TORONTO , Oct. 11, 2023 /CNW/ - George Christopoulos today announced the acquisition of 2,000 Avante Corp. ("Avante") (TSXV: XX) Common Shares ("shares") on October 10, 2023 at $0.71 per share and now beneficially owns 3,797,957 shares or 14.34%. Fairfax (TSX: FFH) controls 5,297,434 shares or 19.99%. Mr. Christopoulos previously held 3,795,957 Avante shares or 14.33%, including for purposes of the September 11, 2023 , voting record date.
Mr. Christopoulos also announced, at this time he intends to vote all shares under his control as follows:
- WITHOLD in respect of director nominee Daniel Argiros , chair of Avante's Audit Committee
- WITHOLD in respect of Fairfax's director nominee Wade Burton , chair of Avante's Compensation, Corporate Governance and Nominating Committee
- AGAINST ratifying the 10% rolling stock option plan
In the opinion of Mr. Christopoulos, Avante's incentive compensation is egregious and components thereof appear to represent material information, which was not disclosed on a timely basis, and has yet to be disclosed through press release as was required.
Furthermore, Avante has a security based compensation plan(s) that goes beyond stock options, and consequently the September 2023 Circular should include a vote on ratifying Avante's entire security based compensation, not just the stock option plan component.
Avante's shares closed at $1.14 on July 31, 2023 . Previously undisclosed information involving certain " Share based payments "and " stock-based compensation " was included in note 21 of the audited financial statements released that evening. By October 2, 2023 Avante's shares closed at $0.69 , down approximately 39%.
Ratification of Avante's Stock Option Plan In 2022 Was Invalid
Mr. Christopoulos is also of the view that the September 29, 2022 ratification of Avante's stock option plan was invalid , because the August 2022 Circular and Avante's other disclosures contained no information whatsoever concerning the award to CEO Mounouchos of one million Avante shares on April 1, 2027 , and a potential further one million Avante shares also payable in 2027 (" the April 8, 2022 Two Million Shares Grant "). This grant was over and above 800,000 stock options awarded on April 28, 2022 .
The 800,000 stock options awarded to Mounouchos equal the options awarded in January 2018 to the previous CEO, Campbell. However, Mounouchos' exercise prices are 50% lower, and Mounouchos' other long-term incentives are ten times larger:
For Campbell:
- Stock option exercise prices were $1.65 , $1.90 , $2.20 , and $2.55 (an average of $2.075 ).
- The 200,000 PSU award was announced by press release on November 25, 2020 , and was made nearly 3 years after Campbell became CEO.
- Any PSU payout was conditional and was scaled : 0% payout if VWAP was less than $3.39 per share , 50% payout if greater than or equal to $3.39 per share, 75% payout if greater than or equal to $3.75 per share or 100% payout if greater than or equal to $4.00 per share.
In comparison, for Mounouchos:
- Stock option exercise prices are $0.88 , $0.97 , $1 .07and $1.18 (an average of $1.025 ).
- Other long-term incentives were awarded immediately, on April 8, 2022 .
- There were no financial targets required for Mounouchos' first grant of one million shares, and there is no disclosure of the financial targets required for the second grant of one million shares.
- Avante is now a much smaller company, with annualized revenue of about 23% of the November 2020 level, but the additional long-term incentives for Mounouchos are ten times larger than those given to Campbell.
April 8, 2022 Two Million Shares Grant Not Disclosed For 16 Months, Then Suddenly Cancelled
The April 8, 2022 Two Million Shares Grant was only disclosed as " Share based payments " and " stock based compensation " in note 21 of the March 31, 2023 audited financial statements released on July 31, 2023 , nearly 16 months after the fact and without a press release to ensure its proper dissemination .
Based on note 21 of Avante's financial statements released on August 29, 2023 , which states " Share based payments incurred during the three months ended June 30, 2023 , include a reversal of a prior stock based compensation due to cancellation of awards to related party .", it appears the April 8, 2022 Two Million Shares Grant was cancelled, as of June 30, 2023 .
A possible reason for cancellation of the April 8, 2022 Two Million Shares Grant was a realization Avante awarded a total of 2,800,000 options and share grants to CEO Mounouchos, representing 10.57% of Avante's shares , far exceeding the 5% limit . Combined with 750,000 stock options issued to directors and the CFO during fiscal 2023, Avante issued a total of 3,550,000 options and share grants, representing over 13.4% of its shares, far exceeding the limit in Avante's 10% rolling stock option plan .
August 29, 2023 Cash Plan Replaces April 8, 2022 Two Million Shares Grant
Avante's 2023 Information Circular released mid-day September 22, 2023 , disclosed "The August 29, 2023 Cash Plan" on pages 23 and 24. It is based on the value of two million shares, and will ultimately be settled in cash, not shares.
Unlike the April 8, 2022 Two Million Shares Grant, the August 29, 2023 Cash Plan is shared with the CFO. CEO Mounouchos is entitled to a cash payment equal to the value of 1,250,000 shares on the "Trigger Date", while the CFO is entitled to the value of 750,000 shares. There is still no exercise price payable.
There is no disclosure of how Avante's shares will be valued on the Trigger Date, and if there is a 30-day volume weighted formula, or if the closing price of Avante's shares for just one single day will be applied.
Incredibly, the September 2023 Circular indicates that the value of 2 million Avante shares is payable even in the event of dismissal for cause.
The CFO was hired September 26, 2022 and immediately awarded 250,000 options exercisable at $0.80 . Why the CFO's long-term incentives have suddenly more than quadrupled requires explanation. Why there are other long-term incentives for CEO Mounouchos beyond his 800,000 options award also requires explanation.
In Mr. Christopoulos' opinion, in addition to being egregious, both the April 8, 2022 Two Million Shares Grant and the August 29, 2023 Cash Plan represented material information, and each required a press release.
- An example of material information in TSXV Policy 3.3(3.8) is: "( y) any other developments relating to the business and affairs of the Issuer that would reasonably be expected to significantly affect the market price or value of any of the Issuer's securities or that would reasonably be expected to have a significant influence on a reasonable investor's investment decisions ."
Importantly, TSXV Policy 3.1(9.2) (d) requires "…all Insiders…who have access to or might reasonably be believed to have access to undisclosed Material Information relating to the Issuer, to refrain from trading in the Issuer's securities until the Material Information has been properly disseminated to the public."
Summary and Related Points
- All director nominees have been chosen by CEO Mounouchos and Fairfax.
- Ratification of Avante's stock option plan on September 29, 2022 was invalid, because the April 8, 2022 Two Million Shares Grant was only disclosed on July 31, 2023 in note 21 of the audited financial statements, and not elsewhere.
- Avante's financial statements did not disclose, as a subsequent event, the introduction, amendment or cancellation of either the April 8, 2022 Two Million Shares Grant, or the introduction of the August 29, 2023 Cash Plan.
- In the opinion of Mr. Christopoulos, the Two Million Shares Grant, its cancellation, and the August 29, 2023 Cash Plan each represented material information.
- Avante appears to have eventually recognized that issuing 1,550,000 stock options plus 2 million share grants, representing a total of 3,550,000 shares or 13.4%, exceeded allowable limits.
- Avante's 2023 Circular was released mid-day on September 22, 2023 , disclosing the August 29, 2023 Cash Plan for the first time, but without a press release. By October 2, 2023 , and despite buying by three of Avante's directors, Avante's share price fell even further, from about $0.85 to $0.69 , or about 19%.
- CEO Mounouchos acquired 9,000 Avante shares from September 21, 2023 to September 25, 2023 .
- Two other Avante directors acquired a total of 132,000 Avante shares from September 25, 2023 to October 2, 2023 .
- Certain previous insider transactions include:
- December 1, 2022 CEO Mounouchos sold 200,000 Avante shares, reducing his share ownership to below 10%. It appears Mounouchos was required to issue a press release and Early Warning Report, but has not filed either. National Instrument 62-104 imposes a moratorium, stating: "…an acquiror, or any person acting jointly or in concert with the acquiror, must not acquire… any securities of the class in respect of which the report is required to be filed…".
- From November 1, 2022 to April 14, 2023 (before the April 8, 2022 Two Million Shares Grant was disclosed on July 31, 2023 by way of note 21 to the 2023 audited financial statements) two directors acquired a total of 793,000 Avante shares.
Important background information and other opinions are included in Mr. Christopoulos' press release dated April 25, 2023 .
Mr. Christopoulos acquired beneficial ownership of, or control and direction over, 3,266,400 shares or approximately 12.33% on or prior to March 28, 2023 , and from April 5, 2023 to August 30, 2023 acquired through the TSX Venture Exchange 529,557 shares or approximately 1.99% at an average price of approximately $0.969 per Common Share, for aggregate consideration of $513,513 .
The Common Shares beneficially owned, or over which control and direction is exercised, by Mr. Christopoulos were acquired for investment purposes. Depending on market and other considerations, Mr. Christopoulos may increase or decrease his ownership, control, and direction over Common Shares of Avante.
This press release includes the personal views and opinions of George Christopoulos . It does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable corporate and securities laws.
Avante's head office address is 1959 Leslie Street, Toronto, Ontario , M3B 2M3. A copy of this press release may be obtained on Avante's SEDAR profile at www.sedar.com .
For a copy of the report filed under National Instrument 62-103, please contact: George Christopoulos , 48 Castle Knock Road, Toronto, Ontario M5N 2J4.
SOURCE George Christopoulos