YGEN.L Regulatory News (YGEN)

ViaLogy PLC ("ViaLogy")

ViaLogy proposes Restructuring and spinout

of Energy Services Business

London, October 29, 2013. ViaLogy PLC (LSE: VIY) today announces details of a proposed restructuring of its operational organisation. As outlined in the report and accounts announced on 30 September 2013, the Board has been reviewing a number of options with the objective to fully realize the commercial opportunities of Quantum Resonance Interferometry (QRI), the patented technology that identifies and interprets ultra-weak signals, and to enable the business to secure financial partnerships that will provide a robust basis for future growth.

To date, ViaLogy's QuantumRD software, which provides seismic data analysis to more accurately detect and de-risk oil and gas deposits for global clients, has centred all its operational activities at its headquarters in Pasadena, California. ViaLogy UK has managed the finance and administration functions and provision of services to support ViaLogy's obligations as a public company and investor relations.

Following extensive consideration, the Board has concluded that its growth objectives can be best achieved through a comprehensive restructuring and refocusing of ViaLogy. The Directors believe that this restructuring will better facilitate funding and the introduction of additional expertise to exploit the opportunities presented in the oil and gas services business; reduce ViaLogy PLC's overall working capital requirements as it considers funding opportunities, as well as open new markets to the Company. By doing so, and with additional funding, the Board further believe that ViaLogy PLC will be able to focus more of its efforts on other sectors where its QRI technology is applicable.

The Company has therefore conditionally agreed with ViaLogy Energy Corp. ("VEC") to (i) grant an exclusive, perpetual worldwide licence of ViaLogy technology and software to VEC specifically for use in providing services in oil and gas; search for water; and electromagnetics ("the Applications"), (ii) transfer those oil and gas contracts and business relationships already entered into by ViaLogy (save for the Atascosa Galba Oilfield working interest agreement) and (iii) transfer those US based employees of ViaLogy LLC (together, "the VEC Transfer"). The VEC Transfer is conditional on shareholder approval at a general meeting to be held on or around 29 November 2013.

VEC is a newly incorporated company in Delaware, with plans to operate in Pasadena and Houston, USA, formed by Dr Sandeep Gulati, Director, on behalf of ViaLogy PLC. On shareholder approval, the VEC Transfer will be undertaken and in consideration, ViaLogy will receive new VEC shares representing 75 per cent. of the issued share capital of VEC. The balance of VEC shares will be held by Dr. Sandeep Gulati, ViaLogy's founder, who will have an interest of 19.5 per cent. (subject to certain conditions as more fully described below), and the remaining 5.5 per cent. held, in aggregate, by Dr. Dan Mandutianu and Vijay Daggumati, who are key members of the current ViaLogy technical team. As such, the VEC Transfer is deemed to be a related party transaction under AIM Rule 13.

Under the terms of the VEC Transfer, the costs associated with VEC operations will be fully borne by VEC and not ViaLogy PLC. This would substantially reduce ViaLogy PLC's working capital requirements as the Board continue to consider how best to provide for PLC's funding requirements. ViaLogy will continue to consolidate VEC revenues to its share of equity ownership under IFRS.

It is the intention of VEC to raise external funding. As part of the VEC Transfer, Dr Sandeep Gulati has agreed not to sell, transfer or in any other way encumber his VEC shares until such time as VEC has entered into a first binding term sheet with investors who commit to invest in VEC at not less than a pre-money valuation of VEC of US$20 million ("the VEC Funding"). If the VEC Funding of at least US$5 million at a pre-money valuation of VEC of US$20 millionis not completed by the first anniversary of the VEC Transfer, the grant of the QRI Technology licence and associated Oil and Gas service contracts will revert to ViaLogy.

With regard to the VEC Funding, preliminary discussions are currently taking place with a number of US based institutions as well as with certain existing ViaLogy customers who have indicated interest in possible participation in the funding of VEC. Any such funding of VEC will naturally dilute the retained interest in VEC of both ViaLogy and the VEC founding management team. The level of dilution will be dependent on both the scale of funding and the valuation ascribed to VEC immediately prior to that funding.

Under the terms of the VEC Transfer, ViaLogy has the right to appoint one representative board member to VEC in addition to Dr Sandeep Gulati and has the right, but not the obligation, to co-invest in any future VEC fundraisings for a period of five years from the conditions of the VEC Transfer being satisfied to maintain a position up to 20 per cent. of the fully diluted capital.

The Board believe that the proposed VEC Funding will better reflect the value of ViaLogy's oil & gas business and QuantumRD technology. It is anticipated that such sources of funding will also add management expertise and strategic industry relationships to enhance VEC's operations. It is emphasised that the Intellectual Property (IP) of QRI and QuantumRD will remain the wholly-owned property of ViaLogy PLC but will be exclusively licensed out to VEC for the Applications.

ViaLogy PLC, through its US wholly owned subsidiary ViaLogy LLC, will seek to license other applications of QRI technology in areas such as mining, pharmaceuticals, security and surveillance.

In addition, ViaLogy PLC will establish a resources asset ownership operation with the remit of having the right to use QuantumRD analysis as the basis for selective commercial participation in specific assets owned by resources companies.

Dr Sandeep Gulati is the Chief Technology Officer for ViaLogy and, as such, the VEC Transfer is deemed to be a related party transaction for the purposes of the AIM Rules. The Directors, save for Dr Sandeep Gulati, consider, having consulted with Cantor Fitzgerald Europe, that the terms of the VEC Transfer are fair and reasonable insofar as the shareholders are concerned.

A circular convening a general meeting for the purpose of seeking shareholder approval for the Company to enter into the VEC Transfer will be sent to shareholders shortly. It is anticipated that such meeting of ViaLogy will be held on or around 29 November 2013.

"The operational restructuring has been carefully planned and is being implemented to make sure ViaLogy properly realises the full potential of its remarkable technology," said ViaLogy's chairman, Terry Bond. "To do this we need to retain our key staff, strengthen our management and technical teams and form business partnerships that will be mutually beneficial. We believe the creation of VEC will further speed the commercial development of ViaLogy."

For further information:

ViaLogy PLC

Terry Bond, Chairman - UK & Europe +44 (0) 1235 834 734

Nominated Advisor to ViaLogy PLC (Cantor Fitzgerald Europe)

Mark Percy / Catherine Leftley - Corporate Finance +44 (0) 207 894 7000