Cyan Holdings plc
AIM : CYAN

Cyan Holdings plc

March 21, 2006 02:13 ET

Cyan Holdings Plc: Preliminary Results for the 12 Months to 31 December 2005

LONDON, UNITED KINGDOM--(CCNMatthews - March 21, 2006) - Cyan Holdings Plc ("Cyan" or "the Group") (AIM:CYAN), the fabless semiconductor company specialising in the development of low powered, configurable microcontroller chips, announces its preliminary results for the 12 months ended 31 December 2005.

Highlights

- Turnover of Pounds Sterling 29,899 (2004: Pounds Sterling 12,116)

- Gross profit is Pounds Sterling 24,933 (2004: Pounds Sterling 3,016)

- The milestone of 100 design wins was achieved by March 2006

- eCOG1k and CyanIDE established in the market place

- Significant product development on eCOG1X

- Strengthened distribution channels in Asia and Europe

- Expanded and reputable management, sales and engineering teams

- Successful AIM IPO which raised Pounds Sterling 6.1 million

Commenting on the results, Paul Johnson, Chief Executive, of Cyan, said: "I am pleased to report Cyan's maiden results since listing on AIM in December 2005. The Group has made significant progress since flotation. The flotation itself enabled us to attract higher profile customers around the world and build on our strategic plan of developing the eCOG product range. I am confident that the combination of all of these key attributes will enable us to maintain our competitive advantage."



For further information:

Cyan Holdings plc

Paul Johnson, Chief Executive Officer Tel: +44 (0) 1954 234 400
www.cyantechnology.com

Collins Stewart Limited

Stephen Keys, Corporate Finance Tel: +44 (0) 20 7523 8312
www.collins-stewart.com

Media enquiries:
Abchurch Communications

Heather Salmond / Dana Thomas Tel: +44 (0) 20 7398 7700
heather.salmond@abchurch-group.com www.abchurch-group.com


Chairman's Statement

2005 was a successful year for Cyan; over two thousand copies of CyanIDE were downloaded by people in the industry, and design wins reached 89 by the year end after the introduction of the 16 bit eCOG1k microcontroller into the market in 2004. Twelve customers moved into production, considerable progress was made on the development of eCOG1X for launch in 2006, and the company was floated on AIM on 7 December 2005. Thanks are due to all our talented colleagues who made this possible.

Our flotation was especially important, not only because it provides the finance for our growth, but also because it has increased our customers' confidence in our future which, in turn, encourages them to trust that our microcontrollers will be available to support their products over the long term. We would like to thank our initial investors for their support and confidence in us, and to welcome our new investors. The Board is committed to enhancing shareholder value through growth, which will be driven by the expansion of our product range, enhancing our customers' product ranges and their product development processes, and providing a first class, one-stop-shop for customer support.

Proceeds from the float amounted to Pounds Sterling 6.1 million, Pounds Sterling 4 million being raised directly from the market and Pounds Sterling 2.1 million from the exercise of warrants by existing shareholders. Cash at the year end was Pounds Sterling 5.5 million. Proceeds will be largely applied to continuation of the product development programme, an increased sales effort, and the funding of working capital as customers' production quantity orders are received during 2006 and 2007.

Cyan is now making rapid progress in its strategy of providing ultra low power and low power, high performance, 16 and 32 bit microcontrollers supported by what we believe to be unique integrated software development tools. Our integrated approach to microcontroller development and software tools development provides benefits in the performance of both, and allows particularly effective customer support. It is a novel approach in our business area.

Sales in the year were Pounds Sterling 29,899, with a Gross Profit of Pounds Sterling 24,933 and a Net Loss of Pounds Sterling 2,086,863 arising out of the set-up stage of the Company and the nature of its products. Microcontrollers are components of other people's products so their own development time is followed by the development time of the customer's product, which might typically take 12 to 18 months, before generating production volume orders to Cyan. Longer term however, the advantage is a stable business model as the incorporation of a Cyan microcontroller into a customer's product produces a stream of orders over the lifetime of that product. This stability is enhanced by the application of our microcontrollers to diverse product sectors and widespread geographical areas.

At the time of the Company's flotation, Cyan's current largest customer had committed to an initial order of 100,000 units of eCOG1k which the Company originally estimated it would begin shipping in December 2005. Delays with the roll-out of tax control POS terminal products in China have led to a rescheduling of the drawdown on this order but we are pleased to say that the initial order will now be dispatched over April, May and June 2006. Further orders for this customer are expected for delivery in the second half of 2006 but the revised shipping schedules will mean that an estimated three months of anticipated sales from 2006 will slip into 2007 potentially affecting 2006 budgeted sales. Nonetheless we are pleased to report that 2006 will be our first year of volume sales.

The Company is delighted to advise that it has reached a milestone in exceeding 100 design wins in March 2006, an increase of some 30 design wins since IPO. Particularly pleasing is the quality of customers and potential volumes involved. A design win is when a customer has entered into a relationship with Cyan whereby the customer has purchased a development board and initial silicon from the Company and is actively working on developing an end product for volume production. There is of course no guarantee that any design win will result in a significant order but Cyan believes that the quantity and quality of the design wins within its portfolio means that such an eventuality is likely.

Cyan achieved a great deal in 2004 and 2005 - a strong management, sales, and engineering team was established, distribution channels were put in place in Asia and Europe, and the first product was introduced to the market. We now look forward to our initial growth period in 2006 and 2007.

Professor Michael Hughes

Chairman

21 March 2006

Chief Executive's review

The successful AIM IPO in December 2005 was important for two reasons. Not only did it provide the resources to take the Company forward but it gave the Company added credibility among its suppliers and customers, effectively removing the 'start-up' label. The Company is now better placed to win substantial new business from many more customers.

Two new revisions of CyanIDE were released last year and a third is currently in beta release with key customers. We prototyped a test chip for our new eCOG1X and eCOG2 product families. The eCOG1X design is currently being prepared for production whilst the test chip is being put through its paces. Preliminary test results are very encouraging. All the major new technology blocks are functioning correctly and there should be a low risk in moving to final production versions. During 2005 some customers received advance information on eCOG1X under non-disclosure agreements. At the Embedded Systems Show in Nuremberg during February 2006 Cyan released preliminary data to the trade. There was great interest in the eCOG1X and we already have design wins. At the International IC exhibition in Shenzhen, China we had our own, well positioned stand which was manned by our own staff and staff from our distributors. About 300 design engineers registered their details and great interest was shown in both the eCOG1k and the eCOG1X.

Cyan has performed a great deal of work on the upcoming 32 bit microcontroller and we have the basics of the CyanIDE toolset completed. Cyan is now able to compile customers' software programs on the 32 bit tools and compare with the most memory efficient processor cores available today, and we are seeing improvements in memory efficiency. This is important as memory in most 32 bit applications is the largest part of the chip, and chip size directly relates to cost.

Cyan is now moving into the production phase of its business and we are setting up the manufacturing operations group. Production orders for silicon wafers have been placed with Taiwan Semiconductor Manufacturing Company (TSMC), our silicon wafer manufacturing partner, to satisfy production orders from our customers.

Strategy

Cyan's approach to the microcontroller market is novel in that it has developed and provides free-of-charge the most advanced software development tools - CyanIDE - in the industry, whilst competitors rely on generic, third party tools. The software makes chip integration into customer's products vastly more simple, quick, reliable and hence less expensive, while dramatically reducing development time. The Company also provides, as a result of extensive experience in semiconductors and computers, a broad range of microcontrollers to the market with minimal R&D and tooling costs. These microcontrollers are of great importance to battery powered applications and techniques that require ultra low power

Markets

The market for microcontrollers has steadily grown at around 10% per annum for many years. The total market size in 2005 is estimated to be about US$14 billion, with about 7 billion units shipped. Over the next 4 years the market is expected to grow to over US$20 billion, with the fastest growth coming from 16 and 32 bit microcontrollers, the areas on which the Company focuses. Cyan has identified Europe and South East Asia as the largest markets for its products and aims to have 1% of the microcontroller market within 5 years.

Customers

Cyan raised its first round of funding in early 2004 and has since been steadily achieving design wins. These design wins are in diverse applications from asset trackers, taxi meters, data loggers, security systems, point-of-sale terminals to small computers for skydivers. Design wins are now starting to translate into production. Cyan monitors the take-up of this technology and tracks website registrations for CyanIDE downloads, and design wins. There is a strong correlation between the two. By the end of 2005, over 2000 people in the industry had downloaded CyanIDE.

We have been successful in winning customers in Europe and China but the biggest potential for volume sales in 2006 and 2007 will be in China. Our largest customer in China has included Cyan's eCOG1k in 7 of its tax control Point of Sale (POS) terminal designs. The total available market for these products is estimated to be in excess of 50 million units over the next few years and our customer is tendering for some 6 million units of near term demand. We are currently working with this customer on the second generation of tax control POS terminals using eCOG1X.

Looking ahead

2006 will see the launch of the eCOG1X product range which will be extensive and include more industry standard peripheral interfaces, which means an even wider range of potential customers. We will be engaging with more distributors as we continue to develop from a one product start-up into a listed company with an extensive product range. Our 32 bit microcontroller (eCOG2) development will continue and we should complete the design of the Linux operating system to run on it.

Linux is becoming increasingly important particularly in China and India. It is an operating system that can, in most cases, replace Microsoft Windows and has the compelling feature of being completely free, hence the interest from China and India. Linux is generally regarded by software professionals as being faster and more reliable than Windows. The availability of Linux will further increase the market for Cyan products and will make it very attractive for use in portable entertainment products which are becoming very popular in China as well as the rest of the world.

Dr Paul Johnson

Chief Executive Officer

21 March 2006



Consolidated Profit and Loss Account
Year ended 31 December 2005

Note 2005 2004
Pounds Pounds
Sterling Sterling

TURNOVER: continuing operations 29,899 12,116

Cost of sales (4,966) (9,100)
-------------------------

Gross profit 24,933 3,016

Administrative expenses (2,228,526) (1,022,033)
-------------------------

OPERATING LOSS: continuing operations (2,203,593) (1,019,017)

Interest receivable and similar income 61,970 12,750
Interest payable and similar charges (12,621) (10)
-------------------------

LOSS ON ORDINARY ACTIVITIES BEFORE
TAXATION (2,154,244) (1,006,277)

Tax on loss on ordinary activities 67,381 -
-------------------------

RETAINED LOSS FOR THE FINANCIAL
YEAR BEING LOSS ATTRIBUTABLE TO
EQUITY HOLDERS (2,086,863) (1,006,277)
-------------------------


LOSS PER SHARE (pence)
Basic and diluted 2 (3.8) (2.5)
-------------------------


Consolidated Balance Sheet
31 December 2005

2005 2004
Pounds Pounds
Sterling Sterling

FIXED ASSETS
Intangible assets 4,000 8,000
Tangible assets 163,236 155,801
-----------------------------------

167,236 163,801
-----------------------------------

CURRENT ASSETS
Stocks 59,583 35,396
Debtors 182,560 21,460
Investments - short term deposits 5,375,000 -
Cash at bank and in hand 192,680 203,459
-----------------------------------

5,809,823 260,315

CREDITORS: amounts falling due
within one year (338,105) (89,734)
-----------------------------------

NET CURRENT ASSETS 5,471,718 170,581
-----------------------------------

TOTAL ASSETS LESS CURRENT
LIABILITIES, BEING NET ASSETS 5,638,954 334,382
-----------------------------------


CAPITAL AND RESERVES
Called up share capital 168,621 81,182
Share premium account 8,598,230 1,121,634
Other reserve - shares for issue - 167,200
Profit and loss account (3,127,897) (1,035,634)
-----------------------------------

EQUITY SHAREHOLDERS' FUNDS 5,638,954 334,382
-----------------------------------


Consolidated Cash Flow Statement
31 December 2005


2005 2004
Pounds Pounds
Sterling Sterling


Net cash outflow from operating
activities (2,015,849) (931,442)

Returns on investments and
servicing of finance 49,349 12,740

Taxation - -

Capital expenditure and
financial investment (66,114) (57,515)
-----------------------------------
Cash outflow before management
of liquid resources and financing (2,032,614) (976,217)

Management of liquid resources (5,375,000) -

Financing 7,396,835 1,036,016
-----------------------------------
Decrease in cash in the year (10,779) 59,799
-----------------------------------



Analysis and Reconciliation of Net Funds

At 1 January 31
Cash December
2005 flow 2005
Pounds Pounds Pounds
Sterling Sterling Sterling

Cash at bank and in hand 203,459 (10,779) 192,680
Current asset investments - 5,375,000 5,375,000

----------------------------------------
Net funds 203,459 5,364,221 5,567,680
----------------------------------------

2005 2004
Pounds Pounds
Sterling Sterling

(Decrease) increase in cash
in the year (10,779) 59,799
Cash outflow from increase in
liquid resources 5,375,000 -

-----------------------------------
Change in net funds resulting
from cash flows 5,364,221 59,799

-----------------------------------
Movement in net funds in year 5,364,221 59,799
Net funds at 1 January 203,459 143,660

-----------------------------------
Net funds at 31 December 5,567,680 203,459
-----------------------------------


Consolidated Statement of Changes In Equity
Year ended 31 December 2005


Share Share
Share premium for Retained
capital account issue loss Total
Pounds Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling Sterling

At 31 December
2004 81,182 1,121,634 167,200 (1,035,634) 334,382
Loss for the
year - - - (2,086,863) (2,086,863)
New issue 87,439 8,317,001 (167,200) - 8,237,240
Expenses of
share issue - (840,405) - - (840,405)
Currency
translation
difference
on foreign
currency
net
investments - - - (5,400) (5,400)
-------------------------------------------------------
At 31 December
2005 168,621 8,598,230 - (3,127,897) 5,638,954
-------------------------------------------------------


During the year 43,719,762 ordinary shares were issued for Pounds Sterling 8,404,440. Share issue costs amounted to Pounds Sterling 840,405. The resultant premium of Pounds Sterling 7,476,596 has been credited to the share premium account.

NOTES TO THE FINANCIAL STATEMENTS

1. Accounting policies

This announcement is prepared on the basis of the accounting policies stated in the previous year's financial statements.

The financial statements are prepared in accordance with applicable United Kingdom accounting standards. The company has adopted FRS 21 "Events after the balance sheet date", FRS 22 "Earnings per share", the presentation aspects of FRS 25 "Financial instruments: disclosure and presentation", and FRS 28 "Corresponding amounts". No restatement of the comparatives was necessary.

The particular accounting policies adopted are described below.

Accounting convention

The financial statements are prepared under the historical cost convention.

Basic of consolidation

The group financial statements consolidate the financial statements of the company and its subsidiary undertakings drawn up to 31 December each year. The results of subsidiaries acquired or sold are consolidated for the periods from or to the date on which control passed. Acquisitions are accounted for under the acquisition method.

Intangible fixed assets

The intellectual property is amortised in equal annual amounts over a period of three years. The amortisation started in January 2004 when the exploitation of the intellectual property commenced.

Tangible fixed assets

Depreciation is provided on cost in equal annual instalments over the estimated useful lives of the assets. The rates of depreciation are as follows:



Leasehold property improvements 20% straight line basis
Office equipment 50% straight line basis
Plant and machinery, tools and equipment 20-25% straight line basis
Fixtures and fittings 25% straight line basis


Stocks

Stocks are stated at the lower of cost and net realisable value.

Research and development

Research and development expenditure is written off to the profit and loss account as incurred.

Foreign exchange

Transactions denominated in foreign currencies are translated into sterling at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates ruling at that date. Translation differences arising are dealt with in the profit and loss account.

Investments

Investments held as fixed assets are stated at cost less provision for any impairment in value.

Taxation

Current, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is provided in full on timing differences, which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.

Leases

Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis.

Turnover

Turnover is principally derived from the sale of integrated circuits and is stated net of trade discounts and value added tax. Revenue is recognised on despatch, which is deemed to be the point at which the risks and rewards of ownership are transferred.

2. Loss per share

The calculations or earnings per share are based on the following losses and numbers of shares.



Basic and diluted
2005 2004
Pounds Pounds
Sterling Sterling

Loss for the financial year (2,086,863) (1,006,277)
---------------------------------



2005 2004
No No
Weighted average number of shares:

For basic and diluted loss per share 54,823,213 39,567,067
---------------------------------


The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 31 December 2005 or 2004. The financial information for the year ended 31 December 2004 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s. 237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 December 2005 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's annual general meeting.

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