NASDAQ, TSX: NVCN
VANCOUVER, Nov. 9, 2017 /PRNewswire/ - Neovasc Inc.
("Neovasc" or the "Company") (Nasdaq: NVCN) today announced that it
has priced an underwritten offering of 6,609,588 Series A units
(the "Series A Units") of Neovasc and 19,066,780 Series B units
(the "Series B Units" and together with the Series A Units, the
"Units") of the Company, at a price of US$1.46 per Unit for gross proceeds of
approximately US$37.487 million,
before deducting the underwriting discounts and commissions and
other estimated offering expenses payable by Neovasc (the
"Offering"). The price of US$1.46 per Unit represents the market price (as
defined in the TSX Company Manual) of Neovasc's common shares
("Common Shares") as of the date of this news
release.
Assuming successful completion of the Transaction (as defined
below), the Company intends to use the net proceeds to fully fund
the approximately US$42 million
balance of the awards granted in the litigation with CardiAQ (after
subtracting the US$70 million that
the Company has paid into escrow), with remaining funds being used
(i) to partially fund the ongoing Tiara clinical program; (ii) to
support the completion of the TIARA-II study; and (iii) for general
corporate purposes.
Each Series A Unit is comprised of (i) one common share of the
Company (each, a "Unit Share"), (ii) one Series A common share
purchase warrant of the Company (each, a "Series A Warrant"), (iii)
one Series B common share purchase warrant of the Company (each, a
"Series B Warrant") and (iv) 0.40 Series C warrant (each, a "Series
C Warrant") to purchase a unit (each, a "Series C Unit") comprised
of one Common Share, one Series A Warrant and one Series B
Warrant. Each Series B Unit is comprised of (i) either one
Unit Share or one pre-funded Series D common share purchase warrant
of the Company (each, a "Series D Warrant"), (ii) one Series A
Warrant, (iii) one Series B Warrant, (iv) 0.40 Series C Warrant,
and (v) 1.1765 Series F common share purchase warrant of the
Company (each, a "Series F Warrant"). The Series A Warrants,
Series B Warrants, Series C Warrants, Series D Warrants, Series F
Warrants and Series E Warrants (as defined below) are collectively
referred to herein as, the "Warrants").
Each Series A Warrant will entitle the holder to purchase one
Common Share (each, a "Series A Warrant Share") at an exercise
price of US$1.61 per Series A Warrant
Share for a period of five years following issuance. Each
Series B Warrant will entitle the holder to purchase one Common
Share (each, a "Series B Warrant Share") at an exercise price of
US$1.61 per Series B Warrant Share
for a period of two years following issuance. Each Series C
Warrant will entitle the holder to purchase a Series C Unit
comprised of a Common Share (each a "Series C Unit Share"), a
Series A Warrant and a Series B Warrant, at an exercise price of
US$1.46 per Series C Unit for a
period of two years following issuance. Each Series D Warrant will
entitle the holder to purchase one Common Share (each, a "Series D
Warrant Share") at an exercise price of US$1.46 per Series D Warrant Share, all of which
will be pre-funded except for a nominal exercise price of
US$0.01 per Series D Warrant Share
for a period of five years following issuance. Each Series F
Warrant will entitle the holder to purchase one Common Share (each,
a "Series F Warrant Share" and together with the Series A Warrant
Shares, Series B Warrant Shares, Series C Unit Shares, and Series D
Warrant Shares, the "Warrant Shares") at an exercise price of
US$1.61 per Series F Warrant Share
for a period of two years following issuance. The Warrants
are subject to adjustment, at any time prior to their expiry. The
exercise price of the Series A Warrants, Series B Warrants and
Series F Warrants are subject to full ratchet adjustment in certain
circumstances. If a registration statement covering
the issuance or resale of the Warrant Shares is not available for
the issuance or resale of such Warrant Shares each Series A
Warrant, Series B Warrant, Series D Warrant and Series F Warrant
may be exercised on a "net" or "cashless" basis. Each Series
B Warrant and Series F Warrant may be exercised on an Alternate Net
Number (as defined below) basis.
Concurrent with the Offering, the Company will be completing a
brokered private placement for the sale of US$32,750,000 aggregate principal amount of
senior secured convertible notes of the Company for gross proceeds
of US$27,837,500 (the "Notes") and
Series E warrants (the "Series E Warrants") to purchase one Common
Share per Series E Warrant (the "Concurrent Private
Placement"). The Notes will be issued with an original issue
price of US$850 per US$1,000 principal amount of note. The
Notes will have an 18-month term and carry an interest rate of 0.0%
per annum (increasing to 15% upon an event of default) from the
closing date of the Concurrent Private Placement. Interest on the
Notes will commence accruing on the date of issue, will be computed
on the basis of a 360-day year and twelve 30-day months and will be
payable in cash on January 1, 2018
and on the first day of each calendar quarter thereafter up to, and
including, the maturity date. The Series E Warrants will have the
same terms and conditions as the Series A Warrants, as more fully
described herein. Completion of the Offering and the
Concurrent Private Placement (the "Transaction") are each
conditional upon completion of the other. The Notes will be
secured by a first priority security interest on all of Neovasc's
assets. The Notes and Series E Warrants are subject to
adjustment, at any time prior to their expiry. The Notes
contain, among other things, provisions relating to future-priced
conversion or exercise formula and full-ratchet anti-dilution and
the Series E Warrants contain full-ratchet anti-dilution. If
a registration statement covering the issuance or resale of the
Warrant Shares is not available for the issuance or resale of such
Warrant Shares each Series E Warrant may be exercised on a "net" or
"cashless" basis.
Canaccord Genuity Inc. (the "Underwriter") is acting as the sole
book-running manager for the Offering and as the sole placement
agent for the Concurrent Private Placement. Neovasc and the
Underwriter have entered into an underwriting agreement dated
November 9, 2017 (the "Underwriting
Agreement").
The Units described above are being offered pursuant to a shelf
registration statement (including a prospectus) previously filed
with and declared effective by the Securities Exchange Commission
(the "SEC") on June 9, 2016 and the
Company's existing Canadian short form base shelf prospectus dated
June 9, 2016. The Units are being
qualified for distribution from Canada by way of a prospectus supplement to
the Company's short form base shelf prospectus. A prospectus
supplement and accompanying base shelf prospectus relating to the
Offering will be filed with the SEC and will be available for free
on the SEC's website at www.sec.gov. Copies of the prospectus
supplement and accompanying base shelf prospectus relating to the
Offering may also be obtained by contacting Canaccord Genuity Inc.,
Attn: Equity Syndicate Department, 99 High Street, 12th Floor,
Boston, Massachusetts 02110, by
telephone at (617) 371-3900, or by email at
prospectus@canaccordgenuity.com. The Units offered and sold
pursuant to the Offering will only be offered and sold in
the United States.
Currently, Neovasc has 78,920,688 Common Shares issued and
outstanding. Pursuant to the Transaction, Neovasc will issue
up to an aggregate of 25,676,368 Common Shares or Series D
Warrants (25,676,368 Common Shares representing approximately 32.5%
of Neovasc's current issued and outstanding number of Common
Shares), 25,676,368 Series A Warrants, 25,676,368 Series B
Warrants, 10,273,972 Series C Warrants, and 22,431,506 Series F
Warrants as well as the Notes and up to 22,431,506 Series E
Warrants.
If a registration statement covering the issuance or resale of
the Warrant Shares is not available for the issuance or resale of
such Warrant Shares, each Series A Warrant, Series B Warrant,
Series D Warrants, Series F Warrant and Series E Warrant may be
exercised on a "net" or "cashless" basis. The number of
Common Shares issuable upon exercise using the "net" or "cashless"
basis, also referred to as the "Net Number", is calculated using
the following formula:
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Net Number
=
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(A x B) - (A x
C)
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D
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Where "A" equals the total number of Common Shares with respect
to which the applicable Warrant is then being exercised. Where "B"
equals the greater of (1) the quotient of * the sum of the VWAP of
the Common Shares of each of the twenty (20) Trading Days (as
defined in the applicable Warrant) ending at the close of business
on the Nasdaq Capital Market immediately prior to the time of
exercise as set forth in the applicable Exercise Notice (as defined
in the applicable Warrant), divided by (y) twenty (20) (the "VWAP
Amount") and (2) as applicable: (i) the Closing Sale Price (as
defined in the applicable Warrant) of the Common Shares on the
Trading Day immediately preceding the date of the applicable
Exercise Notice if such Exercise Notice is (A) both executed and
delivered pursuant to the applicable Warrant on a day that is not a
Trading Day or (B) both executed and delivered pursuant to the
applicable Warrant on a Trading Day prior to the opening of
"regular trading hours" (as defined in Rule 600(b)(64) of
Regulation NMS promulgated under the federal securities laws) on
such Trading Day, (ii) the Bid Price (as defined in the applicable
Warrant) of the Common Shares as of the time of the holder's
execution of the applicable Exercise Notice if such Exercise Notice
is executed during "regular trading hours" on a Trading Day and is
delivered within two (2) hours thereafter pursuant to the
applicable Warrant, or (iii) the Closing Sale Price (as defined in
the applicable Warrant) of the Common Shares on the date of the
applicable Exercise Notice if the date of such Exercise Notice Is a
Trading Day and such Exercise Notice is both executed and delivered
pursuant to the applicable Warrant after the close of "regular
trading hours" on such Trading Day (the "Market Amount").
Where "C" equals the exercise price then in effect for the
applicable Warrant Shares at the time of such exercise. And,
where "D" equals the lesser of the VWAP Amount or the Market
Amount.
Series B Warrants and Series F Warrants may be exercised on an
Alternate Net Number basis. The Alternate Net Number is equal
to the product of (i) the quotient determined by dividing * the
total number of Common Shares with respect to which the applicable
Warrant is being exercised and (y) the maximum number of Warrant
Shares (as adjusted for share splits, share dividends, share
combinations, recapitalizations or other similar events) initially
issuable upon a cash exercise of the applicable Warrant on the date
of issuance and (ii) the quotient obtained by dividing (A) the
difference obtained by subtracting * the lowest daily volume
weighted average price during the ten trading days period ending on
and including such exercise date (the "Market Price") from (y) the
exercise price as of the subscription date (as adjusted for share
splits, share dividends, share combinations, recapitalizations or
other similar events) by (B) 85% of the Market Price.
The Notes contain a future-priced conversion mechanism (the
"Note Conversion Mechanism") whereby nine months immediately
following the issuances of the Notes (the "Conversion Price Reset
Date"), the conversion price will be adjusted to be the lower of *
the then current conversion price and (y) the greater of (i) the
amount in USD equal to the VWAP for the Common Shares on the
Conversion Price Reset Date (or, if the Conversion Price Reset Date
is not a trading day, the immediately following trading day) and
(ii) US$0.50.
The effect of the Alternate Net Number mechanism is that the
number of Common Shares issuable increases as the Market Price
falls. As an example, if the Market Price at the time of
exercise is 95% of the applicable Exercise Price as of the
subscription date, then, if the holders exercise all of the
applicable Warrants for the Alternate Net Number a total of 3.615
million Common Shares will be issued. Further, if the Market Price
at the time of exercise is 90% of the applicable Exercise Price as
of the subscription date, then, if the holders exercise all of the
applicable Warrants for the Alternate Net Number a total of 7.632
million Common Shares will be issued.
The effect of the Note Conversion Mechanism and the Net Number
and Alternate Net Number mechanisms described above is that the
maximum number of Common Shares issuable by the Company pursuant to
the Transaction is based on the future Market Price of the Common
Shares. For illustration purposes, assuming no other changes
to Neovasc's capitalization subsequent to completion of the
Transaction, and taking into account the total number of Unit
Shares issuable under the Offering and assuming full conversion of
the Notes and exercise of the Warrants into Common Shares, if the
Market Price of the Common Shares remained at US$1.46 per Common Share (being the closing price
of the Common Shares on November 9,
2017) on the date of exercise, the maximum number of Common
Shares issuable pursuant to the Transaction would be 175.1 million,
representing approximately 222% of Neovasc's current issued and
outstanding number of Common Shares. If the Market Price of the
Common Shares on the date of exercise reduces to a point lower than
approximately 60% of the closing price of the Common Shares on
November 9, 2017, the Alternate Net
Number mechanism may result in an increase in the number of Common
Shares issuable and that number materially increases as the price
reduces. If the Market Price of the Common Shares on the date
of exercise were to reduce to US$0.20
per Common Share, approximately 13.7% of the closing price of the
Common Shares on November 9, 2017,
within the first nine months after closing of the Transaction, then
the maximum number of Common Shares issuable pursuant to the
Transaction would be 599.6 million Common Shares, representing
approximately 760% of Neovasc's current issued and outstanding
number of Common Shares. If the Market Price of the Common
Shares were to reduce to US$0.20 per
Common Share after nine months from the date of closing the
Transaction then the maximum number of Common Shares issuable
pursuant to the Transaction will materially increase.
Bio IP Ventures II LLC ("Bio IP") does not currently hold Common
Shares of Neovasc. After giving effect to the Transaction,
Bio IP will hold 10,355,108 Common Shares and 3,573,830 Common
Shares represented by prefunded Series D Warrants (the aggregate of
13,928,938 Common Shares representing approximately 13.3% of the
post-closing issued and outstanding Common Shares), 0 Series A
Units, 13,928,938 Series B Units, US$23,925,000 aggregate principal amount of
Notes, and 16,386,986 Series E Warrants. Pursuant to the
Transaction, assuming full conversion of all Warrants and Note held
by Bio IP, the maximum number of Common Shares issuable to Bio IP
would be 107,668,071 Common Shares, representing approximately
136.4% of Neovasc's current issued and outstanding number of Common
Shares.
Frost Gamma Investments Trust ("Frosts") is an insider of
Neovasc, and the Transaction constitutes a related party
transaction under Multilateral Instrument 61-101 – Protection of
Minority Securityholders in Special Investments ("MI 61-101"),
as Frost currently holds 15,051,164 Common Shares representing
19.1% of the currently issued and outstanding Common Shares.
After giving effect to the Transaction, Frost will hold 16,421,027
Common Shares (representing approximately 15.7% of the post-closing
issued and outstanding Common Shares), 1,369,863 Series A Units, 0
Series B Units, US$0 aggregate
principal amount of Notes, and 0 Series E Warrants. Pursuant
to the Transaction, assuming full conversion of all Warrants and
Note held by Frost, the maximum number of Common Shares issuable to
Frost would be 5,753,973 Common Shares, representing approximately
7.3% of Neovasc's current issued and outstanding number of Common
Shares.
Following the Transaction, Boston Scientific Corp. will hold
11,817,000 Common Shares, representing 11.3% of the post-closing
issued and outstanding Common Shares and no Series A Units, Series
B Units, Notes, and Series E Warrants.
Financial Hardship Exemption
The proposed issuance of the Units, Notes and Warrants will
result in the number of Common Shares issued and made issuable
under the Transaction being greater than 25% of the Corporation's
issued and outstanding Common Shares, the exercise price of the
Warrants is less than the market price of the Common Shares, and
the Bio IP's potential investment and subsequent exercise of
warrants could result in the Bio IP holding greater than 20% of
Neovasc's issued and outstanding Common Shares thereby materially
affecting control of the Corporation pursuant to the TSX Company
Manual (the "Manual"). Neovasc would ordinarily be required
to obtain shareholder approval pursuant to the applicable policies
of the TSX. However, the Corporation has applied to the TSX,
pursuant to the provisions of Section 604(e) of the Manual, for a
"financial hardship" exemption from the requirement to obtain
shareholder approval, on the basis that the Corporation is in
serious financial difficulty and the Transaction is designed to
address these financial difficulties in a timely manner.
The Corporation's decision to rely on the financial hardship
exemption in the Manual was made upon the recommendation of a
committee of directors of Neovasc, who are independent of
management, free from any interest in the Transaction and unrelated
to the parties involved in the Transaction (the "Committee"). The
Committee has considered and reviewed all of the circumstances
currently surrounding the Corporation and the Transaction
including: (i) the Corporation's current financial difficulties and
immediate capital requirements; (ii) the lack of alternate
financing arrangements available; and (iii) the fact that the
Transaction is the only viable financing option at the present
time; among other factors.
Based on its analysis, the Committee concluded that: (i) Neovasc
is in serious financial difficulty; (ii) the Transaction is
designed to improve Neovasc's financial situation; (iii) the
Transaction offers the only practical and timely financing solution
to meet the needs of Neovasc; and (iv) the terms of the Transaction
are reasonable for Neovasc in the circumstances. As such, the
Committee unanimously voted to: (i) proceed with the Transaction,
and (ii) given the immediate need for a capital infusion, apply for
the financial hardship exemption.
There can be no assurance that the TSX will accept the
application for the use of the financial hardship exemption from
the requirement to obtain shareholder approval for the Transaction.
Assuming TSX approval for the Offering, Concurrent Private
Placement and the financial hardship application is obtained, it is
anticipated that the Transaction will be completed on November 17, 2017.
The Company is also relying on the formal valuation exemption in
section 5.5 of MI 61-101 and the minority approval exemption in
section 5.7 of MI 61-101 by virtue of the "financial hardship"
exemptions contained in Section 5.5(g) and 5.7(e) of MI 61-101.
Other Matters
Our officers, directors and certain of our shareholders have
agreed that, subject to certain exceptions, for a period of 180
days from the date of the Underwriting Agreement, they will not,
without the prior written consent of the Underwriter, directly or
indirectly, issue, offer, pledge, sell, agree to issue, offer
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lead or otherwise transfer or
dispose of any of our Common Shares or any securities convertible
into or exchangeable for our Common Shares, or make any public
announcement of any of the foregoing, or otherwise enter into any
swap, derivative or other transaction or arrangement that transfers
to another, in whole or in part, any economic consequence of
ownership of any of our Common Shares or any securities convertible
into or exchangeable for our Common Shares. Frost will not be
entering into such lock-up agreements on 2,300,000 of its Common
Shares or any securities it purchases pursuant to the Offering or
Concurrent Private Placement.
The TSX has confirmed to the Corporation that, as a result of
reliance on the financial hardship exemption from the requirement
to obtain shareholder approval, the Corporation will be placed
under remedial delisting review. Delisting review is customary
practice under TSX policies when a listed company requests relief
in reliance on this exemption. Although the Corporation believes
that it will be in compliance with all continued listing
requirements of the TSX following completion of the Transaction and
upon conclusion of a delisting review, no assurance can be provided
as to the outcome of that review and therefore the Corporation may
become subject to delisting from the TSX.
The Company did not file a material change report at least 21
days prior to the anticipated date of completion of the Transaction
due to the Company's determination that it is in the best interests
of the Company to avail itself of the proceeds and complete the
Transaction in an expeditious manner.
In addition to the above, closing of the offering will be
subject to customary closing conditions, including listing of the
Common Shares on the TSX and NASDAQ and any required approvals of
each exchange.
This news release shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of
these securities in any province, state or jurisdiction in which
such offer, solicitation or sale would be unlawful prior to the
registration or qualification under the securities laws of any such
province, state or jurisdiction.
About Neovasc Inc.
Neovasc is a specialty medical device company that develops,
manufactures and markets products for the rapidly growing
cardiovascular marketplace. The Company's products include
the Neovasc Reducer™, for the treatment of refractory angina which
is not currently available in the United
States and has been available in Europe since 2015 and the Tiara™, for the
transcatheter treatment of mitral valve disease, which is currently
under investigation in the United
States, Canada and
Europe. The Company also sells a
line of advanced biological tissue products that are used as key
components in third-party medical products including transcatheter
heart valves. For more information, visit: www.neovasc.com.
This news release contains forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995 and applicable Canadian securities laws regarding the
Transaction, including the size of the offering, the type of
securities to be offered, the intended use of proceeds, the
security holdings of certain shareholders of the Company, the
expected closing date, the closing conditions of the offering, the
granting of the financial hardship exemption and the Company being
placed on remedial delisting review. Words and phrases such as
"intended", and "will", and similar words or expressions, are
intended to identify these forward-looking statements.
Forward-looking statements are based on estimates and assumptions
made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future
developments, as well as other factors that the Company believes
are appropriate in the circumstances. Many factors and
assumptions could cause the Company's actual results, performance
or achievements to differ materially from those expressed or
implied by the forward-looking statements, including, without
limitation, risks relating to the Company's litigation with
CardiAQ, including the Company's ability to successfully appeal the
validity of the awards as well as the ruling on inventorship, which
create material uncertainty and which cast substantial doubt on the
Company's ability to continue as a going concern; the substantial
doubt about the Company's ability to continue as a going concern;
risks relating to the Company's need for significant additional
future capital and the Company's ability to raise additional
funding; risks relating to claims by third parties alleging
infringement of their intellectual property rights; the Company's
ability to establish, maintain and defend intellectual property
rights in the Company's products; risks relating to results from
clinical trials of the Company's products, which may be unfavorable
or perceived as unfavorable; the Company's history of losses and
significant accumulated deficit; risks associated with product
liability claims, insurance and recalls; risks relating to
competition in the medical device industry, including the risk that
one or more competitors may develop more effective or more
affordable products; risks relating to the Company's ability to
achieve or maintain expected levels of market acceptance for the
Company's products, as well as the Company's ability to
successfully build the Company's in-house sales capabilities or
secure third-party marketing or distribution partners; the
Company's ability to convince public payors and hospitals to
include the Company's products on their approved products lists;
risks relating to new legislation, new regulatory requirements and
the efforts of governmental and third party payors to contain or
reduce the costs of healthcare; risks relating to increased
regulation, enforcement and inspections of participants in the
medical device industry, including frequent government
investigations into marketing and other business practices; risks
associated with the extensive regulation of the Company's products
and trials by governmental authorities, as well as the cost and
time delays associated therewith; risks associated with post-market
regulation of the Company's products; health and safety risks
associated with the Company's products and the Company's industry;
risks associated with the Company's manufacturing operations,
including the regulation of the Company's manufacturing processes
by governmental authorities and the availability of two critical
components of the Reducer; risk of animal disease associated with
the use of the Company's products; risks relating to the
manufacturing capacity of third-party manufacturers for the
Company's products, including risks of supply interruptions
impacting the Company's ability to manufacture its own products;
risks relating to breaches of anti-bribery laws by the Company's
employees or agents; risks associated with future changes in
financial accounting standards and new accounting pronouncements;
the Company's dependence upon key personnel to achieve the
Company's business objectives; the Company's ability to maintain
strong relationships with physicians; risks relating to the
sufficiency of the Company's management systems and resources in
periods of significant growth; risks associated with consolidation
in the health care industry, including the downward pressure on
product pricing and the growing need to be selected by larger
customers in order to make sales to their members or participants;
the Company's ability to successfully identify and complete
corporate transactions on favorable terms or achieve anticipated
synergies relating to any acquisitions or alliances; anti-takeover
provisions in the Company's constating documents which could
discourage a third party from making a takeover bid beneficial to
the Company's shareholders; risks relating to conflicts of
interests among the Company's officers and directors as a result of
their involvement with other issuers; and risks relating to the
influence of significant shareholders of the Company over the
Company's business operations and share price. These risk
factors and others relating to the Company are discussed in greater
detail in the "Risk Factors" section of the Company's Annual
Information Form and in the Company's Management's Discussion and
Analysis of Financial Condition and Results of Operations (copies
of which filings may be obtained at www.sedar.com or www.sec.gov,
each of which are included in the Company's Annual Report on Form
40-F). These factors should be considered carefully, and
readers should not place undue reliance on the Company's
forward-looking statements. The Company has no intention and
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
SOURCE Neovasc Inc.