Neovasc Inc (NASDAQ, TSX: NVCN) a specialty medical device company, develops, manufactures, and markets cardiovascular devices worldwide. Its products include the Tiara technology for the transcatheter treatment of mitral valve disease; and the Neovasc Reducer for the treatment of refractory angina. The company also provides Peripatch tissue products. The company was formerly known as Medical Ventures Corp. and changed its name to Neovasc Inc. in July 2008.
Legal actions are still not settled and may impede future cash flows.
Projections of net income losses bring into question liquidity problems.
Industry competitiveness and consolidation will bring on a new set of challenges.
"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
Consequences of a failure to effect a reverse stock split and remain on the NasdaqManagement 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.
Revenues decreased 77% to $339,922 for the three months ended March 31, 2018, compared to revenues of $1,481,360 for the same period in 2017. In December 2017, the Company closed its contract manufacturing and consulting services business and is now focused on the commercialization of its own product, the Reducer.
Selling expenses for the three months ended March 31, 2018 were $286,938, compared to $187,168 for the same period in 2017, representing an increase of $99,770, or 53%. The increase in selling expenses for the three months ended March 31, 2018 compared to the same period in 2017 reflects an increase in costs incurred for commercialization activities related to the Reducer.
The other loss for the three months ended March 31, 2018 was $48,324,003 compared to income of $28,299 for the same period in 2017, an increase in other loss of $48,352,302. The increase in the other loss can be substantially explained by the accounting treatment of the November 2017 financings, which resulted in a $49,277,477 increase in net loss between the periods.
Neovasc finances its operations and capital expenditures with cash generated from operations and equity and debt financings. As at March 31, 2018, the Company had cash and cash equivalents of $12,261,559 compared to cash and cash equivalents of $17,507,157 as at December 31, 2017. The Company will require significant additional financing in order to continue to operate its business. Given the current nature of the Company's capital structure, there can be no assurance that such financing will be available on favorable terms, or at all.
The Company is in a negative working capital position of $1,275,879, with current assets of $14,036,460 and current liabilities of $15,312,339.
Neovasc holds several negative signals and is within a very wide and falling trend, so we believe it will still perform weakly in the next couple of months or a year. We therefore hold a negative evaluation of this stock.
CWEB Analyst's have initiated a Sell Rating for Neovasc Inc (NASDAQ, TSX: NVCN)
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