Tickers: XTSX:VPT, PINX:VPTDF
Tags: #Technology, #Healthcare
Toronto, Ontario - TheNewswire - January 28, 2020 - Ventripoint Diagnostics Ltd. ("Ventripoint" or the "Company", (TSXV:VPT) is pleased to announce stakeholders have stepped forward to finance the commercialization of its robust technology. The past month there has been a restructuring of the Company to focus on manufacturing and sales. The Company is pleased to provide a Corporate update.
Summary
1.The Company has sufficient interest from existing shareholders and insiders to complete a $1,220,000 Private Placement. These funds will be used to resume operations as a going concern and manufacture and sell VMS+3.0 products;
2.Dr. George Adams will be the acting CEO of the Company and the new Board of Directors has initiated a search for a new CEO and CFO. It is expected a new CFO will be hired within the next 90 days. Marrelli Support Services Inc. has been engaged to provide accounting and audit support services.
3.Five of six employees have indicated they will rejoin the Company as soon as operations resume. The sixth employee has elected to go into a professional training program.
4.The focus for the next 6 months will be to manufacture and install VMS+3.0 devices in leading hospitals in the United States and Canada. The Company has committed to provide the machines to 5 cardiac centres and has interest for 3 additional units. In addition, our partner in China has ordered multiple VMS+3.0 machines.
5.The Board of Directors of the Company would like to thank Dr. Alvira Macanovic (former Senior Director of Operations, Regulatory Affairs, and Quality Assurance), Dave McPhedran (former Director of Sales), Ellen Briant (former CFO) and Desmond Hirson (former CTO), who have continued to engage customers and vendors throughout the restructuring process.
Corporate Update
Restructuring and Resumption of Operations
The Company has restructured its Board of Directors (See NR Dec 17, 2019). Dr. George Adams has been appointed the acting CEO of the Company and the new Board of Directors has initiated a search for a new CEO and CFO. It is expected a new CFO will be hired within the next 90 days. Marrelli Support Services has been engaged to provide accounting and audit-support services and the previous bookkeepers have agreed assist to achieve a smooth transition. The Company has engaged Boyle &Co LLP as legal counsel. It is the Company's intention to complete a Private Placement for $1,220,000 (see below) and resume operations as soon as the first tranche of the Private Placement is closed.
The Company has a new business plan to continue operations as a going concern. In December, the Company notified its users and potential customers that the Company was undergoing restructuring and so would be unavailable until this was completed. As previously announced, the Company has completed all development of the VMS+3.0 and has received market approvals Canada, Europe and the United States, including Medical Device Licence, CE Mark, and 510(k) clearance for the clinical use (refer to June 25, 2019, July 2, 2019, and October 17, 2019 press releases, respectively). All the Company's market approvals and Quality Management System (QMS) certifications are unaffected by this hiatus in operations. Users of the VMS+ and VMS+3.0 devices have continued to use their machines with no service interruptions.
Initial customer response to the VMS+3.0 has been positive and so the Company will focus exclusively on manufacturing, sales and customer support for this new model. Users with the older model of the device (VMS+ 2.0) will have their devices replaced. The majority of the new funds from the private placement is budgeted to be used for operations with a focus on sales&marketing (25%), manufacturing&installations (32%), and general&administration (25%) and the remainder to restart operations. Other uses of proceeds are for the restart of operations as described below.
The Company has new orders for the VMS+3.0, which have not been fulfilled. It must pay its vendors for past components and services in order to purchase new components and services to build a new product inventory and fulfill these and future orders. Hence, the budget includes an initial payment of up to $120,000 to clear key current accounts to contractors and vendors, who are required to allow for manufacturing, installations and training. The Company also has to pay its financial auditors and begin the 2019 audit. The Company has other accounts payables, unrelated to manufacturing and customer support, and will seek to negotiate payout terms with these vendors.
The Company has committed to provide VMS+3.0 machines to 5 cardiac centres in Canada and the United States and 3 units in Europe. In addition, our partner in China has ordered three VMS+3.0 machines for demonstration and research use and will pay 100% up front for delivery as soon as possible. It is expected to take 6-8 weeks to build new VMS+3.0 devices and begin to fulfill the orders, once operations resume. Sales projections call for an additional 4 units to be ordered in the next 90 days.
The Company has continued to engage with its employees, vendors and consultants throughout the restructuring process. It is pleased to report that five of the six employees who were terminated and ceased to be employees of the Company on December 31, 2019 have confirmed their intention to work for the Company as soon as it resumes operations. The one employee (administration) will not be returning as he has elected to enter a professional training program. The Company wishes him all the best. Other staff such as trainers and development engineers have also indicated their intentions to continue as contractors to the Company.
The Board of Directors of the Company would like to thank Dr. Alvira Macanovic (former Senior Director of Operations, Regulatory Affairs, and Quality Assurance), Dave McPhedran (former Director of Sales), Ellen Briant (former CFO) and Desmond Hirson (former CTO), who have continued to engage customers and vendors throughout the restructuring process.
Chinese Partnership and Future Development
The Company previously announced (see NR Nov 3, 2015) it had granted an exclusive license to develop and manufacture knowledge-based reconstruction ("KBR") products in the People's Republic of China to YuTian Medical Investment based in Shanghai and Yutian Technology located in Ma'anshan. ("Yutian"). Yutian has developed a series of products to specifically meet the demands of the Chinese market based on the KBR technology and has received regulatory approval for the sale of the KBR-based products in China. Billing codes for RV Ultrasound Quantitative Analysis were granted in November of 2019 and the first two sales in China closed in December of 2019. Additional sales are in progress and will be announced as they are completed over the coming months.
A point of care device with a KBR technology and an integrated portable ultrasound has already received regulatory approval in China and is gaining significant traction in the market.
Ventripoint will provide engineering support to achieve full automation for quantitative analysis of 2D and 3D cardiac echocardiology images based on Ventripoint' s KBR approach and the support of the new center of excellence for Artificial Intelligence (AI) in China, Hefei KBR Hi-tech Co. Ltd., located in Hefei, the second largest science city in China. Yutian will manage this project in China and provide hardware and software support through its wholly-owned subsidiary Hefei KBR Hi-tech Co. Ltd.
Non-Brokered Debenture Unit Private Placement
The Company announces that it intends to complete a non-brokered private placement with gross proceeds of up to CDN$1,220,000 (the "Offering") of debenture units of the Corporation at CDN$1,000 per Unit ("Unit"). Each Unit will be comprised of: (i) CDN$1,000 principal amount of convertible secured debentures ("Debentures"), which shall mature two years from the date of issuance; and (ii) 12,000 common share purchase warrants ("Warrants") with each Warrant exercisable for one common share of the Corporation ("Common Share") at an exercise price of CDN$0.10 per Common Share for a period of 24 months. The Warrants will include an accelerated expiry clause such that the exercise period of the Warrants will be reduced to 30 days if for any ten consecutive trading days during the unexpired term of the Warrant (the "Premium Trading Days"), the closing price of the Company's shares exceeds the exercise price of the Warrants by 25% (and for more certainty, the reduced exercise period of 30 days will begin no more than 7 calendar days after the tenth Premium Trading Day). Depending on market conditions, the Corporation reserves the right to increase the maximum gross proceeds under the Offering, subject to approval of the TSX Venture Exchange (the "Exchange").
The Debentures will bear simple interest at an annual rate of 6.5% for the first year and 10% in the second year, calculated on the principal amount, with any accrued but unpaid interest under the Debentures due and payable quarterly in either cash or Common Shares (at the option of the Corporation), with the number of Common Shares being determined by using the market price on the date of settlement. The Debentures may be converted by the holder at any time within the first year following the date of issuance at a price of CDN$0.075 per Common Share and thereafter at a price of $.10 per Common Share. The Debentures may be redeemed in whole or in part by the Corporation at any time following the date that is four months plus one day from the date of closing of the Offering, upon payment of the principal amount plus a premium of 2.5% of such principal amount and all accrued and unpaid interest.
The Company has a new board of Directors, who are also long-time shareholders. Our partners in China, Yutian and its associates will be the lead investors in the Offering and insiders will be subscribing for $300,000 (approximately 25%) of the Offering. The rest of the debenture investments are expected to come from existing shareholders.
The Corporation will use the proceeds of the Offering will be used to restart operations, sales and marketing, manufacturing and general working capital purposes.
The Debentures and the Warrants issued pursuant to the Offering and any Common Shares issued upon the conversion of the Debentures or exercise of Warrants, will be subject to a hold period of four months plus one day from the date of closing of the Offering, except as permitted by applicable securities legislation and the rules of the Exchange. The Offering is subject to approval by the Exchange.
Exchange of Existing Debentures and Repricing and Extension of the Associated Warrants
The Company sought and has received consent from a majority of the existing debenture holders to proceed with the Offering. The Company will be replacing the currently issued and outstanding unsecured convertible debentures (1,095 debentures representing $1,095,000) issued on January 25, 2019 with new secured debentures (1,095) with the same terms as the Offering Debentures ("Replacement"). New warrants will not be issued with the replacement debentures. The Company will be repricing and extending ("Repricing") the January 25, 2019 warrants (approximately 9,066,000 warrants outstanding). Each Warrant is exercisable for one Common Share at an exercise price of CDN$0.10 per Common Share for a period of 24 months from the close of the Offering. The Warrants will include an accelerated expiry clause such that the exercise period of the Warrants will be reduced to 30 days if for any ten consecutive trading days during the unexpired term of the Warrant (the "Premium Trading Days"), the closing price of the Company's shares exceeds the exercise price of the Warrants by 25% (and for more certainty, the reduced exercise period of 30 days will begin no more than 7 calendar days after the tenth Premium Trading Day).
The Corporation will not be paying any finders' fees on the Repricing transaction, which is subject to final approval by the Exchange.
Related Party Transactions
The Offering and the Replacement transactions are related party transactions within the meaning of TSXV Policy 5.9 and Multilateral Instrument 61-101 ("MI-61-101") as insiders of the Corporation (consisting of two directors of the Corporation) will subscribe for an aggregate of $300,000 of Units under the Offering and will also have existing debenture units replaced with new debenture units. The Corporation is relying on exemptions from the valuation and minority shareholder approval requirements of MI 61-101 contained in sections 5.5(a) and (b) and 5.7(a) and (b) of MI 61-101, as the Corporation is not listed on a specified market and the fair market value of the participation in the transactions by insiders does not exceed 25% of the market capitalization of the Corporation, as determined in accordance with MI 61-101 and the fair market value of the transactions is not more than $2,500,000. The Corporation did not file a material change report in respect of the related party transaction at least 21 days before the closing of the Offering, which the Corporation deems reasonable in the circumstances in order to complete the transactions.
Risks and Uncertainties
Status
The Company reported in its last financial statements of September 30, 2019, liabilities and accounts payables of approximately $2,089,632, of which approximately $1.25M was accounts payable and approximately $0.6M was accrued salaries. This was in addition to the approximately $1.1M of debt in the form of debentures. As mentioned above, a review of the current accounts payable shows an immediate need to pay $120,000 to vendors who provide service or components for the VMS+3.0 so operations can be restarted. It is anticipated the remaining accounts payables will be settled over time and so the majority of the proceeds of the Offering will be used to advance the operations of the company. It is also anticipated that former employees will wait until the Company has sufficient resources to be paid their accrued salaries (the majority is owed the former CEO and now Executive-Chairman, Dr. Adams) or convert them into shares or debentures through settlement agreements which may be subject to approval of the Exchange and shareholders. A majority of the accounts payables date back saeveral years and creditors have been patient throughout this period. There is no guarantee these creditors will remain patient. After the initial payment to vendors, there will be approximately $200,000 of current accounts payables, that will require payout agreements. The ability to negotiate payout agreements with significant creditors may materially affect the Company going forward.
Financial
The Company's success in raising new operating capital has enabled it to finalize its VMS+3.0 development and implement initial commercialization strategies. The Company will require additional operating capital in the future to sustain its level of its operations and to further implement its commercialization strategies. The Company is in discussions with multiple parties related to its financing and commercialization efforts to secure sufficient additional capital and resources to further implement its business plan of deploying 70-100 VMS+3.0 machines and achieve cashflow break-even. The need, success and timing of additional financings and/or strategic relationships cannot projected with any certainty and their ultimate success is necessary for the Company to continue operations and to achieve its near term commercial and development milestones. There is no assurance the Company will be able to secure additional financing on reasonable terms.
Continued Operations
Without sufficient additional capital being secured in a timely manner, Company operations may have to be curtailed; the result of which could render the Company unable to pursue commercialization of its products and services, or to continue its operations. There is no certainty whether the Company will generate significant revenues or attain profitable operations in the near future and there can be no assurance that it will achieve profitability in the future. The Company had incurred a loss of $2,703,289 and had a negative operating cash flow of $1,397,193 for the nine-month period ended September 30, 2019, and has accumulated $37,329,095 of losses as at September 30, 2019. As a result, there is a material uncertainty which creates significant doubt regarding the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent on its raising of future required capital, bringing its products to market and achieving and maintaining profitable operations. The outcome of these matters cannot be predicted at this time.
About Ventripoint Diagnostics Ltd.
Ventripoint's technology is a leading Artificial Intelligence (AI) approach known as Knowledge-Based Reconstruction (KBR), used to create applications to monitor heart disease, a leading cause of death worldwide. The VMS+ is the first cost-effective and accurate AI tool for measuring whole heart function using conventional ultrasound. The Corporation has developed a suite of applications for all major heart diseases and is actively commercializing the approach to improve cardiac care.
For further information, please contact:
Email: peter@weichler.ca
Forward Looking Statements:
This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. In particular, this news release contains forward-looking information relating to the Offering and the use of the proceeds therefrom. The forward-looking statements and information are based on certain key expectations and assumptions made by the Corporation, including expectations and assumptions concerning the completion of the Offering and the use of net proceeds of the Offering. Although the Corporation believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward looking statements and information because the Corporation can give no assurance that they will prove to be correct.
Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. Such factors may include the failure to successfully market the Units and failure to satisfy certain conditions in connection with the issuance of the Units. Other factors which could materially affect such forward-looking information are described in the risk factors in the Corporation's most recent annual management's discussion and analysis that is available on the Corporation's profile on SEDAR at www.sedar.com. Readers are cautioned that the foregoing list of factors is not exhaustive. The forward-looking statements included in this news release are expressly qualified by this cautionary statement. The forward-looking statements and information contained in this news release are made as of the date hereof and the Corporation undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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