VIVIONE BIOSCIENCES INC. ANNOUNCES UP TO US$2,500,000 INVEST
Vivione to issue $1M (U.S.) of LLC units to Montalcino
2015-09-15 14:39 ET - News Release
Mr. Kevin Kuykendall reports
VIVIONE BIOSCIENCES INC. ANNOUNCES UP TO US$2,500,000 INVESTMENT IN ITS OPERATING SUBSIDIARY
Vivione Biosciences Inc., Vivione Biosciences LLC, a wholly owned Arkansas-incorporated subsidiary of the corporation, and Montalcino Holdings I LLC, an investment entity formed in Texas, have entered into a binding agreement whereby Montalcino will purchase up to $2.5-million (U.S.) in the equity of the subsidiary.
In the corporation's press release dated Aug. 6, 2015, Vivione discussed a series of financial and strategic setbacks, and the associated effect on the corporation's ability to continue operations. The corporation has been committed to recovering from these setbacks and has been searching for alternative sources of financing to drive its underlying potential in the biomedical field. The corporation has been unable to find such financing and is now faced with the possibility of insolvency. The transaction provides the corporation with the opportunity to settle over $1.5-million (U.S.) in liabilities, increase its cash reserves and increase the chance of the subsidiary's success.
Details of the transaction
Pursuant to the purchase agreement, Montalcino shall purchase an initial $1-million (U.S.) in Series A preferred units of the subsidiary on or about Oct. 15, 2015, at a price of $1 (U.S.) per Series A preferred unit in the subsidiary and up to an additional $1.5-million (U.S.) in Series A preferred units at the same price over the following year, upon the achievement of the certain milestones (four) set out in the purchase agreement. Each milestone shall represent advances in the research and development of the subsidiary's technology. Upon the achievement of each milestone, Montalcino shall provide a predetermined investment amount, allowing the subsidiary to continue its operations toward its achievement of the next milestone.
Conditions to closing
Closing of the transaction, including the initial investment, is conditional upon, among other things, final approval of the TSX Venture Exchange and approval of the shareholders of the corporation.
Effects of the transaction
The corporation has no remaining capital and believes that without the transaction, the corporation will not be able to continue operations and may have to resort to insolvency. The corporation believes that the transaction will provide the subsidiary the best chance of continuing operations and that the corporation's equity position in the subsidiary, together with the settlement of liabilities, will provide the corporation the best chance of succeeding while preserving some value for current shareholders of the corporation which may not otherwise be the case.
The corporation currently owns 100 per cent of the equity of the subsidiary; however, this will decrease to an economic interest, on a fully diluted basis, of approximately 9 per cent if the follow-on investments are completed. If the follow-on investments are all completed, Montalcino will own, on a fully diluted basis, an approximate 77.5-per-cent economic interest in the subsidiary.
Employees and consultants who have entered into deferred payment agreements with respect to their salaries and fees have agreed to cancel and release Vivione from such obligations in exchange for cash in an amount not to exceed $100,000 (U.S.) and Series B preferred units of the subsidiary, which will represent, if all follow-on investments are completed, approximately 3.5 per cent of the subsidiary's equity, on a fully diluted basis.
Glenn Smith, a director of the corporation, has advanced the corporation revolving loans with a current outstanding balance of $1.42-million (U.S.). Ancillary to the transaction, Mr. Smith has agreed to sell and assign his interest in the receivables of these loans to the subsidiary in exchange for 322,581 Series B preferred units of the subsidiary, representing, on a fully diluted basis, approximately 10 per cent of the subsidiary if all follow-on investments are completed.
Vivione believes that the transaction is a positive step for the corporation and its shareholders, and expects that the transaction will permit the corporation to avoid resorting to insolvency.
Stock exchange listing
It is expected that following the closing of the transaction, the corporation will be unable to meet the TSX Venture Exchange's continued listing requirements and will be transferred to the NEX, a separate board of the TSX-V for companies that are unable to meet the continued listing requirements of the TSX-V.