REG - CyanConnode Holdings - Proposed Placing, Subscription and Open Offer

Cyanconnode HoldingsAnnouncement

19/10/2018 07:05

RNS Number : 5797E
CyanConnode Holdings PLC
19 October 2018
 


The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, THE REPUBLIC OF IRELAND, NEW ZEALAND OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN CYANCONNODE HOLDINGS PLC OR ANY OTHER ENTITY IN ANY JURISDICTION.
CyanConnode Holdings plc
("CyanConnode", the "Company" or together with its subsidiaries the "Group")
Proposed Placing, Subscription and Open Offer to raise up to £5.6 million
Notice of General Meeting
 
 
CyanConnode (AIM:CYAN.L), a world leader in narrowband radio frequency (RF) mesh networks, is pleased to announce that it is proposing to raise £5.1 million (before the deduction of fees and expenses) through the issue of 39,787,391 Placing Shares and 10,665,000 Subscription Shares at 10 pence per Ordinary Share. In addition, the Company is proposing to raise up to a further £0.5 million (before the deduction of fees and expenses) through an Open Offer and the issue of up to 5,142,961 Open Offer Shares at 10 pence per Ordinary Share. The Fundraising Shares will rank, pari passu, in all other respects with the Company's Existing Ordinary Shares. John Cronin, Harry Berry, Heather Peacock and David Johns-Powell, directors of the Company, have participated in the Fundraising.
 
Key Highlights
·      Proposed Fundraising to raise up to £5.6 million through the issue of up to 55,595,352 Fundraising Shares to new and existing institutional and other investors at 10 pence per Share;
·      The Issue Price represents a discount of 18.4 per cent. to the closing price on 18 October 2018, being the last trading date prior to announcement of the proposed Fundraising;
·      The net proceeds of the Fundraising will be used to fund future growth to include investment in research and development and working capital to execute on the Company's order book, pipeline and growth plan;
·      The Fundraising is conditional, inter alia, upon Shareholder approval at the General Meeting of the Company which is expected to be held at Merlin Place, Milton Road, Cambridge, CB4 0DP at 2.00 p.m. on 5 November 2018;
·      £1 million Board and senior management participation in the Fundraising; and
·      Appointment of Arden Partners plc as joint broker
Further information explaining why the Board considers the Fundraising to be in the best interests of the Company and its Shareholders as a whole and why the Directors unanimously recommend that Shareholders vote in favour of the resolutions to be proposed at the General Meeting is set out below in this announcement.
Unless otherwise defined herein, capitalised terms used in this announcement shall have the same meanings as defined in the Circular containing notice of the General Meeting.
 
Enquiries:
 



CyanConnode Holdings plc


Tel: +44 (0) 1223 225 060




John Cronin, Executive Chairman


www.cyanconnode.com














 
finnCap Ltd (Nomad and Joint Broker)


 
Tel: +44 (0) 20 7220 0500




Ed Frisby/ Giles Rolls (Corporate Finance)
Alice Lane (ECM)








 
Arden Partners (Joint Broker)
Paul Shackleton / Daniel Gee-Summons


 
Tel: +44 (0) 20 7614 5900




 
Walbrook PR (Financial PR)
Paul Cornelius / Nick Rome
 


 
Tel:  +44 (0) 20 7933 8780
cyanconnode@walbrookpr.com













About CyanConnode
CyanConnode is a world leader in narrowband radio frequency (RF) mesh networks that facilitate machine to machine (M2M) communication. CyanConnode's innovative technology uses the industrial, scientific, and medical radio band, (ISM), which is optimised to give exceptional performance and competitive total cost of ownership.  Through global partnerships, CyanConnode provides customers with a solution for the rapid deployment of local or countrywide ISM RF mesh networks that provide reliable and secure M2M communication.
For more information, please visit www.cyanconnode.com
Cautionary note regarding forward-looking statements
This document contains statements about the Company that are of may be deemed to be "forward-looking statements".
All statements, other than statements of historical facts, included in this document may be forward-looking statements. Without limitation, any statements preceded or followed by, or that include, the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "should", "anticipates", "estimates", "projects", or words or terms of similar substance or the negative thereof, are forward-looking statements. Forward-looking statements may include, without limitation, statements relating to future capital expenditures, expenses, revenues, earnings, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects, etc.
These forward-looking statements are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual result, performance or achievements of any such person, or industry, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Investors should not place undue reliance on such forward-looking statements and, save as is required by law or regulation (including to meet the requirements of the AIM Rules, the City Code, the Prospectus Rules and/or FSMA), the Company does not undertake any obligation to update publicly or revise any forward-looking statements (including to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based). All subsequent oral or written forward-looking statements attributed to the Company or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements contained in this document are based on information available to the Directors at the date of this document, unless some other time is specified in relation to them, and the posting or receipt of this document shall not give rise to any implication that there has been no change in the facts set forth herein since such date.
The following text has been extracted from the Circular:
LETTER FROM THE CHAIRMAN
 
1              Introduction
 
The Company has announced today that it is proposing to raise £5.6 million (before the deduction of fees and expenses) through the issue of 39,787,391 Placing Shares and 10,665,000 Subscription Shares at 10 pence per Ordinary Share. In addition, the Company is proposing to raise up to a further £0.5 million (before the deduction of fees and expenses) through an Open Offer and the issue of up to 5,142,961 Open Offer Shares at 10 pence per Ordinary Share.
The Fundraising is conditional, inter alia, on:
·      the passing of the Fundraising Resolutions at the General Meeting;
·      in respect of the First Fundraising Shares, First Admission becoming effective by no later than 8.00 a.m. on 6 November 2018 (or such other time and/or date, being no later than 8.00 a.m. on 12 December 2018, as the Company, finnCap and Arden may agree);
·      in respect of the Second Fundraising Shares, Second Admission becoming effective by no later than 8.00 a.m. on 7 November 2018 (or such other time and/or date, being no later than 8.00 a.m. on 12 December 2018, as the Company, finnCap and Arden may agree); and
·      in respect of the Placing Shares, the Placing Agreement between the Company, finnCap and Arden becoming unconditional and not being terminated in accordance with its terms.
 
It is expected that the First Fundraising Shares will be admitted to trading on AIM on or around 8.00 a.m. on 6 November 2018 and that the Second Fundraising Shares will be admitted to trading on AIM on or around 8.00 a.m. on 7 November 2018.
The Issue Price represents a discount of 18.4 per cent. to the closing price of 12.25 pence on 18 October 2018, being the last Business Day prior to the publication of the announcement of the Fundraising.
The Board believes that raising equity finance by way of the Fundraising is the most appropriate method of financing for the Company at this time. This allows certain existing and new investors to participate in the Placing and Subscription whilst also providing the Company's loyal and supportive Shareholders with an opportunity to participate in the Open Offer in recognition of their continued support to the Company. The Board believes that the potential value creation for the benefit of Shareholders arising from the Fundraising outweighs its dilutive effects.
The purpose of the Circular is to set out the reasons for, and provide further information on, the Fundraising, as well as to explain why the Board considers the Fundraising to be in the best interests of the Company and its Shareholders as a whole and why the Directors unanimously recommend that you vote in favour of the Resolutions, as they intend to do so in respect of their own beneficial holdings of 13,629,425 Ordinary Shares, in aggregate representing approximately 10.60 per cent. of the Existing Ordinary Shares on 18 October 2018 (being the last Business Day prior to publication of the Circular).
At the end of the Circular you will find the Notice convening the General Meeting at which the Resolutions will be proposed by the Directors. The General Meeting has been convened for 2 p.m. on 5 November 2018 and will take place at the Company's registered office, Merlin Place, Milton Road, Cambridge, CB4 0DP.
2              Background to and reasons for the Fundraising
 
On 11 September 2018, the Company announced its interim results for the six months ended 30 June 2018 and the Directors highlighted a need to raise additional funding during 2018. At the same time the Company provided an update on trading across the CyanConnode Group. 
During the first six months of 2018, CyanConnode improved its delivery processes which enabled it to achieve record first half revenue of £1,637,008. The key contributors to the revenue growth were achieved from existing customer contracts in India, the Nordics and the UK. The Company has also reduced its cash cost base to approximately £560,000 with effect from January 2019.
In June 2018 CyanConnode officially launched Omnimesh, its IPv6 based technology that is designed to support global communication standards including Advanced Metering Infrastructure (AMI) for the smart metering market. The launch of Omnimesh also signified the end of expenditure on a major software development programme, which has helped to significantly reduce the operating loss for the period. Prior to the end of June 2018 it had received orders to the value of $4.3 million for this platform ($3.2 million received in 2018). A further $14.5 million of orders for this platform were announced in September 2018. The product has been positively received by the Indian market and the Company expects further large orders for the platform to be won.
 
India
The Minister of Power and New and Renewable Energy, R K Singh announced on 7 June 2018 that "in the next three years metering will go smart prepaid and gone will be the days of bills reaching your house. So need of the hour is to scale up manufacturing of smart prepaid meters and to bring down their prices". As a result of this shift, R K Singh has urged smart meter manufacturers to increase their production. This would result in an estimated total installation across the Indian market of at least 220 million smart prepaid meters in three years. The Board believes this will therefore lead to all traditional meters being replaced by smart prepaid meters in the next three years.  
With smart metering being a key focus of the Government, standards for metering, communication network and AMI systems have been developed by The Ministry of Power, through institutions such as National Smart Grid Mission and Bureau of Indian Standards ("BIS").
CyanConnode's new Omnimesh technology fulfils AMI requirements and leading meter manufacturers, such as Genus, Larsen & Toubro ("L&T") and HPL have integrated the Company's technology into their BIS compliant smart meters, enabling rapid deployment. Furthermore, CyanConnode's technology is already integrated into a significant number of smart meter deployments in India and its deployment at the Chamundeshwari Electricity Supply Corporation ("CESC") project in Mysore is being showcased by Government Ministers as a model site.
Utilities are issuing large 'Requests for Proposals' for smart metering solutions including CyanConnode's technology and the Company is currently working on a sales pipeline of qualified opportunities of over $100 million in India alone. The recent orders from L&T and Genus, having a total value of $17.7 million, and utilising CyanConnode's narrowband RF mesh network technology, indicate that the scale of deployments is gaining momentum.
Rest of World
During the first six months of 2018, the Company's contracts in Bangladesh and Iran were progressing through the different stages of the Site Acceptance Testing ("SAT") process with its key partners. CyanConnode's technology is delivered in a phased approach and each stage of the SAT requires the Company's partner and/or customer to determine whether their requirements have been met.
In addition to the above orders currently held by the Company, it has a large pipeline of opportunities in territories such as Indonesia, Philippines, Thailand and Ghana that it is working on with partners. These opportunities are at various stages of completion.
United Kingdom
A close collaborative partnership between CyanConnode, Telefónica and Toshiba resulted in a solution for second generation smart meters ("SMETS2"). Telefónica, (appointed as the preferred SMIP communications service provider for two thirds of the UK), promoted CyanConnode's narrowband RF mesh network technology to extend the reach of its existing mobile (cellular) network, into locations where cellular signal was not available ('Not-Spots').
Embedding CyanConnode's Technology into the Toshiba SMETS2 Telefónica Communications Hub has enabled smart meters to be located in 'Not-Spots'. Anthony Shaw, Telefónica UK Smart Metering Director said, "CyanConnode is one of the very few suppliers globally that has the experience and leading-edge technology to support Smart Meter deployment in areas where there is no cellular coverage."
In June 2018, Secretary of State for Business, Energy and Industrial Strategy ("BEIS"), Greg Clark, announced that 1,000 SMETS2 devices had been installed and that the figure was a "significant milestone because it represents the beginning of the roll-out of the next generation of meters".
CyanConnode's contract is with Toshiba for its SMETS2 Telefónica Communications Hub and consists of software license and support fees. The Toshiba contract was originally calculated to deliver £24m of revenue based on the assumption that 10% of SMETS2 meters would be located in 'Not-Spots'. However, Energy Suppliers are now finding that dwellings with thick walls, or in blocks of flats, or in areas with poor mobile signal, are contributing to one out of three meters being located in 'Not-Spots'. Consequently, if the percentage of meters located in 'Not Spots' is more than 10%, then CyanConnode's revenue expectations from the contract will increase on a pro-rata basis. CyanConnode understands the roll-out of SMETS2 meters has commenced and expects it to gain momentum in the fourth quarter of 2018.
Financial Position and Current Trading
The Company's unaudited interim results to 30 June 2018 highlighted the need for additional funding. The Company reported half year revenues of £1.6 million (more than the Company made in the entirety of the 2017 financial year). Nevertheless the Company recorded a loss for the six month period of £3.1 million. Cash reduced by operations was £4.1 million, resulting in net cash outflow from operating activities in H1 2018 of £2.7 million, after £1.3 million of income taxes received from HMRC for R&D tax credits. Cash received from customers during H1 2018 was £0.9 million. Cash and cash equivalents (unaudited) at 30 September 2018 was £1.3 million, and as previously notified, the Company is forecasting a monthly cash cost base from 1 January 2019 onwards in the region of £560k.
The full year out turn as ever remains subject to the quantum, margins and timing of product and services revenues. The Company has achieved unaudited revenue for the nine month period to 30 September 2018 of £2.1 million. The Board considers that the Company remains on track to deliver full year market expectations, based on the Board's expectations of a very strong financial performance in Q4. In order to deliver a full year in line with market expectations the Company will need to convert a number of identified sales opportunities in to orders, and in addition convert these new orders, and a number of existing orders, in to revenue by way of the delivery of products and services; specifically this would be expected to include:
·      c.£700k of forecast revenue, as notified on 18 September 2018, relating to an order for Omnimesh by an Indian customer; and
·      a high margin license sale opportunity expected late in 2018, as notified on 11 September 2018.
 
As highlighted by the Company previously, certain markets that the Company trades in have an inherent level of uncertainty associated with them and this may result in the predicted level of sales not being achieved, and/or the timing of orders being delayed, as has been the case for the Company in the past. The Directors have taken reasonable steps to satisfy themselves about the robustness of sales forecasts but acknowledge that the timing of customer orders in the Company's target markets can take longer than expected.
The Board believes that the Fundraising will provide CyanConnode with sufficient resources to achieve cash flow break-even based upon current expectations.
Use of Proceeds
The net proceeds of the Fundraising will be used as follows:
·     Research and Development project expenditure (updates, refresh, additional features and functionality, upgrades)
·     Delivery and execution of orders - procurement of components and manufacturing to secure best terms with suppliers and best margins on products
·     Sales and marketing and business development activities in new territories
·     Integration with new meter manufacturers to expand footprint
·     Project support in existing and new territories
·     Expansion to the team in India
·     Ongoing working capital
 
Director change 
Peter Hutton, Non-Executive Director, has indicated to the Board his wish to resign as a Director, due to other work commitments, shortly after completion of the Fundraising. The Company is commencing a process to identify a suitable replacement Non-Executive Director and a further announcement will be made in due course.
Details of the Placing
Summary
The Placing Shares represent up to 21.6 per cent. of the Enlarged Share Capital, and are proposed to be issued at a price of 10 pence per Placing Share. finnCap and Arden have conditionally agreed to use reasonable endeavours to place all of the Placing Shares pursuant to the Placing Agreement.
Conditions
In connection with the Placing, the Company has entered into the Placing Agreement with finnCap and Arden, pursuant to which finnCap and Arden have agreed to use their reasonable endeavours, as joint agents on behalf of the Company, to conditionally place the Placing Shares with certain new and existing investors at the Issue Price. The Placing is conditional, inter alia, on:
·     the passing of Resolutions 1 and 3 at the General Meeting;
·     the conditions in the Placing Agreement being satisfied or (if applicable) waived and the Placing Agreement not having been terminated in accordance with its terms prior to each of First Admission and Second Admission;
·     as regards the First Placing, First Admission becoming effective by no later than 8.00 a.m. on 6 November 2018 (or such later time and/or date, being no later than 8.00 a.m. on 12 December 2018, as the Company, finnCap and Arden may agree); and
·     as regards the Second Placing, Second Admission becoming effective by no later than 8.00 a.m. on 7 November 2018 (or such later time and/or date, being no later than 8.00 a.m. on 12 December 2018, as the Company, finnCap and Arden may agree).
 
Accordingly, if any of these conditions are not satisfied or, if applicable, waived, the First Placing and/or the Second Placing will not proceed. Shareholders should note that it is possible that First Admission occurs but Second Admission does not, should any relevant condition of the Placing Agreement fail to be met between First Admission and Second Admission.
Terms of the Placing Agreement
The Placing Agreement provides for payment by the Company to finnCap and Arden of certain fees and commissions. In addition, finnCap will, conditional on the Resolutions being passed, receive the Corporate Finance Warrants.
The Placing Agreement contains customary warranties given by the Company to finnCap and Arden in relation to, inter alia, the accuracy of the information in the Circular, certain financial information and other matters relating to the Company and its business. The Company has also agreed to indemnify finnCap, Arden and their respective affiliates in respect of certain liabilities that finnCap, Arden and their respective affiliates may incur in connection with the Placing. Further, the Company has provided a number of customary undertakings to finnCap and Arden in respect of the period prior to Admission and for a time thereafter.
finnCap and Arden, having consulted with the Company to the extent practicable, but in either finnCap or  Arden's absolute discretion, are entitled to terminate the Placing Agreement in certain customary circumstances prior to Admission, including:
·     where any statement contained in the Placing Documents (as such term is defined in the Placing Agreement) or any of the warranties given by the Company to finnCap and Arden are found not to be true or accurate or were misleading and which in any such case is material in the context of the Placing;
·     the occurrence of certain force majeure events or a material adverse change in (amongst other things) national or international financial or political conditions (which in the opinion of finnCap and Arden, is material in the context of the Placing); or
·     the failure of the Company to comply with any of its obligations under the Placing Agreement.
If this right is exercised, the Placing (or, if exercised after First Admission, the Second Placing) will not proceed.
The Placing Agreement is not subject to any right of termination after Second Admission.
3              Details of the Subscription
Summary
The Subscription Shares represent up to 5.8 per cent. of the Enlarged Share Capital, and are proposed to be issued at a price of 10 pence per Subscription Share.
Conditions
In connection with the Subscription, the Company has entered into the Subscription Agreements with Subscribers. The Subscription is conditional, inter alia, on:
·     the passing of Resolutions 1 and 3 at the General Meeting; and
·     admission of the Subscription Shares to trading on AIM becoming effective by no later than 8.00 a.m. on 6 November (in respect of those Subscription Shares to be issued on First Admission) or 8.00 a.m. on 7 November 2018 (in respect of those Subscription Shares to be issued on Second Admission) (or such later time and/or date, being no later than 8.00 a.m. on 12 December 2018, as the Company and the Subscribers may agree).
 
Accordingly, if any of these conditions are not satisfied or, if applicable, waived, the Subscription will not proceed.
Related Party Transactions
John Cronin, Heather Peacock, Harry Berry and Anil Daulani
John Cronin and Harry Berry are participating in the Placing, subscribing £100,000 and £20,000 for Placing Shares respectively. Heather Peacock is participating in the Subscription, subscribing £10,000 for Subscription Shares. Anil Daulani intends to participate in the Subscription, subscribing for £100,000 Subscription Shares. Their participation in the Fundraising, by virtue of being directors of the Company (or of a subsidiary undertaking as in the case of Anil Daulani), is a related party transaction pursuant to Rule 13 of the AIM Rules for Companies. The Independent Directors, being Peter Hutton and Paul Ratcliff, having consulted with finnCap, the Company's Nominated Adviser, consider that John Cronin, Heather Peacock, Harry Berry and Anil Daulani's participation in the Fundraising is fair and reasonable insofar as the Company's shareholders are concerned.
David Johns-Powell
On 15 September 2017 the Company entered into a subscription agreement (the "DJP Subscription Agreement") pursuant to which David Johns-Powell agreed, amongst other things, to subscribe £1.8 million for new Ordinary Shares at 28 pence per Ordinary Share. Of this subscription £500,000, being 1,785,714 Ordinary Shares (the "DJP Subscription Shares"), was agreed to take place on or around 6 April 2018 in order that the DJP Subscription Shares would benefit from EIS Relief in the new tax year.
On 10 April 2018, the Company announced that it had not received EIS advanced assurance from HMRC and accordingly the DJP Subscription Shares had not been admitted to trading and the Company had not received the £500,000 pursuant to the DJP Subscription Agreement. On 12 April 2018, the Company and David Johns-Powell both signed a letter (the "Addendum") agreeing that the remaining obligations of the DJP Subscription Agreement, namely the requirement for David Johns-Powell to subscribe for the DJP Subscription Shares, would be deferred until a later date during the 2018/19 tax year provided the Company can confirm that it is a qualifying company for the purposes of EIS.
Subsequent to the Addendum, David Johns-Powell was appointed as a director of the Company on 25 July 2018. The Company received advanced assurance from HMRC that new Ordinary Shares would benefit from EIS relief on 10 October 2018 and as a result Mr Johns-Powell will now benefit from EIS relief should he subscribe for Ordinary Shares.
David Johns-Powell has now agreed to subscribe for £650,000 Subscription Shares pursuant to the Subscription, as part of the Fundraising, on the same terms as the other Subscribers, namely at an issue price of 10 pence per Subscription Share. As a consequence, the Company has agreed to cancel his obligations under the DJP Subscription Agreement and Addendum, subject to Second Admission. Mr Johns-Powell also intends to irrevocably commit to apply for £100,000 of Open Offer Shares (full allocation of which will be dependent upon the level of applications in the Open Offer, and therefore may be subject to scale back), bringing his total intended participation in the Fundraising to £750,000; should the Open Offer be oversubscribed and Mr Johns-Powell's Open Offer application be scaled back, he intends to irrevocably invest any shortfall via subscription directly with the Company at 10 pence per Ordinary Share, within 5 working days of the Second Admission.
His participation in the Fundraising and the cancellation of the DJP Subscription Agreement and Addendum is, by virtue of Mr Johns-Powell being a director of the Company, a related party transaction pursuant to Rule 13 of the AIM Rules for Companies. The Independent Directors, being all those save for David Johns-Powell, having consulted with finnCap, the Company's Nominated Adviser, consider that Mr Johns-Powell's participation in the Fundraising and the cancellation of the DJP Subscription Agreement and Addendum is fair and reasonable insofar as the Company's shareholders are concerned.
In making such assessment the Independent Directors were conscious of the Company's overall financial requirements and the requirement of a number of placees that the Company raise not less than £5 million pursuant to the Placing and Subscription. The Independent Directors note that whilst Mr Johns-Powell's participation in the Fundraising is at the Issue Price, the amount to be invested is significantly increased from £500,000 to £750,000, taking his total investment in the business to date to £3.75 million. Mr Johns-Powell's participation is material to the Fundraising and without this the Fundraising may not have been possible. In the context of the Company's financial position, which is detailed further at paragraph 2 of this Part 1, the Independent Directors consider that it is preferable to have Mr Johns-Powell's participation in the Fundraising and not pursue payment for the DJP Subscription Shares at this time than to risk the Fundraising and simultaneously the financial viability of the Company. The Independent Directors note that the overall difference in dilution for existing Shareholders between Mr Johns-Powell subscribing for £500,000 of Subscription Shares at 10p as opposed to the DJP Subscription Shares at 28p is c.1 per cent. of additional dilution (assumes full take up of the Open Offer).
4              Details of the Open Offer
 
Summary
The Company is providing all Qualifying Shareholders with the opportunity to subscribe, at the Issue Price, for an aggregate of 5,142,961 Open Offer Shares, raising gross proceeds of up to £0.5 million.
Subject to fulfilment of the conditions set out below, and in Part 3 of the Circular, the Open Offer provides Qualifying Shareholders with the opportunity to apply to acquire Open Offer Shares at the Issue Price pro rata to their holdings of Existing Ordinary Shares as at the Record Date on the following basis (and in proportion for any other number of Existing Ordinary Shares then held):
1 Open Offer Shares
for every
25 Existing Ordinary Shares
Entitlements to apply to acquire Open Offer Shares will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will be disregarded in calculating an Open Offer Entitlement and will be aggregated and made available to Qualifying Shareholders pursuant to the Excess Application Facility.
Details of the terms and conditions of the Open Offer are set out in Part 3 of the Circular, and frequently asked questions relating to the Open Offer are set out in Part 4 of the Circular.
Conditions
The Open Offer is conditional upon, inter alia, the passing of the Fundraising Resolutions and First Admission. If the conditions are not satisfied, the Open Offer will not proceed and any Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies under the Open Offer will be refunded to the applicants, at the applicant's risk either as a cheque by first class post to the address set out on the Application Form or returned direct to the account of the bank or building society on which the relevant cheque or banker's draft was drawn in the case of Qualifying Non‑CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest, as soon as practicable thereafter.
Excess Applications
The Open Offer is structured to allow Qualifying Shareholders to subscribe for Open Offer Shares at the Issue Price pro rata to their holdings of Existing Ordinary Shares. Qualifying Shareholders may also make applications in excess of their pro rata initial entitlement. Any such applications will be granted at the absolute discretion of the Company. If applications under the Excess Application Facility are received for more than the total number of Open Offer Shares available following take-up of Open Offer Entitlements, such applications will be scaled according to the Directors' discretion to the number of excess Open Offer Shares applied for by Qualifying Shareholders under the Excess Application Facility. Applications under the Excess Application Facility may be allocated in such manner as the Directors may determine, in their absolute discretion, and no assurance can be given that any applications under the Excess Application Facility by Qualifying Shareholders will be met in full or in part or at all.
Qualifying Shareholders should note that the Open Offer is not a rights issue. Qualifying Non‑CREST Shareholders should be aware that the Application Form is not a negotiable document and cannot be traded. Qualifying Shareholders should also be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market nor will they be placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer.
Overseas Shareholders
Certain Overseas Shareholders may not be permitted to subscribe for Open Offer Shares pursuant to the Open Offer and should refer to paragraph 6 of Part 3 of the Circular.
CREST instructions
Application has been made for the Open Offer Entitlements and Excess Open Offer Entitlements for Qualifying CREST Shareholders to be admitted to CREST. It is expected that the Open Offer Entitlements will be admitted to CREST on 22 October 2018. The Excess Open Offer Entitlements will also be enabled for settlement in CREST on 22 October 2018. Applications through the CREST system will only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.
5              Admission, settlement and dealings
Application will be made to the London Stock Exchange for the Fundraising Shares, to be admitted to trading on AIM. It is expected that First Admission and commencement of dealings in Open Offer Shares will take place at 8.00 a.m. on 6 November 2018. Further information in respect of settlement and dealings in the Open Offer Shares is set out in paragraph 7 of Part 3 of the Circular. 
Upon Second Admission:
·               the Subscription Shares will represent approximately 5.8 per cent. of the Enlarged Share Capital; and
·               the Placing Shares will represent approximately 21.6 per cent. of the Enlarged Share Capital; and
·               the Open Offer Shares will represent approximately 2.8 per cent. of the Enlarged Share Capital.
The Fundraising Shares will represent, in aggregate, approximately 43.2 per cent. of the Company's Existing Ordinary Shares and approximately 30.2 per cent. of the Enlarged Share Capital.
The Fundraising Shares will, upon Admission, rank pari passu with the Existing Ordinary Shares, including the right to receive dividends and other distributions declared following Admission. The Fundraising Shares are not being made available to the public and are not being offered or sold in any jurisdiction where it would be unlawful to do so.
6              Taxation
6.1          Introduction
The following comments do not constitute tax advice and are intended only as a general guide to current UK law and HMRC's published practice as at the date of the Circular (both of which are subject to change at any time, possibly with retrospective effect). They relate only to certain limited aspects of the UK tax treatment of Shareholders and are intended to apply only to Shareholders who for UK tax purposes are resident in and, in the case of individuals, domiciled in the UK and to whom "split year" treatment does not apply. The comments apply only to Shareholders who are the absolute beneficial owners of their Ordinary Shares and the dividends payable on them and who hold their Ordinary Shares as investments (and not as securities to be realised in the course of a trade).
The comments below may not apply to certain categories of Shareholder such as dealers in securities, insurance companies and collective investment schemes, Shareholders who are exempt from taxation (or who hold their Ordinary Shares through an Individual Savings Account) and Shareholders who have (or are deemed to have) acquired their Ordinary Shares by virtue of any office or employment. Such persons may be subject to special rules.
Shareholders who are in any doubt as to their tax position or who are subject to tax in a jurisdiction other than the UK are strongly advised to consult their own professional advisers.
6.2          UK taxation of chargeable gains
Ordinary Shares acquired pursuant to the Open Offer
As a matter of UK tax law, the acquisition of Open Offer Shares pursuant to the Open Offer may not, strictly speaking, constitute a reorganisation of share capital for the purposes of UK taxation of chargeable gains. The published practice of HMRC to date has been to treat any subscription of shares by an existing Shareholder which is equal to or less than the Shareholder's minimum entitlement pursuant to the terms of an open offer as a reorganisation under the provisions of section 126 Taxation of Chargeable Gains Act 1992. It is not, however, certain that HMRC will apply this practice in circumstances where an open offer is not made to all Shareholders. HMRC's treatment of the Open Offer cannot therefore be guaranteed and specific confirmation has not been requested in relation to the Open Offer.
To the extent that the acquisition of the Open Offer Shares pursuant to the Open Offer is treated as a reorganisation of the share capital of the Company for the purposes of UK taxation of chargeable gains, the Open Offer Shares issued to a Shareholder will be treated as the same asset as, and as having been acquired at the same time as, the Shareholder's existing holding of Ordinary Shares. The price paid for the Open Offer Shares will be added to the base cost of Shareholder's existing holding of Ordinary Shares for the purpose of calculating any chargeable gain or allowable loss on a subsequent disposal.
To the extent that, under the Excess Application Facility, Open Offer Shares are acquired in excess of the Shareholder's Open Offer Entitlement, the acquisition will not be treated as a reorganisation of the share capital of the Company for the purposes of UK taxation or chargeable gains.
If, or to the extent that, the acquisition of Open Offer Shares under the Open Offer is not regarded as a reorganisation of the share capital of the Company for the purposes of UK taxation of chargeable gains, the Open Offer Shares would generally be treated as having been acquired as part of a separate acquisition of shares, with the price paid for the Open Offer Shares being taken into account as their base cost.
Disposals of Ordinary Shares
A disposal or deemed disposal of Ordinary Shares by a UK resident Shareholder may, depending on the Shareholder's personal circumstances and subject to any exemption or relief, give rise to a chargeable gain (or allowable loss) for the purposes of UK taxation of chargeable gains.
6.3          UK taxation of dividends
Withholding tax
The Company is not required to withhold UK tax when paying a dividend on the Ordinary Shares.
UK resident individual Shareholders
Since 6 April 2018, an individual shareholder who is resident for tax purposes in the UK is entitled to an annual tax-free allowance of £2,000 of dividend income (£5,000 for the years ended 5 April 2017 and 2018). To the extent that dividend income exceeds the annual tax free dividend allowance, tax will be imposed at the rates of:
(a)           7.5 per cent. to the extent falling within the basic rate;
(b)           32.5 per cent. to the extent falling within the higher rate; and
(c)           38.1 per cent. to the extent falling within the additional rate.
Shareholders who are in any doubt as to how the new rules for taxation of dividends will affect them are strongly advised to consult their own professional advisers.
UK resident Shareholders within the charge to UK corporation tax
Shareholders within the charge to UK corporation tax which are "small companies" (for the purposes of United Kingdom taxation of dividends) and who receive a dividend from a company resident in the UK or a qualifying territory (a jurisdiction with which the UK has a double tax agreement containing a non-discrimination article) will not generally be subject to UK corporation tax on dividends paid by the Company on the Ordinary Shares.
Other Shareholders within the charge to UK corporation tax will not be subject to corporation tax on dividends paid by the Company on the Ordinary Shares so long as the dividends fall within an exempt class and certain conditions are met. Although it is likely that dividends paid by the Company on the Ordinary Shares would qualify for exemption from corporation tax, it should be noted that the exemption is not comprehensive and is subject to anti avoidance rules. Shareholders should therefore consult their own professional advisers where necessary.
6.4          UK stamp duty and stamp duty reserve tax
No UK stamp duty or stamp duty reserve tax will be payable on the issue of Fundraising Shares pursuant to the Open Offer, the Subscription or the Placing.
Provided that the Fundraising Shares are admitted to trading on a recognised growth market (which includes admission to trading on AIM) and are not listed on any market or exchange, transfers of Fundraising Shares will not be subject to UK stamp duty or stamp duty reserve tax. Any agreement to transfer, or the transfer of, Fundraising Shares (or any other Ordinary Shares) at a time when these conditions are not met may, depending on the circumstances, be subject to UK stamp duty or stamp duty reserve tax, generally at the rate of 0.5 per cent. of the consideration given (rounded up to the nearest £5 in the case of stamp duty).
6.5          EIS/VCT 
On issue, the Fundraising Shares will not be treated as either "listed" or "quoted" securities for relevant tax purposes. Provided that the Company remains one which does not have any of its shares quoted on a recognised stock exchange (which for these purposes does not include AIM), the Fundraising Shares should continue to be treated as unquoted securities.
The following information is based upon the laws and practice currently in force in the UK and may not apply to persons who do not hold their Ordinary Shares as investments.
The Company has in the past obtained assurance from HMRC that shares in the Company represented a qualifying investment for a VCT and were capable of qualifying for EIS tax reliefs. The Company has applied for advance assurance from HMRC that its shares continue to qualify for VCT and EIS tax reliefs and whilst this assurance has been obtained in respect of EIS, the Company has been informed that as regards VCT relief, HMRC no longer consider VCT advance assurance applications where the details of the potential qualifying holding are not given: the company must have engaged with the VCT and provide draft documents regarding the terms of the proposed investment. 
The Directors consider that the Company has not received any investments under the EIS in the 12 months immediately prior to the Fundraising and is considered as a knowledge-intensive company. In November 2017 the government announced that the annual investment limit for knowledge-intensive companies would be increased to £10 million of investment per year (£20 million in total over the lifetime of the Company and its subsidiaries). The Fundraising will however limit funds up to £6.1 million from VCTs, investors seeking EIS reliefs and any other State aid risk capital investors in order not to exceed the remaining headroom that the Company has available to raise through risk capital schemes. 
Companies can generally raise up to £5 million under the combined VCT, EIS, SEIS, social investment tax relief or any other State aid risk capital investment in any 12 month period. Increased limits apply to knowledge intensive companies as noted above. Shares issued to a VCT using "protected money" do not count towards the total. "Protected money" is funds raised by VCTs prior to 5 April 2007 or derived from the investment of such money by the VCT.
These details are intended only as a general guide to the current tax position under UK taxation law and are not intended to be exhaustive. Investors who are in any doubt as to their tax position or who are subject to a tax jurisdiction, other than the UK, are strongly advised to consult their professional advisers.
EIS
The Company intends to operate so that it qualifies for the taxation advantages offered under EIS. The main advantages are as follows:
(i)            Individuals can claim tax relief of 30 per cent. of the amount invested in the Company against their UK income tax liability, (provided they have a sufficient tax liability to cover this amount), thus reducing the effective cost of their investment to 70 pence for each £1 invested. However, there is an EIS subscription limit of £2,000,000 in each tax year (provided that at least £1 million of this is invested in knowledge intensive companies) and, to retain the relief, the First Fundraising Shares must be held for at least three years.
(ii)           UK investors (individuals or certain trustees) may defer a chargeable gain by investing the amount of the gain in the Company. There is no limit to the level of investment for this purpose and, therefore, to the amount of gain which may be deferred in this way. Note that the deferred gain will come back into charge when the EIS shares are disposed of, or if the Company ceases to qualify as an EIS company within the three year qualifying period.
(iii)          There is no tax on capital gains made upon disposal after the three year qualifying period ("Qualifying Period") of shares in an EIS qualifying company on which income tax relief has been given and not withdrawn.
(iv)          If a loss is made on disposal of the Fundraising Shares at any time, the amount of the loss (after allowing for any income tax relief initially obtained) can be set off against either the individual's gains for the tax year in which the disposal occurs, or, if not so used, against capital gains of a subsequent tax year, or against the individual's income of the tax year of the disposal or of the previous tax year.
(v)           Provided a Shareholder has owned Fundraising Shares in the Company for at least two years and certain conditions are met at the time of transfer, 100 per cent. business property relief will generally be available, which reduces the inheritance tax liability on the transfer of First Fundraising Shares to nil.
The amount of relief an investor may gain from an EIS investment in the Company will depend on the investor's individual circumstances.
Changes to the legislation that came into effect from 18 November 2015 now mean that an individual can only be eligible for EIS relief on the purchase of shares if all shares held by that investor are either risk based shares (that is where the funds raised will be used for the growth and development of a qualifying trade) or subscriber shares.
Qualifying Period
In order to retain the EIS reliefs, an investor must hold their shares for at least three years. A sale or other disposal (other than an inter-spousal gift or a transfer on death) will result in any income tax relief that has been claimed being clawed back by HMRC. Additionally, any capital gains deferred will come back into charge and the capital gains tax exemption will be lost. It is the investor's responsibility to disclose a disposal to HMRC.
Additionally, if the Company ceases to meet certain qualifying conditions within three years from the date of the share issue, the tax reliefs will be lost. The end of the 3 year qualifying period will be shown as the "Termination Date" on the EIS3 certificate which the Company will issue to investors following formal approval of the share issue by HMRC.
Advance Assurance of EIS Status
In order for investors to claim EIS reliefs relating to their shares in the Company, the Company and its subsidiaries have to meet a number of rules, including those regarding their business activities, the amount of money the Company can raise, the risk to capital condition, how and when that money must be employed for the purposes of the business activities, and the age of the Company and its subsidiaries from the date of their first commercial sale. The Company must satisfy HMRC that it and its subsidiaries meet the various requirements and that the Company is therefore a qualifying company.
VCT
The Company has applied for assurance from HMRC that the Fundraising Shares will be 'eligible shares' for the purposes of investment by VCTs. The Company has been informed that HMRC no longer considers VCT advance assurance applications where the details of the potential qualifying holding are not given: the Company must have engaged with the VCT and provide draft documents regarding the terms of the proposed investment.
 The status of the Fundraising Shares as a qualifying holding for VCTs will be conditional, inter alia, upon the Company continuing to satisfy the relevant requirements. Although the Company currently expects to satisfy the relevant conditions for VCT investment, neither the Directors nor the Company gives any warranty or undertaking that relief will be available in respect of any investment in the First Fundraising Shares pursuant to the Circular, nor do they warrant or undertake that the Company will conduct its activities in a way that qualifies for or preserves its status.
As the rules governing EIS and VCT reliefs are complex and interrelated with other legislation, if Shareholders and potential shareholders are in any doubt as to their tax position, require more detailed information than the general outline above, or are subject to tax in a jurisdiction other than the United Kingdom, they should consult their professional adviser.
7              Directors' Shareholdings
 
The beneficial and non-beneficial interests of the Directors in the Existing Ordinary Shares as at the date of the Circular and following the Fundraising are set out in the table below: 
Certain of the Directors have agreed to acquire Fundraising Shares as set out in the table below:
 







Number of Existing Ordinary Shares


Percentage of Existing Ordinary Share capital


Shares acquired in the Fundraising inc. Open Offer


Resultant Holding


Percentage of Existing Ordinary Share capital




Director
























John Cronin


2,413,467


1.88%


1,000,000


3,413,467


1.85%




Harry Berry


624,219


0.49%


200,000


824,219


0.45%




Heather Peacock


178,255


0.14%


100,000


278,255


0.15%




David Johns-Powell


10,083,490


7.84%


7,500,000


17,583,490


9.55%




Peter Hutton


167,259


0.13%


-


167,259


0.09%




Paul Ratcliff


162,734


0.13%


-


162,734


0.09%




TOTAL


13,629,425


10.60%


8,800,000


22,429,425


12.18%



 
8              General Meeting
 
A notice convening the GM to be held at the Company's registered office, Merlin Place, Milton Road, Cambridge, CB4 0DP at 2 p.m. on 5 November 2018 is set out at the end of the Circular. The Resolutions to be proposed at that meeting are summarised below. Resolutions 1 and 2 are to be passed as ordinary resolutions. This means that for each of Resolutions 1 and 2 to be passed, more than half the votes cast must be in favour of that resolution. Resolutions 3 and 4 are to be proposed as special resolutions. This means that in order for Resolution 3 and 4 to be passed, at least three-quarters of the votes cast must be in favour of those resolutions:
 
·     Resolution 1 - allotment of the Fundraising Shares,
Resolution 1 empowers the Directors to allot and issue the Fundraising Shares and the Corporate Finance Warrants.
 
·     Resolution 2 - allotment of further Ordinary Shares
Resolution 2 empowers the Directors to allot, or where appropriate, issue Ordinary Shares up to an aggregate nominal amount representing one third of the Enlarged Share Capital (separate from the Fundraising).
 
·     Resolution 3 - non pre-emptive allotment of the Fundraising Shares
Resolution 3 empowers the Directors to allot and issue the Fundraising Shares and the Corporate Finance Warrants for cash otherwise than in accordance with the statutory pre-emption provisions set out in the Companies Act.
 
·     Resolution 4 - non pre-emptive allotment of further Ordinary Shares
Resolution 4 empowers the Directors to allot and issue Ordinary Shares for cash (separate from the Fundraising) otherwise than in accordance with the statutory pre-emption provisions set out in the Companies Act up to an aggregate nominal amount representing 10 per cent. of the Enlarged Share Capital.
9              Action to be taken
General Meeting
Please check that you have received with the Circular:
·     a Form of Proxy for use in respect of the General Meeting; and
·     if you are a Shareholder based in the United Kingdom, a reply-paid envelope for use in conjunction with the return of the Form of Proxy.
 
Whether or not you propose to attend the General Meeting in person, you are strongly encouraged to complete, sign and return your Form of Proxy in accordance with the instructions printed thereon as soon as possible, but in any event so as to be received, by post or, during normal business hours only, by hand, to Share Registrars, The Courtyard, 17 West Street, Farnham, Surrey, GU9  7DR, by no later than 2.00 p.m. on 1 November 2018 (or, in the case of an adjournment of the General Meeting, not later than 48 hours before the time fixed for the holding of the adjourned meeting (excluding any part of a day that is not a Business Day)).
If you hold your shares in the Company in uncertificated form (that is, in CREST) you may vote using the CREST Proxy Voting service in accordance with the procedures set out in the CREST Manual (please also refer to the accompanying notes to the Notice of General Meeting set out at the end of the Circular). Proxies submitted via CREST must be received by the Company's agent (Share Registrars, The Courtyard, 17 West Street, Farnham, Surrey, GU9 7DR) by no later than 2.00 p.m. on 1 November 2018 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting (excluding any part of a day that is not a Business Day)).
Appointing a proxy in accordance with the instructions set out above will enable your vote to be counted at the General Meeting in the event of your absence. The completion and return of the Form of Proxy or the use of the CREST Proxy Voting service will not prevent you from attending and voting at the General Meeting, or any adjournment thereof, in person should you wish to do so.
Open Offer
The latest time for application under the Open Offer to be received is 11.00 a.m. on 5 November 2018. The procedure for application and payment depends on whether, at the time at which application and payment is made, you have an Application Form in respect of your Open Offer Entitlements or have Open Offer Entitlements credited to your stock account in CREST in respect of such entitlement. The procedures for application and payment are set out in Part 3 of the Circular.
If you are a Qualifying Non-CREST Shareholder you will have received an Application Form which gives details of your entitlement under the Open Offer (as shown by the number of Open Offer Entitlements allocated to you). If you wish to apply for Open Offer Shares under the Open Offer (whether in respect of your Open Offer Entitlement or both your Open Offer Entitlement and any Excess Open Offer Entitlement), you should complete the accompanying Application Form in accordance with the procedure for application set out in Part 3 of the Circular. Shareholders are advised to return the Application Form using the enclosed reply-paid envelope, which can also be used for return of completed Forms of Proxy.
If you are a Qualifying CREST Shareholder and do not hold any Existing Ordinary Shares in certificated form, no Application Form is enclosed with the Circular and you will receive a credit to your appropriate stock account in CREST in respect of the Open Offer Entitlements representing your entitlement under the Open Offer except (subject to certain conditions) if you are an Overseas Shareholder who has a registered address in, or is a resident in or a citizen of a Restricted Jurisdiction. Applications by Qualifying CREST Shareholders for Excess Open Offer Entitlements in excess of their Open Offer Entitlements should be made in accordance with the procedures set out in Part 3 of the Circular, unless you are an Overseas Shareholder in which event, applications should be made in accordance with the procedures set out in Part 3 of the Circular. Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with the Circular and the Open Offer.
If you are in any doubt as to what action you should take, you should immediately seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other independent professional adviser duly authorised under the FSMA if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.
10           Recommendation
The Directors believe that the Resolutions to be proposed at the General Meeting are in the best interests of the Company and Shareholders as a whole and unanimously recommend that you vote in favour of the Resolutions. Should the Fundraising (or any part of it) not proceed for any reason, the Company would need to find alternative funding and would face future uncertainty. Each of the Directors intend to vote in favour of the Resolutions in respect of, in aggregate, 13,629,425 Ordinary Shares, representing approximately 10.60 per cent. of the Existing Ordinary Shares in issue on 18 October 2018 (being the last Business Day prior to publication of the Circular).
 




FUNDRAISING STATISTICS
 



Number of Existing Ordinary Shares


128,574,049




Issue Price


10 pence




Number of First Fundraising Shares being issued pursuant to the Placing
 


4,460,000




Number of Second Fundraising Shares being issued pursuant to the Placing


35,327,391




Number of Placing Shares being issued pursuant to the Placing


39,787,391




Number of Subscription Shares being issued pursuant to the Subscription


10,665,000




Maximum number of Open Offer Shares being issued pursuant to the Open Offer


5,142,961




Maximum total number of Fundraising Shares being issued pursuant to the Fundraising


55,595,352




Number of Placing Shares as a percentage of the Enlarged Share Capital


21.6 per cent.




Number of Subscription Shares as a percentage of the Enlarged Share Capital


5.8 per cent.




Number of Open Offer Shares as a percentage of the Enlarged Share Capital2


2.8 per cent.




Number of Fundraising Shares as a percentage of the Enlarged Share Capital2


30.2 per cent.




Enlarged Share Capital1 / 2


184,169,401




Gross proceeds of the Placing


£4.0 million




Gross proceeds of the Subscription


£1.1 million




Maximum gross proceeds of the Open Offer


£0.5 million




Maximum gross proceeds of the Fundraising


£5.6 million




Market capitalisation of the Company on Admission at the Issue Price1 / 2


£18.4 million




ISIN of the Existing Ordinary Shares


GB00BF93WP34




SEDOL of the Existing Ordinary Shares


BF93WP3




ISIN of the Open Offer Entitlements


GB00BF7L9478




ISIN of the Excess Open Offer Entitlements


GB00BF7L9361



Notes
1. Assuming that, no Ordinary Shares are issued prior to the date of the General Meeting.
2. Assuming that all Open Offer Shares are issued.
 
EXPECTED TIMETABLE OF PRINCIPAL EVENTS



Record Date for entitlements under the Open Offer


6.00 p.m. on 18 October 2018




Announcement of the Fundraising


7.00 a.m. on 19 October 2018




Existing Ordinary Shares marked 'ex-entitlement' by the London Stock Exchange


8.00 a.m. on 19 October 2018




Publication and posting date of the Circular, the Form of Proxy and, to Qualifying Non-CREST Shareholders only, the Application Form


19 October 2018




Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to CREST stock accounts of Qualifying CREST Shareholders


22 October 2018




Latest recommended time and date for requesting withdrawal of Open Offer Entitlements and Excess CREST Open Offer Entitlements from CREST


4.30 p.m. on 30 October 2018




Latest time and date for depositing Open Offer Entitlements and Excess CREST Open Offer Entitlements into CREST


3.00 p.m. on 31 October 2018




Latest time and date for splitting Application Forms (to satisfy bona fide market claims only)


3.00 p.m. on 1 November 2018




Latest time and date for receipt of Forms of Proxy for the General Meeting


2 p.m. on 1 November 2018




Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instructions (as appropriate)


11.00 a.m. on 5 November 2018




General Meeting


2 p.m. on 5 November 2018




Results of the General Meeting and Fundraising expected to be announced


5 November 2018




Admission and dealings in First Fundraising Shares expected to commence on AIM


8.00 a.m. on 6 November 2018




CREST accounts credited with the First Funding Shares and Second Funding Shares


8.00 a.m. on 6 November 2018




Admission and dealings in Second Fundraising Shares expected to commence on AIM (and CREST accounts credited)


8.00 a.m. on 7 November 2018




Anticipated date of despatch for share certificates in respect of First Fundraising Shares


by 14 November 2018




Anticipated date of despatch for share certificates in respect of Second Fundraising Shares


by 15 November 2018



 




 
 
DEFINITIONS
The following definitions apply throughout this announcement and in the accompanying Form of Proxy and (for Qualifying Non-CREST Shareholders only) the Application Form unless the context requires otherwise:
 






"AIM"


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




"AIM Rules"


together, the AIM Rules for Companies and the AIM Rules for Nominated Advisers;




"AMI"


Advanced Metering Infrastructure;




"Application Form"


the personalised application form which accompanies the Circular (where appropriate) on which Qualifying Non-CREST Shareholders (other than certain Overseas Shareholders) may apply for Open Offer Shares under the Open Offer;




"Board" or "Directors"


the directors of CyanConnode whose names are set out on page 4 of the Circular;




"Business Day"


any day on which banks are usually open in England and Wales for the transaction of business, other than a Saturday, Sunday or public holiday;




"Certificate"


a certificate issued under section 204 of the Income Tax Act 2007 by the Company to certain investors who have requested EIS relief;




"Circular"


The circular posted to Shareholders on 19 October 2018;




"Companies Act"


the Companies Act 2006 (as amended);




"Company" or "CyanConnode"


CyanConnode Holdings plc, a company incorporated and registered in England and Wales with company number 04554942;




"Corporate Finance Warrants"


the 895,132 warrants, created under the corporate finance warrant instrument, to subscribe for Ordinary Shares during the six months following Admission (on the basis of one Corporate Finance Warrant for one Ordinary Share) exercisable at 12 pence per Ordinary Share (being a 20 per cent. premium to the Issue Price); 




"CREST"


the computerised settlement system (as defined in the CREST Regulations) operated by Euroclear;




"CREST Manual"


the rules governing the operation of CREST consisting of the CREST Reference Manual, the CREST International Manual, the CREST Central Counterpart Service Manual, the CREST Rules, the CREST Courier and Sorting Services Operations Manual, the Daily Timetable, the CREST Application Procedures and the CREST Glossary of Terms (as updated from time to time);




"CREST payment"


shall have the meaning given in the CREST Manual;




"CREST sponsor"


a CREST participant admitted to CREST as a CREST sponsor;




"CREST sponsored member"


a CREST member admitted to CREST as a sponsored member;




"CyanConnode Group"


the group of companies of which the Company and its subsidiary undertakings are members;




"EIS"


Enterprise Investment Scheme under the provisions of Part 5 of the UK Income Tax Act 2007 (as amended);




"Enlarged Share Capital"


the Company's issued share capital immediately after the completion of the Fundraising;




"Excess Application Facility"


the arrangement pursuant to which Qualifying Shareholders may apply for any number of Open Offer Shares in excess of their Open Offer Entitlement provided that they have agreed to take up their Open Offer Entitlement in full;




"Excess CREST Open Offer Entitlement"


in respect of each Qualifying CREST Shareholder, the entitlement (in addition to his/her Open Offer Entitlement) to apply for Open Offer Shares pursuant to the Excess Application Facility, which is conditional on him/her taking up his/her Open Offer Entitlement in full;




"Excess Open Offer Entitlement"


in respect of each Qualifying Shareholder, the entitlement (in addition to his/her Open Offer Entitlement) to apply for Open Offer Shares pursuant to the Excess Application Facility, which is conditional on him/her taking up his/her Open Offer Entitlement in full;




"Existing Ordinary Shares"


the existing Ordinary Shares at the 19 October 2018;




"finnCap Ltd" or "finnCap"


finnCap Ltd, the nominated adviser and broker to CyanConnode for the purposes of the AIM Rules;




"First Admission"


admission of the First Fundraising Shares to trading on AIM becoming effective in accordance with the AIM Rules;




"First Fundraising Shares"


those 4,460,000 Placing Shares and 8,140,000 Subscription Shares to be issued by the Company to Shareholders seeking to claim EIS/VCT relief, and up to 5,142,961 Open Offer Shares;




"First Placing"


the conditional placing of certain of the First Fundraising Shares pursuant to, amongst other things, the terms and conditions set out in the Placing Agreement;




"Form of Proxy"


the form of proxy accompanying the Circular for use by Shareholders in connection with the GM;




"FSMA"


the Financial Services and Markets Act 2000;




"Fundraising"


together, the Placing, the Subscription and the Open Offer;




"Fundraising Resolutions"


together, the resolutions to grant the Directors authority to allot the Fundraising Shares and the related disapplication of statutory pre-emption rights, to be proposed at the General Meeting and set out in the Notice as the resolutions numbered 1 and 3;




"Fundraising Shares"


together, the 39,787,391 Placing Shares, the 10,665,000 Subscription Shares and up to 5,142,961 Open Offer Shares;




"GM" or "General Meeting"


the General Meeting of CyanConnode to be held at the Company's registered office, Merlin Place, Milton Road, Cambridge, CB4 0DP at 2.00 p.m. on 5 November 2018, notice of which is set out in Circular;




"HMRC"


Her Majesty's Revenue & Customs;




"Issue Price"


10 pence per Ordinary Share;




"London Stock Exchange"


London Stock Exchange plc;




"Notice"


the notice of GM which is set out in the Circular;




"Open Offer"


the conditional invitation made by the Company to Qualifying Shareholders to subscribe for the Open Offer Shares at the Issue Price on the terms and subject to the conditions set out in the Circular and, in the case of Qualifying Non-CREST Shareholders, in the Application Form;




"Open Offer Entitlement"


the pro rata entitlement of a Qualifying Shareholder, pursuant to the Open Offer, to apply to subscribe for 1 Open Offer Shares for every 25 Existing Ordinary Shares registered in their name as at the Record Date;




"Open Offer Shares"


up to 5,142,961 new Ordinary Shares to be issued by the Company pursuant to the Open Offer subject, inter alia, to the passing of the Fundraising Resolutions;




"Ordinary Shares"


the ordinary shares of £0.02 each in the capital of the Company;




"Overseas Shareholders"


Shareholders with registered addresses in, or who are citizens, residents or nationals of, jurisdictions outside the UK;




"Placing Agreement"


the conditional placing agreement dated 19 October 2018 between finnCap, Arden and the Company, highlights of which are set out in the letter from the Chairman;




"Placing"


the proposed placing by finnCap and Arden, as joint agents for the Company, of the Placing Shares at the Issue Price on the terms of the Placing Agreement;




"Placing Shares"


39,787,391 Ordinary Shares to be issued pursuant to the Placing;




"Qualifying CREST Shareholders"


Qualifying Shareholders holding Existing Ordinary Shares which, on the register of members of the Company on the Record Date, are in uncertified form;




"Qualifying Non-CREST Shareholders"


Qualifying Shareholders holding Existing Ordinary Shares which, on the register of members of the Company on the Record Date, are in certificated form;




"Qualifying Shareholders"


holders of Existing Ordinary Shares on the register of members of the Company at the close of business on the Record Date with the exclusion (subject to exemptions) of persons with a registered address or located or resident in a Restricted Jurisdiction;




"Record Date"


the record date for the Open Offer, being 6.00 p.m. on 18 October 2018;




"Receiving Agent"


Share Registrars Limited, The Courtyard, 17 West Street, Farnham, Surrey, GU9 7DR;




"Registrars"


Share Registrars Limited, The Courtyard, 17 West Street, Farnham, Surrey, GU9 7DR;




"Resolutions"


the resolutions to be proposed at the GM, as set out in the Notice;




"Restricted Jurisdiction"


any jurisdiction where local laws or regulations may result in a significant risk of civil, regulatory or criminal exposure for the Company if information or documentation concerning the Fundraising is sent or made available to Shareholders in that jurisdiction including, without limitation, the United States, Canada, Australia, the Republic of South Africa and Japan;




"Second Admission"


admission of the Second Fundraising Shares to trading on AIM becoming effective in accordance with the AIM Rules;




"Second Fundraising Shares"


the 35,327,391 Placing Shares and 2,525,000 Subscription Shares;




"Second Placing"


the conditional placing of the Second Fundraising Shares pursuant to, amongst other things, the terms and conditions set out in the Placing Agreement;




"Securities Act"


the US Securities Act of 1933, as amended from time to time and the rules and regulations promulgated thereunder;




"Shareholders"


holders of Existing Ordinary Shares in CyanConnode at the 19 October 2018;




"Share Option Scheme"


the CyanConnode Holdings plc Enterprise Management Incentive Scheme;




"Subscribers"


investors investing in the Fundraising under the Subscription;




"Subscription"


the subscription for Subscription Shares by the Subscribers at the Issue Price pursuant to the Subscription Agreements;




"Subscription Agreements"


the share subscription agreements between the Subscribers and the Company;




"Subscription Shares"


10,665,000 Ordinary Shares to be issued to the Subscribers pursuant to the Subscription;


 




"UK" or "the United Kingdom"


the United Kingdom of Great Britain and Northern Ireland;


 




"uncertificated form"


recorded on the relevant register of other record of the share or other security confirmed as being held in uncertificated form in CREST, and title to which, by virtue of the CREST Regulations, may be transferred by way of CREST;


 




"United States"


the United States of America, its territories and possessions, any State of the United States and the District of Columbia;


 




"USE"


unmatched stock event; and


 




"VCT"


a company which is, or which is seeking to become, approved as a venture capital trust under the provisions of Part 6 of the Income Tax Act 2007.
 


 













 




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