Synchronica plc – Collaboration Agreement and £4.7m (gross) Placing

Synchronica plc – Collaboration Agreement and £4.7m (gross) Placing

Synchronica plc (SYNC), the AIM listed mobile e-mail and synchronisation specialist, is pleased to announce that it has signed binding Heads of Terms to enter a collaboration agreement with third parties to design, build, market and sell low cost mobile devices (“LC Devices”) to be bundled with the Company’s Mobile Gateway product, providing end-to-end entry-level push email products.

The Collaboration
As part of the proposed Collaboration Agreement, the Company will receive a commission of 3% of the net sales revenue (the “Royalties”) from the sales of the LC Devices. The revenue from the Royalties will be in addition to licence, professional services, support and hosting revenues from Mobile Gateway which will be sold in conjunction with the LC Devices.

As part of the arrangements relating to the Collaboration, the Company has agreed to strengthen its financial position by raising additional shareholder funds. The proceeds of the fundraising will be used to provide additional funds to enable the development and rollout of the LC Devices and accelerate ongoing development of the Company’s software products.

FinnCap, Nominated Advisor and Broker to Synchronica, has successfully raised £4,723,462 (gross) through a placing of 188,938,483 new Ordinary Shares of 1p each with new and existing institutional and private investors at a price of 2.5p.

Director participation in the Placing
Carsten Brinkschulte, Chief Executive Officer of the Company will participate in the Placing, subscribing for 2,000,000 new Ordinary Shares of 1p each at the Placing Price.

Director Recommendation
The Directors unanimously recommend in favour of the resolutions and will vote accordingly in respect of their own beneficial holdings amounting to 2,646,144 Ordinary Shares representing c. 0.7 per cent. of the Company’s current issued share capital.

Placing statistics and timetable

Placing Price - 2.5p
Number of Placing Shares to be issued - 188,938,480
Percentage of the enlarged issued share capital represented by the Placing Shares - 32.72%
Gross proceeds of the Placing - £4,723,462
General Meeting to seek approval of Shareholders - 7 July 2009
Admission and Commencement of dealings in the Placing Shares  - 8 July 2009

Carsten Brinkschulte, CEO of Synchronica plc, said: “The proposed Collaboration will enhance the Company’s prospects. It will allow the Company to complement its mobile email and synchronization product with a device-centric end-to-end solution, at a time when the Company believes mobile email as a tool for mass market communication is expected to grow significantly.”

Details of the Collaboration Agreement
Final discussions are taking place in respect of a definitive Collaboration Agreement. It is anticipated that the Collaboration Agreement will be finalised and signed before the General Meeting. The Collaboration is likely to be for an initial term of four years.

The Company believes that the Collaboration represents an exceptional opportunity for the Company to benefit from substantial additional revenue streams it can receive as a result of the Royalties from the sale of the LC Devices. In addition, the Company believes that the sale of the LC Devices will trigger further revenues from related sales of Mobile Gateway licences, professional services, support and hosting services. The Company considers that the Collaboration will enable access to a large number of customers resulting in potentially high volume sales of the LC Devices on a worldwide basis. As a result, the Company believes that the Collaboration will further improve its competitive position and increase revenues from its core business, particularly in emerging markets where the LC Devices are expected to show a strong competitive advantage.

It is proposed that the Company will contribute US $1 million (approximately £618,000) to the Collaboration in equal monthly instalments over two years towards the additional operating expenses incurred by one of the Collaboration parties. In exchange for the services to be provided under the Collaboration Agreement (including the provision of production guarantees, product/warranty risk and the financing of working capital), it is proposed that a grant of 38,851,551 options over Ordinary Shares of the Company will be made to one of the Collaboration parties with an exercise price of 2.5p per Ordinary Share. It is proposed that the options will vest in two equal tranches, conditional on certain performance criteria being met. The options may be exercised at anytime up to 12 months following the termination of the Collaboration Agreement.

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