NASDAQ, TSX: NVCN
VANCOUVER, May 15, 2018 /PRNewswire/ - Neovasc Inc.
("Neovasc" or the "Company") (NASDAQ, TSX: NVCN), a leader in the
development of minimally invasive transcatheter mitral valve
replacement technologies, today announced that its management and
board of directors (the "Board") urge the Company's shareholders of
record to vote "FOR" the proposal authorizing the Board to effect a
reverse stock split.
"Remaining on the Nasdaq Capital Market ("Nasdaq") is a critical
piece of the Company's turnaround strategy," commented Fred Colen, Neovasc's President and Chief
Executive Officer. "Without reaching a minimum bid price above
US$1.00 for a minimum of 10
consecutive days before July 2, 2018,
the Company may be delisted from the Nasdaq, which would have
serious consequences for the Company as further outlined in this
press release. In short, a vote against a reverse stock split will
decrease liquidity for existing shareholders, increase the cost of
capital for the Company, and significantly worsen the terms of the
last financing," continued Mr. Colen.
"With an affirmative vote in hand we will then approach the
Nasdaq for an extension to the July 2,
2018 deadline to give us more flexibility on the timing of
the reverse split to best meet the needs of the Company and the
shareholders," continued Mr. Colen. "Without the affirmative vote
for a reverse stock split, we believe it is unlikely we will be
granted such an extension."
"Management believes that it is in the best interest of the
Company and its stakeholders to remain on the Nasdaq, and that the
reverse stock split is the only tool available to get the share
price of the Company above the minimum US$1.00 bid price before that deadline. As such,
the Board and I urge the Company's shareholders to vote "FOR"
granting the Company the ability to effect a reverse stock split,"
concluded Mr. Colen.
In the proxy filed on SEDAR on May 7,
2018 for the annual general and special meeting of
shareholders on June 4, 2018, there
is a proposal for shareholders to provide the Board with the
authority to effect a reverse stock split of up to 1-for-100 at a
time determined at the Board's discretion, if at all.
Consequences of a failure to effect a reverse stock split and
remain on the Nasdaq
Management believes a failure to
approve a reverse stock split and remain on the Nasdaq could have a
material adverse effect on the Company and its stakeholders for
several reasons, including the following:
- Liquidity in the trading of common shares of the Company (the
"Common Shares") will be significantly reduced, as the Nasdaq is
the Company's primary trading market, thereby putting downward
pressure on the share price of the Common Shares.
- It will be more difficult for the Company to raise additional
capital on reasonable terms from the majority of U.S. based
institutional funds that require or want the Company to be listed
on a major U.S. exchange in order to make an investment.
- The Company's US$28,575,000
aggregate amount of outstanding senior secured convertible notes
(the "Notes") require the Company to be listed on the Nasdaq or a
similar major U.S. exchange. Should the Company default on this
requirement, the interest payable on the Notes will jump from 0% to
15% per annum, and holders of the Notes will receive a redemption
right with a premium of 118% multiplied by the greatest closing
price of the Common Shares during the period commencing on the date
of delisting until the date such redemption payment is made.
Clarification on the details of the reverse stock
split
Management wishes to clarify certain matters related
to the reverse stock split:
- The ratio for the proposed reverse stock split is not fixed at
1-for-100 but the Board can utilize any ratio up to 1-for-100.
- The proposed reverse stock split will not happen at the date of
the AGM, but the Board can choose when to effect the reverse stock
split, if at all.
- Approving the reverse stock split should enable the Company to
remain listed on Nasdaq, while providing the Company with
additional time to address the challenges caused by the terms of
its last financing and its capital structure.
- Approving the reverse stock split does not mean the Board will
effect the reverse stock split. The Board may elect not to proceed
with the reverse stock split if it is unable to address or mitigate
the impact of the Event Price Provisions described below.
Impact of a reverse stock split
"A reverse stock split
is a process by which a company's shares are effectively
consolidated to form a smaller number of proportionally more
valuable shares. Despite contrary notions, a reverse stock split
has zero economic impact as an independent action. For example,
under a 1-for-10 reverse stock split, rather than 100 million
shares at US$0.50, a company would
have, all else being equal, 10 million shares at US$5.00 at the time of the split. In either case,
the market value of the example company is the same before and
after," explained Paul Geyer,
Neovasc's Chairman of the Board.
The reverse stock split will proportionately reduce the number
of Common Shares held by all the shareholders. As an independent
action, a reverse stock split has no economic impact on the
percentage ownership in the Company by shareholders. However, the
warrants (the "Warrants") and Notes issued pursuant to the
November 2017 underwritten public
offering and concurrent private placement (together, the "2017
Financings") contain certain provisions ("Event Price Provisions")
that, on the sixteenth trading day following a reverse stock split
or similar event, reduce the exercise price or conversion price, as
applicable, then in effect to the average VWAP of the five trading
days with the lowest VWAP of the Common Shares in the preceding
fifteen trading days in the case of the Notes and twenty trading
days in the case of the Warrants. If the Company is not able to
amend such provisions or obtain a waiver of such provisions in
connection with its efforts to address the challenges to its
capital structure, the Company may elect not to proceed with the
reverse stock split.
For a description of the terms of the Warrants and Notes,
including the Event Price Provisions, see the forms of warrants and
note previously filed on SEDAR and with the SEC on Form 6-K and the
prospectus supplement previously filed on SEDAR and with the SEC.
For a description of the Warrants and Notes outstanding, see the
Company's Management's Discussion and Analysis for the quarter
ended March 31, 2018 previously filed
on SEDAR and with the SEC on Form 6-K.
There are numerous other factors and contingencies that could
also affect the price of the Common Shares, including the status of
the market for the Common Shares at the time, the Company's
operations and general economic, stock market and industry
conditions. Accordingly, the total market capitalization of the
Common Shares after the reverse stock split may be lower than the
total market capitalization before the reverse stock split, and, in
the future, the market price of the Common Shares following the
reverse stock split may not exceed or remain higher than the market
price prior to the reverse stock split.
The Company is also listed on the Toronto Stock Exchange (the
"TSX") and the Company's noncompliance with the Nasdaq minimum bid
price requirement does not affect the Company's compliance status
with the TSX.
About Neovasc Inc.
Neovasc is a specialty medical
device company that develops, manufactures and markets products for
the rapidly growing cardiovascular marketplace. Its 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 clinical investigation in the United States, Canada and Europe. 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
Company's plans and expectations concerning completing a reverse
stock split, the effect of a reverse stock split on the price of
the Common Shares, remaining listed on the Nasdaq, complying with
the terms of the Notes, amending the terms of the Warrants and
Notes or restructuring the Company's capital and the market price
of the Common Shares. Words and phrases such as "continue",
"strategy", "believe", "may", "could", "should", "expect" 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, the substantial doubt
about the Company's ability to continue as a going concern; risks
relating to the Warrants and Notes issued pursuant to the 2017
Financings, resulting in significant dilution to the Company's
shareholders; risks relating to the Company's need for significant
additional future capital and the Company's ability to raise
additional funding; risks relating to cashless exercise and
adjustment provisions in the Warrants and Notes issued pursuant to
the 2017 Financings, which could make it more difficult and
expensive for the Company to raise additional capital in the future
and result in further dilution to investors; risks relating to the
sale of a significant number of Common Shares of the Company; risks
relating to the exercise of Warrants or conversion of Notes issued
pursuant to the 2017 Financings, which may encourage short sales by
third parties; risks relating to the possibility that the Company's
Common Shares may be delisted from the Nasdaq or the TSX, which
could affect their market price and liquidity; risks relating to
the Company's Common Share price being volatile; risks relating to
the influence of significant shareholders of the Company over the
Company's business operations and share price; risks relating to
the Company's significant indebtedness, and its effect on the
Company's financial condition; risks relating to claims by third
parties alleging infringement of their intellectual property
rights; risks relating to lawsuits that the Company is subject to,
which could divert the Company's resources and result in the
payment of significant damages and other remedies; 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 use of
the Company's products in unapproved circumstances, which could
expose the Company to liabilities; risks relating to competition in
the medical device industry, including the risk that one or more of
the Company's 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 its 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 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 the Company's dependence on limited
products for substantially all of the Company's current revenues;
risks relating to the Company's exposure to adverse movements in
foreign currency exchange rates; risks relating to the possibility
that the Company could lose its foreign private issuer status under
U.S. federal securities laws; 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; risks relating to the Company's
dependence upon key personnel to achieve its 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; risks relating to the Company's
ability to successfully identify and complete corporate
transactions on favorable terms or achieve anticipated synergies
relating to any acquisitions or alliances; risks relating to the
Company's ability to successfully enter into fundamental
transactions as defined in the Series C warrants issued pursuant to
the 2017 Financings; 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; and
risks relating to conflicts of interests among the Company's
officers and directors as a result of their involvement with other
issuers. These risk factors and others relating to the Company are
discussed in greater detail in the "Risk Factors" section of the
Company's Annual Report on Form 20-F and in Management's Discussion
and Analysis for the quarter ended March 31,
2018 (copies of which may be obtained at www.sedar.com or
www.sec.gov). In particular, the Company notes that an approval of
the reverse stock split does not necessarily guarantee that Nasdaq
will grant it an extension to regain compliance with the
US$1.00 minimum bid price
requirement. In addition, the Company may elect not to proceed with
the reverse stock split for the reasons described above. 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 or to provide information
relating to further incremental exercises of Warrants or conversion
of Notes beyond required periodic filings with securities
regulators, whether as a result of new information, future events
or otherwise, except as required by law.
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SOURCE Neovasc Inc.