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
developing. The 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 County, CA. 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 pence. Subscribers 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 the
circular 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 the description of a share or other security which is not in
certificated form" 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 the Common Shares in issue assuming full conversion of the
Capital" 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 the circular 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:
"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
END
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