shares in issue assuming full conversion of the Convertible Loan Notes to Common Shares, taking no account of interest or Warrants;

'Euroclear' 

Euroclear UK & Ireland Limited;

'Exchange Rate'

the rate of exchange of £1 being equal to US$1.56;

'Financial Promotion Order'

the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended;

'FSA'

the Financial Services Authority;

'Holder'

a holder of Convertible Loan Notes;

'London Stock Exchange'

London Stock Exchange PLC;

'Maturity Date'

31 October 2011;

'Non-Qualifying Stockholders'

Stockholders other than Qualifying Stockholders;

'Offer'

the offer for Convertible Loan Notes on the terms and subject to the conditions set out in thcircular being posted to Stockholders today and the accompanying Application Form;

'Optionholders'

holders of Options pursuant to the Share Option Schemes; 

'Options'

the options granted by Vycon pursuant to the Share Option Schemes entitling the holder to subscribe for Common Shares;

'Panel'

the Panel on Takeovers and Mergers;

'Prospectus Rules'

the Prospectus Rules published by the FSA from time to time;

'Qualifying Stockholders'


(i) Stockholders on the register of shareholders of the Company on the Record Date; and (ii) participants in the Share Option Schemes on the Record Date; in both cases who are in any jurisdiction other than a Restricted Jurisdiction and, in the case of the United States, come within the definition of an Accredited Investor;

'Record Date' 

the record date in respect of the Offer being 6.00 p.m. on 7 November 2008;

'Restricted Jurisdiction' 


any jurisdiction where local laws or regulations may result in a significant risk of civil, regulatory or criminal exposure to prosecution if information or documentation concerning the Offer is sent or made available to Vycon Stockholders in that jurisdiction;

'Share Option Schemes'

the 2006 Incentive Award Plan adopted by Vycon on 4 October 2006 and the Vycon Non-Qualified Stock Option Plan;

'Stockholders'

holders of Common Shares;

'UK' or 'United Kingdom'

the United Kingdom of Great Britain and Northern Ireland;

'United States'

the United States of America, its territories and possessions, any state of the United States of America, the District of Columbia and all other areas subject to its jurisdiction;

'US Person'

A US Person, as defined in Regulation S under the US Securities Act, being one of the following:

·                      a natural person resident in the United States;
·                     a partnership or corporation organized or incorporated
      under the laws of the United States;
·                     an estate of which any executor or administrator is a 
      US Person;
·                     a trust of which any trustee is a US. Person;
·                     an agency or branch of a foreign entity located in the
      United States;
·                     a non-discretionary account or similar account (other 
      than an estate or trust) held by a dealer or other 
      fiduciary for the benefit or account of a US Person;
·                     a discretionary account or similar account (other than
      an estate or trust) held by a dealer or other 
      fiduciary organized, incorporated, or (if an 
      individual) resident in the United States; and
·                     partnership or corporation if:
        (A)  organized or incorporated under the laws of any
         foreign jurisdiction; and

(B) formed by a US. Person principally for the purpose of investing insecurities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors who are not natural persons, estates or trusts.

'US Securities Act' 

United States Securities Act of 1933 (as amended) and rules and regulations made thereunder; 

'US$'

United States dollars, the lawful currency of the United States.

'Warrants'

the warrants to subscribe for Common Shares issued pursuant to the Offer



Forward-looking statements

All statements, other than statements of historical fact, contained in this announcement constitute ''forward looking statements''. In some cases, forward-looking statements can be identified by terms such as 'may', 'intend', 'might', 'will', 'should', 'could', 'would', 'believe', 'anticipate', 'expect', 'estimate', 'anticipate', 'predict', 'project', 'potential', or the negative of these terms, and similar expressions. Such forward-looking statements are based on assumptions and estimates and involve risks, uncertainties and other factors which may cause the actual results, financial condition, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.


New factors may emerge from time to time that could cause the Company's business not to develop as it expects and it is not possible for the Company to predict all such factors. Given these uncertainties, prospective investors are cautioned not to place any undue reliance on such forward-looking statements. Except as required by law, the Company disclaims any obligation to update any such forward-looking statements in this announcement to reflect future events or developments.



This information is provided by RNS
The company news service from the London Stock Exchange
 
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